I just heard Louisiana Sen. Bill Cassidy outline his plan to “rescue” Social Security on Face the Nation. Here’s the relevant snippet:
SEN. CASSIDY: Yes, but I have a plan, and we don’t raise the retirement age in my plan. But that said–
MARGARET BRENNAN: This is the sovereign wealth fund–
SEN. CASSIDY: –somebody else may have a plan that does it- what’s that?
MARGARET BRENNAN: This is the sovereign wealth fund plan you had with Senator Kaine?
SEN. CASSIDY: This is the one where you do a investment fund and you put $1.5 trillion in it and you allow it to grow with the economy. It’s what the Canadians do, the Norwegians do, the Japanese do. It’s what the U.S. government does with the Federal railroad retirement system. When you do that, the growth in the economy takes care of a lot of the problem with the debt.
IMO that would have been a fine idea in the 1980s when Congress reformed Social Security by raising FICA and the retirement age but it has several serious problems now.
The first is where do you get the $1.5 trillion? Not only do Social Security expenditures exceed receipts but general spending is running at a deficit. We could:
- borrow another $1.5 trillion which would increase pressure to monetize the debt and thereby contribute to inflation and reduced affordability
- raise taxes which Sen. Cassidy opposes
- reduce or reallocate other federal spending
all of which are difficult or impossible in the present political climate.
The second is that such a fund would inevitably be politicized unless clear lines are drawn. The federal government should not be picking winners and losers. Congress would inevitably face pressure to favor politically desirable industries, avoid investments in unpopular sectors, or use shareholder voting power to pursue policy goals.
The third is that a large government purchase of equities would initially transfer wealth to existing shareholders by bidding up asset prices. According to the Federal Reserve the top .1% of wealth owners own 30% to 35% of of equities and mutual fund shares. That the richest are not rich enough is not presently a major problem in the United States.
The conceptual problem is do you really want the federal government to own a large portion of the economy? It’s unclear to me how one can philosophically oppose socialism and support government ownership of the economy. Even if one rejects the label “socialism”, a government investment fund of this scale raises legitimate questions about the appropriate role of the federal government as a major shareholder in private enterprise.
First restore actuarial balance through taxes and benefits; only after the program again generates surpluses should those surpluses be invested. My alternative plan would be to raise the Social Security retirement age to 70, raise the maximum income subject to FICA so that 99% of wage income is subject to it (that’s about $560,000 at present) indexed to inflation, invest some portion of Social Security surpluses up to 100% in one or more privately administered mutual funds, and cap the administrators’ earnings for the fund.
We have had a number of low interest loan programs, like the one with Solyndra in it that made the govt a fair bit of money and was pretty successfull. We have provided tax subsidies to many businesses with varying success. However, we have largely avoided owning businesses although Trump is making that happen pretty frequently. It will alter the way those businesses run themselves and it puts taxpayers on the hook with likely more money being poured in if they start failing. I think it’s something to avoid unless we can be scrupulous about avoiding favoritism and corruption.
The $1,5 trillion plan is a variation of plans often offered by conservatives. Like you, my first question is where does the money come from and over what time period? Between the two of them, Musk and Bezos are worth close to that much money so if they both went crazy and donated that to a fund I would just make it a giant index fund covering the entire stock market. Pay whoever runs it whatever the current top GS pay is. Oh, and that guy cant receive gifts like fancy motor homes or expensive trips from “friends”.
Otherwise my plan would be similar to yours but I would index the retirement age to income so that the expected payout period is equalized. Per this congressional research paper a guy in the lowest quintile expects to reach 77 and a guy in the highest quintile expects to hit 88. (82 and 91 for women.) Index if for something like 12-15 years of payment.
https://www.congress.gov/crs_external_products/R/PDF/R44846/R44846.6.pdf
Steve
Steve, the federal government LOST quite a bit of money on the Solyndra investment. That raises a key issue. What happens when the investment LOSES money?
All the issues “against” that you cite apply. And I’ll throw some gas on the fire.
The very act of purchasing securities would drive up entry prices, and its corollary, reduce ultimate investment returns. I’m totally spitballing this, but in that light suppose the required funding was $2.5t to achieve such a funds actuarial realities. That’s almost a 50% increase in current federal revenues if you go the taxing route. It’s called a depression, not to mention the immoral bait and switch and political impossibility.
And no doubt we would have more of the Synfuels and Solyndras of the world.
