# Scary as hell: the looming economic disaster

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Yup, time to cut the spending that had its roots in the Hoover/Roosevelt administration.

Chance that that will happen= closer to negative than positive.

selfAdjoint
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aeroegnr said:
Yup, time to cut the spending that had its roots in the Hoover/Roosevelt administration.

Chance that that will happen= closer to negative than positive.
You could zero out all the welfare spending (I assume that's what you meant. Or was it Hoover Dam?) and we'd still be in the soup.

member 5645
The 'debtdeficiteconomy' is the reason I am still keeping Kerry as an option right now.

chroot
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Every Republican administration in the last 50 years has increased the deficit. Every Democratic administration has decreased it. Bush has caused the largest increase in debt in US history, second only to his daddy. I cannot even imagine that, if the economy is important to you at all, Bush is even a consideration.

- Warren

Gokul43201
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chroot said:
Every Republican administration in the last 50 years has increased the deficit. Every Democratic administration has decreased it.
I don't think this is entirely accurate. The deficit increased by about 20 or 25% under Carter. Damn him ! :grumpy:

member 5645
chroot said:
. I cannot even imagine that, if the economy is important to you at all, Bush is even a consideration.

- Warren
Well to help you imagine it, other things are a concern as well.

Okay, kill federal education funding, all subsidies, welfare, healthcare, medicare, social security, etc.

By then, I'll be happy, but that's too bad because I'd also be dead (no chance in hell short of revolution).

selfAdjoint
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aeroegnr said:
Okay, kill federal education funding, all subsidies, welfare, healthcare, medicare, social security, etc.

By then, I'll be happy, but that's too bad because I'd also be dead (no chance in hell short of revolution).
You try a revolution on that platform and your neighbors will string you up.

Given the current situation...probably

russ_watters
Mentor
chroot said:
Every Republican administration in the last 50 years has increased the deficit. Every Democratic administration has decreased it. Bush has caused the largest increase in debt in US history, second only to his daddy. I cannot even imagine that, if the economy is important to you at all, Bush is even a consideration.

- Warren
Even scarier is that that's peanuts compared to the debt the article is talking about. And I don't see a way out - people are just too attached to their handouts to rationally consider what it is doing to the economy.

I've resigned myself to the idea that I'll never see a cent of my social security - but I'll still pay into it my entire life. That'll be several hundred thousand dollars flushed straight down the toilet.

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Social Security should be done away with anyway. It was never meant to be permanent, it was only to help out during the Great Depression.

russ_watters
Mentor
gravenewworld said:
Social Security should be done away with anyway. It was never meant to be permanent, it was only to help out during the Great Depression.
Yeah, but people are so irrational about it - once you start handing out money, people won't let you stop (via their vote) even if you're taking money out of their pockets with your other hand.

I laugh at my friends every April when they get all excited about their tax refunds. With that kind of mindset (acting like having your money returned to you is the same as getting a gift) could doom us all.

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selfAdjoint
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I get $1500 a month from social security, and that's what I live on. Oh, I should have saved while I was working? Yeah right! With what? One thing I did all through the years was plug in my FICA, check after check. And that, suitably deflated, is what's coming back to me. We'll seee what you guys think when you get old. Remember to do the calculation, 2.5% average inflation per year for 30 years. That's why it's important to establish a 401k, 401b or other independent retirement fund. Even a roth IRA. Once you get used to living without the little bit of extra money each check, you don't even miss it. That's assuming of course, that you're working already member 5645 selfAdjoint said: I get$1500 a month from social security, and that's what I live on. Oh, I should have saved while I was working? Yeah right! With what? One thing I did all through the years was plug in my FICA, check after check. And that, suitably deflated, is what's coming back to me. We'll seee what you guys think when you get old. Remember to do the calculation, 2.5% average inflation per year for 30 years.
You would have had PLENTY to save while working had you not been paying into the system.

