Articles and Excerpts Related to Social Security





Editor's Note: These articles were published at TomPaine.com in 2000.

  • Dean Baker & Mark Weisbrot: Privatizing Social Security ... A Cure Worse than the Cold

  • Dean Baker & Mark Weisbrot: The Numbers Game

  • Dean Baker & Mark Weisbrot: A Social Security Primer

  • Max Skidmore: Viewing Social Security Calmly

  • Mark Weisbrot: Bush and Gore Are Misleading the Public About Social Security

  • Dean Baker: How John McCain Misleads the Public About Social Security


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    Dean Baker: How John McCain Misleads the Public About Social Security

    Dean Baker, at TomPaine.com (2000):

    John McCain has been riding a tide of media coverage portraying him as a straight shooter with the character to be honest with the American people - coverage that helped him to victory in New Hampshire, Michigan, and elsewhere. In some ways, though, McCain is looking just like the regular politicians he decries. True, few of us these days expect office seekers to have a great deal of integrity. But there are still limits as to how low we expect them to go in search of votes. On the issue of Social Security, John McCain is coming in under that bar.

    The most important issue between McCain and his main opponent for the Republican nomination, George W. Bush, has been Bush's support for a large tax cut. Bush wants to cut taxes by more than $1.0 trillion over the next decade, while McCain argues that the nation can't afford a tax cut of this size.

    There are many good reasons for opposing Bush's tax cut plan. For example, many people consider providing universal health care insurance or reducing child poverty more important goals than giving tax breaks to the nation's richest people. But Senator McCain has not chosen to make such arguments.

    Instead, Senator McCain insists that he opposes Bush's tax cut because he wants to save Social Security. In a television ad he ran before the New Hampshire primary, he actually claimed that he wanted to save Social Security for America's "greatest generation."

    Saving Social Security for America's greatest generation? It's time for a little arithmetic. The "greatest generation" usually refers to the generation that fought and won World War II. The very youngest of this group would have been age 17 in 1945. This means that they are at least age 72 today, and should be collecting their Social Security by now.

    Social Security is currently running a huge surplus. The annual surplus is projected to be $154 billion this year, and to continue growing in size for more than a decade. According to the Congressional Budget Office, the surplus is projected to grow to be $295 billion per year by 2010, the last year for which it makes projections. In addition to this huge annual surplus, the Social Security trust fund will have accumulated more than $3.2 trillion in government bonds that it can draw on.

    Okay, let's check the score here. In the year 2010, the youngest members of the greatest generation will be age 82. Most of the survivors from this generation will be in their late eighties or even nineties. At that point, even without the help of Senator McCain, the Social Security fund will be taking in nearly $300 billion more than it pays out each year. It will have more than $3 trillion sitting in the bank that it can draw on, if it were to start running deficits. Senator McCain wants to save this program for the America's greatest generation? That's a bit like saying he wants to help Bill Gates pay for his groceries.

    The fact is that Social Security, according to any conceivable scenario, is completely solvent for several decades into the future. Anyone who picks up the Social Security trustees report or any other document describing the program's finances knows this. It is possible that the program will have a shortfall at some distant date, but we have plenty of time to worry about a future that we can't even clearly envision at this point.

    The more immediate issue is that there is absolutely no reason that America's greatest generation should ever have to worry about getting their Social Security check. Senator McCain should be able to run for President without scaring the elderly about the safety of their Social Security checks.

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    Dean Baker & Mark Weisbrot: Privatizing Social Security ... A Cure Worse than the Cold

    Editor's Note:The following is an excerpt from the Introduction to Social Security: The Phony Crisis (2000) . In this selection, Baker and Weisbrot take on the arguments advanced by advocates of"privatization." As the authors explain, such a plan could be the beginning of the end of Social Security.

    Privatization fever has now spread to Social Security, fueled by the fastest run-up in stock prices in U.S. economic history. Advocates have crafted their appeal to the growing segment of the public that has at least some money invested in stocks, mostly in 401(k) retirement plans. This is still a minority of the population -- about 41 percent of households at latest count. And ownership is highly concentrated: the typical stock-owning household has only about $14,000, with millions holding only a very small proportion of their assets in stocks. At the other end of the distribution, about 5 percent of households hold the majority of stocks.

    Nonetheless there has been a rapid expansion in stock ownership, primarily through stock mutual funds, over the last decade. This growth has created a base of support for the idea that people could be better off if their Social Security payroll taxes were invested privately. According to various popular presentations of this idea, everyone could be a millionaire upon retirement.

    And indeed they could, if stocks were to continue to double every three years. But there are limits to such speculative bubbles. The reality is that the very run-up in stock values that has placed privatization on the political agenda makes even the relatively modest returns of previous decades less likely in future years. Furthermore, due partly to a slowing of population growth and partly to a (largely unexplained) slowdown in the growth of productivity, the economy is not projected to grow as fast as it did previously. But neither the privatizers nor even the actuaries who made the projections for the recent Advisory Council on Social Security have taken these facts into account when projecting the rate of return for equities. This omission is strange, because it is only under the conditions of the very slow growth forecast that there is even a small projected shortfall in Social Security's revenues. But if the economy is going to grow at less than half the rate of the past seventy-five years, as the Social Security trustees predict, then the return on equities cannot maintain its past performance.

    Privatizers want to win the debate before the public discovers that stock prices can go down as well as up

    Over the past seventy-five years, the stock market has averaged a real (after-inflation) annual return of 7 percent. This is a healthy rate, which would double an investor's money about every ten years. Privatizers argue that the extra risks of the market smooth out over a long period of time, making the market the best place for retirement savings. And they complain that employees whose savings are primarily diverted to Social Security are unfairly prevented from cashing in on these higher returns. During the stock market's turbulence in 1997 and again in 1998, millions of small investors showed their faith in these arguments by buying during the dips and pushing the market back up."I'm in it for the long haul" was a typical response by mutual fund owners to the market's wild ride.

    But it is precisely the long haul that one can actually say something about. In the short run, all kinds of speculative bubbles are possible. Psychological factors-most obviously, the expectation of either higher earnings in the future or simply higher stock prices-can drive the stock market to seemingly unlimited heights. But over a long period of time -- certainly well within the enormously long seventy-five year planning horizon for the Social Security system -- the price of stocks is limited by the earnings of their underlying assets. That is, stocks are ultimately valuable because the companies they represent earn profits. These profits either are distributed to shareholders in the form of dividends or, if reinvested in the company, form the basis for shareholders' capital gains.

