"Templeton Curve" Offered to Decipher Social Security Reform Proposals

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The tool illuminates various reform proposals and their effects on the Federal budget.

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, http://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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