Pandora would love this idea...
December 1, 1998
There has been a growing consensus that private investment is
the key to any future Social Security reform. According to a new study, "The
Perils of Government Investing" by Michael Tanner, director of the Cato Project
on Social Security Privatization, "The key questions at the center of the upcoming
debate on Social Security's future will be what kind of private investment?
And who should do the investing?"
"These are critical questions because the implications of government
control of investment are potentially fraught with peril. Imagine a government
bureaucrat sitting on every corporate board. It is obvious that allowing the
federal government to purchase stocks would give it the ability to obtain a
significant, if not a controlling share of virtually every major company in
America. Experience has shown that even a 2 or 3 percent block of shares can
given an activist shareholder substantial influence over the policies of publicly
traded companies.
"There is a nearly infinite list of current political controversies
which would be ripe for restrictions if the federal government began investing
Social Security funds. Both liberals and conservatives would have their own
investment agendas." For example, should Social Security invest in:
"Tobacco companies? Companies that make nuclear weapons? Companies
that do business in Burma or Cuba? Companies that extend benefits to the partners
of gay employees? Companies that pollute? Or companies that donate to Planned
Parenthood?"
The bottom line, warns Tanner, is that government investment
of the Social Security trust fund would result in a dangerous mix of government
involvement in corporate governance and social investing.
"It's your money, your choice, your future."
The Perils of Government
Investing, by Michael Tanner, Cato Briefing Paper No. 43 (December 1, 1998)
The recent report from EBRI on shifting from the current Social
Security system to one embracing individual accounts purports to ask how these
accounts would work. But the study offers a laundry list of administrative obstacles.
In today's commentary, Robert Genetski argues that private retirement accounts
may cost slightly more to administer, but would provide more substantial and
secure retirement income than the current system.
Today's first (and best!) event at the National Press Club
This morning, the co-chair of the Cato Project on Social Security
Privatization, William Shipman, will be the "Morning Newsmaker" at the National
Press Club. He'll be speaking at 10:00 a.m. in the Lisagor Room.
Bill Shipman is a principal at State Street Global Advisors in
Boston, and is the author of several papers on key aspects of privatization,
most recently on the subject of transition costs. Today, he'll discuss in detail
the three fundamental goals of any Social Security reform: ensuring financial
security for today's elderly; ensuring that younger workers get to keep more
of the fruits of their labor; and ensuring that any reform is a benefit to the
economy, not a burden.
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