Friday, February 04, 2005

Social Security

The Social Security debate will be front and center until it arrives DOA on the Capital steps. I don't have much more to say because I'm not sure of the Biblical mandate for Social Security. That being said, I like the program. I like keeping seniors from poverty. I like disability benefits. I like survivor benefits. If the Church doesn't take on that responsibility, then the government probably should.

If you are still on the fence, take the time to register (free) for the New York Times and read Paul Krugman's article about the inherent problems in claiming that Social Security is a timebomb waiting to explode (in 2052). The main gist is this...
(Privatizers) can rescue their happy vision for stock returns by claiming that the Social Security actuaries are vastly underestimating future economic growth. But in that case, we don't need to worry about Social Security's future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.

Alternatively, privatizers can unhappily admit that future stock returns will be much lower than they have been claiming. But without those high returns, the arithmetic of their schemes collapses.

It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.

And I suspect that at least some privatizers know that. Mr. Baker has devised a test he calls "no economist left behind": he challenges economists to make a projection of economic growth, dividends and capital gains that will yield a 6.5 percent rate of return over 75 years. Not one economist who supports privatization has been willing to take the test.