Wednesday, December 08, 2004

Good question

Kevin Drum asks a good question for those who argue in favor of privatization of some portion of Social Security:
So here's the puzzler: for private accounts to be worthwhile, they need to have long-term annual returns of at least 5%, and 6-7% is the number most advocates use. But are there any plausible scenarios in which long-term real GDP growth is less than 2% but long-term real returns (capital gains plus dividends) on stock portfolios are well over 5%?
The proposed "fix" of privatization would only work under such rosy conditions in which a fix would be completely unnecessary.


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