Create a ‘Sovereign Wealth Fund’
Just this week, Senator Bill Cassidy (R-LA) talked about a “big idea” he and a bipartisan group of senators are working on to address Social Security’s financial crisis during a webcast hosted by the Bipartisan Policy Center.
The idea is to create an investment fund—a sovereign wealth fund—separate from Social Security, and allow the fund to accrue returns over 70 years, keeping it in escrow.
“By doing so, we would end up with a corpus enough to address 75% of the 75-year shortfall, assuming that we did give the authority to borrow to pay scheduled benefits. We think it’s a really good start on a solution,” Cassidy said during the webcast.
Cassidy said he believes the proposal would address a key failing of Social Security’s current investment strategy (he called it “the absolute worst investment strategy you could have right now”), which keeps all of the trust fund dollars in either Treasurys or cash—with Treasurys yielding anywhere from 1% to 3% at a time when inflation has been above 6%. With the fund instead investing in the market, which Cassidy noted has historically provided more than 8% returns, it could address 75% of Social Security’s projected 75-year shortfall.
“It gets us substantially there,” Cassidy said. “Now we need leading presidential candidates to step to the plate, be honest with the American people and help us find the additional 25%.”
Acknowledging that “both sides” will have to come together to cover that last 25%, Cassidy vowed lawmakers would not raise taxes on seniors or increase the retirement age.
Cassidy said the leading presidential candidates are afraid to touch Social Security—promising not to cut benefits—when what they should be worried about is a looming 24% decrease in benefits without a borrowing capacity to address it.
“If that 24% decrease goes into effect, it’ll double the rate of poverty among the elderly,” Cassidy said.
Cassidy and Sen. Angus King (I-ME) are working with a dozen other senators on new legislation that would include the creation of the sovereign wealth fund. No timeline has yet been identified for when the legislation might be introduced.
The plan has raised plenty of eyebrows, including those of the National Committee to Preserve Social Security and Medicare, which said in a March 22 letter sent to Cassidy that it would “put Social Security on a slippery slope toward privatization—and ultimately cut benefits for future beneficiaries.”
The committee’s President and CEO Max Richtman said the “so-called ‘sovereign wealth fund’ in the Cassidy-King proposal is an illusion—a smokescreen to promote a deal that is too good to be true… For the math to add up, a plan like Cassidy-King would ultimately have to cut benefits. Otherwise, we’re talking about ‘magic money’ from ephemeral Wall Street returns that may not materialize.”
Next Page: Social Security Expansion Act
You keep saying the wealthy pay a less percentage than the waitress. But you don’t point out that the wealthy’s S.S. payment is capped at a maximum like everyone else. If you make 200k a year or 2 million a year, you don’t get any more increase in benefit. The benefit is based on that capped taxable amount of $160k. This is FAIR. Unless you see S.S. as a welfare plan – which of course Bernie & Pocahontas do!
As someone concerned about the future of Social Security, I believe that implementing gradual increases in the retirement age is a crucial step towards fixing the system. After reading the article “3 Proposals to Fix Social Security,” it became clear to me that adjusting the retirement age is a practical solution to ensure the program’s long-term sustainability.
Considering the rising life expectancies and changing demographics, it is necessary to make adjustments that align with the current reality. By gradually raising the retirement age, we can address the challenges posed by an aging population and ensure that Social Security remains viable for future generations.
This proposal recognizes the significant improvements in healthcare and overall quality of life that have resulted in longer, healthier lives for many individuals. It acknowledges that people are now able to work and contribute to society for more extended periods. Adjusting the retirement age would reflect these societal changes and distribute the financial burden more evenly.