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A newspaper headline reads, "Millionaire Babies: How to Save Our Social Security System." It sounds a little wild, but the concept expressed in the title of this newspaper headline probably refers to an economic plan proposed by a member of Congress. Senator Bob Kerrey (D-Nebraska) has proposed giving every newborn baby a $1,000 government savings account at birth, followed by five annual contributions of $500 each. (Kerrey offered this idea in a speech devoted to tackling Social Security reform.) If the funds are left untouched in an investment account, Kerrey says, then by the time each baby reaches age 65 , his or her $3,500 contribution will have grown to $600,000 over the years, even at medium returns for a thrift-savings plan. At about 9.4% compounded annually, the balance would grow to be $1,005,132. (How would you calculate this number?) Since about 4 million babies are born each year, the proposal would cost the federal government $4 billion annually. About 90% of the total annual Social Security tax collections of more than $300 billion is used to pay current beneficiaries, making Social Security one of the largest federal programs in dollar expenditure. The remaining 10% is invested in interest-bearing government bonds that finance the day-to-day expenses of the federal government. Discuss the economics of Senator Bob Kerrey's Social Security savings plan. In 2011, Kevin Jones, Texas Tigers quarterback, agreed to an eight-year, $50 million contract that at the time made him the highest-paid player in professional football history. The contract included a signing bonus of $11 million and called for annual salaries of $2.5 million in 2011, $1.75 million in 2012,$4.15 million in 2013,$4.90 million in 2014,$5.25 million in 2015, $6.2 million in 2016, $6.75 million in 2017, and $7.5 million in 2018 . The $11 million signing bonus was prorated over the course of the contract so that an additional $1.375 million was paid each A newspaper headline reads, "Millionaire Babies: How to Save Our Social Security System." It sounds a little wild, but the concept expressed in the title of this newspaper headline probably refers to an economic plan proposed by a member of Congress. Senator Bob Kerrey (D-Nebraska) has proposed giving every newborn baby a $1,000 government savings account at birth, followed by five annual contributions of $500 each. (Kerrey offered this idea in a speech devoted to tackling Social Security reform.) If the funds are left untouched in an investment account, Kerrey says, then by the time each baby reaches age 65 , his or her $3,500 contribution will have grown to $600,000 over the years, even at medium returns for a thrift-savings plan. At about 9.4% compounded annually, the balance would grow to be $1,005,132. (How would you calculate this number?) Since about 4 million babies are born each year, the proposal would cost the federal government $4 billion annually. About 90% of the total annual Social Security tax collections of more than $300 billion is used to pay current beneficiaries, making Social Security one of the largest federal programs in dollar expenditure. The remaining 10% is invested in interest-bearing government bonds that finance the day-to-day expenses of the federal government. Discuss the economics of Senator Bob Kerrey's Social Security savings plan. In 2011, Kevin Jones, Texas Tigers quarterback, agreed to an eight-year, $50 million contract that at the time made him the highest-paid player in professional football history. The contract included a signing bonus of $11 million and called for annual salaries of $2.5 million in 2011, $1.75 million in 2012,$4.15 million in 2013,$4.90 million in 2014,$5.25 million in 2015, $6.2 million in 2016, $6.75 million in 2017, and $7.5 million in 2018 . The $11 million signing bonus was prorated over the course of the contract so that an additional $1.375 million was paid each

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