First, there’s no $2.6 trillion. There’s IOUs for 2.6 trillion.
Second, SSA could begin a phased transition, with new tax receipts invested in the market and the principal and gains used to pay current beneficiaries.
Then, over the next 30 years or so, the ownership of the funds transition to ownership by the worker.
Let’s say 75% of the funds are owned by the worker, and 25% by SSA to cover disabled folks, provide a minimum level of benefits, etc.
Obviously it would be complex, but it’s sustainable forever, the retiree has assets rather than promises, and it
builds generational wealth.
Quote:
Originally Posted by jimhoward
If the SS trust fund invested in assets other than USG securities the economics get very complex. If you changed the law to allow the SS trust fund to buy stocks and If you then inject 2.6 trillion into the stock market then prices will rise and the trust fund will pay dearly for the stocks. The future returns on stocks would then be lower than would otherwise be the case. At the same time the USG would still need to borrow that 2.6 trillion because the deficit doesn't get any smaller just because the trust fund doesn't fund it. Those hated government programs still happen. So it would go into the market and auction 2.6 trillion of T-bills. That would cause interest rates to rise. We would then owe the Chinese (or whoever else buys the T-bills) $2.6T instead of the SS trust fund.
So what would be the end result? I have no idea, but I know it is complicated.
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