8. Expenditures on investment, research, and development in the United States have lagged behind the rates attained by Japan, West Germany, and other rapidly growing industrial nations. Less favorable tax treatment of income from physical capital, large budget deficits, and a reduction in saving induced by the Social Security retirement system have all contributed to the sag in the rate of capital formation in the United States. Since the improvement of tools and equipment is vital to the advancement of worker productivity, it is unlikely that the United States will experience a speedup in its sluggish growth rate unless a larger share of resources is allocated to capital formation and technological development.