More truth about Social Security

Discussion in 'Digital Photography' started by Tom Joad, Feb 1, 2005.

  1. Tom Joad

    Tom Joad Guest

    http://www.nytimes.com/2005/02/01/opinion/01krugman.html?pagewanted=print&position=

    "The fight over Social Security is, above all, about what kind of society we
    want to have. But it's also about numbers. And the numbers the privatizers
    use just don't add up.
    Let me inflict some of those numbers on you. Sorry, but this is important.

    Schemes for Social Security privatization, like the one described in the
    2004 Economic Report of the President, invariably assume that investing in
    stocks will yield a high annual rate of return, 6.5 or 7 percent after
    inflation, for at least the next 75 years. Without that assumption, these
    schemes can't deliver on their promises. Yet a rate of return that high is
    mathematically impossible unless the economy grows much faster than anyone
    is now expecting.

    To explain why, I need to talk about stock returns. The yield on a stock
    comes from two components: cash that the company pays out in the form of
    dividends and stock buybacks, and capital gains. Right now, if dividends and
    buybacks were the whole story, the rate of return on stocks would be only 3
    percent.

    To get a 6.5 percent rate of return, you need capital gains: if dividends
    yield 3 percent, stock prices have to rise 3.5 percent per year after
    inflation. That doesn't sound too unreasonable if you're thinking only a few
    years ahead.

    But privatizers need that high rate of return for 75 years or more. And the
    economic assumptions underlying most projections for Social Security make
    that impossible.

    The Social Security projections that say the trust fund will be exhausted by
    2042 assume that economic growth will slow as baby boomers leave the work
    force. The actuaries predict that economic growth, which averaged 3.4
    percent per year over the last 75 years, will average only 1.9 percent over
    the next 75 years.

    In the long run, profits grow at the same rate as the economy. So to get
    that 6.5 percent rate of return, stock prices would have to keep rising
    faster than profits, decade after decade.

    The price-earnings ratio - the value of a company's stock, divided by its
    profits - is widely used to assess whether a stock is overvalued or
    undervalued. Historically, that ratio averaged about 14. Today it's about
    20. Where would it have to go to yield a 6.5 percent rate of return?

    I asked Dean Baker, of the Center for Economic and Policy Research, to help
    me out with that calculation (there are some technical details I won't get
    into). Here's what we found: by 2050, the price-earnings ratio would have to
    rise to about 70. By 2060, it would have to be more than 100.

    In other words, to believe in a privatization-friendly rate of return, you
    have to believe that half a century from now, the average stock will be
    priced like technology stocks at the height of the Internet bubble - and
    that stock prices will nonetheless keep on rising.

    Social Security privatizers usually defend their bullishness by saying that
    stock investors earned high returns in the past. But stocks are much more
    expensive than they used to be, relative to corporate profits; that means
    lower dividends per dollar of share value. And economic growth is expected
    to be slower.

    Which brings us to the privatizers' Catch-22.

    They can rescue their happy vision for stock returns by claiming that the
    Social Security actuaries are vastly underestimating future economic growth.
    But in that case, we don't need to worry about Social Security's future: if
    the economy grows fast enough to generate a rate of return that makes
    privatization work, it will also yield a bonanza of payroll tax revenue that
    will keep the current system sound for generations to come.

    Alternatively, privatizers can unhappily admit that future stock returns
    will be much lower than they have been claiming. But without those high
    returns, the arithmetic of their schemes collapses.

    It really is that stark: any growth projection that would permit the stock
    returns the privatizers need to make their schemes work would put Social
    Security solidly in the black.

    And I suspect that at least some privatizers know that. Mr. Baker has
    devised a test he calls "no economist left behind": he challenges economists
    to make a projection of economic growth, dividends and capital gains that
    will yield a 6.5 percent rate of return over 75 years. Not one economist who
    supports privatization has been willing to take the test.