    In the short run, there is no necessary relation between the price of stock shares and a company's profits: investors will continue buying so long as they think the price will be higher next year. And it will be higher as long as enough people believe that it will. But this process has an upper limit, as the Japanese learned all too well in 1990. At that time the Nikkei index of Japanese stocks had reached 38,712; it now stands below 14,000.

    No one can safely predict when the stock market will reach its upper limit-anyone with such forecasting acumen could get rich overnight. But there are certain things we can pretty much rule out when we look at a long enough period of time. For example, the price-to-earnings ratios of stocks in the United States are now at near-record levels of 33 to 1. If prices continue to rise faster than profits, this ratio could go higher still. But would investors still hold stocks if it reached 234 to 1? It strains the imagination that they would, yet these are in fact the consequences of assuming that the market will continue to provide a 7 percent return. As noted above, returns on stocks depend on profits, and the growth of profits is proportional to the growth of the economy. If the economy grows at half its past rate, which is the assumption underlying the dire Social Security forecasts, then profits cannot grow as fast as they used to. And so, if we are to accept the projections of a 7 percent rate of return, we must also believe that the price of stocks will rise meteorically in relation to earnings. The arithmetic tells us that we would see a price-to-earnings ratio of 234 to 1 by 2055.

    Undoubtedly the bubble would burst long before the price of stocks flew this far away from the earnings potential of the stocks' underlying assets. So we can safely conclude that the forecast of the privatizers (and of the Advisory Council on Social Security) of a 7 percent real rate of return on equities is, for all practical purposes, impossible. It turns out that the rate of return that is compatible with their projected economic growth is about 3.5 percent. Then there are the quite substantial costs of administration and brokerage fees that the current system avoids but that a private system couldn't. Adding these in knocks the return to privatized accounts down another percentage point, to 2.5 percent.

    And this is still a very charitable evaluation of privatization. Its advocates would like to maintain the mandatory character of Social Security while channeling this money into private accounts. They could hardly choose otherwise. Most households have not taken advantage of existing tax breaks for private savings. Of the 68 million taxpayers with adjusted gross incomes of $30,000 or less last year, fewer than 3 percent put money in an individual retirement account. Forcing people to save and invest their money in privatized accounts raises a host of interesting but not easily resolvable problems. The government will have to certify certain mutual funds for participation in this system. It will have to protect against fraud and other forms of abuse. There will be a lot of political pressure to bail out funds that go bankrupt. And will the government prevent people from borrowing against their forced savings? How will it enforce the conversion of these savings into a stream of retirement income?

    Even if all these problems could be resolved at reasonable expense, and without creating an enormous, hateful bureaucracy, the big question remains: what to do about all the people who have been promised Social Security payments over the next four decades? That's how long it will take for the first cohort of private Social Security investors to be able to retire on the returns from their individual accounts. In the meantime, while investors' money is going into these private accounts, the system cannot do much for the tens of millions of beneficiaries whose checks are due. That means a major tax increase, enough to guarantee a negative return for the first generations of privatized savers.

    A number of other dubious arguments advanced in favor of privatization are addressed in Chapter Five of Social Security: The Phony Crisis. These arguments have been put forward with increasing urgency as the privatizers struggle to achieve their goals before the public discovers that stock prices can go down as well as up ....

    Dean Baker is co-director of the Center for Economic and Policy Research, a senior research fellow at the Century Foundation and a research associate at the Economic Policy Institute. Mark Weisbrot is co-director of the Center for Economic and Policy Research and a research associate at the Economic Policy Institute.

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    Dean Baker & Mark Weisbrot: The Numbers Game

    Editor's Note:The following is an excerpt from the Introduction to Social Security: The Phony Crisis. Baker and Weisbrot are affiliated with several research groups: The Century Foundation in New York; the Center for Ecnomic and Policy Research in Washington, D.C., and the Economic Policy Institute (EPI).

    We have a chance, said President Clinton, to"fix the roof while the sun is still shining." He was talking about dealing with Social Security immediately, while the economy is growing and the federal budget is balanced. The audience was a regional conference on Social Security, in Kansas City, that the White House had helped bring together.

    The roof analogy is illuminating, but we can make it more accurate. Imagine that it's not going to rain for more than thirty years. And the rain, when it does arrive (and it might not), will be pretty light. And imagine that the average household will have a lot more income for roof repair by the time the rain approaches.

    Now add this: most of the people who say they want to fix the roof actually want to knock holes in it.

    This is the situation facing Social Security, and it is well known to those who have looked at the numbers. The program will take in enough revenue to keep all of its promises for over thirty years, without any changes at all. Thirty years is a long time-it's hard to think of any other program that can claim to be secure for that long. Furthermore, the forecast of a shortfall in 2034 is based on the economy limping along at less than a 1.7 percent annual rate of growth-about half the rate of the previous three decades. If the economy were to grow at 1998's rate, for example, the system would never run short of money.

    But even if the dismal growth forecasts turn out to be true, and the program eventually runs a deficit, it's not exactly the end of the world. For one thing, the Social Security system would be far from"broke." While it would indeed be short of revenue to maintain promised benefits, it would still be able to pay retirees higher real benefits than they are receiving today. And the nation has managed obligations of this size in the past: the financing gap would be roughly equal to the amount by which we increased military spending between 1976 and 1986 (a period in which we were not, incidentally, at war).

    The program has promised, and historically delivered, a benefit that rises with wages in the economy. In order to maintain this commitment, we may have to increase the system's revenues at some point. Would this place an undue burden on the post-2034 labor force? Hardly. Even if we were to increase payroll taxes to cover the shortfall, the added cost would barely dent 2034's average real wage, which will be over 30 percent higher than it is today. It takes a great deal of imagination to perceive this as some sort of highway robbery by tomorrow's senior citizens against the youth of today.

    The simple truth is that our economy is generating more than enough income to provide a rising standard of living for future generations while meeting our commitments to Social Security. That's true even at the terribly slow rates of growth projected for the future.

    The strength of the economy isn't perhaps as obvious as it should be, mainly because the majority of employees haven't been sharing in the gains from economic growth. For more than twenty years, most wage and salary earners have actually seen a real decline in their pay. So when people hear that future generations will be able to meet Social Security's obligations out of a much higher income, they don't believe it.

