Thanks, Ami, for pointing out that the government still exerts considerable control over the SS funds "optionally" invested in the stock market. As I now understand the choice, it's really a no-brainer:
1. Put all of your money in Treasury bonds, backed by the government of the United States of America; or
2. Put some of your money into Treasury bonds and the rest (I'm already starting to laugh here) into a basket of securities (gov't-selected diversified mutuals) and hope for the best.
First of all, and I could be wrong here, I cannot see the U.S. government defaulting on any of its SS obligations. There is no doubt in my mind that the potential to raise any shortfall by a combination of increased income taxes on the rich, inheritance tax, taxes on accumulated capital, luxury and so-called sin taxes would be painful for the wealthy owners of the Republocrat Party, but would be a necessity that they will not be able to avoid. Not only for the sake of the pissed-off pensioners, all of whom can vote, but also for the very credit of the U.S. government in international markets. A government which lacks the resources to pay its own pensioners is a government that is one step away from bankruptcy. Whatever confidence is left in the U.S. dollar at that point in time (and, frankly, it won't be much) would simply evaporate overnight, were such a default to occur.
I seriously doubt that any basket of government-selected diversified mutual funds would out-perform social security investments by any significant amount, especially when netted out after commissions, management fees, etc., but even if it did, the net gain would affect only a fraction of the investor's total SS-invested retirement capital anyway. Not only that, but since the net gain itself is only being pursued for investment purposes, you're effectively looking at the interest on the net gain over the retiree's lifetime. NOT a hell of a lot at stake here. Some risk involved for gains that I really can't see as significant.
From the POV of Wall Street, OTOH, this is a real bonanza. Billions pumped into the markets, the fresh flow of capital cushioning any shocks the funds might otherwise feel from market fluctuations and maintaining a momentum that previously had been sustained only by individual investors cherry-picking their way through a whole orchard of funds. The jockeying to get into that basket could become intense, leading to a fiesta of bribery, nepotism, cronyism, junketing and good, old-fashioned American corruption in general that we all have come to know and love. Which is not all that distasteful to any of the regulars inside the Beltway.
This is, all in all, a pretty tasteful rip-off. Not an Enron- Worldcom-style rip-off that leaves the victims bleeding to death on the bathroom floor, just little, survivable bites from millions of investors, generating a steady investment stream from which all the usual profit is there to be made - - commissions, management fees, opening fees, close-out fees and all the tie-ins that the mutual funds in the basket can sell to their captive audience - - credit cards, prepaid funerals, life insurance with no medicals, etc. And if the investors are really fortunate, who knows? there might even be a modest return on investment waiting for them at the end of the road (although I really don't believe that there will.)
