CounterPunch Exclusives

CounterPunch Exclusives

Trump Accounts and the No Economist Left Behind Test

Back when George W. Bush was doing his big drive to privatize Social Security, I got upset because he was using bogus numbers that grossly exaggerated what his private accounts would yield. The basic story was that his team assumed that stocks would provide the same returns they had in prior decades, even though the price-to-earnings ratios in the stock market were far higher than in the past, and projected GDP and profit growth were much lower. Given the assumptions being used on profit growth, their assumptions on returns were virtually impossible.

To illustrate this point, I developed the “No Economist Left Behind Test.” This challenged economists to write down two numbers, one for dividends and one for capital gains, that added to their 10 percent assumed stock returns (7 percent real returns). (For the young’uns, Bush had championed “No Child Left Behind” as the slogan for his education policy.)

I wanted to challenge the return assumptions to effectively take their money away. If the Bush Team could get away with promising an impossible bonanza from their accounts, privatization would look much better than it actually is. It was........

© CounterPunch