Social security is effectively a workout. It will inevitably take a long time (grandfathering people for a period) and have multiple facets. I suspect those facets will include the legitimate extension of the retirement age, extending taxable wage income and simple demographics normalization.
I specified the program, which included many other companies besides Solyndra. So yes, I am aware Solyndra loss money. You seem unaware that was not true of the entire program. You can debate whether or not the US should engage in industrial policy but at least for defense related products it’s our only option I think.
What happens if one of these companies loses money and the US then loses money? There is no way to guarantee that all of these entities in which we are investing/subsidizing will be successful. If that is your primary concern we should stop all loan and subsidy programs and stop investing in/owning companies like we do now.
https://www.newsweek.com/goverment-loan-program-funded-solyndra-makes-money-284538
Steve
Steve
Substantially backing individual companies creates moral hazard. The best you could do is small minority stakes having no governance rights.
Creating a giant, well diversified portfolio is still dubious from a moral hazard perspective, but more palatable. Finally, it should not be an all risk ssset portfolio. (Unless all cattle futures, and Hillary ran it. She’s extraordinarily good at that). It should be stocks and bonds, RE and commodities. Etc. it won’t lose money over a reasonable term.
Maybe put the cash surplus in a “lockbox”.
The US budget for fiscal year 2026 is $7.4 B, with a deficit of $1,9 B. So, 26% of federal budget is funded by borrowing.
For next year, Trump wants $1.5 B for the military. Veteran benefits and some other defense related spending is not included.
We cancelled the copper penny because we couldn’t afford to make them. No doubt the nickel is next.
A generation ago, we mocked Brazil, because they stopped making a plastic coin they lost money making.
Social Security isn’t the problem.
Dave, My plan would have several parts:
1) Subject non-employer income to the Social Security tax. This would include things like capital gains.
2) Adjust marriage rules. For married couples, each dollar earned goes 50-50 into wife’s and husband’s accounts. For a case where only the husband works, this would double the income limit that is subject to taxation. When taking benefits, both spouses now have their own accounts instead of a single account. This disincentivizes married couples from divorcing at retirement to get higher SS payouts.
3) Increase retirement age. Life expectancy has increased by 5 years since 1982.
4) Eliminate the SS income limit for those taking Social Security before age 67. This is a disincentive to work – which subsequently reduces tax revenues.
Bob – Social security and Medicare/caid are the problem. Parsing that out is for other threads. We, of course, spend too much in many areas. But when your organization faces dire financial realities, you go to those first.
This is entirely OT. But I have bent my brain into contortions as to why Trump had his boot on Iranian necks, but let up. I only came up with 3. 1) Listening to deep state operatives who have run the same appeasement operation for 50 years. Their careers depend on it. 2) Pure humanitarian reasons. 3) The knowledge that Iran’s perceived strategic trump card (heh, see what I did there?) is fleeting. The Straights are declining rapidly in strategic importance. The Iranians are going to get left just holding their puds in their hands. In that vein.
Scott Bessent View:
Capital does not tolerate chokepoints; it routes around them.
Saudi Arabia is expanding its East-West pipeline. The UAE has already built out Fujairah as a bypass. Iraq is revisiting overland export corridors. Every marginal dollar now flows toward redundancy, not reliance. What was once a geopolitical lever is being engineered into irrelevance. Bessent gets it: markets don’t absorb coercion, they arbitrage it away
Energy markets are not static, and they are not sentimental. The shale revolution already diluted OPEC’s grip. LNG has globalized gas. Now infrastructure is doing the same to maritime risk. Once these pipelines are built, they don’t get unbuilt. Volume shifts become permanent. Pricing power follows.
Tehran’s miscalculation is classic: overplay a scarce asset, and the world invests to make it abundant. The more Iran rattles Hormuz, the faster it erodes the very leverage it seeks to exploit.
In the end, this is not deterrence. Its substitution, and substitution, once funded, is irreversible. Iran is underwriting its own marginalization.
The US is the big winner. China the big loser.
Welcome to the new great game.
I referenced this issue in a comment a while back. Its happening faster than I think anyone predicted.
Its part of a Drew axiom: capital moves at lightening pace. I’ve lived it. The current communist controlled Democrat Party ought to heed that. Mandami. Hong. Al-Sayud and Piker etc. Its a suicide pact initiated by a bunch of true idiots and crazed ideologues, and accommodated by a sclerotic old guard.
I truly feel sorry for a guy like Dave, a legitimate and well reasoned Democrat philosophy leaning person. Or even steve, a cultist if there ever was one, but no crazed Piker.
