Cato Scholar: Enron Not Relevant to Social Security Debate

January 22, 2002

As skeptics try to draw parallels between Social Security reform through personal retirement accounts and the case-specific failure of Enron's private pension accounts, reform experts advise otherwise. An examination of how personal retirement accounts would run per the recommendations of the President's Commission to Strengthen Social Security clarifies the difference between the two approaches to increasing wealth accumulation for America's workers. Simply, Enron pension accounts and private Social Security accounts are not the same.

In response to attempts by anti-reformers to forge an erroneous Enron link, Michael Tanner, co-chair of the Cato Institute Project on Social Security Privatization, said:

"The Enron situation has no relevance to Social Security privatization. No serious plan to allow workers to privately invest a portion of their payroll tax would allow the workers to invest so heavily in a single stock. Indeed, the plans suggested by the President's Commission to Strengthen Social Security, those legislative proposals currently in Congress, and the plans discussed by various think tanks, all envision broadly diversified portfolios."

"If opponents of privatization truly believe that Enron means that private investing is just too risky, they should be advising Americans to abandon their 401(k)s and other investments. Of course, they are doing nothing so foolish. In fact, Senator Daschle recently endorsed private investment accounts as an "add-on" to the current Social Security system. This is because even opponents of privatization understand that private capital markets are extremely safe long-term investments."

"Trying to drag Enron into the Social Security debate shows just how few arguments opponents of privatization really have."

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