Brad DeLong's Semi-Daily Journal: A Weblog

But wait, don't look at that chart! It's SOCIAL SECURITY that is "in crisis." Look over there!

Why do liberals hate your children and try to steal money from them? These questions and more discussed on Hannity & Colmes.

You know, Angrybear.com put up some interesting commentary with that interesting graph.

My interesting commentary: it doesn't go far enough. Graph our DEBT CEILING. That includes all the funds they don't include in the official red ink numbers. Around $100+billion each year.

An entry in the "we may have a real press corps" sweepstakes can be found in the Edmund Andrews NYT article today

There must be a chart error. Bush promised to cut the deficit in half. That is not what the chart shows.

Apropos Don F's comment, here's a letter I sent to Andrews this morning.

----------------------------

Dear Mr. Andrews:

Thank you for penning "Social Security Reform, With One Big Catch" (NYT,
2004-12-12).

In addition to your useful point about risk/return tradeoffs, there are two
other points to consider regarding the investment of social security taxes
in equities.

First, the projections for future equity returns are inconsistent with the
economic assumptions used in the projections of the future health of the
Social Security system. Equity returns are limited by future economic
growth, and the rate of growth posited in the SS projections is far lower
than the historic rate of growth which is the foundation underlying the
historic rate of return on domestic equities. (Dean Baker has made this
point repeatedly; his work can be reviewed at http://www.cepr.net.)

Second, the overall national rate of investment returns cannot be improved
by altering the mix of stocks and bonds held. Quoting William Bernstein of
Efficient Frontier: "In short, __the aggregate national investment return
will be approximately the same no matter what the overall stock/bond mix of
the capital markets.__ To the extent that debt tends to decrease agency
conflicts, a small nod may go to an increase in the overall debt/equity
ratio. If everybody issues/invests in stocks, then stock returns must fall
to the aggregate return rate. Which may actually already have happened. If
all of the nation's pension funds and newly-privatized social security
accounts shifted to stocks, they most decidedly would not obtain the
historical 7%-8% real return." [Emphasis in original.] (URL:
http://www.efficientfrontier.com/ef/900/heisenbg.htm )

It's a lovely summary chart for explaining why people are worrying about the wrong things, but sources for data, please? What assumptions about policy?

The question is: How big is the accumulated SS surplus? (Or in other words, the debt owned by the government to the working people.)

Liberal

Projections for future equity returns are inconsistent with the economic assumptions used in the projections of the future health of the Social Security system. Equity returns are limited by future economic growth, and the rate of growth posited in the SS projections is far lower than the historic rate of growth which is the foundation underlying the historic rate of return on domestic equities.

Anne

In addition to this important comment, if economic growth is stronger than projections, and I am comfortable thinking it will be, then future problem with Social Security will be rather trivial.