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:

Quit Modifying Capitalism Andy Kessler, The Wall Street Journal

In Democrat-Led State Capitals, GOP Tax Reform Push Could Scramble Fiscal Plans Politico

Top U.S. General Says He Would Reject ‘Illegal’ Nuclear Strike Order From President Trump Chris Enloe, TheBlaze

One-Third Of 214 Arrested MS-13 Gangsters Were ‘Unaccompanied Alien Children’ [Watch] Ian Mason, Breitbart

New York Times Reporter: Obama Administration Misled On Al Qaeda Jenna Lifhits, Weekly Standard

A Fair Hearing By A Jury Of His Pervs Clarice Feldman, American Thinker

The NFL Commissioner Should Be Paid Far, Far Less (And I'm Available Cheap) Jeffrey Dorfman, Forbes.com

Thanksgiving Dinner Costs Less Than It Did 30 Years Ago, Thanks To The Free Market Investor’s Business Daily

‘Hope And Change’ — We Just Learned Who’s Paying 80% Of The Obamacare Mandate And It’s Bad Nick Arama, American News

Bald Kathy Griffin Unhinged: ‘I’m On A Hollywood Blacklist; My Legal Bills Are Through The Roof’ [Watch] Cristina Laila, Gateway Pundit

The Cops Were Chasing A Shoplifter. They Ended Up Destroying An Innocent Man's Home. Jay Stooksberry, Reason

Housing Bubble 2.0: Michigan Bank Offers Zero-Down Mortgages Andrew Moran, Economic Collapse News

Companies Have Now Invented “Climate Leave” William Teach, Right Wing News

Today, Even Snow Pants Are Accused Of Promoting Toxic Masculinity Naomi Schaefer Riley, Acculturated

There’s No Such Thing As An Unregulated Market [Watch] Learn Libery

For More go to the Home Page >>>

Search

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: 4.1%
    FreeMarket Central Shadow Stats: 21.6%
  • Inflation:
    FreeMarket Central October Year-to-Year: 2.23% (CPI-U*)
    FreeMarket Central Shadow Stats: 10.0%

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