>>>>Last time I checked, there is no compounding interest to speak of in the Social Security system. Before you label me as a privatization advocate, I do not know that I am for privatization, but I do think that the point must be made, in order to have an honest, factual debate.
If I have labeled you such (and I don't remember having done so), accept my apologies. I indeed am not anti-privatization for some aspects of SS.
The problem with 'rates of return' is that SS is not meant to be an investment program. It was designed to be social insurance. What rate of return do you expect from a 1 year term insurance policy costing $200 with a 100 K death benefit. Either 0% or many thousand %. What rate of return from your health insurance premium?
The existance of SS does not 'outlaw' compound rates of return. IRA's, 401-K's, Keough's, ESOP's, private after tax savings, etc. are all vehicles making that possible. Indeed, we may want to reform SS to privatize most of the 'retirement' aspects of SS. But the process is not as simple as using the CATO-type calculator to show a 'net return'. They do not account for the social safety-net aspects of SS whose costs are 'hidden' within the FICA tax.
Most of the 'reform' proposals preserve some sort of means-tested program for the less well-to-do. If we establish that, we need to know its cost. Because, logically you will need to subtract that from your FICA tax before you can invest the rest, and analyze your rate of return. Looking at SS as just an investment makes it look bad to the average Gen-Xer, as well as just about everybody else.