    But the offer still stands. Ladies and gentlemen, would you care to explain
    your position?"
    Tom Joad, Feb 1, 2005
    #1
    1. Advertising

  2. "Tom Joad" <> wrote in message
    news:...
    > http://www.nytimes.com/2005/02/01/opinion/01krugman.html?pagewanted=print&position=
    >
    > "The fight over Social Security is, above all, about what kind of
    > society we want to have. But it's also about numbers. And the numbers
    > the privatizers use just don't add up.
    > Let me inflict some of those numbers on you. Sorry, but this is
    > important.
    >
    > Schemes for Social Security privatization, like the one described in
    > the 2004 Economic Report of the President, invariably assume that
    > investing in stocks will yield a high annual rate of return, 6.5 or 7
    > percent after inflation, for at least the next 75 years. Without that
    > assumption, these schemes can't deliver on their promises. Yet a rate
    > of return that high is mathematically impossible unless the economy
    > grows much faster than anyone is now expecting.
    >
    > To explain why, I need to talk about stock returns. The yield on a
    > stock comes from two components: cash that the company pays out in the
    > form of dividends and stock buybacks, and capital gains. Right now, if
    > dividends and buybacks were the whole story, the rate of return on
    > stocks would be only 3 percent.
    >
    > To get a 6.5 percent rate of return, you need capital gains: if
    > dividends yield 3 percent, stock prices have to rise 3.5 percent per
    > year after inflation. That doesn't sound too unreasonable if you're
    > thinking only a few years ahead.
    >
    > But privatizers need that high rate of return for 75 years or more.
    > And the economic assumptions underlying most projections for Social
    > Security make that impossible.
    >
    > The Social Security projections that say the trust fund will be
    > exhausted by 2042 assume that economic growth will slow as baby
    > boomers leave the work force. The actuaries predict that economic
    > growth, which averaged 3.4 percent per year over the last 75 years,
    > will average only 1.9 percent over the next 75 years.
    >
    > In the long run, profits grow at the same rate as the economy. So to
    > get that 6.5 percent rate of return, stock prices would have to keep
    > rising faster than profits, decade after decade.
    >
    > The price-earnings ratio - the value of a company's stock, divided by
    > its profits - is widely used to assess whether a stock is overvalued
    > or undervalued. Historically, that ratio averaged about 14. Today it's
    > about 20. Where would it have to go to yield a 6.5 percent rate of
    > return?
    >
    > I asked Dean Baker, of the Center for Economic and Policy Research, to
    > help me out with that calculation (there are some technical details I
    > won't get into). Here's what we found: by 2050, the price-earnings
    > ratio would have to rise to about 70. By 2060, it would have to be
    > more than 100.
    >
    > In other words, to believe in a privatization-friendly rate of return,
    > you have to believe that half a century from now, the average stock
    > will be priced like technology stocks at the height of the Internet
    > bubble - and that stock prices will nonetheless keep on rising.
    >
    > Social Security privatizers usually defend their bullishness by saying
    > that stock investors earned high returns in the past. But stocks are
    > much more expensive than they used to be, relative to corporate
    > profits; that means lower dividends per dollar of share value. And
    > economic growth is expected to be slower.
    >
    > Which brings us to the privatizers' Catch-22.
    >
    > They can rescue their happy vision for stock returns by claiming that
    > the Social Security actuaries are vastly underestimating future
    > economic growth. But in that case, we don't need to worry about Social
    > Security's future: if the economy grows fast enough to generate a rate
    > of return that makes privatization work, it will also yield a bonanza
    > of payroll tax revenue that will keep the current system sound for
    > generations to come.
    >
    > Alternatively, privatizers can unhappily admit that future stock
    > returns will be much lower than they have been claiming. But without
    > those high returns, the arithmetic of their schemes collapses.
    >
    > It really is that stark: any growth projection that would permit the
    > stock returns the privatizers need to make their schemes work would
    > put Social Security solidly in the black.
    >
    > And I suspect that at least some privatizers know that. Mr. Baker has
    > devised a test he calls "no economist left behind": he challenges
    > economists to make a projection of economic growth, dividends and
    > capital gains that will yield a 6.5 percent rate of return over 75
    > years. Not one economist who supports privatization has been willing
    > to take the test.
    >
    > But the offer still stands. Ladies and gentlemen, would you care to
    > explain your position?"
    >
    >


    I don't know why you insist on sending this dribble to this site. You
    obviously can't read and/or understand what you do read as if you were
    capable of reading and understanding things that you read, you would
    know with out any doubt that this site (rec.photo.digital) is for
    discussing digital cameras not a Social Security debate forum. Your
    issue and your thoughts about it are perfectly valid but PLEASE do it
    in the proper forum not this one. Please respect this forums concept and
    purpose and place you political agenda at the forums that probably
    abound in great numbers that are more appropriate for your topic.

