04/12/2017

Should Social Security Invest In The Stock Market?

Andrew Biggs, Forbes.com

The Wall Street Journal features an online debate on whether the Social Security trust funds – which currently hold only special-issue government bonds – should instead seek out higher returns by investing in stocks. On the Pro side is Boston College economist Alicia Munnell, director of the Center for Retirement Research; arguing Con is Michael Tanner, a senior fellow at the Cato Institute (and, full disclosure, my former boss from when I worked at Cato in the early 2000s).

They both make some solid points. But it’s a short piece. And, inevitably, the points they make aren’t precisely those that I’d make. So here are a few extra thoughts on investing the Social Security trust funds that I think add something to the debate.

State and local pensions have a hard time investing in risky assets. For Social Security, it would be even harder. Most defined benefit pension plans – including both private sector pensions and state and local government employee pensions – calculate their annual required contributions based on a formula that accounts for the ups and downs of their investments. If the pension’s investments fall in value, then contributions in following years will have to be higher. That’s been a problem for state and local governments because they can’t meet the required payments. Even today, eight years past the end of the Great Recession, nearly half of state and local pensions don’t receive their full annual contribution.

But for Social Security it could be even worse, because – unlike most other traditional pensions – there’s no automatic balancing for Social Security financing. Social Security has been underfunded since the mid-1980s and Congress has done precisely nothing to fix the problem. And there’s nothing in the law that requires Congress to act. Investing the trust fund in stocks would add more volatility to Social Security’s finances, but with no requirement that Congress act to address that volatility.

Read full article



You May Also Like:

Black Police Officer On NFL Protest: "Now I Have Had Enough" [Watch] Brandon Tatum, YouTube

Ted Cruz Just Stuck A Fork In The Graham-Cassidy ObamaCare Repeal/Replace Bill streiff, RedState

ObamaCare’s Tax On The Poor The Wall Street Journal

How Obama Is Funding The Anti-Trump Resistance Paul Sperry, New York Post

John McCain: Obamacare Savior Guy Benson, Townhall

NFL Picked Sides In The Culture War, Now It Has To Live With The Consequences William A. Jacobson, Legal Insurrection

Trump Tells NFL Fans To Stop Going To Games 'Until Players Stop Disrespecting Our Flag & Country’ [Watch] Joseph Weber, Fox News

NFL Team Owner Shahid Khan Joins NFL's National Anthem Protests USA Today

It Was The Deep State That Colluded With The Russians, Not Trump Clarice Feldman, American Thinker

Theresa May Prepares To Leave The EU John O’Sullivan, National Review

Showdown Looms: FBI Misses Third Deadline To Turn Over Subpoenaed Trump Dossier Docs Byron York, Washington Examiner

Global Warming: Who Are The Deniers Now? Investor’s Business Daily

If Trade 'Deficits' Are Bad, Why Do Rich Countries Have Them? Allan Golombek, RealClearMarkets

Reminder: Obama Paid The NFL Millions To Be Patriotic Timothy Meads, Townhall

Can The Sugary Beverage Tax! John O. McGinnis, Library of Law and Liberty

California Legislature Demands Apology From Trump Casey Ryan, Daily Signal

NFL Issues Official Statement On Donald Trump Brian Thomas, Federalist Papers Project

Solar Panels Perfect Case Of Protectionism Costing More Jobs Than It Saves Jeffrey Dorfman, Forbes.com

What Did The Founders Think About Freedom Of Speech? Mike Sabo, American Greatness

For More go to the Home Page >>>

Search

SIGN OUR PETITION

FreeMarket Central

TELL CONGRESS: STOP THE POLITICS.

PASS A HEALTH CARE BILL THAT PUTS PATIENTS FIRST



Americans need a health care bill that serves needs of individuals—not those of Washington and big corporations.

 

Read more

Bookshelf

FreeMarket Central

Some titles recent, all recommended -

Special Video Feature

FreeMarket Central

Voices From The 2017 International Students For Liberty Conference

In Search Of History

When America Was Truly The Land Of Opportunity

For [early immigrants] America was truly the land of opportunity. For the first time in their lives, many were truly free to pursue their own objectives. That freedom released the human energies which created the United States. There were few government programs to turn to and nobody expected them. But also there were few rules and regulations. There were no licenses, no permits, no red tape to restrict them. They found, in fact, a free market, and most of them thrived on it. 

-- Milton Friedman,

Shadow Stats Snapshot


FreeMarket Central

ShadowStats alternate economic indicators are based on the methodology of noted economist John Williams, specialist in government economic reporting.

  • Unemployment:
    FreeMarket Central BLS: 4.44%
    FreeMarket Central Shadow Stats: 22.2%
  • Inflation:
    FreeMarket Central August Year-to-Year: 1.73% (CPI-U*)
    FreeMarket Central Shadow Stats: 9.4%

*[cpi-u is the Bureau of Labor Statistics inflation rate for all urban consumers]