If there is one lesson in the debt ceiling discussions, it is that there is risk in the Social Security system.  The President exposed a serious problem with Social Security.  The investment policy of the Social Security Trust Fund has put our seniors at risk by putting all of the resources of the Social Security system into a single investment.  That investment policy nearly caused the system to stop paying checks.

These risks will get worse  over time as the system increases its dependence on the Trust Fund to pay benefits.  Today, Social Security has a buffer of payroll taxes which covers most of the outgo of the system.  That buffer will decrease over time.  The system will progressively become dependent upon redeeming assets in order to pay benefits.  At that time, a market disruption with the redemption process will create significant problems within the system.

Our solution lowers risk in two different ways. 

1. It diversifies the investment portfolio. Simply put, the Trust Fund will have less exposure to market disruptions with the redemption process.  Such an event will affect a smaller portfolio of assets, and diversification will give the Trust Fund more options to get through such an event.

2. Our plan will push a small portion of the Trust Fund's assets into higher yielding investments in a shared-risk model.  The Trust Fund shares risk with workers who want more risk.  They want their benefits tied to the performance of these investments.  So if the assets lose money, the Trust Fund's future liabilities are reduced.

Critics of investing in equities suggest that it is risky and complicated. Nothing is more risky than what we are doing. We have 100% of our money in a single asset class that has enjoyed a 30 year bull market.  Today, the President isn't sure whether benefits can be paid 30 days out.  That is a problem.