Word: stocking
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Dates: during 2000-2000
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Assuming Bush substantially cuts the guaranteed benefits paid by the government each year to retirees (he has so far avoided actually saying he would do this), he can reduce the long-term cost of the program. And if the stock market continues its historical rate of return of 7% a year (or even if it gains a more modest 4% a year), such cuts would be painless because most beneficiaries would retire with more money than they would otherwise receive under the current system. Giving workers private accounts should also help boost the dismal national savings rate...
...GAMBLE If stocks do not continue to rise (a very real possibility, considering how high current stock prices are relative to company earnings), workers would be stuck with lower benefits. If large numbers of retirees lost money in the market, there would be pressure on the government to bail them out, forcing a future Administration to choose between precipitating a fiscal crisis and ignoring the struggling elderly. Even if the market stays strong, some people are bound to retire and cash out their holdings in a bear market (historically, nearly 1 out of every 4 years has shown negative stock...
...benefit to ensure that more seniors do not fall into poverty. Bush vows to preserve the existing safety net for survivors and disabled workers, but so far, he does not guarantee a high enough safety net for poorer workers or for those who do not fare well in the stock market...
...there's a rub. Americans are more tied to the stock market than ever, and most of their holdings are of large U.S.-based companies. As the euro slides, so does the profit picture at those kinds of companies. Why? They do business across the globe. When the foreign currencies they are paid in lose value against the dollar, that translates into lower profits at home...
Third, taking money out of the current system introduces significant new risks. If a stock downturn comes, there could be serious shortfalls requiring additional spending. Furthermore, administrative costs are likely to be far higher than supporters have predicted, resulting in lower returns. Even Feldstein's plan calls for a period of Trust Fund bankruptcy from 2031 to 2052--bankrupting the system six years early. During that period, the government would have to borrow immense sums to fund the benefits without raising the real interest rate above three percent. The plan relies on further increases in returns and additional infusions...