    Thanks,

    Ken Miller
    Kenneth Miller, Feb 1, 2005
    #2
    1. Advertising

  3. Tom Joad

    rafe bustin Guest

    On Tue, 01 Feb 2005 05:38:56 GMT, "Kenneth Miller"
    <> wrote:


    >I don't know why you insist on sending this dribble to this site. You
    >obviously can't read and/or understand what you do read as if you were
    >capable of reading and understanding things that you read, you would
    >know with out any doubt that this site (rec.photo.digital) is for
    >discussing digital cameras not a Social Security debate forum. Your
    >issue and your thoughts about it are perfectly valid but PLEASE do it
    >in the proper forum not this one. Please respect this forums concept and
    >purpose and place you political agenda at the forums that probably
    >abound in great numbers that are more appropriate for your topic.



    Umm, Ken?

    The title of the thread is pretty clear.
    How hard is it to simply not read it, if
    it so upsets you?


    rafe b.
    http://www.terrapinphoto.com
    rafe bustin, Feb 1, 2005
    #3
  4. Tom Joad

    C J Campbell Guest

    "rafe bustin" <> wrote in message
    news:...
    >
    > The title of the thread is pretty clear.
    > How hard is it to simply not read it, if
    > it so upsets you?


    Why bother to have forums if you are just going to post whatever you want
    whenever you want? You start getting a lot of this and sooner or later all
    the discussion of photography disappears.

    Besides, avoiding corrosive topics like politics and religion enables us to
    argue about things of real substance, such as Canon vs. Nikon, with a more
    collegial atmosphere.
    C J Campbell, Feb 1, 2005
    #4
  5. Ken,
    Trolls like "Tom Joad" post their kooky views on sites like this because
    they're self-centered assholes.
    Dennis D. Carter
    Dennis D. Carter, Feb 1, 2005
    #5
  6. Tom Joad

    Des Perado Guest

    "Tom Joad" <> wrote in message
    news:...
    >
    > "The fight over Social Security is, above all, about what kind of society
    > we


    This has nothing to do with digital photography, which is where I'm reading
    it. So why don't you take your 6Kb of drivel and stick it up your arse.
    Des Perado, Feb 1, 2005
    #6
  7. Tom Joad

    FredBillie Guest

    << From: "C J Campbell"
    Date: Tue, Feb 1, 2005 12:31 AM
    Message-id: <>


    "rafe bustin" <> wrote in message
    news:...
    >
    > The title of the thread is pretty clear.
    > How hard is it to simply not read it, if
    > it so upsets you?


    Why bother to have forums if you are just going to post whatever you want
    whenever you want? You start getting a lot of this and sooner or later all
    the discussion of photography disappears.

    Besides, avoiding corrosive topics like politics and religion enables us to
    argue about things of real substance, such as Canon vs. Nikon, with a more
    collegial atmosphere.
    >><BR><BR>

    In addition, the Social Security poster ignores the problems he causes people
    that download the NewsGroup articles to read on their computers for cost or
    other reasons. The following post is by an individual who is probably affected
    by the Social Security poster:

    >>>>It seems that there are too many messages sitting in this group - it
    >>>>takes my computer a long time to load them. I have other newsgroups,
    >>>>and everything's fine with them.
    FredBillie, Feb 1, 2005
    #7
  8. Tom Joad

    Anymous Guest

    What about the mice? Its a little know fact, but mice are
    anti-communist. They are slowly eating away at the Social Security.
    As the rodent population grows in the world, more money is needed to
    spend to feed people because mice are eating everything. Hell, theyre
    eating everyones Social Security checks causing constant reissues.
    Government employees are going missing every day, persumably in the
    belly of large packs of mice. The longer the Social Security exists,
    the larger the mouse population will continue to grow. Now really,
    who would perfer to be ruled by mice so that Social Security can
    continue.