    The only real threat to Social Security comes from political assaults by would-be"reformers."

    To reclaim the majority's share of the economic pie is the real" challenge and opportunity of the twenty-first century," to paraphrase another of President Clinton's favorite lines. Yet the question of income distribution has been removed from the political agenda. Instead we are told that we can no longer afford our not-so-generous social safety net for the elderly. It is one of the greatest triumphs in the history of public relations to have transformed this prolonged episode of class warfare into an intergenerational conflict.

    Mark Twain once said that a lie can get halfway around the world before the truth even gets its shoes on, and it's hard to find a more compelling example than the lie about Social Security's finances. Despite the fact that none of the numbers cited here are a matter of dispute, the public has been overwhelmingly convinced that Social Security is in deep trouble. According to a February 1998 poll by Peter Hart Research, 60 percent of nonretired Americans expect Social Security to pay much lower benefits or no benefits at all when they retire. The proportion is even higher, at 72 percent, for people aged 18-34.

    Ironically, the only real threat to Social Security comes not from any fiscal or demographic constraints but from the political assaults on the program by would-be"reformers." If not for these attacks, the probability that Social Security"will not be there" when anyone who is alive today retires would be about the same as the odds that the U.S. government will not be there. The latter event is, of course, a possibility, but not enough of a likelihood that most people would plan their retirement around it.

    Even noted economists Paul Krugman and Lester Thurow fell for the"entitlements trick."

    Confusion over these issues is not confined to the general public: it has infiltrated the upper reaches of the economics profession as well. Lester Thurow is a former dean of MIT's Sloan School of Management, arguably one of the nation's best writers on economic topics. He is also to the left of most economists with regard to issues concerning the appropriate size and scope of government and its intervention in the economy. Yet in an essay in the New York Times Magazine he argued that the nation's growing elderly population constituted"a new . . . revolutionary class, one that is bringing down the social welfare state, destroying government finances, altering the distribution of purchasing power and threatening the investments that all societies need to make to have a successful future."

    Even Paul Krugman, one of the nation's foremost economists and winner of the John Bates Clark award (for the best economist under forty years of age), fell victim to these popular notions of demographic determinism. In a favorable review of Peter G. Peterson's latest book, Will America Grow Up Before It Grows Old?, he endorsed the volume's thesis that major reform of the Social Security system was necessary to avoid an unresolvable budget crisis twenty to thirty years from now."The budgetary effects of this demographic tidal wave are straightforward to compute, but so huge as to defy comprehension," he wrote. Krugman later admitted, though, that he"went overboard in supporting Pete Peterson's position on entitlements and demographics. . . . I broke my own rule that you should always check an argument both with a back-of-the-envelope calculation and by consulting with the real experts, no matter how plausible and reasonable its author sounds."

    Both Krugman and Thurow fell for the"entitlements trick," a device deployed with great success by advocacy groups like Peterson's Concord Coalition. The idea is to lump Social Security and Medicare together as"entitlements for the elderly." On the basis of the last thirty years of health care inflation, it is easy to project explosive growth in future Medicare spending. The federal budget deficit therefore also explodes, and the whole economy goes down the tubes.

    But Social Security and Medicare are separate programs, funded by separate taxes. (There is a connection in that Medicare's Part A, which covers hospital insurance, was modeled after Social Security in the sense that it is a social insurance program for the elderly.) Most people probably do not distinguish between the part of their payroll tax that goes to Social Security and the part that goes to Medicare. As a political matter, for example, a large increase in the payroll tax for one program would make people less willing to pay more for the other. But the two programs are financed separately, and they face very different financial problems, with different causes. Although Social Security is not facing any serious financial difficulties, Medicare will run into serious trouble within the next decade if medical care inflation continues at its historic rates.

    Because the fees paid by Medicare to health care providers are overwhelmingly determined in the private health care system, Medicare's financial problems have been driven by decades of double-digit inflation in the private sector. The program could be abolished entirely, but that would not avert the economic disaster thirty-five years from now that emerges from a simple projection of past increases in health care spending into the future. In short, past rates of increase in health care spending are economically unsustainable, regardless of what happens to Medicare. These projections make a good argument for health care reform, but they say little about"entitlements for the elderly," and nothing at all about Social Security.

    The generational warriors have shunted aside these basic facts, preferring instead to view Medicare's real financing problems, like Social Security's imagined problems, through a fantastic prism of demographic determinism. Peter Peterson conjures up frightening dystopian visions of"a nation of Floridas," with hordes of gray-haired baby boomers jetting around the country on senior citizen travel discounts, laying waste to the potential savings of Generations X, Y, and Z. The media have been influenced by these warnings, and we are regularly informed, as in the New York Times, that"Social Security faces a crisis early next century when the 76 million in the baby boom generation start retiring and putting a strain on the system."

    But the baby boomers begin retiring in 2008, and at that time Social Security will still be running an annual surplus of about $150 billion (in constant 1999 dollars) per year. In fact the last of the baby boomers will already be retired by the time the system suffers its projected shortfall, even assuming the slow growth described above, at the end of 2034. It may come as a surprise to many readers that the main reason for this projected shortfall in the second half of the seventy-five year planning period is not the retirement of the baby boom generation. Actuarially, the main reason is that people are living longer.

    Another example of how the truth of these matters can be so easily turned upside down is the belief of millions of people that Social Security has actually contributed to the federal budget deficits and the national debt. In fact the opposite is true: the Social Security trust fund actually loans its annual surplus, now running at over $100 billion, to the federal government. The surplus, which has been accumulating since 1983, when the payroll tax was increased, will help finance the baby boomers' retirement, which is why the program will not have any trouble meeting its obligations while the boomers are retiring.

    So much for the"demographic time bomb" with which the system's"reformers" have been threatening us. With a few selected facts dressed up as surprises --such as a rising elderly population or a declining ratio of workers to retirees -- and an oversized dose of verbal and accounting trickery, opponents of Social Security have been able to create the impression that the program is demographically unsustainable. This impression is false, as would be any economic projections that failed to take into account the other side of the equation, namely, the growth of the economy....

    Dean Baker is co-director of the Center for Economic and Policy Research, a senior research fellow at the Century Foundation and a research associate at the Economic Policy Institute. Mark Weisbrot is co-director of the Center for Economic and Policy Research and a research associate at the Economic Policy Institute.


