Bush's Social Security plan

[SensibleAmerican]

I was thinking about George Bush's Social Security plan and how he claims that Americans will get a "better return" if we invested our Social Security in the stock market.

At this point, I realized that George Bush knows nothing about capitalism and this plan would tank our economy, and not for the usual reason of the fact that the stock market is risky.

1. FICA taxes are about 10% of most peoples income. If we put all of Social Security in the Stock Market, what do you think will happen to our rate of return? Simple Supply and Demand says that the rate of return on stocks would drop way down if the US Government becomes a permanent player in the Equity Markets as the Government will constantly be buying and selling the same stocks. This will also hurt the real investors in the stock market.

2. Do we want the US Government distorting the US economy by getting involved in the stock market? We've already seen the controversy over CALPERS, and that is the pension fund for just one state managing funds for only the state employees. Just because individuals get high yields in the stock market doesn't mean the US government would.

3. If we are going to invest Social Security in the Stock Market, this means we can no longer invest in Treasury bills. Why would the Government want their cost of borrowing to increase? The gains we make in the stock market (if any) will be lost in the increased Treasury yields. In fact, it would not surprise me if the Treasury yield winds up equaling the index yield as some sort of mathematical constant or if the stock market does not become riskless due to the Federal Government intervening, then the Treasury yield plus the risk that the Federal Government bears would equal the index yield.

4. If we haven't let our T-Bills default ever, what makes you think we would let Social Security default (barring Republicans being in power? The answer is we wouldn't (or anybody sensible in power wouldn't). However, we don't need to get involved in Government owning business (which is exactly what Bush's plan is) in order to pay out beneficiaries.