Downsize Washington #6
Devolve Social Security to the States and Create 50 Trust Funds to be invested in the real economy
Alexander Hamilton successfully argued that the new federal government born in 1787 at the Constitutional Convention in Philadelphia should assume the debt the 13 original states contracted during the Revolutionary War.
Consider if the now 50 states should proportionally divide and assume the assets and liabilities of the federal government’s Social Security program, including its Trust Fund.
Washington has limited investment of the now almost $3 Trillion Social Security Trust Fund to U.S. Treasury bills or bonds. If invested on Wall Street, it was rightfully feared, the Fund would wield too much power over the stock market. If, however, the 50 states could manage 50 separate Trust Funds, that fear disappears. The 50 states could treat these 50 Trust Funds as Norway does its sovereign wealth fund, freely investing them in the real economy, both here and abroad, and earning higher returns for their residents.
During a transition, the 50 states would collect the 6.2% FICA tax from each worker, and the corresponding 6.2% employer’s contribution, and begin to invest the funds to maximize growth at a pre-established risk tolerance. Washington would continue to pay benefits by drawing down the Trust Fund balance.
Consider if Washington at the same time raises the retirement age and curbs exaggerated cost of living adjustments (COLAs).
With 50 state trust/sovereign wealth funds invested in the real economy, a higher retirement age, and adjusted COLAS, Social Security will stand on firmer ground for future generations.
To further reduce any unfunded liabilities, many Americans who have their retirements otherwise secured may wish to trade their Social Security claim for an Oval Office meeting with the President or other unforgettable experience.
Let me know in your comments below how you would lower the over $30 Trillion national debt, and reform Social Security and other entitlement programs that drive it.
