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Social Security Equity Investments Inevitable?

Wed, 10/04/2000 - 12:00am — Karen Stevenson
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In the October 9 issue of Business Week, Howard Gleckman and Rich Miller analyze a little-known dilema -- the Social Security trust fund most likely will have to be invested in corporate securities within the next 15 years, regardless of the outcome of the current debate about "privatizing" Social Security. Oddly enough, the dilema will be a result of something policy-makers have been trying hard to do -- eliminate the national debt. Gleckman and Miller build on arguments developed by former Congressional Budget Officer Robert D. Reischauer and Barry Bosworth of the Brookings Institute to point out that if the national debt is eliminated within the next 15 years, as is currently predicted, the Social Security trust fund will no longer have the option of buying treasury securities. This is because those treasury securities are issued against the debt, and will no longer be needed if the debt has been eliminated. The authors point out that this fact has been largely ignored in the debate about the wisdom of allowing the federal government to buy corporate equities. They suggest that rather than debate whether or not the government should purchase corporate equities, policy-makers should begin discussing how the government can start to do so without unnecessarily influencing stock prices or injecting the government into corporate governance.

In the October 9 issue of Business Week, Howard Gleckman and Rich Miller analyze a little-known dilema -- the Social Security trust fund most likely will have to be invested in corporate securities within the next 15 years, regardless of the outcome of the current debate about "privatizing" Social Security. Oddly enough, the dilema will be a result of something policy-makers have been trying hard to do -- eliminate the national debt. Gleckman and Miller build on arguments developed by former Congressional Budget Officer Robert D. Reischauer and Barry Bosworth of the Brookings Institute to point out that if the national debt is eliminated within the next 15 years, as is currently predicted, the Social Security trust fund will no longer have the option of buying treasury securities. This is because those treasury securities are issued against the debt, and will no longer be needed if the debt has been eliminated. The authors point out that this fact has been largely ignored in the debate about the wisdom of allowing the federal government to buy corporate equities. They suggest that rather than debate whether or not the government should purchase corporate equities, policy-makers should begin discussing how the government can start to do so without unnecessarily influencing stock prices or injecting the government into corporate governance.