RE: Honesty on Stock Return Projections

[National Dialogue Moderator <moderator>]

As I noted before, the Kolbe-Stenholm plan is not dependant upon
achieving any particular level of stock market returns, and no
worker is required to put any of their retirement funds in the
stock market.

I agree with Mr. Baker that we should be cautious in all of our
assumptions.  We should not assume that the stock market continues
to boom -- which we do not do in our plan -- and we should not
assume that the current economic boom and rosy budget conditions
will continue into the future.  Any plan that is dependant on any
optimistic assumptions, whether it be assumptions on economic
growth, continued budget surpluses or stock market returns should
be viewed skeptically.  I believe that one of the strengths of the
Koble-Stenholm plan is that it is based on very conservative
projections, and does not rely on projected surpluses, optimistic
assumptions about economic growth or a continued boom in the stock
market to make our plan work.

It is worth noting that the assumptions that the Social Security
trustees use for stock returns are based on long-term historical
averages.  No estimates about what will happen in the future can
be certain, but long-term historical averages provide some guide.
I agree with those who say that it is unrealistic to assume that
the stock market will grow as rapidly as it has in the last few
years, and we have never assumed that it would.

I would hope that Mr. Baker would agree that we should apply the
same rule to economic assumptions.  Some of the opponents of reforms
have argued that the problem is not as large as the Social Security
Trustees report suggests because they believe the economic projections
inthe trustees report are too pessimistic. That argument is based
on the same type of myopic reasoning that opponents of individual
accounts incorrectly atttribute to those of us who support individual
accounts.

It is true that the economic projections in the trustees report
assume much slower economic growth than we have experienced in the
last few years. However, the trustees looked at the historical
averages over the last 25 years to get a more accurate picture of
economic trends.  When you look at the economic performance over
the last 25 years instead of the current conditions, the assumptions
in the trustees report are very reasonable.


Congressman Charlie Stenholm