Privatization Pep Rally

Doug Henwood dhenwood at
Wed Jul 29 13:21:20 PDT 1998

Seth Ackerman wrote:

>I thought I remembered Dean Baker once saying that the rate would have
>to be something like 3% at least to wipeout the projected SS shortfall
>singlehandedly. Is this not right? Whence 2.5%?

Dean said that there's a passage in the SS Trustees report arguing this, but I sure can't find it. I did the simulation myself. I assumed that the dollar obligation of SS pension checks remains the same, and had GDP grow at 2.5% rather than 1.5%. I also assumed that the system's revenue as a % of GDP would remain constant. If all those things happen, no shortfall.

The Trustees have three scenarios, an optimistic, middle (official), and pessimistic. Their optimistic scenario uses a growth rate around 2.5%, but it also assumes higher immigration and lower unemployment (assumptions consistent with higher growth rates) than the middle scenario. No shortfall there, either, but I wanted to isolate the effects of GDP growth alone, leaving other assumptions untouched.


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