Privatization Pep Rally
John K. Taber
jktaber at onramp.net
Wed Jul 29 17:21:03 PDT 1998
Doug Henwood wrote:
> 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.
Perhaps the 2.5% is a confusion of the GDP and the "actuarial imbalance"
of the Trustee's report. Raising FICA from 6.2 to 7.4 for the employee
and the employer gets rid of the projected shortfall. That's pretty
close to 2.5% like the GDP.
Towards the end of the 75 year projection, the GDP is estimated
My understanding of the forecasted GDP is that it is a function of
number of workers times projected productivity. According to
demographers, the fertility rate will fall to 1.9% while the SSA
does not foresee enough immigration to compensate. 1.9% is below
the 2.1% needed to maintain the population.
In my arguments in soc.retirement I have found it useful to give
credit to the low SSA forecast of GDP in order to attack the
misguided notion that the stock market will "rescue" Social Security
if only we privatize. IMO it cuts the ground out from under the
Also, I have found a paper at the Fed Reserve, St. Louis, by
Susan Miller, that casts a lot of doubt on the stock market
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