selfAdjoint
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By paying into the system I was saving. The idea that I could have had more if I had invested it is a counterfactual; I could also have lost it all. I was also buying a house (a couple of houses at different times). I lucked out; both times when I sold the market was high and I got an excellent price. That money went to buy the place I now live in (in a deal with my daughter), so at least that part of my outgo is nulled, and you could say from saving.

member 5645
selfAdjoint said:
By paying into the system I was saving. The idea that I could have had more if I had invested it is a counterfactual; I could also have lost it all. I was also buying a house (a couple of houses at different times). I lucked out; both times when I sold the market was high and I got an excellent price. That money went to buy the place I now live in (in a deal with my daughter), so at least that part of my outgo is nulled, and you could say from saving.
Have you ever calculated how much you paid into the system in yoru life?

russ_watters
Mentor
selfAdjoint said:
I get $1500 a month from social security, and that's what I live on. Oh, I should have saved while I was working? Yeah right! With what? If you hadn't paid that 7.8% of your income to Social Security, would you have saved it? How about a 401K? That's free money (in two ways - matched funds and tax-deferred investing). The idea that I could have had more if I had invested it is a counterfactual; I could also have lost it all. Only if you were really, really stupid (ie, greedy). The stock market is a far better investment than people realize. member 5645 russ_watters said: The stock market is a far better investment than people realize. And even then, thereare plenty of other no risk investments that pay back higher than you will see from SS, and earlier if needed russ_watters Mentor Here is a quickie little spreadsheet showing what the stock market can do for you without thinking about it, ie. if you simply put all of your investment money into a stable index fund (S&P is preferable). My assumptions are that you start with an income of$24,000, get a 2%+inflation raise per year (you're a mediocre employee), invest 7.8% (the amount you put into SS), and the stock market rises at a constant 8% yearly rate (its historical inflation adjusted average), and you invest for 40 years (start investing at 30, retire at 70). Feel free to tweak them to fit you. The results in today's dollars:

Your lifetime (40 years) earnings are $1,43,319 Your lifetime investment input is$114,918
Your investment portfolio's end value is $697,491 This will provide 26 years of income at half your salary at retirement of$53,376 (assuming it doesn't continue to grow).

Now that's not great, but thats a doable retirement. But my assumptions were very conservative. Try a 10% yearly market increase instead of 8% (the past 50 years have been better than the overall average). Try a 5%+inflation yearly salary increase (or if you're ambitious and a good worker, try 7%). Try investing 10% instead of 7.8%. Try making the investments tax deferred (add ~40% to each payment into it). Try 50% (or if you work for a good company, 100%) matched funds for your 401K. Try adding the post-retirement investment growth. Try starting to invest at age 25 instead of 30. Try getting that other half of your SS tax (the part your employer pays) to invest.

Put even half of these improvements in the assumptions into the equation and, on a modest income, virtually anyone could retire truly wealthy if SS wasn't standing in the way.

BTW, SA, assuming you will make that $1500/mo for 30 years, that comes out to$540,000 - about $150,000 less than if you had invested that 7.8%. But wait - its even worse - your employer matched that 7.8% with 7.8% of its own! selfAdjoint Staff Emeritus Gold Member Dearly Missed Index funds weren't available throughout most of my career, so it's moot. And your assumptions are wildly off. I started in 1964 at$8000 per year, got a raise to $11,000 in 1968 and$18,000 in 1973. These were excellent salaries for the time. I went to $30,000 in 1980,$40,000 in 1986, worked at a consultant for $35 an hour from 1990 to 1995,$55,000 from 1995, $65,000 from 1998,$72,000 in 2000, unemployed and drawing Social Security from 2001.

I just wanted to also add that you have to take inflation into account. So 600K in today's dollars will only be worth a percentage of that in 30 or 40 years. 600K sounds great now, but in 30 years when it costs 20 bucks for a gallon of milk it won't buy nearly as much. If you're not staying ahead of inflaction and the value of the dollar, in addition to the 8-10 percent you're making on your investment, you won't be doing that great.

Mercator
Anybody thought about what would happen to the stockmarket if everybody would put his money on it?