Social Security reform

We all know that Social Security is a mess, though different people have different takes on how messy it is (and isn’t the lack of agreement a sign of its messiness?). President Bush’s proposal to reform Social Security has caused many critics to issue warnings about cost, risk, etc. But as Donald Luskin, Paul Krugman’s nemesis, shows by way of the example of the government’s own Thrift Savings Plan, investing a portion in a well-diversified equity (and/or bond) portfolio proves to be superior. Of course, as they say, past performance is no guarantee of future results; but I think it is reasonable to say that if a well-diversified portfolio should turn out to be not-so-good, it probably means that the economy would be a disaster anyway, so that one would have been no safer had one invested in “safe” investments such as money markets.