Social Security and the 2001 Reform of the Railroad Retirement Program
The experience of the reformed Railroad Retirement program has lessons for initiatives that would invest Social Security assets in equities: * To address the risk in equity investment, Congress would likely require an automatic adjustment mechanism to keep the program “on track.” * The adjustment mechanism should address surpluses as well as shortfalls, and cannot be expected to provide a complete solution to the problem of risk. * Such a mechanism presupposes a program in balance, or moving toward balance. The investment of Social Security assets in equities would need to be part of a package that produced a sustainable Social Security program. * The adjustment mechanism would respond to any shock, not just financial shocks. Had such a mechanism always been in place, it would have introduced adjustments to the Social Security program, without the need for Congress to act, in response to the demographic shocks that created the program’s current long-term funding shortfall.
|Date of creation:||Jun 2013|
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