Zeev's Turnips Patch-No Politics (ZEEV)

[TJ Parker]

someone finally gets it!

Bush's Social Security Plan Assumes Much From Stocks

By Jonathan Weisman and Ben White
Washington Post Staff Writers
Wednesday, February 9, 2005; Page E01

To conclude that Social Security is careening toward a crisis in 2042, President Bush is relying on projections that an aging society will drag down economic growth. Yet his proposal to establish personal accounts is counting on strong investment gains in financial markets that would be coping with the same demographic head wind.

That seeming contradiction has become fodder for a heated debate among economists, who divide sharply between those who believe the stock market cannot meet the president's expectations and those who say investor demand from a faster-growing developing world will keep stock prices rising.

"If economic growth is slow enough that we've got a problem with Social Security, then we are also going to have problems with the stock market. It's as simple as that," said Douglas Fore, director of investment analytics for TIAA-CREF Investment Management Group. A spokeswoman said the company has not taken a position on the Social Security debate.

In the next two decades, as elderly populations swell throughout the developed world, retirees will begin withdrawing their savings, selling their financial holdings to raise cash and potentially glutting the world with stocks and bonds. Richard Jackson, director of the Center for Strategic and International Studies' global aging initiative, called it "the great depreciation scenario." Germany's Mannheim Research Institute for the Economics of Aging dubs it the "asset meltdown hypothesis."

That would not be an auspicious environment for young investors opening personal accounts to replace a portion of their traditional Social Security benefits.

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http://www.washingtonpost.com/wp-dyn/articles/A9090-2005Feb8.html