From: EllanorF@aol.com
Date: Fri, 6 Jun 1997 12:13:51 -0400 (EDT)
To: oldfreak@ix.netcom.com
Subject: Social Security reform
Dear Mr. Moore:
Thank you for emailing your proposal for Social Security reform to the Concord Coalition. It is heartening to see more and more people thinking carefully about the looming problems ahead for Social Security and suggesting ways to address the shortfall. The more people who understand the actual dimensions of the problem and its urgency, the more willing our political leaders will be to venture a solution.
Your proposal, as we read it, recommends investing 40% of the Social Security trust fund's annual surpluses in dividend paying stocks and increasing that percentage so that, by 2010, the SSTF would not own any U. S. government securities.
The key to increasing fixing Social Security is to increase savings. Investing some or all of the trust fund's surplus in the stock market does not increase savings. It simply shifts it from one form of investment -- U.S. treasuries -- to another -- dividend paying stocks. The level of the debt doesn't change.
If the gov. were to invest heavily in the stock market, it would have to find buyers in the market for its bonds in order to finance the portion of the debt that currently is financed with Social Security surpluses. Most likely, it would have to raise interest on the bonds in order to get investors to buy them. That would make the interest on the debt go up.
Many people are rightly very concerned about having the government be a big player in the stock market. They have no confidence in politicians making the best investment decisions for Social Security. In addition, the government would be the largest investor in every company that it invested in and, by dint of that influence, would be the controlling investor in those companies. This effect can be avoided by using "index funds," but your plan specifically calls for investing in stocks that pay high dividends.
We will watch your Home Page to see what kind of response you get for your proposal.
Sincerely,
Ellanor Fink
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