Social Security Projections

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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?