Daily Archives: 12 April 2017

Reluctance

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Ahead of the G-7 meeting, one aspect of which is shaping up to be sideline meetings among the Seven and a number of Arab nations who were invited to discuss Syria, the question of additional sanctions against Syria (and Russia) has come up.  However,

Italian Foreign Minister Angelino Alfano said that G-7 foreign ministers haven’t agreed to fresh sanctions on Syria following a suspected chemical attack.

The group reached “no consensus on new sanctions to attain the goal we are aiming for[.]”

Indeed, in the realization of the event,

Germany and Italy vetoed the idea of targeting Russian and Syrian military leaders until an investigation has been carried out into who was to blame for last week’s nerve gas attack in Idlib province.

Any excuse for avoiding action will do, apparently.

The actual rationale for such hesitation, though, is unclear to me.  In the first place, investigations of various sorts have occurred, and there is no “suspected” to the chemical attack; it plainly occurred.  Turkish autopsies have confirmed the attack.  It’s also the case that the Syrian government (read: President Bashar al-Assad) is responsible for ordering the attack: not even his master and benefactor Vladimir Putin could have ordered the attack without al-Assad’s permission.  It’s also clear that the Syrian air force executed the attack: no one else in the nation has the capability to deliver the attack other than Russia and the United States, and Russia has much too much to lose were it to have done so and got caught at it.

It may be that sanctions won’t achieve the goals we are aiming for, but it is crystalline that nothing productive will be achieved without sanctions being applied.  The European dithering will have counter-productive results, though.

Social Security Trust Fund Investing in the Stock Market

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The Wall Street Journal held one of its aperiodic debates last Sunday, this time on whether the Social Security Trust Fund should be allowed to invest in stocks.  One debater argued that such investing would reduce the need for dependence on benefit cuts or tax increases; the other claimed that government should stay out of the market.

It’s certainly true that investing in the stock market could produce better returns than the Trust Fund’s current requirement to invest wholly in (unmarketable) Federal debt instruments.

Stocks are riskier than bonds, so shifting some Social Security assets from low-risk, low-return Treasury bonds to high-risk, high-expected-return stocks would expose the program to greater financial risk. This risk, however, has to be balanced against the likelihood of a larger trust fund and thereby less need for benefit cuts or tax increases to shore it up down the road. Economists also make a theoretical argument that the plan would especially benefit the young—who haven’t yet accumulated much financial wealth—by enabling them to invest in high-yielding financial assets without direct exposure to market risk.

The problem with this, though, is that a realized loss risk in those stock investments would negatively impact everyone so invested: every person with a present or future claim on the Trust Fund were Social Security to take such a chance, rather than only those individuals who make the choice for themselves.  I’m one of those confident in the long-term profitability of stock investing, but that’s my choice.  No one else should be dragooned into the outcomes of my choice were I to turn out wrong and wind up eating cat food inside my cardboard box under a bridge abutment.

[N]o one wants the Social Security trust fund to control the stock market. Even if the entire trust fund was plowed into stocks, it would account for only a fraction of the market.

This is disingenuous.  It’s the government doing the investing; of course, it will move to protect its investment with laws attempting to bar losses, laws attempting to dictate the kinds of risks companies in the market should be permitted to take, laws demanding taxpayers make the Trust Fund whole from market downturns, laws….  Politics cannot be divorced from the Trust Fund’s investments or the outcomes of those investments.  Especially since, as is currently the case, so much of the Trust Fund’s contents finds its way into the general treasury through “borrowing.”  All for the welfare of our seniors, of course.

Better to duck the question altogether, and make an even more radical change to our retirement safety net: privatize Social Security, as I’ve suggested before.  Let individuals invest their monies (including those, if any, by law earmarked) for their own future retirement in the stock market—if they wish—and be responsible for their own outcomes only and not, as taxpayers, for the government’s, and so everyone else’s, outcomes also.