Rescuing Social Security

WSJ A Capitalist fix for SS

Instead putting the trust fund in government bonds as less than 2% put it in an S&P Index fund at better than 10% over the last 50 years. And the Federal Government is more likely to default than the S&P to go bust.

25 thoughts on “Rescuing Social Security

  1. No thanks.
    I do not believe in magic. Stock markets go up and down and they crash. They are dominated and manipulated constantly by self-serving people accountable to no one.

    A better first step will be to cancel the absurd carried interest provisions of the tax code.


        1. For the S&P index to go bust, most major commercial sectors will have to fail. compare that to our government, which is in an interest rate death spiral and can only avoid bankruptcy by printing money, spurring inflation that triggers COLA increases in SS.

          The risk of the former is far less than the continued downward spiral of the government.


          1. “For the S&P index to go bust . . .”

            If the government collapses as you predict, the stock market will also collapse. So, private sector approach has essentially the same risk as the current approach plus the risk of market downturns. The government, at least, can print money. The private sector cannot.


          2. Why would you think that?

            The stock market represents the factories and machines and the skills of the employees.

            If the government defaults, do those things evaporate.


          3. “Why would you think that?”
            Because I am not a doctrinaire dope unable to see that the government is vital to our economy. In your dream scenario where the government stops paying its debt, the immediate and unavoidable consequence would be a global financial meltdown at least as disastrous as the Great Depression.


  2. RE: “If we must force workers to save for retirement, the least we can do is have them invest in American companies.”

    Wrong idea. We shouldn’t force workers to save for retirement at all. Let’s go back to the way retirement worked before Social Security came along.

    I know that some people would suffer without public assistance and for reasons beyond their control. But that is always true.

    In time society would develop the coping strategies needed to care for retirees. This may sound harsh, but such is the human condition.


    1. This sounds just like your suggestion that the there should be no building code regulations. If enough people die in shoddily constructed homes and high rises, the markets will correct.

      And yet you are adamant about saving fertilized eggs no matter what the circumstances.

      Do you have no consistency as to the value of human life?

      Even chimpanzees in the wild, no docile species by any stretch, still take care of their own.

      I think we can and should do better.

      Liked by 2 people

      1. That is pretty much irrelevant to the issue.

        I agree with Mr Roberts that SS is immoral. We should be able to opt out and make our own investments, but seeing that FICA is not going away, it would make sense to invest the trust fund in equities that have a record of better returns than the government bonds that we currently use.

        In fact, a financial planner who invested private pensions in such low yield bonds would wind up in prison.


        1. SS is immoral is a value judgement, not a financial reality. You think taxes are thievery, so I just have to assume that is where you are coming from.

          Financial anarchy is not better than a political one. If we are going to be Darwinian about this, then let’s be consistent. Do not save the weak at all. (The abortion issue come to mind if you really care and think about it.)

          If a citizen is too unsophisticated to sort through financial chicanery while working hard to feed himself and his family, too bad. Unregulated financial management companies will thrive. By the time they are sued for breach of fiduciary responsibility people are wiped out.

          Humans are not automatons. Emotions drive decisions as much as astute sophistication. Our retail economy, which is about 70% of our GDP is almost totally dependent upon that. I know, I was in the ad business for 40 years.

          Incentives to do well should be rewarded and if lucky or prescient enough, then great wealth should be the result. But starvation should not be the incentive for failure avoidance except in the jungle.

          Liked by 2 people

        2. “ That is pretty much irrelevant to the issue.”

          No it is very relevant to the concept that government is unnecessary, building codes or SS.

          Liked by 1 person

        3. “In fact, a financial planner who invested private pensions in such low yield bonds would wind up in prison.”

          Another very silly bit of hyperbole.

          And maybe you have not noticed, but the payments from Social Security are a matter of law and not of ROI. And that is on purpose.


          1. “The payouts for SS are by law, but that does not mean the trust fund should be invested by idiots.”

            So someone who disagrees with you is an “idiot?” That seems to be the case on every subject.


          2. “Had the Trust fund been invested in S&P indexes from the beginning the system would not be in trouble.”

            Maybe or maybe not. Such a radical change in the market participants would have effects that are just about impossible to know. But, your hindsight is irrelevant. As I said some posts ago it is about risk. I will stipulate that greater risk is usually associated with greater rewards. Until it isn’t.


