Monday, March 21, 2005

Tolles on Math

Earlier today, I pointed out a WaPo article where the author claims that a privatized social security plan would hurt 75% of workers, then in the very next sentence says it would hurt one third of workers. Tolles' substantive response:

That's right, Max. Keep flogging that private accounts plan! It's going great so
far.

Actually, I am not sure I have ever flogged the private accounts plan. And I certainly didn't do so here.

Congrats, Tolles, and a big thumbs up for coming up with a creative way to avoid a substantive response.

On the issue of private accounts: social security is, in effect, a market account where you are 100% invested in US bonds. No financial planner would do that to one of their customers. Also, while there are some really good, really serious reasons to not go to a private accounts type of plan, opponents of private accounts ought to subject their plans to the same kind of assumptions. The Professor in WaPo today makes several worst case types of assumptions for private accounts but then compares that to a stable, no change scenerio for the current system. The problem is we know for a fact that no change is not an option for the current system. Taxes will have to be raised or benefits cut or deferred. Apples should be compared to apples.

On to Tolles' nonresponsive response: Not sure if you mean "not working politically" or not working in terms of the markets. I largely think you are right that it is not working politically, although when David Brooks made the same point last week you said he had nothing new to offer and called him an asshole. If you mean the markets aren't working, I don't get it. I anticipate my retirement will be funded almost entirely by my retirement accounts, not by my social security check.

What any of that has to do with the WaPo publishing contradictory numbers, I'm not sure.

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