This is a question for the panelists. Recently, Chairman Greenspan testified before a Congressional Subcommittee. One of his points was that having the federal government invest Social Security Trust Fund monies in the stock market would result in a net gain to overall retirement benefits of 0%. The reason is that Social Security funds are in the form of Treasury bonds, and in order to invest in the stock market, the U.S. government would have to find someone willing to trade stocks for those Treasury bonds. Since Treasury bonds are currently used in many pension plans, they would be the most likely place for the Treasury bonds to wind up. However, in order for pension funds to accept the trade, the U.S. government would have to offer a higher interest rate on the bonds, thus reducing the rate of return for Social Security. Also, because the trade is between pension funds and the Social Security Administration, an increased return for one means a decreased return for the other. In other words, it is a zero sum game, with no overall improvement for retirement, in the aggregate.
My question is this: regardless of whether you prefer the idea of privatization, how could the system be designed, so as to change the scenario to a positive sum game?