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    Mark Weisbrot: Bush and Gore Are Misleading the Public About Social Security

    Mark Weisbrot is the co-director of the Center for Economic and Policy Research in Washington, D.C. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

    George W. Bush has a secret plan to save to Social Security. He is vague about the details, but the main point is that everyone is going to retire rich and happy if we just let him privatize a portion of the Social Security program.

    Voters may choose not to take this one on faith. There are times when the details may not matter much, but this is a case where the devil really is all over the details. As congressional Republicans have found in recent years, it is very difficult to design a privatized system to replace Social Security.

    The first problem is the administrative cost. One hundred fifty million individual accounts cost far more to administer than a single centralized system like Social Security. It costs less than 0.8 percent of annual tax revenue to run the Social Security system. By comparison, the administrative costs of the individual account systems in Britain and Chile, which the privatizers hold up as models, are between 15 and 20 percent of annual revenue. If the U.S. system were run the same way, it would mean $60 to $80 billion pulled out of workers' retirement accounts each year, and placed into the pockets of the Wall Street brokerage houses and banks.

    The second basic problem with individual accounts is that they can't guarantee workers a secure income. As anyone who has followed the Nasdaq in recent months knows, markets do not always go up. Workers who are lucky enough to retire on a market upswing may do well with their individual accounts. But workers who retire on a bad day will end up with much less money than they had expected. If the point of Social Security is provide workers with a core retirement income that is absolutely certain, individual accounts won't do the trick.

    The third problem with the Bush plan is that it is making impossible assumptions about the returns that people can expect from stocks.

    The main reason Social Security is projected to face problems in the distant future is that projections show that the economy will grow much slower in the future in than in the past. In fact, the Social Security trustees' projections assume that the economy will grow less than half as fast over the next seventy-five years as it did over past seventy-five years. If the economy kept growing at the same rate as in the past, the program would be fine for at least seventy years into the future.

    Remarkably, the Bush plan assumes that the stock market will produce the same high rates of return in a slow-growing economy as it did in the more rapidly growing economy of the past. This assumption defies basic logic, and none of Mr. Bush's economic advisors has been able to show how it could be possible.

    The stock market also remains grossly overvalued, even with the recent" correction" in the Nasdaq. Price-to-earnings ratios -- a measure of how much stocks cost relative to the profits of the companies they represent -- are still about twice their historic average. In the short run, the price of stocks can be determined by psychology: people believe that stocks are going up, so they buy them, and the buying drives prices up. But this kind of a speculative run-up cannot last indefinitely. Over the long run -- and for Social Security that means the Trustees' seventy-five year planning period -- stock prices must reflect the real earning potential of real companies. This is another reason why no one -- including Bush's economic advisors -- can tell a coherent story about how they expect the stock market to deliver the goods that they are promising over the next few decades.

    There is another problem with Mr. Bush's plan: He is proposing to divert some amount -- probably 2 percent -- of payroll (about $75 billion dollars this year) from the current Social Security program to individual accounts. But this is money that currently goes to retirees, surviving spouses, and other beneficiaries. So he has to find a way to replace this money, if he is not going to cut benefits.

    One way to do this would be to take the money from projected federal government surpluses. This could conceivably take care of the problem for about the next fifteen years, but that would leave no money to augment other programs, such as health care and education. It is therefore doubly dishonest for Mr. Bush to claim, as he does, that he is"saving" Social Security from insolvency. He is in fact creating new financial problems for the program, and even if they turn out to be solvable, it will be at the expense of the federal treasury and other programs.

    The other part of the dishonesty is unfortunately shared by many Democrats -- namely the whole myth that Social Security needs to be"saved." If not for their complicity, we would probably never have reached this sorry state of affairs, where a presidential candidate can actually try to run on a platform that would undermine America's most successful and popular anti-poverty program.

    As anyone who has looked at the numbers knows, Social Security is financially sound for as far into the future as we would ever want to worry about. Even with the Trustees' gloomy growth projections, which are the basis for this whole discussion, the program can pay all promised benefits for the next thirty-seven years -- without any changes whatsoever.

    That really should be the end of the story. We don't have much of an idea what the world will look like in thirty-seven years, and economists can hardly forecast the federal budget surplus a few years out without embarrassment. Projections for 2050 or 2075 might as well be read from Tarot cards, for all the good they are going to do.

    For those who wish to take such projections seriously, there is still no problem that anyone should be losing sleep over. The Trustees' projections show a shortfall of well under 1 percent of our income over the whole seventy-five year period. So the worst that could happen is that people making 50 or 60 percent more than the average wage-earner of today might have to pay that little bit more in taxes to support their parents and grandparents in their old age. We doubt that they will complain.

    But in any case, it will be their decision -- not ours -- to make. The shortfall that might occur in the far off, hazy future is due to the longer life spans that future generations are expected to enjoy. (Contrary to popular mythology, it is not a problem of retiring the baby boomers, the last of whom will turn sixty-seven in 2031.) If people are indeed living longer, they will have to choose how much of their longer lives they want to spend in retirement, and how they want to pay for it.

    The generations of the future will have many opportunities to make these retirement decisions for themselves, and to adjust Social Security's funding and benefits accordingly. It is a bit presumptuous, to put it politely, for us to pretend that we are making the rules for the next seventy-five years.

    Vice President Gore has gone along with the farce and offered his own plan to"save" Social Security. In doing so, he has added more smoke and mirrors to the show. He now pretends that we need to use Social Security's surplus funds to pay off the national debt. There is no defensible economic argument for doing this, and it certainly won't affect Social Security one way or another. The Social Security program loans its surplus funds to the Treasury each year, and receives bonds in return. These bonds are as good as any held by other investors. Whether the government uses the money it borrows from Social Security to pay down the national debt, or spends it on other programs, Social Security's finances remain the same.

    By relying on false arguments in this debate, Gore's defense of Social Security is much weaker than it should be. And by pretending that the program needs to be"fixed," he undermines confidence in the system and makes it more vulnerable to benefit cuts, or even partial privatization if Bush should win the election.

    Social Security keeps half of our elderly above the poverty line, and provides more life insurance than the whole private life insurance industry. It is much more than a retirement program -- it is a commitment across generations to guarantee a safety net for those whose contributions to our economy have raised the standard of living for everyone. It is much too important to be put at risk by the presidential ambitions of any candidate.


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    Dean Baker & Mark Weisbrot: A Social Security Primer

    Editor's Note:The following is a selection from the Introduction to Social Security: The Phony Crisis, by Dean Baker & Mark Weisbrot.

