Monday, January 31, 2005

Great Quote on Social Security Reform

PoliPundit comes up with a great quote. Link. Despite the link, it is short enough that I am giving the entire quote here.

Today, Social Security is strong. But by 2013, payroll taxes will no longer be sufficient to cover monthly payments. And by 2032, the trust fund will be exhausted, and Social Security will be unable to pay out the full benefits older Americans have been promised.

The best way to keep Social Security a rock-solid guarantee is not to make drastic cuts in benefits; not to raise payroll tax rates; and not to drain resources from Social Security in the name of saving it.

* * *

Specifically, I propose that we commit 60 percent of the budget surplus for the next 15 years to Social Security, investing a small portion in the private sector just as any private or state government pension would do. This will earn a higher return and keep Social Security sound for 55 years.

– President . . . William Jefferson Clinton, January 19, 1999. (Emphasis added.)

President Clinton is correct that the only viable, long-term solution to the Social Security problem/crisis is to invest the contributions (a polite word for the taxes) at market rates. I disagree with him as to who should make those investments. Experience shows that when any level of government is investing in equity markets, the temptation to chose investments for political reasons, to reward friends and harm enemies, is usually too strong to resist forever. That is not a good way to get a fair return for those for whom you are supposed to have a fiduciary responsibility. When individuals are investing for their own retirement, priority number one is to get a good return at a moderate level of risk.


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