4 ms·

The US would need 56 trillion to achieve the same level of per capita income

gok 10y ago
Trillion (10^12), not quadrillion.
dogma1138 10y ago
That's not a correct calculation, however the US has sovereign wealth funds which are usually administered on a state level and are usually orietned towards a specific funding goal (e.g. https://en.wikipedia.org/wiki/Permanent_School_Fund https://en.wikipedia.org/wiki/Permanent_School_Fund) , as well as social security. The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Overall a pretty stark difference between the funds is the source and volatility of the revenue, US funds tend to be considerably more safe in those regards, and the how and where it is invested. 55-60% of Norway's (and there are calls to increase this to 70%) fund is invested in the international stock markets, US funds are for the most part invested locally (within the US) and in considerably less volatile commodities. A large scale financial crisis can erase much of Norway's SWF while having considerably less effect on US social security and state level SWF's.
- mburns 10y ago
  >The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.
  - dogma1138 10y ago
    Different sovereign/public funds have different regulations, they are usually split between equity and fixed income, Norway splits it to 60% equity, 5% real estate, and 25% fixed income. As far as the fixed income goes most of it is invested in treasury bonds, while the equity is invested in primarily the international stock markets. Overall the Social Security Act does disallow prefunding of the fund with marketable investments but one of the reasons it hasn't been changed it's because it's actually a pretty solid policy, and the world for the most part also doesn't want the US to drop a 3 trillion dollars investment pinata on the global markets. Overall while there is a lot of clickbait that inflates the Norwegian one it is not a special case if you look at public fund rankings http://www.swfinstitute.org/fund-rankings/ http://www.swfinstitute.org/fund-rankings/ you'll see that the US Federal Pensions Fund and the California Reteirment Fund combined are about equal to the Norwegian National Fund, and those are just 2 funds. Overall pretty much every state in the US has multiple SWFs, public funds or similar investment ventures those are usually directed at a specific funding target e.g. retirement, public schools, universities, infrastructure etc. Each fund funds usually only a single thing and each fund has a different source of revenue and investment goals and regulations, for the most part based on how the US federal system works in general it's a better model. California isn't expected to fund education in Texas or pay for a new road in Wyoming and vise versa so each state runs their own funds to fund their own needs (there is some federal money involved) overall it's likely a slightly safer bet than putting all your eggs in a single basket. This is also why you simply can't blow up the Norway's fund to US levels and say you'll need 56 trillion dollars because the US doesn't pay for everything from a single fund. The Gross National Wealth of Norway including the fund is about 85% of the US one when adjusted per capita, Norway is rich, the fund is wonderful and very well performing but it's not some unheard of economic miracle that no one else is using ;)
    - harryh 10y ago
      This (and your other comments in this thread) was super interesting to read. Thanks!
    - ckinnan 10y ago
      Actually the state funds do hold real assets but the federal system does not, there's no $3 trillion dollars to invest, the Social Security Trust Fund is just a non-marketable claim on the U.S. Treasury. It is an accounting placeholder-- a promise if you will-- there are no assets of any kind backing it. When the IOUs come due the Treasury will have to cut spending, raise taxes, or borrow new funds.
      - dogma1138 10y ago
        This isn't exactly the case, "real assets" is a tricky term. There is a difference between the SSA and the Social Security Fund, the SSA is funded through the budget "independently" of the fund, in some years the SSA have been funded at a deficit. Yes you can say that the fund is an "accounting placeholder" just like many other economic tools, when you take a loan from a bank it doesn't give you money, it effectively gives you a tradeable IOU against yours even tho you treat it as currency. To put in in a simpler terms the year to year budgetary deficit of the SSA against the payout claims should be treated as a separate thing to the actual Social Security Fund, if the US government or any other institution with sufficient means and credit would make a commitment to pour 3bln dollars into a bucket, said bucket is now worth 3bln dollars even if it is empty.
  - ckinnan 10y ago
    In fact you are wrong. The SS Trust Fund holds no real assets. It holds non-marketable IOUs from the Treasury. They do not invest in Treasurys, although the SS surplus is spent by the federal government. There are no actual assets and there is no real trust fund, it is just an accounting scheme. Treasury will need to raise taxes, cut spending, or borrow cash on the open market to repay the IOUs.

gok 10y ago

Trillion (10^12), not quadrillion.

