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  • From: Clansgian AT wmconnect.com
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Using bad numbers to sell SS privatization
  • Date: Thu, 24 Mar 2005 22:09:02 EST


> I wonder if they are factoring in inflation and rising cost of living? Or
> do they mean that the poor schmucks in 2079 will be living on 68% of what a
> recipient now receives?

While some dynamics are factored into the figures, they are ridiculously
optimistic. For the figures to hold true, there must be only very modest
inflation with an extremely robust economic expansion during the whole
period. That
has never happened yet in the history of our country.

Also remember that in 2017 (or sooner, or much sooner) when the present
payroll tax rate does not take in enough to pay the expenditures and the SS
begins
cashing in it's bonds that were purchased with the surplus up to that point,
there are no material assests backing those bonds. The only way the
government
can come up with the money is to raise taxes or borrow money. Between now
and then we will be going from 3.3 workers paying into the system for each
person drawing benefits to 2 workers paying into the system for each person
drawing benefits. And that's if we have tweleve years of rosy economy facing
rising
oil prices, a huge trade deficit, and a dollar declining against other
currencies.

This last is quite important because the US has sold tresury instruments to
other countries to the point that it is close to saturating the market.
There
is no "integrity of the US government" involved in it. Just like everything
else, the US's tresury instruments are worth exactly what people are willing
to
pay for them. If the US enters yet another round of supporting its SS system
by selling treasury bonds to other countries against a falling dollar, it
would only take a few major holders of bonds to dump them on the market and
they
all become nearly worthless.

Politicians (and some economists) can do the dance and the dodge all they
like, offer all sorts of alternate and creative proposals, or (like most
people)
wet themselves while they desperately try to make themselves believe that
they will always have the purchasing power that their SS check gets them now,
--
but the central fact won't go away: You can only have a certain small
percent
of any economic body using goods and services for which they do produce goods
and services, and they can only do it for a short time each, and we have
already gone past that point.

There was a skit once where President Reagan was being interviewed:

"Mr President, can you explain your economic proposals."

"Yes, I can explain it very simply. Picture the entire revenue of the US
government as big blueberry pie. You cut that pie in half. Half of the pie
goes
to pay the military, half of the pie goes to pay for domestic programs, and
half of the pie goes to social security."

"I'm afraid I don't understand, Mr. President."

"OK, let me explain in simpler terms. You take those halves of the pie and
you put them into a big tub. Picture the national debt as a gallon of milk
and inflation as a bag of sugar. You put the milk and sugar on the pie and
you
mix it all around ....."

"But, Mr President, that would just be a big mess."

"Ah .. OK, now you understand it."


James




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