This is what I haven’t seen mentioned in the debate over the future of social security.
Opponents of private accounts cite the risk inherent in investing in markets. Instead, they will rely on future generations of workers to pay the taxes necessary to pay promised social security benefits.
It seems to me, though, that investments in U.S. securities markets, both stocks and bonds, derive their value from the underlying strength of the U.S. economy. If the economy does well, in the long run, markets do well. If the economy does not do well, the investments will not do well, and social security recipients will need to rely on a future generation of workers to pay taxes that will pay benefits.
Where do these taxes come from? They come from workers, hopefully earning high salaries to pay the high taxes that will be needed. But if the economy does not do well, there will not be very many highly-paid workers, and the government may have trouble collecting enough taxes to pay social security benefits.
So we need to hope that the U.S. economy performs well, so that private accounts earn a high return, or there will be workers earning enough to pay high social security payroll taxes.