A Spirited Solution for Social Security
It sounds like the basis for a Monty Python skit, except that it's true. Diageo, the maker of Johnnie Walker whiskey, is protecting its employees' pensions by putting two million barrels of maturing whiskey into a separately managed pension funding partnership. As the whiskey appreciates and is sold, cash is made available to make pension payouts. The pension partnership owns the casks, providing legal protection from Diageo's creditors should the company default. The whiskey will sell for market prices as it ages, serving as a natural hedge against inflation. Employees are happy with the arrangement, management is happy, stockholders are happy, regulators are happy, and whiskey drinkers can sip securely.
Does this give you any ideas? Let the asset hunt begin!
Hey, New York. How about privatizing the Triboro Bridge and Tunnel Authority, the immortal cash machine established by Robert Moses? Putting these income producing assets into a pension trust to cover militant public employee unions whose underfunded pensions are threatening to bankrupt the state may be New York's best way to avoid a Grecian meltdown. Taxpayers may leave New York in droves to escape a crushing tax burden that only promises to get worse as desperate politicians grasp for new revenue, but they can't take the bridges with them. Meanwhile instead of letting bridges rot due to deferred maintenance, private owners will have every incentive to make sure their properties are maintained and modernized, perhaps even introducing innovations like rush-hour pricing or premium-pay fast lanes. Are you seeing any better ideas come out of Albany?
Hey, California. What do you figure you could fetch for your airports? Reservoirs? Beachfront? The Golden Gate Bridge? Are these iconic properties so precious that you'd rather fire all your teachers and firemen? Have you figured out yet that the Federal government is in no position to bail you out?
The list goes on. If tax and spend Blue states don't start looking at some novel solutions to escape their downward spiral it will just be a matter of time before the bond vigilantes render their debt unfinanceable. Why not consider privatization?
Which brings us to the great white whale of broken entitlement programs, Social Security. How much Federal land, bridges, highways, parks, mineral rights, oil leases, and other income producing infrastructure could be transferred into a pension trust to cover this mother of all unfunded liabilities? Can you think of a better way to keep cash out of the hands of 535 Congressmen bent on squandering ever penny on constituent largess trying to get re-elected one more time before their house of cards comes crashing down?
Social Security would likely remain a Ponzi scheme; after all Federal "insurance" programs are exempt from normal accounting rules. The difference is that instead of strangling a diminishing pool of young workers with ever higher taxes to support retired Baby Boomers the Federal government could start divesting itself of the assets it has agglomerated over the past 200 years. Congress can keep Washington DC; no buyer in their right mind would try to run such a money-losing operation. But imagine all the PE funds you could get to bid on the Grand Canyon?
The alternative is to continue doing nothing, admittedly Congress's strong suit. Of course this means that China will one day own our entire country. Although this would be humiliating, Mao's greedy-capitalist heirs do seem to be doing a better job managing their economy than our own elected representatives.
Speaking of which, we can take some comfort from the knowledge that the giant sucking sounds that went by the names John Murtha and Robert Byrd are no longer funneling billions into the pockets of their loyal voters. But the mere death of a few rabid earmarkers won't make a dent in a system so fundamentally out of whack. Perhaps selling the country back to the people they took it from might be a way to put our Congressional shysters on a diet. If massive asset privatization helps impoverished retirees avoid having to live on dog food, which is going to happen when the Social Security System collapses, so much the better.
Asset transfers are apparently good enough for Johnny Walker, one of the oldest and most trusted brands in the world. Could they be good enough for a prostrate and threadbare Uncle Sam?
