Saving Social Security: A Better Approach


Financial Analysts Journal November/December 2008, Vol. 64, No. 6 has the article, Saving Social Security: A Better Approach by Thomas K. Philips and Arun Muralidhar.  Arun Muralidhar is the coauthor with Franco Modigliani of many of the items I have talked about before with regard to saving Social Security.  This article is a wonderful introduction to their ideas with some updating since the 2004 book that I have mentioned.

Here is one notable excerpt from the article.

Arnott and Casscells (2003) and Munnell and Sass (2008) pointed out that the real problem of designing a retirement plan for the population does not relate to inadequate savings, but rather to demographics and productivity (i.e., the generation of sufficient real consumption goods by the future young to support the consumption of the then elderly).

I particularly like this quote because it answers the article’s initial statements about the need for increased saving.

I like the thought experiment of considering the day when automation allows all the necessary goods and services to be produced without the need for anybody to work.  Would we have a society where the benefits of this paradise were shared among all the people?  Or would we have a society in which one or two people owned everything and the rest of us had to live as beggars?  This thought experiment focuses us on the real issue of the economy being able to produce enough goods and services.  If the economy is able to produce enough goods and services, then it is only a political/moral issue of whether or not everybody in society benefits. The issues of savings and investment are just bookkeeping.

Another notable quote is:

The assets of the Social Security system should be invested solely for the benefit of beneficiaries. And their management should be subject to the regulation of ERISA to ensure that neither the U.S. Congress nor any presidential administration can divert the assets to purposes that are not in the best interest of the entire system. In particular, all proxies should be voted to benefit shareholders (i.e., the citizenry of the United States) in accordance with ERISA, and not to protect inept or politically wellconnected special-interest groups.

I like the quote because it addresses just what stance the Social Security Administration should take with respect to the companies whose stocks it has in the Social Security Trust fund.  It also shows that the authors of the article address the many thorny, practical, political considerations in moving to the plan they propose.

Read the full article at the link I have provided above to get many more valuable ideas.

If you have a subscription to Financial Analysis Journal, you can read the Letter To The Editor “Saving Social Security: A Better Approach”: An Update March/April 2009, Vol. 65, No. 2: 10

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