Why Isn't Social Security's Reserve/Trust Fund In Equities?

[Blue Collar Guy]

So the US Federal Government has a very nice paper trail between the income and outgo of the Social Security System. The Federal Government pays the money it borrowed from SS back including interest. Those payments to SS come from the general treasury. Just like the unused SS tax funds went into the general treasury and were used to pay for general fund stuff to keep the total debt down a bit. Very soon the general treasury will have to start paying back the bonds as well as the interest. That money all comes from the general treasury which is funded by taxes and deficit spending. The government will honor the SS commitment by making up the difference between the amount of income from SS taxes and SS payouts from the general treasury. The only thing that nice paper trail will do, IMHO, is fix a date when the current law says it is OK for the government to give SS recipients a hair cut. An alternative would be to change the law in some way to balance the SS taxes and SS payments.

And my solution is to print about 600 billion and invest it in the total us market. Or throw the whole 2.6 trillion into the Vanguard Wellesley fund.

 

[Hermit]

And my solution is to print about 600 billion and invest it in the total us market. Or throw the whole 2.6 trillion into the Vanguard Wellesley fund.

You might ask the folks in Argentina how printing large sums of money worked out for them...

 

[Blue Collar Guy]

You might ask the folks in Argentina how printing large sums of money worked out for them...

I believe the printing presses are on overtime now.

 

[Texas Proud]

So the US Federal Government has a very nice paper trail between the income and outgo of the Social Security System. The Federal Government pays the money it borrowed from SS back including interest. Those payments to SS come from the general treasury. Just like the unused SS tax funds went into the general treasury and were used to pay for general fund stuff to keep the total debt down a bit. Very soon the general treasury will have to start paying back the bonds as well as the interest. That money all comes from the general treasury which is funded by taxes and deficit spending. The government will honor the SS commitment by making up the difference between the amount of income from SS taxes and SS payouts from the general treasury. The only thing that nice paper trail will do, IMHO, is fix a date when the current law says it is OK for the government to give SS recipients a hair cut. An alternative would be to change the law in some way to balance the SS taxes and SS payments.

But that is the general fund borrowing the money... right? SS right now has a positive balance...

Just like if you have a treasury or other instrument, the general fund has to borrow money to pay you off...

The main difference is that they were hiding the true deficit spending for all the years SS was running a surplus... no surprise there...

 

[ejman]

I believe the printing presses are on overtime now.

When the printing presses are on overtime the result is massive hyperinflation as in Germany after WWI, Argentina or Venezuela currently. By what magic do you suppose we are able to run our printing presses on overtime and there is no inflation in sight? In fact we struggle to even hit the 2% Fed inflation target.

 

[Blue Collar Guy]

When the printing presses are on overtime the result is massive hyperinflation as in Germany after WWI, Argentina or Venezuela currently. By what magic do you suppose we are able to run our printing presses on overtime and there is no inflation in sight? In fact we struggle to even hit the 2% Fed inflation target.

The debt went from 10 trillion to 20 trillion in the blink of an eye(10 years?), They have to print money to cover that eventually, I think they should print more and invest it as per my older post. BTW I dont care if this part is accurate about the printing presses being on overtime or not, I want them to print 2.6T extra and invest it.

 

[Alan]

I think the poster child for a government to invest their state pension funds in private equities is Norway.

How to invest like...Norway's £700bn oil fund

From 1998 to 2015 it achieved an annualised return of 5.6pc - a figure many investors would take in a heartbeat.

The fund invests in more than 9,000 companies, and owns more than 1pc of the entire global equity market. Converted to cash, the fund would have enough funds to buy Apple, the world's largest company, as well as the giants BP and GlaxoSmithKline.

 

[braumeister]

I think the poster child for a government to invest their state pension funds in private equities is Norway.

Yeah, if there were a scale for government responsibility, it would probably have Norway at one end and Zimbabwe at the other. Last time I looked, a Zimbabwe 100 trillion dollar bill would just about buy you a cup of coffee.

 

[atmsmshr]

A rather comprehensive article on the myriad solutions to solve the social security funding issue. Well done with objective pros and cons. you can vote at the end and see how others view "the fix."

Fixing Social Security - Washington Post

It is unfortunate (but not unexpected) that politicians continue to kick the can down the road. I predict another 1980's style solution of waiting until the last minute with a result of no horrific changes for any single group.

 

[Blue Collar Guy]

Yeah, if there were a scale for government responsibility, it would probably have Norway at one end and Zimbabwe at the other. Last time I looked, a Zimbabwe 100 trillion dollar bill would just about buy you a cup of coffee.

