Feel free to tell me the flaws in this thinking. I thought about this the other day, and it turns out Bill Clinton already wanted to do this. Now I love him even more. Anyway...
My concern with private accounts is in part the volatility, but mainly it's the idea of doing away with the notion of a guaranteed benefit. There already exist excellent vehicles for personal retirement investment in the form of IRAs and 401(k)s (which if any of you have not opened yet, I'd do so immediately if you are able; yes even college students). So for starters, I want the Trust Fund to exist to offer guaranteed benefits not just to retirees, but also to the disabled and such.
However, rather than investing the surplus into Treasury bonds, why not invest it (or at least some of it) into the stock market? I guess one immediate problem would be that the surplus will be erased soon (which is why we should have been doing this for decades already), but we can get rid of the payroll tax ceiling or something. And/or have the government pay back some of the existing bonds so the Trust Fund can buy stocks instead (which I know is a problem now since we'd either have to cut the deficit instantly or borrow on new Treasury bonds).
One thing Alan Greenspan was concerned about was the government politicizing its investments. But that can be avoided by investing into non-managed indices rather than with a fund manager. In fact, you can use the existing G, F, C, S and I funds that the Thrift Savings Plan for federal employees already uses!
The threat of volatility (already admittedly low if you examine stock market performance over a long period of time) is lessened by the fact that the government isn't on a 40, 30 or 20 year retirement savings timeline. They have centuries to ride out bad times. Sure, sometimes they'll dip into the Trust Fund's principal, but most of the time they will able to pay out of the Trust Fund on capital gains alone!
Why isn't this being talked about in Washington? And even if it is, why haven't I heard anything on it? Democrats are opposed to Bush's private accounts plan, but they aren't offering an alternative plan to really woo voters. This could be that plan!
My concern with private accounts is in part the volatility, but mainly it's the idea of doing away with the notion of a guaranteed benefit. There already exist excellent vehicles for personal retirement investment in the form of IRAs and 401(k)s (which if any of you have not opened yet, I'd do so immediately if you are able; yes even college students). So for starters, I want the Trust Fund to exist to offer guaranteed benefits not just to retirees, but also to the disabled and such.
However, rather than investing the surplus into Treasury bonds, why not invest it (or at least some of it) into the stock market? I guess one immediate problem would be that the surplus will be erased soon (which is why we should have been doing this for decades already), but we can get rid of the payroll tax ceiling or something. And/or have the government pay back some of the existing bonds so the Trust Fund can buy stocks instead (which I know is a problem now since we'd either have to cut the deficit instantly or borrow on new Treasury bonds).
One thing Alan Greenspan was concerned about was the government politicizing its investments. But that can be avoided by investing into non-managed indices rather than with a fund manager. In fact, you can use the existing G, F, C, S and I funds that the Thrift Savings Plan for federal employees already uses!
The threat of volatility (already admittedly low if you examine stock market performance over a long period of time) is lessened by the fact that the government isn't on a 40, 30 or 20 year retirement savings timeline. They have centuries to ride out bad times. Sure, sometimes they'll dip into the Trust Fund's principal, but most of the time they will able to pay out of the Trust Fund on capital gains alone!
Why isn't this being talked about in Washington? And even if it is, why haven't I heard anything on it? Democrats are opposed to Bush's private accounts plan, but they aren't offering an alternative plan to really woo voters. This could be that plan!