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“THE OMAHA WORLD-HERALD ON THE INVESTMENT OF SOCIAL SECURITY FUNDS” mentioning the Federal Reserve System was published in the Extensions of Remarks section on pages E163-E164 on Feb. 9, 1999.
The publication is reproduced in full below:
THE OMAHA WORLD-HERALD ON THE INVESTMENT OF SOCIAL SECURITY FUNDS
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HON. DOUG BEREUTER
of nebraska
in the house of representatives
Tuesday, February 9, 1999
Mr. BEREUTER. Mr. Speaker, this Member commends to his colleagues an excellent editorial questioning the President's proposal to invest Social Security funds in the stock market which appeared in the Omaha World-Herald, on January 29, 1999.
I'll go further than the World-Herald. Even without detailed study of the issue, it should be clear to most thoughtful Americans that this proposal by President Clinton should be considered ``dead on arrival.'' Chairman Alan Greenspan's opposition is highly appropriate. The Government as an Investor: Questions Need To Be Addressed
President Clinton's proposal to invest billions of dollars in Social Security funds in the stock market is the target of a barrage of criticism. Clinton and others who support the idea may have a fight ahead if they are to prove its worth.
The president would allocate 62 percent of the government's budget surpluses over the next 15 years to Social Security to ensure that it can pay promised benefits until 2055. That amounts to about $2.7 trillion.
He has suggested investing more than $40 billion of those Social Security funds a year--nearly $700 billion over 15 years--in the stock market. Another $500 billion would be used to set up individual universal savings accounts for many Americans to bolster the retirement nest-eggs of lower-income people.
The surplus not put into the stock market or individual retirement accounts would be invested just as money collected for Social Security has always been: It would be used to buy Treasury bonds, which are interest-paying federal IOUs.
In the past, Congress and the president have taken the money from Social Security, replaced it with bonds and used the cash like other borrowed income, spending it on programs and services. Clinton, to his credit, has proposed that lawmakers be barred from using future proceeds from those bonds for any purpose other than reducing the national debt.
Alan Greenspan, chairman of the Federal Reserve, has said he highly approves of the national debt provision. Congressional Republicans, on the other hand, criticized the president for failing to earmark any of the surplus for tax cuts.
In addition, many people have specific concerns that will need to be addressed in detail if the plan is to warrant serious bipartisan consideration. Greenspan, in particular, has raised thoughtful questions, most recently on Thursday in front of the Senate Budget Committee.
``I do not believe it is politically feasible to insulate such huge funds,'' he said. With so much money on the table, he said, Congress or the president might be tempted to influence the selection of companies and industries to benefit from government investments.
There is reason for his concern. Congress routinely passes bills that benefit businesses. Members try to direct spending to their districts. Often they try to take care of specific individuals or companies. How much more could they do if the government became a much larger investor in private securities?
Another issue is the matter of political correctness and the pressure that would materialize to use the money for a social statement. Should the government own stock in companies that make cigarettes? That distribute liquor? That offer abortions? That have operations in repressive nations? That have a bad environmental record? Some members of Congress might try to influence investments on the basis of social conscience instead of market savvy.
Clinton supporters have argued that the problem is solvable, perhaps with an independent board of long-term appointees, similar to the Federal Reserve Board. The board would direct investments, perhaps from a limited list of broad, mutual-fund type stocks.
Other opponents have wondered at the propriety of government ownership of shares in private sector companies. Stockholders have a say in company management, voting for board members and approving mergers and acquisitions. the government could have an effect on the company either way, if it voted the shares it owned and if it didn't.
There are precedents, however. States, cities and some independent federal agencies such as the Federal Reserve System have pension plans invested in stocks. Managers of those funds say they have not created any of the problems that critics are bringing up. On the other hand, those funds are not as large as the potential Social Security investment.
Removing the stock-market investment portion of Clinton's plan would not kill it. Experts suggests that it would mean the proposal would extend the solvency of Social Security only 50 years rather than 55 years.
The plan is a radical departure from current practices. It has some intriguing aspects, but comes with troubling questions such as those raised by Greenspan. The questions need to be answered before the plan can be assessed.
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