How to turn $3.00 per day into over $1 million

By David Morgan

Sometimes it is difficult for many of us to grasp a view of the obvious. I once had a professor of mine say: “Any fool can take something simple and make it complicated, or take something complicated and keep it complicated.” He was right.

So what we will attempt to do here is to take something really rather simple and keep it that way. I find it very frustrating to hear all the rantings and ravings about how complex and difficult a task we face in dealing privatizing some small part of Social Security.  That just isn’t that case.

We have all heard about some little old cleaning woman who passed away and left several million dollars to her favorite charity or institution. And everyone always wonders out loud, ”How could she do it, how is that possible?” But then no one ever bothered to try answer the question.

The answer is simple, but it requires a minimum of discipline and a slight understanding of what happens when funds are invested and compounded. The cleaning lady evidently understood. Many of our most learned politicians seem not to.

$3.00 a day

Let’s look at what happens when a person saves just $3.00 a day each year and invests that at the end of each year in the stock market. On an overall basis, the stock market has grown well over 10% per year over the past 40 years; it is not unreasonable to assume it will continue to do so.

What the stock market intrinsically reflects is the value of American ingenuity, creativity and corporate assets expressed in monetary terms, and either you believe in America or you do not. If you don’t, not much else will pan out to be a very rewarding investment either. So let’s proceed with our humble daily investment policy.

In addition, let’s take that $3.00 per day and increase it for inflation at a conservative rate of 3% each year, just so we can talk in terms of constant dollars.

In other words if you save $3.00 per day in year one, then in the following year you would have to save $3.09 per day to allow for inflation of 3%. After 10 years, you would have to save $3.91 per day to be saving the equivalent of $3.00 per day 10 years earlier with an average inflation of 3%. Not very complicated.

What the chart in Exhibit 1 shows is that after 20 years your investment account would be worth $75,064; after 30 years it would be worth $232,409; after 40 years $653,489; after 45 years $1,077,040; and after 45 years $1, 763,091 - just by saving and investing the equivalent of $3.00 per day!

One kind of rocket science is that?  Practically anyone can afford to do that - a little over the price of a pack of cigarettes or less than the price of a gallon of milk a day.

Now think about this. If you are earning $30,000 per year, your gross contribution to Social Security is 15.3% of $30,000 or about 4.5 times that much. If you were to plug that full amount into the same equation and assume your earnings never increased except for inflation, after just 31 years your account is worth $1,083,932. Now tell me some sort of privatization doesn’t make sense.

However, there is one more point that seems to crop up in the news.  That point is that it will cost some $2 trillion or $3 trillion to cover the short falls if all of the funds that are scheduled to go into Social Security are not put there.  That is, if you are so generously allowed to invest some of the current funds for yourself, then this horrible shortfall will arise.

There is also a simple solution to this.

The U.S. Government now owns and manages 29% of the land base of the United States. The land base is 2.3 billion acres. The U.S. government owns and manages 657 million acres. This land is equivalent to the area of the states from Maine to Florida - Maine, Vermont, New Hampshire, Connecticut, Massachusetts, Rhode Island, New York, New Jersey, Pennsylvania, Delaware, Maryland, Virginia, North Carolina, South Carolina, Georgia, and Florida - multiplied 2 and one-half times.

The area under the management of the U.S. Forest Service - 191 million acres - is the size of reunited Germany, Italy and Greece combined, in which live some 165 million people.

One small monument that was suddenly unilaterally thrown into the government’s possession was the Grand Staircase Escalante National Monument. On September 18, 1996, President Clinton, under the authority of the Antiquities Act (Act of June 8, 1906, Section 2) signed Presidential Proclamation 6920 that unilaterally changed 1.7 million acres of Utah land into the "Grand Staircase Escalante National Monument." In 1995, the BLM (Bureau of Land Management) released a report indicating, "the greatest value derived from the land would be its energy producing abilities." By March 26, 1996, Kathleen McGinty, Chair of the CEQ (Council on Environmental Quality) had already determined that the land proposed was "not really endangered." The Monument’s linchpin was the Kaiparowits Plateau, which contained some 62 billion tons of coal, worth approximately $1 trillion. Nestled onto the Plateau was the "Warm Springs Project," containing some 30 million tons of coal. “Stroke of the pen, law of the land. Kinda cool,” said Paul Begala, White House advisor to Clinton at the time. And this is high-grade coal.

In any case, the sale of just the coal alone from this one small piece of land would cover one third of the so-called deficit that many of the alarmists are concerned about.  It would seem that out of the 657 million acres the government now owns, they could sell off a few acres to help cover this problematical Social Security “shortfall.”

Surely there are just some few properties out there that are not “national treasures.”

Basically, if you save $3.00 per day and the government sells off just some of its millions of acres of land, the entire system will correct itself. I’m sure the little old cleaning lady would understand.

David Morgan is Editor at Large of  the Tribune Papers