How Will Private Retirement Accounts Affect Corporate Debt?

CFO has a very interesting article about privatizing social security and the effect it may have on the capital markets.

To be sure, the Social Security debate centers on the financial fate of current and future retirees. But privatization would certainly spawn side effects in finance and business circles. At the very least, PSAs would send a huge amount of money Wall Street's way. Less well discussed are the big potential effects that privatization could have on corporations and their ability to raise capital.

Much depends on which reform plan, if any, is enacted and on how much money beneficiaries choose to sock away in the accounts, economic experts say. But even if the most moderate privatization plan would produce two stunning results in the capital markets. First, hundreds of billions of PSA dollars would flow into stocks and bonds, possibly during a short period. Second, the federal government would be forced to borrow up to $2 trillion over the next few decades to ensure that the current Social Security Trust Fund is solvent during the transition to a privatized system.

This is an area of the debate you don't hear much about, but it could have positive or negative consequences for companies, depending on the specifics and how the markets play out.