Mike Johnson Frames $26.6 Trillion Social Security Borrowing Plan
mike johnson is tied to a Social Security debate centered on a plan from Bill Cassidy and Tim Kaine that would rely on the stock market and $26.6 trillion in new borrowing. Boston College researchers said last month the proposal would fail to cover the added debt about 64% of the time, even when they assumed 6.5% real annual stock returns.
The proposal would have the federal government borrow $1.5 trillion for an investment fund loaded with stocks and other risk assets, then borrow another $25.1 trillion to cover the gap between Social Security revenue and benefits over 75 years. That leaves the plan dependent on market gains to do work that current payroll revenue does not cover.
Bill Cassidy and Tim Kaine
Cassidy, a U.S. senator from Louisiana, and Tim Kaine, a U.S. senator from Virginia, proposed maintaining current Social Security benefits by using stock-market returns and new debt. The plan came as trust fund projections this month showed the fund will run out of money sooner than previously thought, with benefits facing a 22% cut by 2032 unless adjustments are enacted.
The Boston College Center for Retirement Research said the gamble does not always pay off. In simulations using a 4% yearly real return on stocks, the investment fund failed to pay off debt 83% of the time.
Boston College Simulations
Researchers Anqi Chen, Alicia Munnell and Jean-Pierre Aubry wrote that after accounting for equity volatility, the plan faces a steep risk of leaving the government with debt still hanging over it. Their report said total debt is $39 trillion and publicly held debt is already 100% of GDP.
Even in the more optimistic 6.5% return case, the added debt was not covered in about 64% of simulations. The report also said the most likely outcome is that in the 75th year the government will end up with a big pile of debt requiring large interest payments.
Debt and Benefits
The Boston College report said a different mix could work better: tax hikes or equivalent benefit cuts, along with allocating 40% of the trust fund to stocks, would keep Social Security solvent indefinitely in most simulations. That leaves the Cassidy-Kaine plan as a bet on borrowing and market performance rather than an answer that closes the financing gap on its own.
For readers watching the Social Security debate, the practical takeaway is simple: the proposal would not avoid large federal borrowing, and the researchers say its results would still depend heavily on stock returns over decades. President Bill Clinton once considered looking to the stock market to rescue Social Security in the 1990s, and Ted Cruz suggested last month that so-called Trump accounts for American children are part of an effort to revamp Social Security.
