Put Social Security taxes in private sector investments
Social Security benefits shouldn't be drastically altered, and retirement income shouldn't be made a personal responsibility. We should focus on finding a way to pay the benefits to which recipients are entitled. The key to making this program financially secure is to get higher returns on the taxes paid into Social Security. Rather than investing taxes in low-yield government bonds, the federal government should invest Social Security taxes in the private marketplace to increase the yield.
What Should be Done?
Invest taxes paid into the Social Security Trust Fund in the stock market to increase the yield and provide sufficient funds to pay benefits to future retirees. Make government responsible for covering the financial risk if the stock market declines.
Arguments For This Approach
It's the only practical and politically acceptable way to maintain Social Security benefits over time. Since return on private investment has been substantially higher than the interest rate on government bonds, this approach is likely to generate much higher revenues. By investing in the stock market, this plan would pump a huge amount of money into the private economy, stimulating economic growth.
Arguments Against This Approach
The market may go down, jeopardizing the retirement income of millions of Americans. If we switched to a system in which payroll taxes were invested by the federal government in the private economy, government would take on a new and unpredictable role as a huge institutional investor. Currently, Social Security taxes are invested in federal bonds, helping finance government programs. If Social Security taxes were invested in stocks, government borrowing costs and the federal deficit would soar.
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