Toward Long-Term Solvency of US Entitlement Trust Funds, I: How to Market Time Trillions

The US Entitlement Programs such as Social Security and Medicare now make up over half the US annual budget (52% in 2022) but are heading for imminent collapse by 2033–35, as outlays exceed receipts. There appear to be only two options: increase tax receipts or reduce benefits, but neither of these is politically palatable. In this study, the author offers a third option: to make the Trust Funds themselves work harder, by investing them in US capital markets. This idea is not new, but the fear of major market downturns has always stopped this line of thinking. For the first time, the author offers a game changer: use algorithmic trading to invest Trust Funds. It is a method developed in previous papers and designed to both exceed market returns and reduce drawdowns. This two-sided win can be the catalyst to finally make these Entitlement Programs solvent for the long-term. The author shows that if the Social Security Trust Funds had been invested in the market since 1991 as designed, then even after paying benefits, the Funds would stand today at a healthy $6.2T, rather than the actual $2.8T. Going forward, bold action is needed to avert disaster and ensure solvency. Investing in the market is broadly supported by other informed observers, but some believe it is now too late. We advance a new way forward. But time is of the essence.