          3. Look at Biden’s budget going forward, and then tell me there is more risk in the collective judgment of thousands of successful businessmen than in the political maneuverings of politicians seeing only the next election.


      2. RE: “And yet you are adamant about saving fertilized eggs no matter what the circumstances.”

        I think you are misunderstanding a few things.

        My abortion views derive from my belief that it is best for humanity to deal with the natural world as given, and not as we may wish or to pretend it to be. The same applies to government regulation of construction standards.

        The two are not incompatible, but I can understand there will be objections to the basic premise. My response is to observe that the attempt to protect others from the consequences of their own decisions usually amounts to false compassion.

        If we want to “do better,” we should at least do better than false compassion and other pretenses.


  3. Don, if the government defaults, the stock market will probably collapse.

    True, historically the markets have shown decent returns over long periods. But people have to eat, have shelter, medical care,
    And care for families daily. They can’t wait 3 or more years for a depression to right itself.

    In addition, the markets are not always reflecting the actual values of a given company. Stocks rise and fall to reflect such quasi casino tactics as high frequency trading, hedge fund manipulations, crypto crap, etc.. it takes more than enough financial sophistication to sort through this while working two jobs and raising a family. And I can tell you that financial management company’s are loaded with fees that require careful analysis to find. Not all are rapacious, but many are.

    A close family member was a comptroller for a very successful local corporation. She was truly upset at the choices made for the 401k retirement matching benefit companies hired because they had connections and charged higher fees. Fees that only hurt the future values of the employees retirement, but padded the management company. Subtle, and legal, but pernicious it it’s effects.

    Capitalism is wonderful, but the risks are often high for many investors. Retirement funds should be as secure as possible and SS is the backstop when things go south.

    Liked by 2 people

    1. S&P Index funds include stocks for 500 major and minor companies, in proportion to their valuation. There is no management, it is on autopilot. For the fund to fail, a lot of those companies would have to fail. The odds of the government going bankrupt are far higher. (hyperinflation of the currency is just another way of going bankrupt.)

      The safety of the S&P index derives from its diversification.

      The S&P index has had negative returns over 3 years in a row only once, 1929-1933.

      SS could invest its trust fund in the S&P and protect itself the same way I do with my private accounts. When the market is up, I sell enough shares to maintain a cash or cash equivalent fund for 3 years of my needs. When the market is down, I draw on those cash reserves, and replenish the fund when the market is back up.

      Nothing is 100% risk free, especially the government.


      1. Wonderful. You are a well educated, market sophisticated, detail oriented person. Admirable.

        We hire a man who has a full time job as a janitor at a local university. He works hard, is very honest, conscientious and reliable. He was employee of the year there 2 years ago. He works from 2-10 or so, so he works for us in the mornings. He came from a huge family in rural NC. But his abilities beyond physical labor are limited. We paid for his extensive dental work, helped get safer housing and if need be, drive him since he has no license or car. He is about 60 ish. Because of his state job at NSU, he will be vested soon and will not be homeless.

        The odds of him surviving on his own without guidance and financial backstops is minimal.

        He represents millions that a financial free for all would crush. And note that we had to pay for his dental work (which, BTW, he insisted to work off at least partly for us…that kind of character is better than most across the economic spectrum, top included.) Dental work is health care we apparently think is not critical for health. We know better, but hey it’s money.

        Charity is not enough.

        Liked by 1 person

        1. RE: “The odds of him surviving on his own without guidance and financial backstops is minimal.”

          Does he have no friends, family, community?


        2. We’re talking about how to protect and grow the SS Trust fund. They are certainly sophisticated enough to keep enough cash and equivalent funds on hand for three years of hard times and to put the rest in an S&P Index.


          1. I apparently misunderstood. The mantra has been to scrub SS completely by the conservatives.


            If the fund is capable of being professionally managed to gain a higher rate of return while still maintaining security and honesty, even if the conservative investing cost a point, it could be a help.

            It was never meant to be retirement fund per se. But the facts are that middle and working class incomes have stagnated from 1980 till the last few years. So the number of elderly living on $12-15K/ year is a shameful statistic for the leader of the world.

            The caveat is we have to clean up Wall Street first from being a casino for the wealthy at the expense of the majority.


            Liked by 1 person

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