Railroad Investment Scheme Passes House

September 12, 2000

Legislation allowing the government to invest a portion of the railroad retirement fund in the stock market passed the House of Representatives Thursday night, setting a precedent that could pave the way for government investment of trillions of dollars in Social Security money in the stock market. As reported in the July 17 issue of Social Security This Week, the House was considering legislation sponsored by Rep. Bud Shuster (R-PA) that would allow the government to invest funds from the Railroad Retirement System in the stock market. This legislation, HR 4844, the Railroad Retirement and Survivors' Improvement Act of 2000, passed by a vote of 391-25.

The Railroad Retirement System is similar in many ways to Social Security, providing retirement, disability and survivor annuities to workers employed in the railroad industry (who are exempt from Social Security). Like Social Security, the Railroad Retirement system currently faces large unfunded liabilities. HR 4844 would establish the Railroad Retirement Investment Trust, which could invest up to $18 billion in taxpayer dollars in the Rail Industry Pension Fund in the stock market. Currently, the RRS invests only in government bonds.

Allowing the government to control billions of dollars in railroad retirement funds will encourage those who want the government to control trillions in Social Security funds. Federal Reserve Board Chairman Alan Greenspan has warned that government investment in the stock market threatens political control over the economy and would likely bring lower returns to workers than if they had invested themselves. For more details, see "The Perils of Government Investing" by Michael Tanner.

Chances to derail the railroad retirement legislation now stand with the Senate.

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