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Ralph Bristol |
by Ralph Bristol, Facebook Post, July 14, 2025-RESOLVED: Borrowing $1.5 trillion to create a sovereign wealth fund, to save Social Security 75 years from now, is the single worst policy idea ever to cross the Potomac.
THE PLAN: Two U.S. Senators, Bill Cassidy of Louisiana and Tim Kaine of Virginia propose to create a $1.5 trillion Sovereign Wealth Fund with borrowed funds and invest it for 75 years, after which it would pay back the loan with interest. In the meantime, the Treasury would make up the shortfall that will occur in Social Security after the year 2032 or 2033 when the trust fund no longer has enough income and assets to fully fund the program. The Sovereign Wealth Fund would pay back its loan and that collective shortfall, plus interest. Then, it would be responsible for funding the shortfall in Social Security forever. Problem solved forever – starting 75 years from now. The fund would invest in “stock, bonds and other investments.”
GOVERNMENT OWNERSHIP OF THE MEANS OF PRODUCTION
If there were no other reason this is a terrible idea, this would be enough. The most significant difference (I’m tempted to say the only significant difference) between communist countries and ours is communist countries governments are the primary owners of their countries’ means of production.
In the United States, we leave the production of wealth up to private people and companies. The government regulates the companies and taxes that wealth to fund the government. The taxation and regulation of companies and people ultimately leads to some corruption, especially now that industrial policy* is being increasingly employed by both political parties. (*Industrial policy: when government intentionally targets and/or supports specific industries or sectors to transform the structure of economic activity.)
If our government becomes one of the largest stockholders of our most productive and profitable industries, which it would, that will inspire a new level and form of industrial policy and corruption that is much closer to that of communist countries, and that is not conducive to optimum wealth production (or stock market returns, which the government would be depending on as the center-piece of this 75-year scheme.)
This reason alone, makes this the single worst serious policy proposal to grace the halls of Congress. But wait, there’s more.
INFLATION PLUS INTEREST
Normally, when one invests in the stock market, one must only beat inflation and taxes to achieve positive returns over time. That’s challenging enough, but when you borrow money to invest, you have to beat the combination of the inflation rate and the interest rate on the money you borrowed, which no financial planner would ever recommend except for a very sophisticated investor, and then only with a very small part of his or her overall portfolio because subtracting both interest and inflation from long-term stock market gains will leave you with very little, if any, net gain.
Of course, the government, unlike other investors, would not have to worry about taxes on its gains, so the fund would have that advantage. Still beating both inflation and interest is a hard target, unless of course, you control interest rates, which some government officials are becoming more interested in doing. If you can shield yourself from both taxes and interest, borrowing money to invest may in fact be a good idea...which brings me back to the first reason. The government would not only have regulatory and tax hammers it can hold over the companies’ heads, it can manipulate taxes to benefits the companies in which it invests. The corruption potential is staggering. Corruption destroys capitalism and greatly weakens wealth creation.
THE NUMBERS
According to the Social Security Administration, the annual shortfall after insolvency occurs in 2032 or 2033, which the Treasury would have to cover over the next 75 years, would amount to an average of about $384 billion a year, which means in addition to the original $1.5 trillion, the fund would owe Treasury about $27.5 trillion more dollars in 75 years, plus interest, which, at 3% a year, would be $65 trillion, bringing the total debt to $94 trillion. It’s very hard to project that far in advance, so these are rough estimates.
The fund that starts with $1.5 trillion would have to pay its lender about $94 trillion to be out of debt before it could start funding the shortfall in Social Security –That’s a lot to ask of a $1.5 trillion investment.
But, If it grows at an average annual rate of 7% over 75 years, it would be worth $172 trillion in the year 3000. After it paid back the $94 trillion, it would have about $80 trillion left over, to help fund Social Security, which will cost about $10.4 trillion a year 75 years from now. It wouldn’t have to pick up the full cost. The payroll tax would still be in effect, but the two senators believe the Sovereign Wealth Fund will be able to pay 85% of the cost of Social Security with its growth and income after 75 years.
These are the approximate set of assumptions Senators Cassidy and Kaine believe makes this a viable plan. I find these assumptions to be wildly speculative, leaving very little room for error or “unforeseen circumstances.” I can’t imagine we’ll have any of those between now and the year 2100.
IT'S A GIMMICK TO AVOID SPENDING CUTS
The purpose of the plan is to avoid spending cuts. We don’t need new ways to avoid spending cuts. We need spending cuts, including in Social Security.
We can no longer afford the generous Social Security retirement system FDR created for a completely different generation – under demographics (worker/retiree ratios) that have changed so drastically that comparable benefits are no longer affordable. We need to pare them back – for everyone but the truly impoverished – about 10 percent of the beneficiaries.
I don’t think it’s wise to wait and do it all at once in 2033 or 2032 when the trust fund can no longer pay the full bill. It would be better to phase in the benefit cut between now and then, but we should allow everyone’s benefit to fall to whatever level is necessary – the same percentage across the board – rather than raising one more penny of taxes or borrow one more cent to fund Social Security. No more taxes. No more borrowing. No more means testing.
I know this won’t happen. I’m probably the only person in the country who thinks this is the right approach, but you can only keep a 1940 Ford in top condition for so long if you are driving it harder and farther every day, before you are just throwing good money after bad. It’s time most of us started relying less on our 1940 Social Security system and more on our own savings. It’s not like we didn’t have plenty of warning that something like this was coming. I’ve been hearing people say since the 1990s that they didn’t expect to have Social Security when they retired. They were telling themselves they need to save more, and they were right.
They will have Social Security, but they should not expect it to be as generous as it was for the WWII generation. That generation lived through the Great Depression and WWII, and they didn’t live as long back then because they didn’t have all the expensive health care we have now, funded by another government program that also needs to be cut back.
The programs created for the greatest generation are not suited for we Baby Boomers or any of the generations after us. Ours should be the transition generation, one that has received the full benefits for part of our retirement, but will receive smaller benefits for the last half. Future generations should all receive smaller retirement benefits and depend more on their own savings, which means they should be spending less and saving more than we did, and we saved a lot. Most of us can afford to do with less from the government. We won’t like it, but we should expect it, and accept it.
FINAL THOUGHTS
No Certified Financial Planner has or will ever recommend to a client, especially one that has nine times more debt than annual income, to borrow a ton of money and invest it in the market to solve the client’s solvency issues. And if a CFP would make such a recommendation, no bank would ever loan the client the money!
Of course, the U.S. is not just any client, and the financial planners recommending this fix are not CFPs. They are two U.S. Senators, one a doctor, the other a lawyer. In the words of President Trump, when Israel and Iran temporarily broke their cease fire, “they don’t know what the f*** they’re doing.”
Fortunately, President Trump has not endorsed this plan, at least not yet. He did sign an executive order in February to develop a plan within 90 days to create a different sovereign wealth fund, by selling or monetizing public lands, redirecting trade/tariff revenues, and selling federal assets. That is still in the planning stages and no action has been taken, or at least announced.
Ralph Bristol is the former long-time morning talk radio host broadcasting on Supertalk 99.7 WTN. He was one of the less provocative and bombastic of conservative radio personalities, more thoughtful and grounded in conservative ideas. He left talk radio in 2018 and retired. He lives in Nashville.
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