    This can all be validated by watching "An American Tail" of coarse.
    Mice are strongly anti-communist and really hate stuff like Social
    Security and Food Stamps.

    On Mon, 31 Jan 2005 20:56:23 -0800, "Tom Joad" <>
    wrote:

    >http://www.nytimes.com/2005/02/01/opinion/01krugman.html?pagewanted=print&position=
    >
    >"The fight over Social Security is, above all, about what kind of society we
    >want to have. But it's also about numbers. And the numbers the privatizers
    >use just don't add up.
    >Let me inflict some of those numbers on you. Sorry, but this is important.
    >
    >Schemes for Social Security privatization, like the one described in the
    >2004 Economic Report of the President, invariably assume that investing in
    >stocks will yield a high annual rate of return, 6.5 or 7 percent after
    >inflation, for at least the next 75 years. Without that assumption, these
    >schemes can't deliver on their promises. Yet a rate of return that high is
    >mathematically impossible unless the economy grows much faster than anyone
    >is now expecting.
    >
    >To explain why, I need to talk about stock returns. The yield on a stock
    >comes from two components: cash that the company pays out in the form of
    >dividends and stock buybacks, and capital gains. Right now, if dividends and
    >buybacks were the whole story, the rate of return on stocks would be only 3
    >percent.
    >
    >To get a 6.5 percent rate of return, you need capital gains: if dividends
    >yield 3 percent, stock prices have to rise 3.5 percent per year after
    >inflation. That doesn't sound too unreasonable if you're thinking only a few
    >years ahead.
    >
    >But privatizers need that high rate of return for 75 years or more. And the
    >economic assumptions underlying most projections for Social Security make
    >that impossible.
    >
    >The Social Security projections that say the trust fund will be exhausted by
    >2042 assume that economic growth will slow as baby boomers leave the work
    >force. The actuaries predict that economic growth, which averaged 3.4
    >percent per year over the last 75 years, will average only 1.9 percent over
    >the next 75 years.
    >
    >In the long run, profits grow at the same rate as the economy. So to get
    >that 6.5 percent rate of return, stock prices would have to keep rising
    >faster than profits, decade after decade.
    >
    >The price-earnings ratio - the value of a company's stock, divided by its
    >profits - is widely used to assess whether a stock is overvalued or
    >undervalued. Historically, that ratio averaged about 14. Today it's about
    >20. Where would it have to go to yield a 6.5 percent rate of return?
    >
    >I asked Dean Baker, of the Center for Economic and Policy Research, to help
    >me out with that calculation (there are some technical details I won't get
    >into). Here's what we found: by 2050, the price-earnings ratio would have to
    >rise to about 70. By 2060, it would have to be more than 100.
    >
    >In other words, to believe in a privatization-friendly rate of return, you
    >have to believe that half a century from now, the average stock will be
    >priced like technology stocks at the height of the Internet bubble - and
    >that stock prices will nonetheless keep on rising.
    >
    >Social Security privatizers usually defend their bullishness by saying that
    >stock investors earned high returns in the past. But stocks are much more
    >expensive than they used to be, relative to corporate profits; that means
    >lower dividends per dollar of share value. And economic growth is expected
    >to be slower.
    >
    >Which brings us to the privatizers' Catch-22.
    >
    >They can rescue their happy vision for stock returns by claiming that the
    >Social Security actuaries are vastly underestimating future economic growth.
    >But in that case, we don't need to worry about Social Security's future: if
    >the economy grows fast enough to generate a rate of return that makes
    >privatization work, it will also yield a bonanza of payroll tax revenue that
    >will keep the current system sound for generations to come.
    >
    >Alternatively, privatizers can unhappily admit that future stock returns
    >will be much lower than they have been claiming. But without those high
    >returns, the arithmetic of their schemes collapses.
    >
    >It really is that stark: any growth projection that would permit the stock
    >returns the privatizers need to make their schemes work would put Social
    >Security solidly in the black.
    >
    >And I suspect that at least some privatizers know that. Mr. Baker has
    >devised a test he calls "no economist left behind": he challenges economists
    >to make a projection of economic growth, dividends and capital gains that
    >will yield a 6.5 percent rate of return over 75 years. Not one economist who
    >supports privatization has been willing to take the test.
    >
    >But the offer still stands. Ladies and gentlemen, would you care to explain
    >your position?"
    >
    Anymous, Feb 1, 2005
    #8
  9. Tom Joad

