The Babe Theory Of Political Movements.
Mar. 21, 2005 11:50 AM
Iran's Sham Election In Houston.
June 20, 2005 5:36 AM
Yes, Kanye, Bush Does Care.
Oct. 31, 2005 12:41 AM
Health Care vs. Wealth Care.
Nov. 23, 2005 3:28 PM
Americans Voting With Their Feet.
Nov. 30, 2005 1:33 PM
Idea Majorities Matter.
May 12, 2006 6:15 PM
Twilight Zone Economics.
Oct. 17, 2006 12:30 AM
The "Shrinking" Middle Class.
Dec. 13, 2006 1:01 PM
From Ashes, GOP Opportunities.
Dec. 18, 2006 6:37 PM
Battle Between Entitlements & Pork.
Dec. 21, 2006 12:31 PM
Let Economic Freedom Reign.
Dec. 22, 2006 10:22 PM
Biggest Health Care Moment In Decades.
July 25, 2007 4:32 PM
Unions Antithetical to Liberty.
May 28, 2008 11:12 PM
Right To Work States Rock.
June 9, 2008 12:25 PM
Social Security Reform Thursday.
March 13, 2008
Caption Contest: Enter Today!
Due: July 29, 2008
The Carnival Of Classiness.
Mar. 14, 2006
Quotational Therapy: Obama.
Apr. 4, 2008
Mainstream Melee: Wolfowitz.
May 19, 2007
Pundit Roundtable: Leaks.
July 9, 2006
A WILLisms.com(ic), by Ken McCracken
July 14, 2006
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Social Security Reform Thursday: Week Sixty -- Declining Rate Of Return.
Thursdays are good days for reform, because they fall between Wednesdays and Fridays. And reform is a long-haul process, not a fleeting event. So we're going to keep plugging along with the case for reform, even as the issue goes off the political radar screen.
That's why WILLisms.com offers a chart or graph, every Thursday, pertinent to Social Security reform.
This week's topic:
Social Security Has An Increasingly Abysmal Rate Of Return.
Just a quick reminder about Social Security's underlying demographic crunch, from Heritage's 2006 Candidate Briefing Book:
More retirees. Fewer workers. People are living longer. Benefit increases have outpaced inflation. Long-term structural forces have contributed to an untenable entitlement system. To fix Social Security temporarily, Congress-- at various points in time-- has pushed the retirement age back, raised the tax rate, and expanded the tax base.
Social Security's problems go much deeper than that. The fix is not as easy as soaking the rich... or the middle class.
Social Security needs structural reform. It needs strengthening. It needs modernization. It needs a radical transformation. Social Security needs to move beyond 1935. It is outrageous-- and a bit awe-inspiring (and not in a good way)-- that the shortsightedness of policymakers more than a century before my retirement could continue to have such a deleterious impact over so many trillions of dollars.
It's even more outrageous that we now, in 2006, are missing a clear opportunity to transform Social Security from a malfunctioning Depression-era relic into a wealth-generating powerhouse for Americans of all income levels.
It's sad that so much of America's Gross Domestic Product is being siphoned off into such an inefficient boondoggle. It's a shame that so many dollars of American income (1 of every 8 dollars earned, for many working Americans) are being footled into a program with such a poor investment return:
Those dollars ought to be growing. Compounded. Into real wealth. Into significant, substantial, Republican-creating wealth.
Americans deserve a better deal. We deserve a modern Social Security system. In a global economy, we can't afford anything less.
It's time for reform.
Previous Reform Thursday graphics can be seen here:
-Week One (Costs Exceed Revenues).
Posted by Will Franklin · 10 August 2006 12:00 PM
Social Security reform is way past due! It creates false hope for induividuals thinking that the Gov. is going to be there providing security for old age. WRONG...
Posted by: Zsa Zsa at August 10, 2006 12:44 PM
Historically, the S&P 500 has earned an average rate of return of 10% for oh, about the last 100 years. Now that includes down cycles and up cycles, but averaged for any decade, it is right at 10%.
Let's take a hypothetical worker earning $10 per hour. Let's eliminate inflation and assume that the person earns $10 per hour for their entire life just as a simplistic explaination. One invests 7.5% of his income into a plan earning 3% returns and the other invests in the stock market earning 10%. That works out to approximately $1,500 per year for the 40 years from age 20 to age 60.
At the end of the 40 years, one person has $660,000 and the other has approximately $110,000.
What we are doing is spending my contributions into Social Security today and making promises to provide an annuity in the future that exceeds the actual future value of the net contributions if the person lives over 10 years. And the average lifespan is well over 77 years now. So the net present value of my contributions exceeds the net present value of the payouts that I expect to receive based on a 3% return. Based on a 10% return, it is the opposite.
Poor investing by the government of my money means that the net present value of every single payor is less than the value of the benefits they will receive if they live to the current average age. And sooner or later, that difference plus the fact that the "surplus" does not really exist, has to be dealt with.
If Social Security were a business, all of the "surplus" calculations would have to be based on the NPV of both the current income and the future payouts when compensated for the rate of return and inflation, etc. It is not even close. We are writing checks today that are going to come due in the future. Either the taxpayers make up the shortfall or the beneficiaries are going to get shafted.
Posted by: Justin B at August 10, 2006 01:33 PM
Posted by: lester at August 10, 2006 04:25 PM