That's not a correct calculation, however the US has sovereign wealth funds which are usually administered on a state level and are usually orietned towards a specific funding goal (e.g. https://en.wikipedia.org/wiki/Permanent_School_Fund https://en.wikipedia.org/wiki/Permanent_School_Fund) , as well as social security. The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Overall a pretty stark difference between the funds is the source and volatility of the revenue, US funds tend to be considerably more safe in those regards, and the how and where it is invested. 55-60% of Norway's (and there are calls to increase this to 70%) fund is invested in the international stock markets, US funds are for the most part invested locally (within the US) and in considerably less volatile commodities. A large scale financial crisis can erase much of Norway's SWF while having considerably less effect on US social security and state level SWF's.

mburns 10y ago
>The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.
- dogma1138 10y ago
  Different sovereign/public funds have different regulations, they are usually split between equity and fixed income, Norway splits it to 60% equity, 5% real estate, and 25% fixed income. As far as the fixed income goes most of it is invested in treasury bonds, while the equity is invested in primarily the international stock markets. Overall the Social Security Act does disallow prefunding of the fund with marketable investments but one of the reasons it hasn't been changed it's because it's actually a pretty solid policy, and the world for the most part also doesn't want the US to drop a 3 trillion dollars investment pinata on the global markets. Overall while there is a lot of clickbait that inflates the Norwegian one it is not a special case if you look at public fund rankings http://www.swfinstitute.org/fund-rankings/ http://www.swfinstitute.org/fund-rankings/ you'll see that the US Federal Pensions Fund and the California Reteirment Fund combined are about equal to the Norwegian National Fund, and those are just 2 funds. Overall pretty much every state in the US has multiple SWFs, public funds or similar investment ventures those are usually directed at a specific funding target e.g. retirement, public schools, universities, infrastructure etc. Each fund funds usually only a single thing and each fund has a different source of revenue and investment goals and regulations, for the most part based on how the US federal system works in general it's a better model. California isn't expected to fund education in Texas or pay for a new road in Wyoming and vise versa so each state runs their own funds to fund their own needs (there is some federal money involved) overall it's likely a slightly safer bet than putting all your eggs in a single basket. This is also why you simply can't blow up the Norway's fund to US levels and say you'll need 56 trillion dollars because the US doesn't pay for everything from a single fund. The Gross National Wealth of Norway including the fund is about 85% of the US one when adjusted per capita, Norway is rich, the fund is wonderful and very well performing but it's not some unheard of economic miracle that no one else is using ;)
  - harryh 10y ago
    This (and your other comments in this thread) was super interesting to read. Thanks!
  - ckinnan 10y ago
    Actually the state funds do hold real assets but the federal system does not, there's no $3 trillion dollars to invest, the Social Security Trust Fund is just a non-marketable claim on the U.S. Treasury. It is an accounting placeholder-- a promise if you will-- there are no assets of any kind backing it. When the IOUs come due the Treasury will have to cut spending, raise taxes, or borrow new funds.
    - dogma1138 10y ago
      This isn't exactly the case, "real assets" is a tricky term. There is a difference between the SSA and the Social Security Fund, the SSA is funded through the budget "independently" of the fund, in some years the SSA have been funded at a deficit. Yes you can say that the fund is an "accounting placeholder" just like many other economic tools, when you take a loan from a bank it doesn't give you money, it effectively gives you a tradeable IOU against yours even tho you treat it as currency. To put in in a simpler terms the year to year budgetary deficit of the SSA against the payout claims should be treated as a separate thing to the actual Social Security Fund, if the US government or any other institution with sufficient means and credit would make a commitment to pour 3bln dollars into a bucket, said bucket is now worth 3bln dollars even if it is empty.
- ckinnan 10y ago
  In fact you are wrong. The SS Trust Fund holds no real assets. It holds non-marketable IOUs from the Treasury. They do not invest in Treasurys, although the SS surplus is spent by the federal government. There are no actual assets and there is no real trust fund, it is just an accounting scheme. Treasury will need to raise taxes, cut spending, or borrow cash on the open market to repay the IOUs.