A viewer asked this question on 4/25/2000:
I am wondering where SSA funds (paid into the SSA by individuals) are invested by the government. I think the answer is in US treasury bonds.
If this is correct--that SS funds are in bonds--then a follow-up question is "Where are these investments held, and who administers the investments?"
JesseGordon gave this response on 5/4/2000:
There's some further politics involved beyond AnswerPro's answer. The political issue is about where the funds, usually referred to as "the Social Security Trust Fund", SHOULD be invested in the future. The potential answers are:
1. KEEP THE TRUST FUND IN TREASURY BONDS:
Since T-bills are just paper IOU's from one section of the government (Treasury) to the other (Social Security), this means that the Trust Fund is being used to balance the budget, since the amounts from Social Security are counted as offsetting a budget deficit. The Trust Fund is currently at about $600 billion, compared to a total budget of $1800 billion, so it's a major factor. Only the amounts ADDED each year would count against the budget deficit, but counting them in the last 2 years has been enough to CREATE a surplus instead of a deficit. Some Senators, led by NY's Pat Moynihan, say we don't really have a surplus at all because we should discount the Social Security input.
2. PUT THE TRUST FUND INTO THE STOCK MARKET:
Since the stock market has been doing so well lately, and historically does much better than the rate of return on T-bills, many have suggested that the Trust Fund get "invested" in stocks or private bonds. It's a lot of money to invest at once -- $600 billion is over 5% of the total value of the NY Stock Exchange (currently valued at about $11 trillion). So if it were all invested at once, it would cause the stock exchange to fall by 5% in value (which means, it would have to be spread out). Many Senators support a "Lock Box" bill to prevent investing the Trust Fund anywhere but T-bills and other "safe" investments, on the grounds that the stock market is too risky.
3. PRIVATIZE THE TRUST FUND:
Some people advocate letting individuals determine where their portion of the Trust Fund gets invested. Allowing that would be about the same as investing the entire amount slowly in the stock market and other private investment vehicles. It would also allow each person to determine the level of risk they're comfortable with.
4. PRESIDENTIAL CANDIDATES' VIEWS:
In summary, Bush believes we should do #3 above, but also supports the "Lock Box":
- Backs private accounts for Security contributions
- Tax-funded private IRA's under federal guidelines
- Give Americans more freedom to manage their social security
- Details at http://govote.com/election2000/issue_popup.asp?candidate=Geo rge+Bush&issue=Social+Security
In summary, Gore believes that we should build up the Trust Fund within the government (#1 above), and that privatization is too risky:
- Protect retirement plans while times are good.
- No privatization; no increase in retirement age
- Details at http://govote.com/election2000/issue_popup.asp?candidate=Al+ Gore&issue=Social+Security