http://www.pionline.com/article.cms?articleId=49851(subscription required)
Pensions & Investments April 4, 2005
Yale University professor Robert J. Shiller gave President Bush a "D" on his proposal to partially privatize Social Security.
"What is the president proposing? The president is proposing that Americans don't buy stock on margin enough," . . .
Here's why. Americans who opt to invest 4% of their Social Security-eligible earnings will have two new accounts created: the investment account, and an offset account of the same size that will be assumed to earn a 3% real interest rate. At retirement, the individual will receive the traditional Social Security benefit plus the value of the individual account minus the value of the offset account. In effect, the 3% real rate serves as a hurdle rate or a margin rate.
"I am skeptical of the his (the president's) financial engineering," Mr. Shiller, who wrote
Irrational Exuberance said in his commencement address.
. . .