Sunday, May 08, 2005

Well, Solving Social Security was easy!

I couldn't help it, I had to do this.

I went to a compound interest catalogue on the Web and asked it the following question...

If we took $200 billion, the amount of money we've spent on Iraq and Afghanistan, and invested the money in bonds and equities for 65 years, getting a 6% return (a low estimate for an equity portfolio)... we would get $8,828,994,329,178.23 by 2070. The supposed shortfall in the trust fund is only $1.3 trillion.

If we only invested the money for 35 years, we'd get $1.5 trillion, enough to make the system solvent in 2040 when payouts would start to exceed tax receipts.

Or, let's say you think my investing the money in stocks and corporate bonds is too risky. So, assume a 3% return for 65 years, which could be done by investing, as we do now, in US Treasury bonds. We'd have $1.36 trillion in 2070 -- enough for solvency and an extra $600 billion dollars.

And all we'd have to do is divert $200 billion from elsewhere in the budget and we'd only have to do it once. That's less than half the Pentagon's budget, by the way. The Pentagon would only have to do without for one year. Their budget could return to normal the following year. No taxes raised, no benefits cut, problem solved.

I used this calculator.


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