[North-NV-Greens] Fwd: CBS Offers Misleading Pro-Privatization Predictions

Thu Mar 10 00:40:37 PST 2005

>Date: Tue, 8 Mar 2005 13:29:00 -0800
>Subject: CBS Offers Misleading Pro-Privatization Predictions
>To: "Paul Etxeberri" <eusko at earthlink.net>
>From: "FAIR" <fair at fair.org>
>Reply-To: fair at fair.org
>X-ELNK-AV: 0
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>
>ACTION ALERT:
>CBS Offers Misleading Pro-Privatization Predictions
>
>March 8, 2005
>
>CBS Evening News has presented two segments in recent weeks (2/9/05,
>3/4/05) that purport to show how typical American workers would fare under
>George W. Bush's plan to privatize Social Security.  But the segments rely
>on stock market projections that, if true, would make any "crisis" in
>Social Security almost impossible.
>
>CBS reporter Jim Axelrod first profiled (2/9/05) Jama Whitesell, a
>28-year-old receptionist making $32,000 a year.  Axelrod went to a
>financial planner who predicted that a private account would be a safe bet
>for this worker-- based on a projected 8 percent return on the private
>account.  Why did CBS choose this figure?  Axelrod claimed that is "an
>assumption based on how the market's done the last 80 years," though he
>did add that "in the next 40, Jama could do worse. Of course, she could do
>better."
>
>Axelrod returned to this theme more recently (3/4/05), profiling a
>48-year-old worker earning $98,000 a year who would also benefit from a
>private account-- again, relying on an 8 percent return on his private
>account.  Axelrod again pointed out that "nothing's guaranteed, certainly
>not an 8 percent return." (Interestingly, an earlier CBS Evening News
>report-- 2/5/05-- estimated a 9 percent return on a private account).
>
>It's true that stock prices in the past have fluctuated markedly; looking
>at 35-year spans, which is the length of a typical working life, stock
>returns over the past 100 years have fluctuated between 3 and 10 percent
>(Center for American Progress, 2/10/05).  Including a range of results
>would give viewers a better sense of the range of potential outcomes.
>
>But even suggesting that 8 percent will be the most likely growth rate for
>private accounts over the next 40 years is problematic.  For one thing,
>the projections made by the Social Security actuaries and touted by the
>Bush administration estimate a lower return (about 4.6 percent), both
>because they expect stock prices to rise more slowly and because private
>accounts would likely be balanced between stocks and bonds (Economic
>Reporting Review, 3/7/05; NPR, 2/4/05; Washington Post, 2/27/05).
>
>And there are good reasons to think that stocks will grow more slowly in
>the future than they have in the past.  Though CBS explained that they're
>using the 8 percent figure because it is a historical average, the Center
>for Economic & Policy Research (2/10/05) points out that "current
>price-to-earnings ratios are approximately 50 percent higher than their
>historic average."  This means that stocks are valued more highly today
>than they have been in the past; in order to match past growth rates, they
>would have to make a similar upward leap in the future, when history
>suggests that they're more likely to return to their earlier, lower
>valuation.
>
>In any case, a stock market growing at a sustained rate of 8 percent would
>only be possible in a robust economy, a situation which would swell Social
>Security revenues, heading off any crisis or shortfall.  The projected
>shortfall is based on gloomy forecasts that foresee the nation's economy
>growing at a much slower rate than it has over the past 80 years.  It is
>unfair in the extreme to compare the future of Social Security with the
>return on private accounts by using two very different economic models.
>
>Stories tracing the impact of policy on individuals can be helpful for
>viewers who do not follow the minutiae of public policy debates.  But
>giving viewers an unrealistic view of the benefits of Social Security
>privatization only serves the interests of the White House and its allies.
>
>
>ACTION: Please tell CBS Evening News to use a more realistic range of
>numbers when projecting the returns from Social Security privatization.
>
>CONTACT:
>CBS Evening News
>mailto:evening at cbsnews.com
>Phone: 212-975-3691
>
>As always, please remember that your comments have more impact if you
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-- 
Paul Etxeberri

"Forests precede civilizations and deserts follow"   ---Chateaubriand