Social Security part 2

Brad Delong expands on the way to reconcile the numbers (see my post below) and adds three other ways.

1. A substantial decline in the stock market in the near future to push dividend yields back up to the levels they need to be.
2. Stagnant wages and a permanent jump in the profit share to push dividend yields up to the levels they need to be.
3. A large jump in firm payouts, supported by the fact that accounting earnings are massively understated.
4. A long-run trade surplus of 6% of GDP.

3 and 4 are just plain silly. 1 is scary and 2 sounds like so much fun!

Some people expressed confusion at all this stuff (Hey Moz!). Well quick version:

Right now, SS collects more money than it sends out. The extra is put into a Trust Fund(think a bank account). Republicans think the Trust Fund will run out of money in the future. It is possible. They are suggesting that we should change the system to one in which people invest their money in the stock market. It should make up the shortfall (or so they claim). The issue is whether it is possible for SS to fail AND the private accounts to suceed. That is what the statements above discuss. It is possible but so unlikely or scary as not to be something you want to plan for.