If you’re watching the Republican Party national convention for clues about how to invest or what is going to happen to Social Security, don’t bother.
When it comes to Social Security, the country’s largest retirement account, the Republican convention platform draft declares that “as the party of America’s future, (they) accept the responsibility to preserve and modernize a system of retirement security forged in an old industrial era beyond the memory of most Americans.”
Details on shoring up Social Security are sparse, however. The Republican Party does say it rejects the old maxim that the program is the third rail of American politics: The party is not afraid to touch it. Saving the system, the party says in its platform draft, is their “moral obligation to those who trusted in the government’s word.”
Watch for waffling
But what does all this mean?
“There’s a pressing need for the next generation of leadership to view (Social Security) more seriously,” says Mark Hamrick, senior economic analyst for Bankrate’s Washington bureau. “Millennials are not very optimistic on their ability to count on Social Security by the time they reach retirement.”
Presumptive presidential nominee Donald Trump has vowed not to cut Social Security benefits. This puts him at odds with the Republican Party, and notably with the Speaker of the House, Paul Ryan (R-Wisconsin). Trump hasn’t said how he will avoid shrinking the program — only that powering up the economy with tax cuts and fewer regulations is the way to save Social Security.
Trump’s belief seems to be wishful thinking, Hamrick says, perhaps unsurprisingly. “Nothing specific on the issue, but he’s taking more of a broad-brush stroke.” The Republican Party’s draft platform includes declarations that younger workers “will have the option of creating their own personal investment account as supplements to the system.” Hamrick decodes this to mean that at least part of Social Security would be privatized, allowing people to choose their own investments.
Will Pence weigh in?
Trump and his choice for vice presidential nominee, Mike Pence, have wildly different views on how to fix the system. While Trump has stated that he opposes benefit cuts or raising the retirement age, Pence has voted for both.
Pence, Indiana’s governor and a former member of Congress, is in favor of every method of cutting and altering Social Security: raising the retirement age, reducing the cost of living adjustment and means-testing. He supports privatizing Social Security: setting up individual accounts and investing of the money in the stock market. “I’m an all-of-the-above guy,” Pence told CNN in 2010.
When Pence speaks at the convention on Wednesday, it will be interesting to see if Social Security is on his agenda.
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What is discussed at the convention and what actually comes to pass might be 2 different things. Whoever wins the White House, Hamrick says, whether Hillary Clinton or Donald Trump, the foremost challenge is getting along with a new Congress. “One of the biggest variables will be whether the Senate goes to the Democrats, and that can probably present some opportunities for the Democrats to get some legislation approved,” he says.
As interest rates affect investments, Hamrick notes that Clinton is likely a supporter of Janet Yellin, chairman of the Federal Reserve. Trump, on the other hand, has said he would want to put a new nominee in place when Yellin’s term is up in 2018. “Also, ironically, he says he’s a low-interest rate person,” Hamrick says. That might be an empty utterance, but Hamrick points out it could have some bearing on Trump’s desire to politicize the Federal Reserve rather than remaining neutral.
Whether watching the Republican or the Democratic convention, and whether watching much of the proceedings or just taking in snippets, stay skeptical, Hamrick says. “This is essentially the political equivalent of a sales job.”