    Social Security is our largest and most successful antipoverty program, keeping about half of the nation's senior citizens from falling below the official poverty line. In 1959, the poverty rate among the elderly was more than 35 percent; by 1970, it was twice the rate of that for the general population. Largely as a result of the Social Security program, it has since fallen to 10.8 percent, or slightly less than that for the general population. For two-thirds of the elderly, Social Security makes up the majority of their income; for the poorest 16 percent, it is their only source of income.

    Social Security provides about $12 trillion worth of life insurance, more than that provided by the entire private life insurance industry. The program's 44 million beneficiaries today include 7 million survivors of deceased workers, about 1.4 million of whom are children. Some 5.5 million people receive disability benefits, including not only disabled workers but also their dependents. For a typical employee, the value of the insurance provided by the program would be more than $200,000 for disability and about $300,000 for survivors insurance.

    The coverage of the program is nearly universal -- about 95 percent of senior citizens either are receiving benefits or will be eligible to receive them upon retirement. For a society that wants to ensure some minimum standard of living for its elderly, this is an important achievement in itself. But it also allows for other accomplishments that would be difficult or impossible to replicate in the private sector. For example, Social Security provides an inflation-proof, guaranteed annuity from the time of retirement for the rest of the beneficiary's life. The cost of retirement, survivors, and disability insurance does not depend on the individual's health or other risk factors. And the benefits are portable from job to job, unlike many employer-sponsored pension plans.

    The ethic of social insurance says that"we are all in this together."

    The success of Social Security also owes much to the superior economic efficiency of social insurance as a means of providing core retirement income. The program's administrative costs are a small fraction of the private alternatives: they amount to less than 1 percent of payout as opposed to 12-14 percent for the private life insurance industry. On these strictly economic grounds alone, the case for Social Security is strong.

    But social insurance also embodies a different ethic and a different conception of the relation between the individual and society. The ethic is a solidaristic one, which is different from either self-interest or altruism. It transcends this dichotomy in favor of a collective self-interest that promotes the advancement of everyone.

    Most of us will grow old and will, either before or during that time, experience health problems or reduced capacity for work. The ethic of social insurance says that"we are all in this together" and that it is in our collective and individual interest to pitch in and provide for these eventualities and risks. We can contribute when we are relatively young, healthy, and working, and draw benefits when we are not. Some will draw a luckier number in the genetic lottery or inherit wealth or even be more successful or healthy or live longer by virtue of their own efforts or wisdom; but this is no reason to deny the necessities of life to anyone else, any more than we would want our local fire department to ignore calls from the poor, or even from those whose fires were caused by their own carelessness.

    The case for social insurance is also grounded in a view of society that differs considerably from the agglomeration of atomized individuals, each maximizing his or her own utility, that forms the foundation of contemporary neoclassical microeconomics. In this broader context, the national product is seen more as a social product, which requires the efforts and cooperation of all who work. Market outcomes are not necessarily fair or just, nor should they determine one's fate, especially in times of hardship....

    Dean Baker is a senior research fellow at the Century Foundation and the Preamble Center and a research associate at the Economic Policy Institute. Mark Weisbrot is research director at the Preamble Center and a research associate at the Economic Policy Institute.


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    Max Skidmore: Viewing Social Security Calmly

    Max Skidmore is a political science prof. at the University of Missouri- Kansas City and the author of Social Security and Its Enemies.

    "It ain't what people don't know that's so dangerous, it's what they know -- that just ain't so," said Will Rogers. That covers Social Security. Almost everything the public hears today about the program is wrong.

    The public"knows" that baby boomer retirement will bankrupt the trust funds. As a matter of fact, the trust funds are unlikely ever to run out of money. When the boomers retire in 2030, about 44 percent of the population will be in the work force. True, the work force today is slightly larger and has 46 percent of the population, but during the 1960s -- largely because few women worked -- the ratio was much worse. Only 37 percent were in the work force, yet everything was fine.

    The public"knows" that the government has taken Social Security's money and used it for other purposes. As a matter of fact, the funds by law are invested in government bonds. These mature regularly, and pay interest back into the trust funds. If the government had not borrowed from the trust funds during the 1980s when deficits were soaring, it would have sold bonds to private investors such as Arab oil sheiks and Japanese industrialists. The money would still have to be paid back, but would be flowing out of the country instead of back to the American people.

    Much of the concern results from the intermediate projections of Social Security's Trustees. For years they reported that the trust funds would be exhausted in 2029. Their 1998 report jumped the dreaded date three years later, to 2032. The 1999 report put it later yet, 2034. This year, the report says 2037. The public has been led to believe that these dates are definite, even though they obviously change and even though the Trustees themselves caution that they are"estimates" that"are not intended to be exact predictions of the future status of the OASDI program."

    The Trustees also issue"low cost" projections calling for no trouble -- ever. But the public hears nothing of these. How many know that from the time of the 1983 reforms until the 1990s, the intermediate projections called for a surplus indefinitely?

    What happened to that surplus? The Trustees admit that the trust funds have performed even better than they had predicted in the 1980s. The surplus vanished, not for any economic or demographic reason, but simply because the Trustees changed to an excessively conservative method of calculation. If the economy performs in the future as well as it has through American history, there will be no difficulty. The reports now assume, however, that during the next seventy-five years, the best year for the American economy will be worse than the average year of the past. These are the shaky assumptions indeed, but they have convinced both journalists and policy makers that Social Security needs"saving."

    Public discussion has been saturated by a multi-million dollar propaganda campaign for"reforms" that would dismantle a highly efficient system, funnel billions of dollars in commissions to brokers and investment firms, and create enormous risk. Late in 1997, I debated Michael Tanner from the Cato Institute. Cato, I said, had spent $2 million for propaganda designed to undermine public confidence in Social Security. Tanner responded smugly -- but honestly -- that it was $3 million. The media have reported press releases from Peter Peterson's Concord Coalition as though they were legitimate news items; Peterson is an investment banker, and an anti-Social Security zealot.

    The campaign has succeeded in closing off public discussion. The media report much hand wringing about how to"save" Social Security. It would appear to be bad form to question whether the system needs more than minor tinkering. It seems equally in poor taste to consider what actually has happened in privatized programs. The practice is rather to praise them as models.

