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Reform Thursday: Week Fourteen.


Thursdays are good days for reform, because they fall between Wednesdays and Fridays.

That's why WILLisms.com will display a chart or graph, every Thursday, pertinent to Social Security reform. The graphics are mostly self-explanatory, but we include commentary on some of them where and when necessary.

This week, we examine the five Thrift Savings Plan (TSP) funds all federal employees can choose from for their retirement. Social Security personal accounts would be modeled along similar lines.

One thing to note is how each fund, over the past decade, has delivered positive and significant returns, even through slumps in the market. In each of these models, we calculated what would have happened to $10,000 in each fund from 1995 to the end of 2004:

Fund C-


And a look at the current incarnation of the Thrift Savings Plan's C Fund, since its inception (.pdf):


Fund F-


And a look at the current incarnation of the Thrift Savings Plan's F Fund, since its inception (.pdf):


Fund G-


And a look at the current incarnation of the Thrift Savings Plan's G Fund, since its inception (.pdf):


Fund I-


And a look at the current incarnation of the Thrift Savings Plan's I Fund, since its inception (.pdf):


Fund S-


And a look at the current incarnation of the Thrift Savings Plan's S Fund, since its inception (.pdf):


This is why personal accounts are so attractive. They would provide real options, without burdening inexperienced investors with the responsibility of picking individual stocks. There would be a choice of extremely conservative and safe funds, or more aggressive funds with a better overall payoff over the longer term.

Social Security Reform is about younger workers using compound interest to get a better deal, which would smoothly and easily offset the President's proposed progressive indexing. All progressive indexing does is say to lower income workers that they will not see any change in the growth of their benefits; benefits will still be pegged to wage growth. In other words, nothing changes for lower income workers, except the possibility of earning more through personal accounts. Lower income workers still pay into the system, so the claim that President Bush wants to turn Social Security into "welfare program" is just not the case. Quite the opposite, in fact.

Under progressive indexing, what changes is that middle and upper income workers will see the growth of their benefits pegged to inflation rather than wages. To make up for (and then some) that gap in benefit increases, personal accounts will allow any worker who chooses to benefit from investing a portion of his or her payroll taxes into a personal savings account resembling those found in the Thrift Savings Plan (TSP).

These funds, incidentally, have average fees of less than sixty cents per thousand dollars (less than 6 basis points). Social Security's Actuaries estimate personal accounts would have fees of about 30 basis points, or three dollars per thousand dollars, but, as Don Luskin points out, economies of scale might be able to keep those fees even lower.

It's a win-win, people.

Let's please get over this "benefit cuts for the middle class under the President's plan" business.



Political Calculations has more on the Thrift Savings Plan (TSP).

Previous Reform Thursday graphics can be seen here:

-Week One.
-Week Two.
-Week Three.
-Week Three, bonus.
-Week Four.
-Week Five.
-Week Six.
-Week Six, bonus.
-Week Seven.
-Week Seven, bonus.
-Week Eight.
-Week Nine.
-Week Ten.
-Week Eleven.
-Week Twelve.
-Week Thirteen.

Tune into WILLisms.com each Thursday for more important graphical data supporting Social Security reform.

Posted by Will Franklin · 5 May 2005 05:03 PM


Another killer!

Posted by: Ralph at May 5, 2005 06:20 PM

Way to go WILLisms.com You are so great!...Maybe this will open some eyes! Thank you WILLisms.com so much for Showing the facts of why these liberal Senators don't find it one of their "top ten" priorities!

Posted by: Zsa Zsa at May 5, 2005 07:02 PM

Brilliant and dynamic is all I can say about reform day at WILLisms.com

Posted by: Zsa Zsa at May 5, 2005 07:23 PM

I am PRO CHOICE!...You would think for once the Democrats and Republicans could agree on something! This truly is an issue that should be a CHOICE! ... Social Security Reform is not exactly a choice. Social Security Reform sooner or later is a MUST!...

Posted by: Zsa Zsa at May 6, 2005 06:55 AM

Good work, as always!

Using the Investing: Rate of Return tool at my blog, I determined that the various TSP funds had the following raw (not adjusted for inflation) rates of return for the time invested:

Fund C: 10.46%
Fund F: 6.86%
Fund G: 5.75%
Fund I: 5.45%
Fund S: 11.84%

I may have to figure out what the inflation-adjusted rates of return are and post a companion piece to your post later today....

Posted by: Ironman at May 6, 2005 08:44 AM

Will... is Zsa Zsa your mom, by chance?

I have a hunch...

Posted by: Hoodlumman at May 6, 2005 08:50 AM

Perhaps IF SEN. HARRY REID, REP. LORETTA SANCHEZ, FORMER FIRST LADY AND NOW SEN. HILLARY CLINTON,AND HOUSE MINORITY LEADER NANCY PELOSI were forced to pay into the Social Security plan themselves it would seem like more of a" crisis," not such a "silly Social Security thing" Become one Hillary's "top five things to think about" and Nancy Pelosi might think it more necessary to order House Democrats to propose instead of oppose Social Security reform!... I think they should opt out of their cushy Federal retirement program and pay into Social Security like the rest of the Americans if they don't think of it as important!
Social Security Reform is not "Silly". It is in "Crisis"...It is time to do something and we have a great President who is not afraid to work hard and get things going for millions of Americans!
Obstructinism, and negligence is not good political policy for our countries hard working citizens, DEMOCRAT OR REPUBLICAN!...

Posted by: Zsa Zsa at May 6, 2005 08:56 AM

When the President spoke at an automobile plant in Mississippi recently, he said that federal employees and members of Congress currently have the option of investing some of their payroll taxes into the Thrift Savings Plan, according to the local newspaper.

Is that how the Thrift Savings Plan works?

Posted by: Steve at May 6, 2005 01:04 PM


Your local newspaper may be mistaken, although it's tough to tell since they did not quote what the President said in that regard. For the record, government employees may invest up to 14% of their basic pay (excluding bonuses, overtime, etc.) in the TSP, but they also pay full Social Security taxes. For more information, see the TSP's web site.

And, as I threatened to do before, here is the companion rate of return post at Political Calculations.

Posted by: Ironman at May 6, 2005 02:43 PM