It is estimated that the Social Security system will have to reduce benefits to every retiree by 21% in 2033 if nothing is done to shore up the system.
Proposed fixes include significant tax increases on all taxpayers, raising the retirement age, or further taxing Social Security recipients themselves. It would be very painful. However, according to the Center for Cost Effective Government, there is a better way.
The Center’s executive director, Steve Levy, former New York State Assemblyman and Suffolk County executive, announced the filing of a new white paper from the center which concludes that allowing for a small portion of the Social Security trust fund to be invested in a Standard and Poor’s index fund would grow the Social Security fund by trillions of dollars over future years and alleviate the need for draconian measures to bail out the system.
These proposals were floated by Congress in 1996 and by various presidential candidates, even as late as 2005. Had a portion of the fund been invested in the S&P index, there would be trillions of dollars more in the fund today. While the trust fund’s investment grew a paltry 2.2% per year, and 55% over the last 20 years, the Standard and Poor’s index was rising an average of 9.82% annually while having an astonishing 406% increase over a 20-year period.
The report notes that fears of a system collapse with an economic downturn are unfounded since the fund is not dependent on any one year’s return. Even sharp drops after 9/11, the 2007 real estate collapse, and the pandemic were only short-term and the market rebounded.
Levy noted how the New York State pension system is far more diversified than the Social Security trust fund. The allowance for equity and real estate investment by the pension fund has brought about a return that doubles that of the Social Security system, and the pension fund is rated as very secure.
The think tank also cited successful privatization programs in other countries, including Sweden and Australia.
A full reading of the paper can be read here.
The Center for Cost Effective Government is a think tank dedicated to exposing wasteful government spending and educating the public on various measures that can control taxing and spending for the purpose of creating more hospitable conditions for taxpayers and the business community. www.centerforcosteffectivegovernment.org