[quote]100meters wrote:
BostonBarrister wrote:
First, with respect to the problem with Social Security, I don’t know where you’re getting a 1.8% productivity growth as the key – the key is the change in demographics, unless somehow a slighty higher productivity growth that is reflected in the wage of 1 worker but in the benefits to 10 retirees (just to pull some numbers out of my ass - I forget the precise ratio). In the actuary’s report, it states explicitly that demographics are the cause for the rising costs that will drain the system.
1.8 is the number used to get to doomsday by 2042. Actually it’s 1.8 for like the next 10 years then it goes down to like 1.2 or something like that.
So no, I don’t necessesarily think the program would be “flush with cash” under a 2.8% productivity growth. In fact, as I see it, and as I wrote above, the way the program is currently set up, with the SS inflator tied to producitivity gains but with a cap on the income subject to SS taxes at $90,000 in current dollars, it seems to me that higher productivity would in fact cause a larger problem.
See graph (in your link) of optimistic assumptions—by flush with cash, I mean still running surpluses.
“Optimistic assumptions” – these would include people dying faster, working longer, and producing at a greater rate (or immigration to make up the shortfall) – basically going against current demographic trends in the developed world. It doesn’t make sense to base policy on the most optimistic set of assumptions, especially if there seems to be a trend in the other direction – if they happen, great (or rather, not so great, if you want to live longer).
It would make sense if those assumptions are historically correct, and if as I’ve already pointed out doomsday continues to be pushed further and further out. 10 years ago doomsday was 2029, But now it’s 2042–see what I mean?
BTW, I would love for you to demonstrate that w/r/t Social Security numbers figured by the actuary, the optimistic scenario has always held and the pessimistic scenario has never held. If that were the case, we’d have some serious issues with how they were making their calculations, but I haven’t seen anyone except you saying that they have been so wrong.
My bookmarked link to one example isn’t working, trying to find a “hard link” but here’s a quote:
David Langer, an independent actuary who made a study of Social Security’s previous projections compared with the actual results in 2003, thinks the ‘‘optimistic’’ case is its most accurate. Over a recent 10-year span, the trustees’ intermediate guesses turned out to be quite pessimistic. Its optimistic guesses were dead on, and its pessimistic case ? sort of a doomsday situation ? was wildly inaccurate."
One more small thing to point out: These are the Social Security actuary’s numbers. They aren’t politically motivated, and they aren’t Bush’s numbers.
yes and no.
Now, private accounts – which are NOT the overall solution to the Social Security problem – nor are they claimed as the solution for the Social Security problem. It seems that the AARP, Harry Reid and others who want to demagogue the issue are the only people who want to say that the private accounts are part of the solution to solving the Social Security projected shortfall.
The private accounts are the worst part of the solution–that’s the whole point.
Private accounts are good for two reasons: 1) They give people more ownership and control of their own money; 2) They give people a chance to increase their returns over the base that the government will pay – if they want to participate. No one will be forced to invest in stocks or bonds – they can simply take the risk-free rate that social security offers. Which, of course, is why this isn’t part of the shortfall solution – the shortfall solution could be addressed, at least partially, by attempting to increase the rate of return on the over-contribution now, but it would need to be done program-wide. The solution for the shortfall will definitely involve lowering future payments by fixing the Social Security inflator to reflect cost of living growth instead of productivity growth.
Unfortunately, there are more than 2 reasons why private accts would be bad.
For example if you started in 2000, how would your private acct be doing today?
With respect to the stock market, you’d need some good reason to set productivity growth at lower than its long-term average of 2% – and that long-term 2% has been weighted toward greater productivity gains over the last 20 years. I’ve seen some arguments for why it would be lower and why it would be higher, but you can’t take it as a given. And the trend would seem to be toward greater productivity.
Also, the CBO assumptions obviously don’t agree with the 1.8% number – at least if it’s as completley limiting as you say it is, because they assume the greatest probability is 6.8% real growth in the value of stocks over the long term.
THIS is my whole point B.B.! Are you not getting the contradiction presented here?
On the one hand doomsday is 2042 based on an average of 1.8 percent productivity(actually less), on the otherhand, with private accts, stocks will grow 7 percent based on an average closer to 3 percent productivity (forever).
If they presented private accts assuming the same 1.8 percent productivity used to get to doomsday in 2042, Then NOBODY would be remotely interested because of DISMAL returns (the market would have been crushed!)
I’m pointing out the hypocrisy in the presentation of the plan, you see? If your predicing an economy humming along, then you don’t need private accts in the first place… you don’t need to do anything, because S.S. would be more than meeting optimistic projections.
[/quote]
100
You have no idea what you are talking about as you have proved.
Call the NYSE and ask them about stock market returns for the last 100 yrs.
A private accounts started in 2000?Are you that naive. These accounts are long term. If your over 50 it wouldn’t even apply.
It is pointless arguing with you until you get a clue and get up to speed on the mechanics of the market and investment rates of return.
Don’t frustrate yourself by calling me out on this any further. You are way out of your league. You need a basic investment course.
Hey what about Pelosi? Your dodging that one like a swinging ax. Let’s here you rationalization.