    In the real world, the Wall Street Journal reveals that Britain's partially-privatized system has been a disaster. Huge numbers of citizens who opted out of the public system discovered their benefits to be only about a quarter of what they would have been if they had left their social security alone. The much-touted Chilean program rakes off enormous administrative fees, fails to cover large numbers who simply don't participate, and recently has faced serious shortfalls. Social Security, by contrast, operates more efficiently than any other system in the world.

    Privatizers all along have concealed Social Security's true range of benefits. They generally ignore both disability protection and protection for survivors. To duplicate Social Security's disability and life-insurance features in the private market for the average worker would require policies valued at nearly $600,000. Advocates of privatization fail to factor this cost into their calculations, or to mention that putting Social Security taxes into private retirement schemes would eliminate Medicare. Instead, they offer false and misleading calculations regarding"return on investment," ranging from 2 percent downward.

    Even the retirement benefits would not be what privatizers promise. Employers in this age of downsizing would be unlikely to add their match to the employee's salary if they were not required to do so, yet the propaganda usually assumes the employee would have that amount to invest. Social Security benefits are indexed to inflation; private investments are not. Social Security pays benefits to a spouse; private investments do not.

    It is sad to see a major contender for the presidency recommending a radical and dangerous revision to the world's most successful income-maintenance program. It is worse to see him praised for his"boldness." In truth, George W. Bush has surrendered to the privatizers. True, two Democratic senators have endorsed his notion of private accounts, but they are hardly representative. Senator Moynihan has long been a gadfly rather than a legislative craftsman, and Senator Kerrey's erratic views on Social Security owe more to Peter Peterson's Concord Coalition than to serious policy analysis.

    Bush refuses to give details about his plan. Would it require benefit cuts? His answer reveals his depth of understanding."Maybe, maybe not," he says. Two things, though, are clear. First, he would introduce an element of risk into the system. Second, he would drain money away from Social Security, leaving less available to pay benefits. Thus, Bush's plan could actually make trouble for Social Security where none now exists.

    Social Security provides enormous -- and often overlooked -- benefits to the whole population, not merely to retirees. Workers can count on protection for their dependents and against disability, and no longer is it common to have to support elderly relatives.

    What program could better support family values? Social Security benefits wives who have not worked outside the home, widows, and children of deceased workers along with caregiving parents.

    Americans -- including George W. Bush -- should remember that we once did have a completely privatized system of retirement. It became a disaster. That's why we now have Social Security.


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    John H. Lederer - 2/27/2005

    "The problem is that you are reifying money, treating it as if it had objective existence when it is merely a consensual illusion."

    Do you think Ponzi could have avoided prison had his lawyer explained this to the jury?


    John H. Lederer - 2/27/2005

    "The problem is that you are reifying money, treating it as if it had objective existence when it is merely a consensual illusion."

    Do you think Ponzi could have avoided prison had his lawyer explained this to the jury?


    John H. Lederer - 2/27/2005

    "The problem is that you are reifying money, treating it as if it had objective existence when it is merely a consensual illusion."

    Do you think Ponzi could have avoided prison had his lawyer explained this to the jury?


    John H. Lederer - 2/27/2005

    "The problem is that you are reifying money, treating it as if it had objective existence when it is merely a consensual illusion."

    Do you think Ponzi could have avoided prison had his lawyer explained this to the jury?


    Andrew D. Todd - 2/9/2005

    The problem is that you are reifying money, treating it as if it had objective existence when it is merely a consensual illusion. A dollar bill is not capable of driving a truck or whatever. It is only worth something if a human views it as a fair exchange for work. For example, the Reichsmark which would have bought something in 1917 was worthless in 1923-- and it was the same piece of paper. The difference was mostly a matter of cumulative war-weariness in the face of defeat. The hyperinflation was the economic equivalent of a draft riot. If you prefer, substitute Confederate dollars for Reichsmarks, and use 1862 and and 1865 as your dates. During the German hyperinflation, the middle-class had their savings in Reichsmark-denominated forms such as bonds. A big firm such as Krupp would issue bonds, but shares would be confined to a small group. The baronial industrialist of the time made a sharp distinction between borrowing money, and surrendering, even in part, his right to command. The result of the hyperinflation was that the firm technically redeemed all its bonds but actually repudiated its obligations. The middle class found its savings wiped out.

    By the same token, a factory is worthless unless people want to buy whatever that factory makes. In the case of the 1990's telecom boom, investors' money was actually used to pay crews who were actually digging ditches and actually putting optical fibers in them. The only difficulty was that, through certain miscalculations, something like twenty different firms built national networks, each of which would have been sufficient to supply the total long-distance communication requirements of the United States for the foreseeable future. The natural result was ruinous competition, and a series of bankruptcies.

    http://www.wired.com/wired/archive/10.07/gilder.html

    http://www.amazon.com/gp/product/product-description/0471434051/104-8059540-4201520?_encoding=UTF8&;n=283155&s=books

    Investors, once upon a time, used to be called "merchant adventurers," which I think captures the ultimate reality of the situation. The belief that buying stocks somehow, ipso facto, constitutes investment, without reference to what the money gets spent on, is a theological proposition, rather than an empirical one.

    The "individual investment" accounts will be invested in securities chosen, not by the social security recipient, but by some kind of officialdom. It seems quite probable that the investments may be chosen for political reasons, in a form of crony kleptocracy. Here is an interesting case study of what may happen:

    http://www.washingtonpost.com/ac2/wp-dyn/A35297-2003Dec27?language=printer

    http://www.rationalrevolution.net/bush_family_and_the_s.htm

    http://www.sptimes.com/News/102900/Business/Influence_and_bailout.shtml



    John H. Lederer - 2/9/2005

    "The "ponzi-ness" of Social Security is common to any old-age-pension scheme, that is, the assumption that the young will work to support the old."
    =======================
    I do not think that is true. Roosevelt had a choice presented to him on social security. He could start making retirement payments immediately, or he could set up a system in which payments would start in a few years and be based on payments the people receiving the benefits had put into the system. He chose the former...and that made it a Ponzi like scheme.

    In the normal course, any fully funded pension scheme will be paid for, more or less, by the same workers who receive the benefits. For instance, some state teacher pension schemes actually maintain accounts in which a teacher's pension is based on the amount the teacher paid in plus the actual investment appreciation.

    The "ponzi-ness" occurs when "capitaL contributions are used to pay supposed "interest". Instead of being invested, capital contributions are paid out as interest. They are, in fact, a type of pyramid scheme.

