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Politics : Formerly About Advanced Micro Devices

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To: Road Walker who wrote (211805)	11/16/2004 5:00:12 PM
From: TimF	Read Replies (1) of 1584795

We would be explicitly borrowing money that had to be paid back instead of making a promise to pay money back at some time in the future. The real loss is only the interest, or really only the real interest because social security payouts are adjusted for inflation. Trillions of incremental deficits just in the first five years and just from the change in social security doesn't make sense. Social security current takes 12.4%, some percentage of people currently paying in to social security would have 2% go in to a private account. That percentage would not be 100% because those nearing retirement would have their plan stay the same and I believe others have the option not to pay in to this plan. Even if its 70% who join the new plan that would mean that the reduction of social security income would be (2*.7)/12.4 or 0.1129. In other words if 70% participate the reduction in immediate social security revenue would be about 11%. Net contributions in 2003 where 533.5 billion (http://www.ssa.gov/OACT/TR/TR04/II_cyoper.html#wp95421). 11% of 533.5 billion is under 60 billion. $60 billion times 5 years is $300 billion. Even allowing for normal growth in the program that $300bil, and allowing for interest costs on the extra borrowing, that $300bil won't even turn in to half a trillion in 5 years let alone "$Trillions". And remember the net final cost isn't the $50 or $60 bil a year (gradually growing) but the interest above inflation on that amount. Right now real interest rates are close to 0 but I don't expect that situation to last forever. If we instead pay 1 or 2 % real interest than the net cost would start out at about $500mil to $1.2bil a year. That cost would grow from there until the first entrants in to the new plan retire, but it would never touch $1trillion even if you add and up the cost for all of the years. A sense of fiscal reality includes a sense of the liabilities on the government's balance sheet that aren't part of the deficit. If we reduce one type of liability while increasing another the net increase in liability is not equal to the increase in the 2nd type. Tim

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