Tuesday, February 01, 2005

Social Security Sanity

The incredible Paul Krugman writes another solid editorial on Social Security Phase out today, making a point I've made before (which I probably ripped off of him).
They 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.
It's a little bit like the old "heads you win, tails I lose" scheme I used to play as a kid. Other kids loved to play that with me, but it took it's tole. In the seventh grade alone I lost $52,304.25 to that game.

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