NCPA - National Center for Policy Analysis

Achieving Socialism Through Social Security

January 26, 1999

Nobel Prize winner Milton Friedman has done some calculations regarding investment of the Social Security trust fund in the stock market. He has reached some chilling conclusions.

  • At the end of 1997, the value of the trust fund totaled $656 billion.
  • But its unfunded liability for old age, survivor and disability benefits has been estimated at anywhere from $4 trillion to $11 trillion. -- compared to a total market value of all domestic corporations in the U.S. at that time of roughly $13 trillion.
  • If Social Security had been fully funded from the outset in 1937 by investment of the trust fund in stocks, the trust fund balance would now total approximately $7 trillion.
  • In that case, the Social Security trust fund would own more than half of all domestic corporations.

Friedman cautions that these calculations assume that stock prices, dividend yields, Social Security tax receipts and benefit payments would not be affected by investments in stocks. Clearly, with so much extra money flowing into the market, there would have been economic effects.

In any event, he concludes, the calculations show that investment in equity stocks yields a much better return than government bonds, and that "full funding" through trust fund investment "would long since have brought complete socialism."

Source: Milton Friedman (Hoover Institution), "Social Security Socialism," Wall Street Journal, January 26, 1999.


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