There's a reverse scaling effect. Generally speaking, the bigger the fund, the lower the returns. That's because 1) it's really hard to find worthwhile investments on such a grand scale, and 2) larger supply of investment funds means a lower interest rate (assuming constant demand for investment).

You can see it if you look back to the years 2005-2008, where investment firms were leveraging themselves chasing after smaller and smaller returns, chasing an every shrinking yield.

Theoretically, it's possible. However, in practice, this doesn't happen. The only first-world country that has a solvent retirement program is Singapore (more on this further down).

There are multiple reasons for that:
1. Incentives. The incentives for government officials is either to just be re-elected 2 or 4 or 6 years down the road. That usually translates into vote buying, and not any real long-term investments. For government bureaucrats, the incentives are in keeping their jobs and/or budget, which are not always aligned with the incentives of the "investors".

You can argue that some of that occurs on the private side as well (and it does), but then comes my next point.

2. Feedback. Privately, you can't lose money forever. You can't borrow forever, and your investors don't have to put their money with you. Those constraints mean that you must actually deliver on your promises, both short term and long term, or go bankrupt. On the government side, governments can borrow nearly indefinitely, and force "investors" to hand them their money. Typically, people cannot chose to abandon the government plan and go with some different plan. At best, there's a vote every few years on a huge basket of issues, of which a tiny subset is the investments the government has made or might make.

This is a huge gap in terms of information & feedback between the two.

Again, this doesn't mean it's impossible for the government to do better in aggregate, or even in specific cases, but it makes it less likely.

Both Social Security and the CPP work in very similar ways here:
- Current workers pay into the plan.
- The money collected is invested in the safest security available: government bonds.
- The government on the other side sees the new bond purchases and then gets excited about all those investors who are eager to loan to the government.
- The government spends this money in the general fund (ie: current programs & interest on the debt).
- Current retirees are paid out of the interest on their bonds (ie: interest on the debt from the general fund).

This system is sustainable if:
- The government gets a real return equal or greater than the payouts it needs. That is, it needs to invest it into real goods or service producing endeavors, and any money not invested into goods or services must be made up by a higher return on the money that is invested.
- or, population grows exponentially.
- or, taxes increase exponentially.

Unfortunately, none of those are or can be true indefinitely.

So the question now is: How does Singapore do it? Well, the Singapore system is very different from the ones in Canada, the US and most of Europe.

First, the government requires you to save 30% of your income. It doesn't matter how much you make, you save 30% of it. Make minimum wage? Save 30% of it.

Those savings go into an account with your name on it. Some portion of that money is available for your own investments (similar to an RRSP or a 401k). The savings can then be used to:
- Buy a house.
- Purchase health care or health insurance.
- Retire.
- Unemployment.
- Start a company.

That's pretty much it. For the really poor (think <= $10,000/year), there is a very minimal welfare system.

Since the money is in your name, and yours to invest, it's up to you to plan accordingly. There are no dependencies on later or previous generations outside of the investments made. The system is solvent and scale-free.

Edit:

I forgot to mention. The CPP and Social Security are not transferable except to your spouse (and children in very very limited cases). The returns on Social Security are also very low.

In other words, people are better off if they could take that 12% or so of your income that was put in SS, and instead just buy government bonds. The "investment" is the same, but the returns are much greater. In fact, just mandating that people buy government bonds with 12% of their income would be better than the current SS system.

Also, this debt ceiling panic is complete theatrics.

For one thing, the Social Security "Trust Fund" and the Medicare "Trust Fund" can be redeemed into regular treasuries without hitting the debt ceiling. So these programs won't be a problem for another 3 years.

The Federal government also has about $1.5 trillion in unused assets can be auctioned off (large stacks of gold, land, oil, buildings, etc). So the government can keep funding itself for at least another year.

That should give Congress plenty of time to figure out what the next steps are. There's no need to go in all-panic mode right now.

Spoiler: Entitlements are a significant amount of Federal spending, growing larger every year.

That claim about the Republicans is a Democrat lie that conveniently ignores a major part of the issue, which is that spending is and has been out of control. The stance I'm interested in is the refusal to just continue raising the debt ceiling irresponsibly without doing something to curb spending. The last comprehensive summary I read about a recent Democrat proposal was that they'd mostly create "savings" by increasing taxes for the rich and slashing the Defense budget.

Chart?!

But Obama's out of control spending is the real problem here. That's clearly the truth because it's what I've been told over and over again.

This is exactly what I'm talking about. The actual truth is only about... oh 2% relevant.

1. Nobody has any incentive to do research or practical thinking, or letting the best ideas be discovered.

2. People who do "research" never let it speak for itself. "I have the facts right here!" Sure you do.

3. "Truth," for all practical purposes is whatever arbitrary idea that's reinforced the most. It helps a lot if it resonates with a voter's belief system. That's all that matters here. That's the only force that carries any significant weight for voters.

4. Everything is used for a selfish purpose.

This system is all fucked!

No science, no intelligence, only rampant stupidity followed by rampant pandering. How do you win? Pander to the most easily manipulated and controllable sect of the public: the stupid people.

We need smart, educated people to guide us. Following along with what the masses are told to want is a recipe for disaster.

Is it just me or does is seem like the forces that control the people seem to be getting stronger? Could just be my mood.

Only a politician would view tax cuts as a "cost" to the government, as if it's something it is paying for.

I only skimmed Mark's post the first time but now I noticed something I'd like to respond to:

I've noticed the opposite, all the "on the road to" socialists have been getting really quiet and people on the margin are becoming conservative. Everyone's^[1] getting conservative friendly. I think recessions do that to people.

It's worse than that, the tax "cuts" are simply reductions in projected increases, not actual lower taxes.

[EDIT]

The pendulum will swing back yet again eventually. Politicians heads will roll, preferably not via guillotine.

Where would you recommend a fellow USer live?

I'm seriously tired of the US. Our people are lazy, apathetic, powerless, and stupid. Failure is inevitable.

America is the best!

Yes, AMERICA. We own that word. GO AMERICA!!! WOOHOOOOOO!

Mark is an unpatriotic traitor who deserves to get run over by a football team.

PS: We beat Canada at hockey and caused their entire country to riot.

Did he mean a handegg team?

Hand Ball

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Foot Egg

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Bat Ball

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What are you on? I live in the rockies in AB and it's literally paradise here.

Ya but you should see our skiing riots.