Eureka!! Social Security Solved

So, I don't understand why social security reform is so difficult.

The administration says that, at some point, social security will run out of money. This is primarily a demographic question. More people retiring and living longer, and fewer young people in the workforce.

It is also, they say, a question of return on investment. The social security investments in government paper yield considerably less than the yield obtained by stock market investments.

The solution, says the government, is to permit individuals to invest a portion of what would be their social security payments in one or more of a selected group of mutual funds, giving individuals some control over the investments and increasing their return. Some people (fewer than a majority, apparently) support this plan; others are convinced that it is step number one in the dismantling of the entire social security system.

So, I say, why not the following:

No private accounts. Continue a system of a combination of taxpayer and employer contributions to the social security system.

But rather than have the government invest all of these funds in low yield investments, let the government invest a portion in stock owning mutual funds, just as is suggested to be permitted for individuals under the president's proposal.

There is nothing sacrosanct about low yield investments, and if the government can provide a better return on social security by investing in mutual funds, so be it. There is nothing lost here from the privitization proposal (except the ephemeral opportunity to pick an investment vehicle from an approved list). And, the danger of the dismantling of social security vanishes.

If the government is correct, the return (the level of social security payments on retirement) will increase significantly. Of course, the government may be wrong, and the market driven investments may engender yields below those of the government securities. In this cas,e the government should simply guarantee to the taxpayers that their beneifts will in no case be less than that which they would have received had all of their investments been in government securities. If the government really believes that its projections are accurate, this is in fact a guarantee without risk.

On the other hand, if the investments in the mutual funds truly prosper, the social security benefits will be much higher. If the government so desires, it can cap the benefits for an individual at a pre-determined level, and use the rest to plow back into the system. Benefits themselves will be calculated for individuals based upon the timing of their investments and their retirement. Computers can do wonders.

Is there a flaw here? I am not sure that there is.

Eureka!! I have fixed the system. George Bush, hang your head in shame.