Maybe its a very large cup?

 

[Blue Collar Guy]

I think the poster child for a government to invest their state pension funds in private equities is Norway.

How to invest like...Norway's £700bn oil fund

+1 See this is the kind of stuff Id like to see done with our Social security,

 

[Blue Collar Guy]

A rather comprehensive article on the myriad solutions to solve the social security funding issue. Well done with objective pros and cons. you can vote at the end and see how others view "the fix."

Fixing Social Security - Washington Post

It is unfortunate (but not unexpected) that politicians continue to kick the can down the road. I predict another 1980's style solution of waiting until the last minute with a result of no horrific changes for any single group.

Wow, best article I ever saw about the problem and the solutions being considered. Shame its 2.5 years old, if they opted for my Nobel winning suggestion, they would have gotten a nice bang for their (our) buck already. Thanks for sharing this article. I enjoyed reading every word of it, and the polls after the discussion were interesting.

 

[pb4uski]

It is required by law to invest in US obligations.

Some details here , https://www.ssa.gov/oact/NOTES/note142.html

One item of note they specifically prohibit capital markets so that the fund doesn't disrupt it.

The Council recommends that investment of the trust funds should, as in the past, be restricted to obligations of the United States Government. Departure from this principle would put trust fund operations into direct involvement in the operation of the private economy or the affairs of State and local governments. Investment in private business corporations could have unfortunate consequences for the social security system--both financial and political--and would constitute an unnecessary interference with our free enterprise economy. Similarly, investment in the securities of State and local governments would unnecessarily involve the trust funds in affairs which are entirely apart from the social security system

+1 totally agree with the Council's recommendation and reasoning

Here is and example of the reason why... while the intent may be noble, I don't think the government should be activist investors:

Norway's sovereign wealth fund is taking steps to become more active in company governance. In the second quarter of 2013, the sovereign fund voted in 6,078 general meetings as well as 239 shareholder proposals on environmental and social issues. Norway's Government Pension Fund Global (GPFG) has the potential to influence the corporate governance market in Europe, and possibly China as well, greatly. It has also started to become active in pushing for lower executive pay.

http://fortune.com/2016/05/02/norway-wealth-fund-ceo-pay/

 

[atmsmshr]

Call me overly optimistic, but I do not believe in a 10-20% cut in SS benefits is in the making for anyone over 55.

 

[gerntz]

I'd, 1) adjust the COLA to be in line with what what people on SS actually experience vs. using the current COLA that actually increases spending power. 2) Raise both FRA to 70 & initial benefits age to 65 and then index them to longevity. I don't understand why SS should be a source of income for more & more years if we on average live longer. On the bright side for SS Trust Fund, suicides & the opioid epidemic together seem to be denting longevity increase.

 

[Blue Collar Guy]

I'd, 1) adjust the COLA to be in line with what what people on SS actually experience vs. using the current COLA that actually increases spending power. 2) Raise both FRA to 70 & initial benefits age to 65 and then index them to longevity. I don't understand why SS should be a source of income for more & more years if we on average live longer. On the bright side for SS Trust Fund, suicides & the opioid epidemic together seem to be denting longevity increase.

Thats one way to find a silver lining.

 

[Hermit]

I'd, 1) adjust the COLA to be in line with what what people on SS actually experience vs. using the current COLA that actually increases spending power. 2) Raise both FRA to 70 & initial benefits age to 65 and then index them to longevity. I don't understand why SS should be a source of income for more & more years if we on average live longer. On the bright side for SS Trust Fund, suicides & the opioid epidemic together seem to be denting longevity increase.

There are a lot of jobs that cannot be done as you get much over 60. Living longer does not mean you can find reasonably productive employment if your skills are not in a white-collar world.

 

[Texas Proud]

I'd, 1) adjust the COLA to be in line with what what people on SS actually experience vs. using the current COLA that actually increases spending power. 2) Raise both FRA to 70 & initial benefits age to 65 and then index them to longevity. I don't understand why SS should be a source of income for more & more years if we on average live longer. On the bright side for SS Trust Fund, suicides & the opioid epidemic together seem to be denting longevity increase.

Getting off topic... but I heard that the $45 billion proposed for opioid spending being proposed is way short of 'what is needed'!!! They say the gvmt needs to spend $200 billion over the next 10 years....

REALLY


And they say 'fix' it... well, it will not be fixed.... just like the war on drugs has not fixed the drug problem either...

 

[joeea]

Facts are so yesterday.

Unless they are Alternative Facts. Those are definitely "in".

 

[MichaelB]