Social Security Projections

One of the bigger political “footballs” of early 2005 concerned revising Social Security. Projections abounded — that nobody refuted — that the system would start being in net cash outflow by 2017 (give or take a year or two) and go broke by 2042 (again, give or take a year or two).

Politics may have tabled the topic for a while, but it is useful analytically. Let me pose two questions.

First, how can we analyze the Social Security situation as a valuation problem?

Second, “Stocks are too risky for Social Security” has been one of the arguments against the proposed private accounts. Do you agree or disagree?

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