    Social Security, because it used contributions of workers to immediately pay benefits to retirees who had not contributed to the system or contributed minimally is a sort of Ponzi scheme -- substitute "fund contrbutions" for "capital" and "benefits" for "interest" in the description above.

    The lure for a politician is that the scheme generally collapses long after the politician is retired and no longer needs votes -- Ponzi was a very popular man in Boston till the system went bust.

    Charitably, Roosevelt was also concerned with the depression and believed social security would help the economy by poutting money into the hands ofthose not working who would immediately spend it-- but the explicit choice was presented to him, along with a description of the drawbacks of the "ponzi" type scheme. He chose.


    Andrew D. Todd - 2/8/2005

    The "ponzi-ness" of Social Security is common to any old-age-pension scheme, that is, the assumption that the young will work to support the old. This assumption does not go away when you assume a stock market-based system. It merely takes a different form, eg. becoming the assumption that the young will go to work for companies which cannot offer very good wages because they are carrying an overhead in pensions; that consumers will pay comparatively high prices for the products of such companies, etc. The Regional Bell Operating Companies, the "Baby Bells," are an illustration of this problem. They figure in large numbers of pension accounts, but they are increasingly likely to be bypassed by advanced telecommunications gear (eg. Wi-Fi). Perhaps ten percent of a telephone bill represents the actual cost of moving data, assuming you do it in an efficient way. The other ninety percent is an accumulation of social obligations of one kind or another. The RBOC's valuation of their plant is almost certainly riddled with overvaluations. Their response is largely a desperate effort to obstruct the modernization of the national telecommunications infrastructure. In the end, the only practical solution will be a government buyout of some kind. I suspect that the foundation of the Tennessee Valley Authority might be a parallel case. Many of the long-distance telephone companies lowered their costs drastically by going through bankruptcy proceedings and turning their stock (and some of their bonds) into worthless paper.

    The manufacturing corporation as we know it is an artifact of a particular technological system-- mass production and the assembly line. In the pre-industrial era, production was organized around the skilled worker, the journeyman. A journeyman had only a few versatile tools, which he could afford to own free and clear. Depending on how it was held, a carpenter's chisel could make many different kinds of cuts. A journeyman who thought his boss was diverting away too much surplus value could set up in business for himself, and deal with the ultimate customer directly, without any loss of efficiency. Industrial technique changed this. There were now one or more tools for each action, and in aggregate, they cost more than any individual could afford. The corporation which owned such an ensemble of tools was able to control the business, because it was more efficient than hand labor, and could only be threatened by another corporation with comparable resources. However, when computers enter the game, the rules are changed back. It becomes possible to combine the efficiency of machine production with the benefits of small scale and personal ownership. This may very well mean ownership by the consumer, who by definition has far lower marketing overheads than any business.

    It has been observed that, of the organizations in western society which are six hundred years old or more, one is the Catholic Church, and the rest are universities. Technology corporations are generally academic overflows. At a certain point, a major university said to one of its researchers: "No, no, no, you are spending too much money and employing too many people. If you want to do it, take it off campus." MIT's laboratories overflowed onto the grounds of Hanscom AFB, and the over flow eventually became known as "Route 128." In the west, the overflow from Stanford and Berkeley became the Silicon Valley. The widespread use of computers means that academic researchers are less likely to go into "big science" mode, less likely to have a run-in with the provost, and more likely to eventually deal with their innovations according to academic norms, that is, by open-sourcing them. The result is that technology companies are going to be increasingly weighted down with the technological bad ideas, while the good ideas circulate freely within the academy.

    The virtue of the Social Security system as presently constituted is that it is keyed to nearly all paid work, not just to the work which happens to be performed by a particular class of firms, those which issue stock. Social Security is therefore comparatively robust in the face of unforeseen economic changes.


    Hugh High - 2/7/2005

    Andrew Todd's reponse to my explanation of the essential monitoring function of the share market, which I provided so that those who think the share market is but a Ponzi scheme as Social Security decidedly is, amounts to the following : crooks exist, and economists don't acknowledge their existence.

    I plead guilty to being an economist -- but I have never assumed crooks don't exist, and don't think most economists deny their existence. Indeed, an entire literature in the sub-discipline of law and economics explores the conditions under which people will be induced to violate laws.

    The problem with Social Security -- to return to the issue underlying this -- is that it is fundamentally dishonest : a Ponzi scheme. By hypothesis, I assume Todd would agree that those who established it, such as Roosevelt, are crooks and fraudsters ? This is a conclusion with which Todd and I are in agreement.


    Andrew D. Todd - 2/7/2005

    That would be the conventional dogmatic economist's answer, "invisible hand" and all that. The only problem is that it does not account for such real-world phenomena as Enron and Worldcom today; Dupont Glore Forgan and Bernard (Bernie) Cornfield, back in the 1960's; or even Richard Whitney, back in the 1920's and 1930's. The problem is that economics does not take account of human nature, and is in the last analysis something of a pseudoscience. The reality is that men so treasure the corner office that in efforts to hang onto it for a little longer, they commit offenses such as embezzlement which result in their going to prison. Common elements of these cases were that accounts were pervasively falsified, auditors suborned, etc., and the first obvious sign of trouble was when checks started bouncing because the firm was in an actual state of bankruptcy, had sold or mortgaged everything it could, and had finally exhausted the banks' credulity. It is somewhat difficult to move money which has already been lost.

    Parkinson's Law applies to corporate bureaucracies. If you give a CEO a chance, he will come up with excellent reasons, vide Monty Python, why he needs not one, but two, pantomime horses. If you make credit easily available, it will be mopped up by fundamentally insolvent businesses which do not want to admit that they are insolvent. It has been pointed out that business managers tend to be what are sometimes called "type A personalities," professionally overconfident by temperament. The new money thrown onto the stock market by the president's proposal will go to precisely those stock offerings which failed to raise money under the old dispensation. Even worse, it will go into "cash-out" IPO's, whose essential purpose is to allow the management group of a start-up company to retire at the age of thirty or forty, and detach their finances from the company.

