What's driving America over the cliff

[Toro]

People already have this opportunity. If it was made clear that you and you alone are responsible for your retirement savings i think you will see that most people will save more.

They would save more, but almost certainly not enough.

There has been a fair amount of research into the behavior of savers, and we tend to put off saving what we need, regardless of the size of the government program.

 

[Toro]

How does SS compound? I thought congress just spends the money, and promises to pay in the future, with checks adjusted upwards by whatever the official rate of inflation is.

Anyway, I don't like the idea of Uncle Sam playing the stock market. I don't see why anyone on the left or right would support it, the possibilities for abuse are too great. A left-wing government might start making demands on the companies it has shares in--cut CO2 output, pander to unions, sell your products below market price, and politically correct but unviable business plans in general. A right-wing government might pander to management, or treat companies it has stakes in with kids gloves, looking the other way as they commit fraud, and so forth. Both sides would probably pressure the fed for inflation in order to goose the stock market, since politicians tend to be very short sighted and don't want to face the wrath of voters whose pensions have lost money.

Every single state in America has a pension fund for its employees that invests in stocks. How often do you hear of the government interfering in the operations of those companies? Every once in a while, a political issue will arise, but I would estimate it would account for a fraction of a percent of the actual machinations of a pension fund. So if 50 states think it is a good idea, why not the federal government?

Also, many countries invest directly in the stock market. The governments of Canada and Norway for example invest heavily in stocks around the world. Sovereign wealth funds invest trillions into equities. These countries do not interfere in the companies they invest. They are professional owners that seek to maximize returns. So why not America?

A typical fund will target a return of 6%-8% a year, and generally attains those returns over very long periods of time. SS returns about 3%. To demonstrate the power of compounding, a 3% return over 50 years earns 338%. An 8% return over 50 years earns 4,590%. Over 100 years, the returns are 1,822% and 219,876% respectively.

Why is this not a good idea?

 

[garyd]

That trend began a long time before Bush, and your boy Obama is accelerating the pace.