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Well, yes. But it would probably cause some serious issues with the market and bubbles.
If the government takes $50,000 for every birth within the USA each year, and puts it into a broad market fund returning 6% a year (this is conservative), at age 70, that's worth $2,953,796.51.
Everyone who makes it to 70 automatically gets $3 million. At 4% per year (considered the "safe" withdrawal rate) this is $120k per year. Current max social security per year is $45,864.
There are 3.7 million live births per year in the US. Times $50,000, that's $185 billion. Per year.
Current social security disbursements, annually, are about $1.4 trillion.
So, there, I've solved social security, right?
Maybe, but maybe (probably) not.
People, and the politically ambitious among them, will inevitably see this $3 mil as "theirs" - They will want to withdraw it early, or be able to take loans out against it etc. If we allow people to include this payout in their wills, you'll have all sorts of fun family fights about who gets to go to the lawyer with Mom. If all of this is allowed to happen, we're right back in the same situation as at present and, for an added bonus, we get a massive doom credit bubble to wait on to explode.
This involves putting tax dollars directly into the market. Lot's of people have problems with this on principled grounds (which are valid). The pure financial economics of it are also worrisome - every year, the market can count on $185 bn of super patient capital arriving. That will fuel risky bets left and right.
The one upside I can think of is that people who choose to live frugally can do so with a very real sense of 'reward' coming to them. Entrepreneurial types will maybe decide to take the risk and start-the-thing in their lives. Most will fail, but many more people taking risks like that could actually propel the general advancement of society forward.
You can math out some solutions, sure, but @Amadan's point remains - what do when the bottom 10 - 20% find a new and inventive way to short circuit the system? "DIE IN THE STREETS" is an attractive edgelord position, but even median pop culture level moral thinking detests that.
The answer is we'll muddle through. I see a comeback of multigenerational households. I see a return of old school style "poor houses" and weird alt-poverty encampments (think Slab City, not Portland Tent Camp).
The problem with this sort of thinking is that the stock market isn't a magical money machine. There's no particular limit on money being invested- banks create money out of thin air all the time. The reason stocks appreciate is that we limit how much money banks can create, and that the economy overall is growing. If the government throws in an extra 10 trillion dollars into the stock market, all that happens is that stocks overall grow slower because they're weighted down by all this useless government money.
Is this your serious explanation of how equity appreciation works? Or is this kind of a short hand for something else? I can't tell.
If it's the first (i.e. serious explanation) this is a categorically incorrect understanding of financial markets.
I could have phrased it better, but my position is basically the mainstream economist view that a soveriegn wealth fund like you describe wouldn't make sense for the US:
https://archive.is/xCTIz
I'm not describing a sovereign wealth fund.
SWF are financed, normally, through commodity exports or foreign exchange reserves. I'm suggesting a method whereby general treasury receipts (taxes) are invested in direct association with a live birth in the United States.
Again, this ongoing misinterpretation of my position doesn't seem come across as particularly innocent. There are definitely some major potential flaws in my idea (which is why it's a back-of-the-envelope solution I'm posting to an anonymous message board). I think the biggest one is the moral hazard of a nearly $200bn injection of cash into the market annually by the government. The resulting asset bubbles would be pretty outrageous.
But I'm proposing even this basic blueprint of a solution because the current system, the Social Security Trust, will fail in the next ten years. Most likely, we'll just end up reducing benefits, raising the retirement age, and then setting a hard cutoff wherein all but the destitute receive zero benefits (my guess is those with a birth year of 1980 or later).
Bro, you must realize that what you're proposing has been proposed many times before, in various forms. Mostly famously by Bush in 2000s. I think there was a decent argument for it back then, but also lots of arguments against it which I paraphrased. I didn't doing anything malicious to you, it's just I've heard this debate way too many times. It's definitely not a good idea to pump government money into equities (either as a soverieng wealth fund or any other similar form) when equity Price-Earnings ratios are near all-time highs.
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The 6% is not the real return but the nominal one. Adjusting for inflation by the time the newborn is 70 $120k will be extremely mid.
No, 6% is the real return. Link
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