My Buddy comes through with a good reference point on SS

My Buddy is an avid reader of Mitt Romney’s economic guru Harvard economist Greg Mankiw. Seeing my post on SS he kindly passes this Mankiw post along which points to a 1967 Newsweek column by noted economist Paul Samuelson who makes a couple observations about the wonders of Social Security. I’ll comment on two of them.

First Samuelson makes a flip comment about how future retirees get their payments Ponzi-like by current workers who are growing in numbers.

Well that was 1967 when I was a high school junior and no one was planning on a day when future generations might be smaller than existing ones. That such a day would come is made inevitable by the finite space on the planet to locate growing populations. Once populations could grow no more the Ponzi house of cards was sure to tumble.

Second Samuelson says this: “Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in — exceed his payments by more than ten times (or five times counting employer payments)!”

Samuelson then goes on to explain how this is made possible by compound interest at a rate which no longer applies. In fact, many assumptions that seemed safe 44 years ago have come undone and there has already been some alteration of Social Security strings to deal with them. But more interestingly look at the graph in the previous post of mine. The graph does not apparently account for phenomenon like inflation but despite that its quite clear that there is nothing like a 5 fold, let alone 10 fold, increase in Social Security earnings over payments for the current generation of recipients.

Just thought I’d point that out. More grist for the mill.

Thanks Buddy!

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