Hacker News Reader

Thus far the risk of investing the SS surpluses into any investments other than US treasuries far out-weighed the risk of the US choosing to make SS forgive the debt incurred by said treasuries.

I've often argued that SSA should be allowed to invest some portion of the surplus (perhaps 10-20%) in AAA-rated municipal bonds. Perhaps the downgrade today will prompt more people to consider this.

View on HN

Isn't reducing the conflict of interest a small price to pay for slightly higher risk? Currently, Congress can "save" money by cutting benefits to Social Security receipients and use that money to pay off the bonds owed to Social Security.

Congress can't actually divert revenue from SS. The way that cutting benefits affects the budget is that the SSA uses more of the payroll tax to buy more bonds, rather than paying the revenue out as benefits. The government still has to use non-SS revenue to pay off prior SSA-held bonds. Thus, once SSA collects less from the payroll tax than they need to pay out (which will happen soon, and may have already happened due to the Making Work Pay tax cut), cutting benefits will not reduce the budget deficit at all, because the SSA will need all of the revenue from the payroll tax and all of the revenue from its maturing bonds to pay out benefits. In order to use any payroll tax revenue (via SS bonds) for non-SS programs, they would have to make unrealistically large cuts in benefits. So, in short, that well will run dry soon enough, and you won't have to worry about it.

Reply on news.ycombinator.com