I'll try to be more succinct and accurate in my endeavor to make these simple points. I offered this argument to Barry previously using a weekly savings rate that I rounded up and the totals came out much higher as a result. That's the magic of compound interest. A few bucks a week adds up to quite a bit if you leave it alone to compound for 30 or 40 years. Using completely square figures, my points are still irrefutable - unless someone wants to try. 1. A man making 6.00 an hour has his wages clipped by $18.36 per week by the U.S. government under the guise of providing him with security when he is old. Someone please refute this.
2. This same government forces his employer to match that deduction for a total of $36.72. Someone please refute this.
3. $36.72 per week ($1,909.44 yearly) compounded over 10 years at 10.5% is $34,443, over 20 years is $127,926, over 30 years is $381,647, over 40 years is $1,070,265, and over 50 years is $2,939,228. Someone please refute this.
4. The U.S. stock markets have grown an average of 10.5% for the last 60 years. Someone please refute this.
5. A man can put up to $2000 a year away in a Roth IRA and have it and the interest on it tax deferred until he reaches age 59. If he is married, his wife can do the same. Someone please refute this.
6. After 30 years of working, a man can make over $40,000 a year if he can make 10.5% on $381,647. Someone please refute this.
7. If he wants to have an interest rate that is guaranteed by nothing less than the viability of the U.S. government, he can invest his $381,647 in T-bills and earn 4.5%. That nets him $17,174 per year, which is $4,694 more than he made any year while he was working. Someone please refute this.
8. Socialism has no hope of providing a man with a $40,000 a year income after working 30 years in a job where he never made more than $13,000 a year. Someone please refute this.
There are quite a few additional points to make here, all of which will increase my leverage in this debate.
1. A man is going to increase his wages past $6.00 an hour with any initiative whatsoever.
2. A man might increase his investments beyond $36.72 at some point.
3. A man could certainly outperform the S&P index with a modicum of investment savvy.
4. A man could have enjoyed an average of 17% increase for the last 20 years if investing in a mutual fund which tracks the S&P (the Vangaurd S&P 500 Index Fund, for example).
5. A smaller, less socialist federal government might tax this man and his employer less allowing that employer to further increase this man's wages.
One can suggest that past performance is no indication of future results as the fine print always says. I'd like to know, however, where better to hang one's hat considering the fact that whole economic systems come and go in as little a span as 72 years, as did the Soviet Union. When we see consistent performance such as the S&P 500 Index clearly illuminates, true altruism dictates that practical solutions which incorporate known successes should be considered well ahead of pie in the sky ideals for those who are stuck in poverty. One very practical solution would be for our government to stop confiscating money from workers and their employers and try educating people in the benefits and virtues of capitalism. One semester of Compound Interest 101 would be of infinitely more value to the average person than 8 years of Marxism. At the very least it would give them a seven and a half year edge compounding their savings - assuming, of course, that Marxists ever save or invest anything.
Stuart Gort
