Another excerpt taken from a great article from NRO's Financial Contributing Editor, Donald Luskin. Read on.
The Innumeracy of It All! - Behold the mathematical exaggerations of the Left on Social Security.
In the debate over Social Security reform, the dollar figures involved can be dauntingly large and dizzyingly complex. That opens up a lot of opportunity for demagogic mischief, and the leftist opponents of reform are taking full advantage.
In fact, there seems to be no end to the Left's demagogic innumeracy on Social Security. In an op-ed in the New York Times last week, Barry Schwartz, a professor of psychology at Swarthmore, wrote that the administrative costs of keeping track of these private accounts, according to President Bush's Commission to Strengthen Social Security, will be 10 to 30 times the cost of administering the current system. But the President's Commission's report said that the administrative costs would be about the same as those of the current system: three-tenths of 1 percent per year. That's 30 basis points, not 30 times.
Why the Times would hold out a professor of psychology as an expert on such matters is a mystery. And so far the Times has not run a correction ("public editor" Dan Okrent accused me of being "infantile" when I asked for one). Of course, the Left has already repeated the Times's uncorrected statement. Three days later it appeared almost word for word (to put it delicately) in a Molly Ivins syndicated column. No correction there, either.
Ivins is on a roll. In another column this week, she wrote that "The Social Security trustees, paid to be professional gloom-mongers on this subject, say [the system is] good until 2042 ... not before Social Security goes broke, but before Social Security has to dip into its trust fund." Dead wrong. What the trustees really say is that Social Security will start dipping into its trust fund in 2018. The year 2042 is when they say the trust fund will be entirely and utterly exhausted after 24 years of dipping. Correction? Surely you jest.
Want to read the entire article? Click on this link:
http://www.nationalreview.com/nrof_luskin/luskin200501141230.asp
It's the definitive answer to the regressive thought pattern on Social Securty and President Bush's reform intentions.
Friday, January 14, 2005
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Opponents to Social Security reform should address the following illogic implied by their opposition:
As Social Security is currently structured, individuals must first be employed. Secondly, employee contributions are matched by the employer. These two things are prerequisites for the continual funding of the program. If I were a proponent of Social Security in its current format, I would be a strong proponent of a vibrant and growing economy that allows for the perpetual contributions; from employees and employers.
You can’t have Social Security without economic growth. No employers, means no employees, means no contributions, means no Social Security funds over the long-term. The Government just can’t tax non-existent assets and profits to meet its obligations. Assets and profits are a prerequisite of Social Security. With me so far?
Now, here’s the kicker. If you assume that the current system requires a growing economy to sustain itself, why would you not translate that same assumption to the Personal Account structure of retirement funding?
Admittedly, there are no guarantees either way. That’s the very definition of a risk; no guarantees. Both structures involve risk. And BOTH sides of the issue (pro/con reform) assume a long term growing economy with occasional set backs.
I planted several Silver Maples in my backyard 15 years ago. The trees were barely 3 feet tall when I planted them. I did my research on what trees would do best considering soil and weather conditions. I almost went with Weeping Willows, but was advised against them. They grow very quickly, but according to the garden store owner, are ‘stringy’ and disease prone. My Maples have survived severe winters, summer droughts and insect infestation. But through it all, most of them have managed to survive; over the long term. They’re now about 40 feet tall. Long-term investing involves a similar patience and risk taking.
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