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I should have added the proviso "assuming no change in current taxes" and clarified what I meant by "national saving." The scheme could be financed by future taxes (i.e gov borrowing) or current taxes. If you define national saving as private saving plus public saving, then if the government borrows to finance this scheme then obviously national savings must remain unchanged and would probably go down for the reason I mentioned. The only way that the scheme could possibly increase national saving would be if current taxes were increased to finance it. So it would basically end up being a policy of forced savings. In both cases private saving is higher than it otherwise would have been, but in only one of the cases does national
saving actually rise. Of course, both schemes reduce welfare, which is what really matters.
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