[Congressional Record Volume 143, Number 158 (Monday, November 10, 1997)]
[Senate]
[Page S12484]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    NEW REPORT DOCUMENTING THE RISKS OF PRIVATIZING SOCIAL SECURITY

 Mr. REID. Mr. President, in the last several years a virtual 
cottage industry has sprung up in this city to promote the 
privatization of this Nation's Social Security system.
  Phase out, partially privatize, or dismantle Social Security 
entirely, say the privatization advocates, and let each American 
citizen invest their payroll tax on Wall Street and become a 
millionaire by retirement. With Social Security requiring adjustments 
to maintain its long-term solvency, and the Dow Jones until recent days 
seeming to hit stratospheric highs almost every day, the notion of 
letting the private markets provide for retirement has had a certain 
appeal for privatizers.
  Now a thoughtful and extremely sobering new economic analysis is 
warning us to plant our feet back on solid ground and take a hard look 
at the very considerable and too-little discussed risks of privatizing 
Social Security.
  On October 21, 1997 I was pleased to sponsor a congressional staff 
briefing which unveiled a report written by economist John Mueller of 
the Lehrman, Bell, Mueller, Cannon, Inc. market-forecasting firm on 
behalf of the National Committee to Preserve Social Security and 
Medicare.
  It is worth pointing out that this report is not the product of some 
anti-Wall Street or pro-big government partisan. John Mueller is a 
conservative, supply-side Republican who served for a number of years 
as the chief economist for Jack Kemp and the U.S. House Republican 
caucus.
  After putting aside the usual optimistic rhetoric about privatization 
and actually examining the numbers, here's what John Mueller found:
  That Social Security provides a measurably higher real return than 
all types of financial assets--including the stock market--when 
traditional calculations of risk are considered. In fact, financial 
asset returns, under the same economic conditions, are lower than the 
average return on a steady-state, pay-as-you-go Social Security system.
  Social Security will be even more attractive, not less, than private 
investments in financial assets during the next 75 years, when 
actuarial projections contend that the U.S. economy is likely to slow 
to a 1.4 percent growth rate. The same economic and demographic factors 
that drove average, real stockmarket returns up by 10 percent annually 
in the past 20 years will drive Wall Street returns down to about 1.5 
percent in the next 20 years.
  Social Security, by financing a huge investment in human capital, has 
been an enormous engine for the growth of the U.S. economy. 
Privatization would result in lower investment, slower growth, and a 
smaller economy; the loss well could reach $3 trillion and cost the 
economy at least 4 percent in lost growth during the next 75 years.
  Mr. President, I urge my colleagues to obtain a copy and read John 
Mueller's report: Three New Papers on ``Privatizing'' Social Security, 
One Conclusion: Bad Idea. I would be pleased to provide a copy to any 
colleague who may be interested.

                          ____________________