"Templeton Curve" Offered to Decipher Social Security Reform Proposals
The tool illuminates various reform proposals and their effects on the Federal budget.
West Chester, PA (PRWEB via PR Web
Direct) January 11, 2005 -- Let Freedom Ring Inc. today proposed a new tool
called “The Templeton Curve” to compare various Social Security reform proposals and their impact on the
long-term liquidity of the Social Security Trust Fund. Let Freedom Ring Inc., a public-policy non-profit located in
West Chester, PA, created the tool to help average citizens and experts alike
quickly grasp the financial effects of these complex reform
proposals.
The “Templeton Curve” is named for Dr. John M. Templeton, Jr.,
the Chairman of Let Freedom Ring, Inc. and the son of Sir John Templeton,
founder of the Templeton Funds, who was hailed by Money magazine as the
“greatest stock picker of the (twentieth) century.”
The “Templeton
Curve” plots the cash flow impact of any Social Security proposal. The span of
time measured is seventy-five years. The basis for the Templeton Curve is the
cash flow analysis portion of the “Financial Effects” studies performed by the
Office of the Actuary of the Social Security System. The two reform proposals
most recently scored by the Office of the Actuary are the Ryan – Sununu bill,
also known as the “Social Security Personal Savings and Prosperity Act” and the
Kolbe – Stenholm proposal, also known as the “Bipartisan Retirement Security
Act.”
“For the first time, the Templeton Curve makes it possible to see
the effects of these complex proposals in terms that are easy to grasp, both
visually and conceptually,” said Let Freedom Ring's President, Colin A. Hanna.
“The Templeton Curve is a product of actuarial science, not just a symbolic
graphical device like the Laffer Curve,” Hanna explained.
“The Laffer
Curve conveyed the idea that tax cuts can sometimes increase tax revenue, and
that tax increases can sometimes actually reduce tax revenues. It all depends on
where on the curve the current level of taxation falls. Dr. Laffer never
presented the Laffer Curve as a predictive mathematical model; rather, it was a
simple graphical representation of a basic concept -- and it was a powerful and
effective means of conveying that concept.” The Templeton Curve, on the other
hand, is a mathematical representation of the financial effects of an actual
policy proposal.
The Templeton Curves for the two above Social Security
reform proposals are posted on Let Freedom Ring's website, www.letfreedomring.com.
“The Templeton Curve for the Ryan-Sununu plan clearly shows the
potential for large personal accounts to provide surpluses in later years that
greatly exceed the deficits in the early transition years. That would make
feasible the issuance of such financial instruments as zero-coupon bonds to
finance the transition costs, redeemable when the system is in surplus, thus
avoiding the need for either tax increases or benefit cuts.
“On the
other hand, the Templeton Curve for the Kolbe-Stenholm proposal shows the
difficulties of a plan with short-term surpluses and long-term deficits. A cynic
might conclude that the Kolbe-Stenholm proposal was designed to pass
Congressional Budget Office muster, rather than to actually fix the problems in
the current Social Security system, since its short-term surpluses roughly
coincide with the ten-year horizon of the CBO’s scoring system, and then it
slips into intractable deficits thereafter,” said Hanna.
Dr. Templeton
commented, “On behalf of Let Freedom Ring, I want to emphasize that we have not
endorsed any particular plan, nor do we intend to. We do believe in harnessing
the power of compound interest, which Albert Einstein called ‘the greatest power
in the universe,’ as the best means of achieving financial independence. The
only way to do that is through reforming Social Security from pay-as-you-go to
personal retirement accounts.”
Mr. Hanna continued, “From a public-policy
standpoint, the best thing about the Templeton Curve is that it puts the matter
of transition costs into an understandable perspective. People can see that
reforming Social Security by going to large personal accounts rather than small
ones, as some so-called reformers have recommended, is not only in the best
long-term interest of the worker, it is also in the best interest of the
taxpayer.”
As the debate over Social Security reform heats up, and as
new proposals emerge, Let Freedom Ring, Inc. will issue Templeton Curve analyses
of the major new proposals.
“As other reform proposals are analyzed and
Financial Effects reports on them are released by the Office of the Actuary, we
will produce additional Templeton Curves for them. There is simply no better way
for the average citizen to grasp the financial impact of the impacts of Social
Security reform proposals on both the worker and the taxpayer than to see their
Templeton Curves,” Mr. Hanna concluded.
Let Freedom Ring’s mission
statement, which is incorporated into its logo, promotes three themes:
“constitutional government, economic freedom and traditional values.” Social
Security reform is the group's principal policy objective for 2005 under the
“economic freedom” theme.
Colin Hanna is available for media interviews
by calling Let Freedom Ring, Inc. at 610-793-1800.
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Source : http://www.prweb.com/releases/2005/1/prweb196263.htm