Do the benefits of equity investment in the Trust Fund outweigh possible risks?
As I noted earlier, an important element of the president’s framework is the proposal to invest part of the transferred surpluses in equities. This offers the prospect of raising the rate of return on the Trust Fund relative to the past practice of investing every cent in government bonds. This is important because any step that raises the rate of return on the Trust Fund directly reduces the need to meet future demands on the system in other ways. Even the modest equity investment proposed in the president’s plan would achieve as much, in terms of improving the 75 year actuarial balance of the Fund, as a 5 percent cross-the-board cut in benefits starting in 2030, or raising the normal retirement age by an additional year and a half. We believe equity investment in the Trust Fund should be part of any overall framework for saving Social Security. On the other hand, we recognize that — carelessly structured — such investment could raise the possibility of political interference or abu
