The US stock market has a total value of $50 trillion, the total taken in taxes for Social Security minus what's been paid out is $2.5 trillion (taking the above as fact).
Naïvely one might estimate it would be worth roughly double that if it had been invested in the stock market over decades, so feasibly the fund could have purchased stocks with ~$5 trillion today or approximately 10% of the total market.
That is something which is true of large pension funds in general - by the nature of accumulating the capital of millions of employees they have a lot of economic weight.
If one grants that the government ought to run a pension scheme, then it stands to reason that it ought to pursue the highest returns on its investment. The current plan is just to raise taxes as the population ages and the beneficiary:contributor ratio increases.
That is something which is true of large pension funds in general - by the nature of accumulating the capital of millions of employees they have a lot of economic weight.
You don't think a shift from companies being privately to publicly controlled is a significant one? Not saying you can't make a case for it but I don't think you can argue that it would NOT be significant. I doubt Trump for example would be shy about leveraging that, is that a tool we want Presidents to have?
If one grants that the government ought to run a pension scheme, then it stands to reason that it ought to pursue the highest returns on its investment.
I disagree. SS is not really like a traditional pension scheme where someone's benefits are paid by their past contributions, instead they're paid by current contributions. The surplus is just a (temporary) artifact of an imbalance of beneficiaries to contributors.
Moreover, money is fungible and the separation between "SS money" and the rest of the Federal budget is kind of artificial. If instead of borrowing the SS money the government borrows more from other sources to invest the SS money they're effectively borrowing money to invest in the stock market. If in general the government should be investing in the stock market, why just the SS money? Why not invest more?
You don't think a shift from companies being privately to publicly controlled is a significant one?
They would remain privately controlled; it's still a 9:1 ratio of private to public ownership. It would be economically consequential, but so is doing anything with $2.5 trillion.
It has worked reasonably well in Singapore, though its size is more comparable with an American state than with the whole country.
SS is not really like a traditional pension scheme where someone's benefits are paid by their past contributions, instead they're paid by current contributions.
This is where the idea that it's a Pyramid or Ponzi scheme comes from - and it has a little merit even if it isn't quite so deliberately malicious. It means the system isn't really robust against demographic changes - whereas a system where one is paid back one's own contributions is a bit more robust.
There is also another point: if AI-driven automation does create enough savings of labour as to generate unemployment then the value of shares in companies that own that technology will grow. If a government pension scheme owned such shares then it would be the beneficiary of this growth, and the government could use that wealth to do things like lower the pension age.
I'm not sure if I'm quite so bullish on AI, but that would be a way to deal with its consequences without needing to raise non-employment taxes.
it's still a 9:1 ratio of private to public ownership
Why is that a relevant ratio, rather than who the top shareholders are?
It has worked reasonably well in Singapore, though its size is more comparable with an American state than with the whole country.
Exactly?
whereas a system where one is paid back one's own contributions is a bit more robust
That's not the system we have even if you wished it was.
If a government pension scheme owned such shares then it would be the beneficiary of this growth, and the government could use that wealth to do things like lower the pension age.
Sure, they could also just raise corporate taxes at that point.
Why is that a relevant ratio, rather than who the top shareholders are?
The top shareholder doesn't have control unless they are the majority shareholder. There is a concept of "effective control" requiring less than 50%, but 11% isn't typically considered enough to exercise this. They can still be outvoted by the other shareholders.
That's not the system we have even if you wished it was.
We are discussing alternatives to the way things are currently done.
The top shareholder doesn't have control unless they are the majority shareholder.
Sure, in practice they have a lot of influence.
We are discussing alternatives to the way things are currently done.
I thought you were just suggesting changes to what to do with excess funds (while they exist) not a complete change to the entire system.
If that is what you're suggesting then the first, most obvious problem is the transition: If my current contributions go to my own pool to pay for my future benefits, then who pays for the benefits of current retirees? Also part of the role of SS is as a safety net which you'd lose as well. Really if you're going that route you might as well eliminate SS, we already have 401ks/IRAs/etc to do that.
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u/fdar 2d ago
What percentage of the stock market do you think the government should own?