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To: econ_grad

The Bush plan really does nothing to address the actuarial deficit. It merely allows folks under 50 to borrow from their standard SS benefits at 3% over the inflation rate, and buy stocks. I would never do that - ever.


49 posted on 03/08/2005 9:46:03 PM PST by Torie
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To: Torie
You may not, but many of us would. That's why it's called voluntary private accounts. If I can get a 4-5% rate of return over a 1.2% rate of return, I think the decision is obvious. As far as risk goes, I'll take my chances. It's my monet, therefore it should be my decision. Plain and simple.
53 posted on 03/08/2005 9:54:32 PM PST by smokeman
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To: Torie

The actuarial problem, by that I am assuming you mean solvency, is caused by borrowing from the trust fund and spending it in the general budget.

Your analysis is deeply flawed. It is exactly the reverse of what you said. Social security taxes actually result in the govt borrowing at 0.86% because that is the real return on social security. No other sector of the economy can borrow at that rate. The (real) equity premium over 30-40 years during any period from 1926-now is much higher than that.

Also, the benefit of social security privatization is like getting a tax-cut on your labor income. If you know that a marginal hour of labor will produce benefit that can be put in a private account that is for yours to keep, then people will work longer. The marginal investment in personal accounts from working a marginal hour is not a tax, as it is the case now, but a tax-cut.

As I said, it will bring about people chaning their labor input and also will make people more risk-averse and people will engage in risky activities less and less.


70 posted on 03/08/2005 10:41:13 PM PST by econ_grad
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