Social Security Reform, With One Big Catch

"Of the 10 Congressional districts with the highest percentage of Social Security beneficiaries, seven are held by Republicans; five of those seven are in the Sunshine State. . . . approximately two-thirds of the 25 districts with the highest percentage of people on Social Security are currently held by Republicans, according to calculations done by TechPolitics, an Internet research site."

http://www.nytimes.com/2004/12/12/business/yourmoney/12view.html?oref=login&th

Social Security Reform, With One Big Catch


By EDMUND L. ANDREWS December 12, 2004 WASHINGTON

OF all the arguments being made to replace part of Social Security with private retirement accounts, few are more seductive and more misleading than the prospect of earning higher returns.<snip>

It sounds like a no-lose proposition. According to the Social Security Administration, Treasury bonds can be expected to yield a real annual rate of return of about 3 percent. Equities, by contrast, can be expected to earn 6.5 percent.

That assumption is crucial to arguments that personal accounts can reduce Social Security's long-term shortfall - which the government estimates to be at least $3.5 trillion. Most of the proposals to overhaul Social Security call for steep reductions in future benefits that would be offset by the higher returns people would presumably earn on their investments.

Stephen Goss, the Social Security Administration's chief actuary, has endorsed the assumption of higher returns. In evaluating the major proposals for putting some payroll taxes into personal investment accounts, Mr. Goss estimated that even people who hedged their risk by mixing stocks and bonds could expect an average return of 4.45 percent.

But that logic is as flawed as a perpetual motion machine. If it were true, the government could erase Social Security's entire projected deficit by selling bonds at 3 percent and buying stocks that yield 7 percent.<snip>

But there are no guarantees. According to Ibbotson Associates, which publishes data showing average returns over different periods, large-cap stocks actually suffered a loss of 1 percent, annualized, from early 1929 to the end of 1942.<snip>

Those who imply that stocks can promise higher returns without higher risk are essentially arguing that Social Security can be fixed with a huge exchange of paper.

If that is the government's strategy, people should by all means push for the right to shift all their payroll taxes to personal accounts and invest the money in gold.

... they don't deserve to continue as a national political party.

:-)

Based on all the town hall meetings and such, it appears that the Democrats have done a good job at killing the privatization issue.

Until...

DINO Joe Lieberman started negotiating with the GOP.

Yep, that's right. DINO Joe, who couldn't win a debate with Cheney, is out there selling the win down the river.

http://www.timetogojoe.com/

Zell Miller on valium.