[Congressional Record Volume 145, Number 23 (Tuesday, February 9, 1999)]
[Extensions of Remarks]
[Pages E163-E164]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   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.

              [From the Omaha World-Herald, Jan. 29, 1999]

     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

[[Page E164]]

     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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