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Vail Valley Voices: W. was right about this one

Marty SchulmanVail, CO, Colorado

Trivia question: In 2004, what did George W. Bush designate as the No. 1 priority of his second administration? Hints:1. It was a real problem, but probably not in the top five (or 10) confronting the nation. 2. In a vague way it was a good idea but only with refined implementation.3. No progress in this area was made during his second term. Extra added attraction: A basic stock market truth you will never hear on CNBC, or see in Forbes or The Wall Street Journal. Hint: One dollar invested in the S&P 500 Total Return Index in June 1957 is now worth $161 as of March 2012. When these two paragraphs were written, I didn’t realize they were related. Answer to the trivia question: Bush said that privatizing Social Security was the No. 1 goal of his second term. Since leaving office, he has also said his greatest regret as president was not being able to privatize Social Security. (As far as W’s priorities, let’s not get into “the doctrine of relative importance.”)I agree that privatizing social security is a good idea. What?!Slow down. I think he had a good idea, but never presented a reasonable way to implement it. At present, money in the Social Security system is invested in treasury securities, and is very safe but earns very little. If our nation’s Social Security money had been fully invested in stocks in 2008, just before the worst bear market since the Great Depression, we would have had nothing short of Revolutionary War II.Which brings us to the second paragraph. Over long periods of time (20 years ago or more) the stock market vastly outperforms treasuries. This favorable return is even more pronounced if calculations are based on money invested at regular intervals (dollar cost averaging) rather than specific dates (Oct.1, 1929 vs. Oct 1, 1949).So how does this circle get closed? How is it possible to make privatizing Social Security a good idea? The answer lies in three words: slow, gradual, incremental.It might take 30 to 50 years to safely accomplish the privatization of Social Security — and it probably would be best to privatize only a fraction of incoming dollars. Prudence would dictate starting with a very low percentage (1-2 percent) of contributions of the youngest workers (under 30 or 35), and very slowly increasing that percentage. Workers would not own the privatized assets. Thoese would simply part of the system. Qualified people (I am not one) could refine the details of this plan (investment in the broadest representation of the entire stock market, percents to be privatized, ages to participate in privatization and numerous other details).Here a few other facts about Social Security: 1. Social Security is not bankrupt! (If it were, how come the checks keep coming?) 2. Social Security is extraordinarily tweakable. That is, it can easily be made more or less solvent by minor changes in the percentage of contribution, age of retirement, amount of an individual’s income subject to Social Security tax, adjustments for inflation, and many other factors. Finally, I would like to disseminate any opinions that expose flaws in this premise. One caveat: Please be a little more specific than “Hey, you’re a leftwing jerk.” Anybody still reading this? Bonus for those who have made it this far: Sarah looked out from her porch and thought she saw Russia, but it was just an Aleutian.Marty Schulman, a Vail resident, is a vascular surgeon and political junkie. He can be reached at mlsvd@yahoo.com


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