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Letter to the Editor ¦ June 5, 2001
Social Security Options

By David Langer

To the Editor:
Hal R. Varian (Economic Scene, May 31) reports that the stock market has returned 7 percent over 100 years. However, workers under Social Security receive a yield now that will greatly exceed 7 percent for many, if all the program's benefits are factored in - among them the money saved if one doesn't have to contribute to parents who are not indigent but would be in the absence of their Social Security benefits.

A negative effect of privatization is that the large sums that would come on the market would artificially inflate stock prices, which would become additionally divorced from reality. The current price-earnings ratio of 25 is likely the result of the substantial sums regularly added by 401(k)'s and I.R.A.'s. Social Security privatization would further inflate and destabilize the market.

- David Langer, a consulting actuary and president of David Langer Co., Inc.
New York


© 2001 DAVID LANGER COMPANY, INC.