Saturday, December 18, 2004

Social Security Facts and Figures

By 2018 the amount of money going into the Social Security fund will fall below the amount going out.

The only money in the fund now is IOUs. The fund will then have to start cashing in these IOUs and by 2042, these IOUs will run out.

The hole in the fund is estimated to be $24 to $27 trillion over the next 75 years. The only way to fill that hole is to cut benefits or raise taxes or both. That would and should set off an intergenerational war. Reckon our laws regarding euthanasia will change?

The government estimates that those starting to work today can expect a negative return of -0.87% a year on the money they put into Social Security as opposed by a 6.5% increase on contributions to a stock market fund over the next 50 years.

There has never been a 30 year period with negative returns in the market.

The Heritage Foundation estimates that if Americans take 2-4% of their taxable payroll and put it into investments, the funding gap will drop to $7 trillion, a savings of some $20 trillion. The so-called transition cost of this is said to be $1-2 trillion, so this is a pretty good return.

Finally, private savings accounts will mean $91 billion in increases in the savings by Americans each year. Since the total savings by Americans last year was $110 billion, the increased amount available for research, building factories, and other GDP - enhancing activities will be a considerable benefit to our economy.

The opponents of this, mainly Democrats will say it is too risky to do this, but the status quo is much riskier.

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