I don't mean to single out Representative Stenholm here, but I just want people to understand the nature of the stock projections used in analyses by SSA and CRS. They have simply assumed that stock returns will be the same in the future as in the past.
No one has even attempted to produce a set of projections for stock returns that are consistent with the Trustees projected growth rates for profits. I can say this with a high degree of certainty, because I believe I've talked to just about everyone who does work in this area.
As an economist, I can not accept projections which are not logically consistent. Therefore, I can not see the point in even discussing the merits of a plan when it is being evaluated based on the assumption that the stock market will provide real returns in excess of 6.0 percent.
I understand that the solvency of the system is not affected by stock returns under Rep. Stenholm's plan. But, I would think that he would still like to know what it is reasonable to expect workers to end up with in their individual account. For this reason, I would hope that he would also endorse a measure that would explcitly require the Social Security Administration to produce projections of stock returns derived from its two components (dividends and capital gains), which are consistent with the other projections in the Trustees Report.