    In a current case, Wall Street fell for SCO, hook, line, and sinker. A rather sordid little drama is unfolding in Utah, not without points of interest for the connoisseur of such things. The stockbrokers were blinded by their mental prejudices.

    http://www.groklaw.net/

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

    John Brooks, _The Go-Go Years, The Drama and Crashing Finale of Wall Street's Bullish 60's_, 1973

    Frederick Lewis Allen, _Only Yesterday, An Informal History of the 1920's_, 1931

    --------------, Since Yesterday, _The 1930's in America, September 3, 1929-September 3, 1939_, 1939


    Hugh High - 2/7/2005

    Andrew Todd demonstrates a common, and erroneous, understanding of the nature of the stock market but before speaking to that , I would make the observation that it is difficult for me to understand the necessary relevance between his statement, and my (correct) assertion that the US Social Security system is little more than a Ponzi scheme !!

    As to his misunderstanding of the nature of the stock market : many think the stock market is a 'casino' -- indeed, there are books by that title. This reflects the failure to understand that the stock market serves as a monitor of the actions of corporate officers and the employees of shareholders. Specifically, if corporation undertake 'bad' actions, share prices will fall -- and shareholders (e.g. pensioners, the proverbial 'widows and orphans', and others ) will be made worse off. They will require better and more efficient management by the corporation's officers -- either by directly replacing them, or by moving their monies to other companies and/or investments.
    This will cause share prices to fall further -- and cause the prices of shares in other companies to rise. To the extent that the incentive packages of corporate officers have been designed to ensure that those officers also are made worse off when the company's share prices fall, those officers have every incentive to ensure the company is well run.

    In short, what many, including Mr. Todd, fail to realize is that the share market serves as an excellent monitoring device and 'policeman' of company managers. It is not a casino or Ponzi scheme. The Social Security system, in contrast, most assuredly is.


    Andrew D. Todd - 2/6/2005

    If Social Security is a Ponzi scheme, the stock market is also one. Money put into securities only yields returns if it should be productively invested. There are a lot more computers in circulation than there have ever been, and a lot more computer-driven tools. This tends to affect the legitimate capital requirements of business. There are an increasing number of "initiatives" for which it simply does not make sense to seek financing. You don't need a bank loan to start a blog, to take a somewhat extreme case.

    What made the dot-com boom go was that large numbers of people were floating public companies to do things which would have been creditable high-school science fair projects. Either there were no barriers to entry, in which case large numbers of competitors popped up, or else some other party owned the barriers to entry, and used its leverage to strip away the dot-com's profit. For example, in airline reservations, it became apparent very quickly that an ordinarily knowledgeable traveler would have American Airlines' website opened in one window, Delta's in another, and so on; and that there was no good reason for an airline to pay large commissions to any party which did not have a demonstrated "special relationship" with the buyer.

    New stock issues can be expected to exhibit the same basic "dot-com" properties. There is no reason for a competent business manager to offer a piece of the action to outside investors if he can fund something out of retained earnings, deferred maintenance, etc. The same reasoning applies to personal proprietorships. The fact that a development is open to public investment is an indication of comparative incompetence in its management, other things being equal, or, alternatively a disposition to commit stock fraud.

    Let's take Google for example. Google is trading at a price-earnings ratio of about 250. Practically every major company in a range of cognate businesses is starting up its own search engine to compete with Google (eg. Microsoft and Amazon). The fact that Google got to the stage of an Initial Public Offering means that large numbers of Fortune 500 companies looked at it, and took a rain check. The people who took a rain check are likely to know much more about the business than most stockbrokers and most investors.

    If a company's product is subject to Moore's Law, then the biggest imponderable is whether the customers can be gotten to consume ever-increasing quantities of the stuff, to keep up with the falling prices. This applies with especial force if the product is durable. Alternatively, there is a real likelihood that someone will come along with a radically superior competing product in five or ten years, and it is not likely to be the same company. Different products are likely to be folded into each other-- for example, video becomes MPEG files, which play on an ordinary computer. No television set, no VCR, and no video rental store. The result is that industries which previously had their separate markets are dumped into one big highly competitive market. There is a whole range of market-leading high tech companies for which a price-earnings ratio greater than five is unrealistic. Much of the whole fantasy of wealth is attached to this kind of company. The kind of sedate companies which have a fairly good chance of long-term survival are also fairly transparent, and it is not easy to "spin" them. Companies of this latter kind don't pretend to be a better investment than paying off a mortgage.


    Hugh High - 2/5/2005

    Mr. Lederer's observation that the crucial issue is the ratio of workers to retires is quite correct.

    However, that raises the rather more important point that what is particularly dishonest is the very nature of the Social Security system .

    It is discouraging that the American public generally, and the leaders of the Democratic party particularly and more recently, would fawn over Franklin Roosevelt for having perpetrated what is, in fact, nothing more than a Ponzi scheme on the American public. It intrigues me endlessly that there is virtually no mention that, in fact, that is what the Social Security system is -- it crucially hinges on evermore people enterring the scam and contributing to it -- just as any Ponzi scheme. This is the real issue to which Mr. Lederer's comments are addressed.

    As an aside : it is intriguing that the virtually all the articles in the section on Social Security are "pro" Social security and by the virtually the same authors -- none of whom point out the inherent dishonesty of the system (but then Charles Ponzi also asserted he was 'helping the people.' )


    John H. Lederer - 2/3/2005

    An effort "to craft a bipartisan bill to assure Social Security's solvency," says the Los Angeles Times.'

    "A bold move to put the future of the massive retirement program at the top of his agenda," says The Washington Post.

    "They still must resolve an emotional ideological debate over whether the government should continue to take money from the working-age generation and transfer it to retirees . . . or whether Social Security should be transformed so that individuals would have more freedom and responsibility to save for their own retirements," says the New York Times.
    ========================================
    That is what they said about William Clinton's plan -- which differed from George W. Bush's in that Clinton would have had the government make the stock market investments for the worker.


    John H. Lederer - 2/3/2005

    "When the boomers retire in 2030, about 44 percent of the population will be in the work force. True, the work force today is slightly larger and has 46 percent of the population, but during the 1960s -- largely because few women worked -- the ratio was much worse. Only 37 percent were in the work force, yet everything was fine."

    That is irrelevant. What matters is the ratio of workers to retirees.




    John H. Lederer - 2/3/2005

    "When the boomers retire in 2030, about 44 percent of the population will be in the work force. True, the work force today is slightly larger and has 46 percent of the population, but during the 1960s -- largely because few women worked -- the ratio was much worse. Only 37 percent were in the work force, yet everything was fine."

    That is irrelevant. What matters is the ratio of workers to retirees.