Stock Markets and Social Security
By Arnold Kling
It is natural to look at the collapse of stock prices and say, “See? Social Security privatization would be a disaster.”
But consider two possibilities:
1. The market is down because future U.S. wealth is down. In that case, government-provided Social Security in future decades is in trouble.
2. The future outlook of the economy is good. In that case, the stock market will come back, and letting young people opt out of Social Security to invest in stocks would give them a windfall.
I’ll admit that people in their 60’s should not have all of their assets in the stock market. But that is not an argument against privatizing Social Security.
The key point to remember is that the younger generation’s outlook at retirement depends on economic growth, not on what government promises them.