I don’t feel sorry for the Schumers, Spanberger’s or Newsoms of the world. Not a leadership bone in their bodies.
A last thought: you do know that Obama set this all in motion, right? The arrogant, smooth tongued but empty suit Messiah is destroying the Democrat Party.
@Drew
So, we just need to wait a few years foe oil to be re-routed, and it will be all rainbows and unicorns. How exactly does this allow Trump to extract the US from this quagmire? Do you really believe that the Iranians are as spoiled as Americans? NEWSFLASH: The everyday live of most people on this planet would be intolerable to Americans.
Trump is fucked, and he is beginning to realize it.
“So, we just need to wait a few years foe oil to be re-routed, and it will be all rainbows and unicorns. ”
Tasty – please don’t cheapen yourself with high school debating. The re-routing is well underway, and of significant impact. And it will continue at a rapid pace. I can’t imagine that the Saudi and UAE plea to Trump hasn’t been just this: you have decimated them for years, the Straights problem will resolve, don’t let them blow up our facilities now. Oh, by the way, you are starving them of capital. People get pissed when they can’t get food and heat……….
The issue turns to attacks on these pipelines, and eliminating future attacks. And of course to spanking a cleric driven regime who just won’t take the hint. They will. Just one man, I’d have driven this to conclusion far sooner. But I’m not CIC. But they are dead men walking. Hear me. DMW
A valuable comment I heard recently reflects a comment Dave made a while back. Someone has mis-judged their leverage.
The Iranians have seriously misjudged theirs. They can be obliterated with one phone call. Their perceived Straights advantage is fleeting, an illusion. They may not know it, but reality is a bitch.
No unicorns, tasty. WTFU
@Drew
A while back there was an earthquake in Iran that killed 20,000 people. I doubt that they changed and/or enforcing building codes as a result. You and Trump have vastly overestimated the ability of the US to realistically damage Iran. Unless Trump are willing to drop multiple nuclear bombs, he is fucked.
The Strait is a side-show to Iran. It is only meaningful to Trump. The victory you perceive is him walking away without too much egg on his face. So much for total surrender.
Tasty –
Well, I differ. I understand their indifference to their population. But they are near extremis. No money. No wages. No electrical power. Soon no food. At some point their indifference morphs into rebellion. The clerics are horrible people, but they need to maintain a certain level of authority.
You discount the Straight. But its their lifeline. No oil. No Iran.
At some point it will come down to troops. My view is that it should be Israeli, Saudi and UAE. Its their back yard.
The mullahs are losing oxygen, bluster aside. I hope they have jets and Russian residencies awaiting. Actually, no I dont….
@Drew
It’ll be 3-4 weeks, and it will be wrapped-up. It is the same song and dance time after time – Vietnam, Iraq, Afghanistan, Libya, Syria, and now Iran.
Again, the Strait is a side-show. Iran has been isolated for the past 45 years. Now, Trump is going to put them on “double secret” isolation, and they are going to fall in line.
Arab troops are worthless. Actually, they are worse than worthless. Israel does not have the numbers required. Iran is 13x larger than N. Korea, 5x larger than Vietnam, 3.5x larger than Iraq, 2.5x larger than Afghanistan, a little smaller than Libya, and almost 9x larger than Syria. Let me guess. It will take 20,000 US troops (or less), and they will be greeted by cheering crowds.
Post-WW2, the only successful military campaign was the 1st Gulf War. Kuwait is 92x smaller than Iran, and 500,000 troops were committed. The generals were junior officers in Vietnam, and they were determined not to repeat the same mistake. It did not hurt that President Bush had actual combat experience.
I guess Trump thinks Rat Patrol re-runs are better experience than actual combat.
This steaming pile of shit belongs to Trump, and he is well on his way to surpassing Jimmy Carter as worst president of the past 100 years.
Drew- Why would we have Hillary do it when Trump, your idol, has been picking winners? It’s hard not to notice you didnt like this when Dems did it but are OK with Trump. Plus, while the Dem programs were loans, on which as I noted we came out ahead. Trump is actually taking ownership stakes.
I am not sure what made you think Trump had the boot on Iran. All we were doing was bombing them and history, along with military theory, shows that isn’t very effective. Further bombing is unlikely to do much and he doesnt seem to want to use land troops. I agree that we will get pipelines but reading and listening to the oil guys it is 2027 at the earliest for the shorter ones. Anyway, once the pipelines are running we are back to the status quo before the war.
