Historical Net Discount Rates-An Update through 2003
Ireland, Thomas R., Journal of Legal Economics
The following eight tables are updated versions of the eight tables that were presented in a previous paper by this author that contained calculations through 1999 (Ireland 2000) and update through 2001 (Ireland 2000-01). The Bureau of Labor Statistics has made revisions to its "Average Weekly Earnings of All American Workers" series as of the Economic Report of the President (ERP) for 2004. The revisions go back to the beginning of the data for that series provided in tables 5-8. The current tables have been revised to include the revisions made in the series back to 1965. The 2004 ERP did not include data in that series prior to 1965 and tables 5-8 have therefore started with 1965 instead of 1959, as previously. This allowed calculations of up to 39 years. The 2004 ERP also removed reference to 1981 data for the Employer Cost Index, and that year of data was also dropped. For tables 1-4, however, data regarding the CPI and MCPI from the 2004 ERP allow a 50 year series. In other respects, the methods used in compiling these tables for the two previous publications have been maintained.
Brief Explanation of the Tables
The original purpose of these tables was to provide forensic economists with values for net discount rates and the real interest rate that were varied and flexible. The original version had data for the 30 year U.S. Treasury Bond rate. That has been discontinued because the U.S. Treasury stopped issuing those bonds several years ago. The tables still provide data for the 91 Day Treasury Bill, the 3 Year Treasury Note, the 10 Year Treasury Bond, the Corporate Aaa rate and the Municipal Aaa rate. Those rates are compared year by year with the CPI and the MCPI in tables 1-4 and with the Average Weekly Earnings series of earnings increases and the annual rates of change in the total compensation measure in the Employer Cost Index in tables 5-8. Using each interest rate and each growth rate, the tables provide year by year net discount rates for wage growth, the real interest rate by comparing each interest rate to the CPI growth rate, and the net medical discount rate by comparing each interest rate to the MCPI growth rate.
Tables 1 and 5 provide basic data from the ERP for price index increases in table 1 and for earnings increases in table 5. Tables 2 and 6 provide annual growth rates for each variable for periods starting in each past year and ending in 2003. This results in up to 50 year averages for the price index to interest rate comparisons and up to 40 year averages for the earnings growth rates to interest rate comparisons. Table 2, for example, shows that the arithmetic average rate of effective yields on 91 Day Treasury Bills from 1954 through 2003 was 5.64% and that the average rate of increase in the CPI over that same 50 year period was 3.96%.1 Table 3 provides calculations of the real interest rate based on comparing each of the interest rates with the growth rate in the CPI for each of 50 possible time periods ending in 2003. Table 4 provides the same comparisons with the growth rate in the MCPI for up to 50 year periods. …