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View Diary: This Senior Citizen NAILED IT!!! (90 comments)

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  •  Privatization (8+ / 0-)

    Now you're arguing for something like privatization. It would probably be a very bad idea to have the federal government investing so massively in the equity markets. I'm sure it would create all kinds of distortions.

    And in fact, the national debt is much larger than the holdings of the social security trust fund. The fact is, once we decided to deliberately run a large surplus on Social Security (back in the early 80's) the only sensible thing to do was to purchase government debt. That was the arrangement made at the time and it's still in place.

    "The smartest man in the room is not always right." -Richard Holbrooke

    by Demi Moaned on Tue Sep 13, 2011 at 12:33:57 PM PDT

    [ Parent ]

    •  That was not Privatization of Social Security (3+ / 0-)
      Recommended by:
      lakehillsliberal, Demi Moaned, J M F

      Privatization of Social Security is generally understood as no or much lower contributions to the Federal program, and individuals investing privately what otherwise would have gone to Social Security payment (FICA).  That is not what I was proposing.

      The alternative I mentioned would be for the Social Security Trust Fund to be diversified and have it professionally invested, just as is the case for government employees receiving government pensions.

      The current SS trust fund is $2.6 Trillion (http://www.ssa.gov/...)

      This is about the size of assets under management by JP Morgan Chase Bank.  ($2.3Trillion)

      While JPM is a significant player in the financial market, they don't have the power to dictate what the financial markets do.

      There would be an issue of politics impacting what a Social Security Trust fund is to be invested in unless the policy was along the lines of investing in the total market through indexing.  There is also the risk that when the financial markets rise strongly for years, that politics increase the benefits paid or the FICA contributions reduced, only to be followed by an extended market decline.

      Looking back, the problem with investing the Social Security surplus in Treasuries is that politicians were "seduced" by this large yearly cash-flow and spent more and taxed less than they would have otherwise.  Putting the money aside can happen for a few years at most, but politicians don't have a good track record of holding large sums unspent for long periods of time.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Tue Sep 13, 2011 at 01:46:46 PM PDT

      [ Parent ]

    •  Exactly. Invest it in the safest thing available, (0+ / 0-)

      rather than letting it sit and lose value.  It also would have taken a lot of money out of the economy if it had just sat there.

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