TB- Let me second that bit about Saudi troops being awful. Arab militaries in general are poor but the Saudis stand out in that regard. I would also agree on Bush Sr. He was advised that continuing the war in Iraq would lead to a quagmire. He listened, maybe influenced by his prior military experience. Anyway, you arent going to convince Drew. He thinks like a business guy and wont understand people foregoing profits.
Steve
@Drew
Is Israel going to force Iran to unconditionally surrender before or after they force Hamas to unconditionally surrender?
For over three years, Israel has been trying everything except explicit genocide, and they have not been able to break the will of the people. Compared to Gaza, Iran’s size is 4,500x larger, and Iran’s population is 44x larger. Do you really think that breaking the will of the Iranians will be any easier?
I assure you that Netanyahu knew it was a fool’s errand, and so, he selected Trump for the task.
I recognize he’s tempting to forget but Biden’s record will be hard for anyone to equal. IMO Biden’s primary accomplishment was pushing Jimmy Carter out of the #1 position.
I wish more people, Republican and Democrat, would recognize that over the last 25 years we’ve had a sequence of weak and/or bad or both presidents. They should reflect on how that happened.
TastyBits: This steaming pile of shit belongs to Trump, and he is well on his way to surpassing Jimmy Carter as worst president of the past 100 years.
Dave Schuler: I recognize he’s tempting to forget but Biden’s record will be hard for anyone to equal. IMO Biden’s primary accomplishment was pushing Jimmy Carter out of the #1 position.
Historians disagree. Scholarly surveys generally put Trump, Harding, Hoover, and Nixon among the bottom-tier presidents. Carter is generally in the middle, while Biden is currently better regarded by scholars than Carter.
Dave Schuler: I wish more people, Republican and Democrat, would recognize that over the last 25 years we’ve had a sequence of weak and/or bad or both presidents.
As for the last 25 years (Obama, Biden, W. Bush, and Trump), historians generally rank Obama near the top, Biden in the upper-middle tier, W. Bush below average, and Trump atrocious.
(See scholarly surveys by C-SPAN, Siena, and the Presidential Greatness Project.)
@Dave Schuler
Biden did not get us into any stupid wars.
Zachriel:
Identify one historian that is NOT a “yellow dog” Democrat who disagrees.
TastyBits:
I agree completely. Trump is a bad president.
Dave Schuler: Identify one historian that is NOT a “yellow dog” Democrat who disagrees.
Among Republican scholars only: Trump (1st term only) is the worst president in the last 25 years and the worst in the last 100 years. Among Republicans, at least, he is not the worst of all time. That honor belongs to Buchanan, who watched fecklessly as the Union tore apart.
See the 2024 Presidential Greatness Project
https://presidentialgreatnessproject.com/
@Dave Schuler
My issue is with stupid wars not Trump. Presidents come and go. Stupid wars have no expiration date, and they persist long after the president who started them is out of office.
I have a personal opinion of Trump, but it is personal. In a little over two years, he will simply be an ex-president, and my opinion will be meaningless.
The Jimmy Carter reference was a jab. I doubt any Trump supporter would want Trump and Carter lumped together.
Asking both Grok and Chat-GPT plus looking via Google I cant find and survey of historians or political scientists that rank Carter as worst or Biden in the lowest 10. They all place Trump at or near the bottom. After having spent a week listening to lectures on the founders and doing a lot of reading I think that I would be tempted to place Washington as number 1. He could have been king if he wanted and thwarted our try at democracy. He very much put his life and his way of life on the line for the country. Interesting fact from about the middle of 1775 until the end of the war in 1783 he spent 3 days at home. Hard to imagine any modern American leader who would make such a sacrifice.
Steve
Steve
Did you read a word I wrote about government investment?
BTW. Does anyone here actually read and understand economic data?
I did. We dont have a giant well diversified portfolio. We have Trump picking out specific companies and/or industries he likes. Yet you wont criticize that because he is Trump.
Steve
@zachriel – Since you mentioned President Buchanan (who is on my 5 worst presidents list), I saw a stat this week that surprised me. Buchanan was the last Democratic president who replaced a living Democratic president. I had no idea.
Charlie Musick: Buchanan was the last Democratic president who replaced a living Democratic president.
Quite. Whereas Republicans did so as recently as 1989: Reagan –> HW Bush. Then again, FDR was elected four times. Not much chance to succeed a living president when the predecessor keeps getting reelected unto death. Still, an interesting tidbit. Thanks.