Don’t Trust Your Social Security Funds to Bill Frist

Kevin Drum has two posts of interest. The first is a longer version of an excellent comment made by Bakho to my last post on this issue as it notes the payroll tax increase of 1983, which was supposed to be for prefunding our Social Security retirement fund but now looks like it was nothing more than an employment tax increase to fund tax cuts on capital income. Thanks both to Bakho and to Kevin for keeping this distributional issue alive.

Kevin’s second post points to this article about how Senator Frist managed his campaign finances. Kevin does not try to relate this story to the Social Security debate, but let me try. The article and Kevin note that Frist put his finances into the stock market – I guess hoping to receive higher returns than one would get from placing the funds into Treasury bills. While the expected return to stocks might exceed the return to government bonds, actual returns may deviate from expected returns and sometimes negatively. OK, some Democrats overplay the risk aspect of putting Social Security funds into the stock market but what I find interesting about this story is this:

After big losses in the stock market, U.S. Senate Majority Leader Bill Frist’s campaign committee is short of money to cover a bank loan that was due in August, records show. The committee’s most recent filing shows a little more than $10,000 was paid on the $360,000 loan from U.S. Bank.

In other words, the Frist campaign used borrowed funds to invest in the stock market and now U.S. Bank is facing default risk. Since it is the leadership of the GOP that wants to borrow on our Social Security Trust Fund to cover the massive General Fund deficits, it would seem how he manages his campaign financing to be an interesting analogy.