    Guest

    snip
    >>

    >
    >I don't know why you insist on sending this dribble to this site. You
    >obviously can't read and/or understand what you do read as if you were
    >capable of reading and understanding things that you read, you would
    >know with out any doubt that this site (rec.photo.digital) is for
    >discussing digital cameras not a Social Security debate forum. Your
    >issue and your thoughts about it are perfectly valid but PLEASE do it
    >in the proper forum not this one. Please respect this forums concept and
    >purpose and place you political agenda at the forums that probably
    >abound in great numbers that are more appropriate for your topic.
    >
    >Thanks,
    >
    >Ken Miller
    >

    And you are just as big a pest for quoting the whole body of his
    post..

    --
    A: Maybe because some people are too annoyed by top-posting.
    Q: Why do I not get an answer to my question(s)?
    A: Because it messes up the order in which people normally read text.
    Q: Why is top-posting such a bad thing?
    , Feb 1, 2005
    #9
  10. Tom Joad

    Mike Guest

    "Kenneth Miller" <> wrote in message
    news:QBELd.128230$...
    >
    > "Tom Joad" <> wrote in message
    > news:...
    > >

    http://www.nytimes.com/2005/02/01/opinion/01krugman.html?pagewanted=print&po
    sition=
    > >
    > >
    > >

    >
    > I don't know why you insist on sending this dribble to this site. You
    > obviously can't read and/or understand what you do read as if you were
    > capable of reading and understanding things that you read, you would
    > know with out any doubt that this site (rec.photo.digital) is for
    > discussing digital cameras not a Social Security debate forum. .
    >
    > Thanks,
    >
    > Ken Miller
    >

    And then Ken you and others insist on cross posting your replies to the
    troll, who KNOWS, you will rise ot the bait he has cast upon the waters.
    Not only do you guys cross post your replies you also DON'T edit the OP.
    IF no one replied to the trolls the trolls would go away........sheeeeeeeesh
    Mike, Feb 1, 2005
    #10
  11. In article <>,
    says...
    > Subject: Re: More truth about Social Security
    > From: Anymous <>
    > Newsgroups: soc.culture.usa, rec.photo.digital, rec.video.desktop, alt.woodworking, rec.photo.equipment.35mm
    >
    > What about the mice? Its a little know fact, but mice are
    > anti-communist. They are slowly eating away at the Social Security.
    > As the rodent population grows in the world, more money is needed to
    > spend to feed people because mice are eating everything. Hell, theyre
    > eating everyones Social Security checks causing constant reissues.
    > Government employees are going missing every day, persumably in the
    > belly of large packs of mice. The longer the Social Security exists,
    > the larger the mouse population will continue to grow. Now really,
    > who would perfer to be ruled by mice so that Social Security can
    > continue.
    >
    > This can all be validated by watching "An American Tail" of coarse.
    > Mice are strongly anti-communist and really hate stuff like Social
    > Security and Food Stamps.
    >


    The answer is clear then, invest your own money in Warfin mouse baits.
    --
    _________________________
    Chris Phillipo - Cape Breton, Nova Scotia
    http://www.ramsays-online.com
    Chris Phillipo, Feb 1, 2005
    #11
  12. Tom Joad

    BandHPhoto Guest

    <I don't know why you insist on sending this dribble to this site. You
    obviously can't read and/or understand what you do read as if you were
    capable of reading and understanding things that you read>

    Meaning no disrespect but considering the reason for your ire, you could have
    trimmed some of the original post before attaching your reply.

    Just a PERSONAL observation.
    - henry
    BandHPhoto, Feb 1, 2005
    #12
    1. Advertising

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