[Congressional Record (Bound Edition), Volume 151 (2005), Part 7]
[Extensions of Remarks]
[Pages 9659-9660]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      IDEAS ON RETIREMENT SECURITY

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                          HON. JOHN B. LARSON

                             of connecticut

                    in the house of representatives

                         Thursday, May 12, 2005

  Mr. LARSON of Connecticut. Mr. Speaker, I wish to submit for the 
Record this article that appeared in the Hartford Courant on May 9, 
2005. It poses the idea of investing the Social Security surplus in the 
financial markets. The future of Social Security would be addressed 
through the strength of these markets without the uncertainties of the 
stability of individual private accounts. The author also addresses 
some of the concerns that have been raised about this idea.
  As you can see, there are many thoughts that can be brought to the 
table to address the future of Social Security and to utilize the 
forces of the financial markets without being wedded to private 
accounts. Additionally, there are many issues surrounding personal 
retirement savings and pension security that deserve to be looked at 
carefully.

               [From the Hartford Courant, May 10, 2005]

                   Push-Button Picks Just Too Simple

                             (By Dan Haar)

       The Social Security private accounts tour passed through 
     Hartford Monday with some downhome remarks from Treasury 
     Secretary John W. Snow that called to mind H. Ross Perot, who 
     sounded open-minded but wasn't.
       Snow was in town pushing President Bush's scheme to move 
     much of the Social Security trust fund into private accounts, 
     where you and I can watch our retirement accounts grow and 
     wither and maybe grow back again.
       The private accounts would cost an estimated $2 trillion to 
     set up, and they would do nothing on their own to fill the 
     Social Security shortfall. These are not points of debate.
       Still, Snow said, ``I challenge all of our critics to say, 
     if you think you've got a better idea, what is it?''
       He added, echoing Perot without the irony of anatomy, 
     ``We're all ears.''
       Well there is a better idea--but sadly, the administration 
     is all fists in fighting it back. That's because private 
     accounts are not on the list of features the Bush folks are 
     willing to do without.
       The idea behind the private accounts is that workers could 
     choose to invest their money in stocks. not just the long-
     term bonds the trust fund uses today. Over time, on average, 
     company shares earn higher returns than bonds. Social 
     Security could meet its obligations without raising payroll 
     taxes, and poof! We wipe out much of our $11 trillion 
     deficit.
       If tapping into the stock markets would work in private 
     accounts. why can't it work for the trust fund as a whole? 
     Why can't the fund simply set a target of stockownership--
     say, 25 percent--and gradually ramp up to that target, 
     without giving Aunt Martha fits over the state of her 
     personal account?
       The financial results would be identical to Bush's plan.
       The start-up cost would be lower because it could be done 
     over a period of years.
       Aunt Martha, who may already have plenty of worries about 
     her 401(k) and other private savings, could rely on a 
     predictable stream of retirement income, no matter what--just 
     like uncle Chester had back in the day.
       The fund could achieve returns based on decisions by the 
     best and brightest financial minds--not the twitches of a 
     nervous household, multiplied by 100 million.
       Last week, a ranking Treasury official told me the problem 
     is that Social Security would end up meddling in the stock 
     markets--a dangerous thing if, say, someone in power wanted 
     to help or hurt General Electric Co.
       But that worry is easy to wave off with a pair of laws even 
     this Congress would pass without much debate: All stocks must 
     be part of broad index funds, and never could the Social 
     Security Administration vote in company proxies.
       On Monday, Snow produced another answer: Allowing the fund 
     to invest as a whole in stocks produces a short-term surplus, 
     ``and short-term surpluses become subject to the spending 
     proclivities of Congress.''
       ``This,'' Snow said of the private accounts, now echoing Al 
     Gore, ``is a lock-box.''
       It's true that Congress--and our free-spending president, 
     by the way--have borrowed heavily from today's Social 
     Security surpluses. But it's hard to believe that federal 
     spending rises just because the surplus is there. It rises 
     because we have rising needs, and because the political 
     system we have causes it to rise.
       Anyway, there are better ways to rein in federal spending 
     than to needlessly take trillions of dollars out of the 
     system and put them in a place--your hands and mine--where 
     they will cause new grief. The administration's real goal 
     here is not to advance

[[Page 9660]]

     Social Security, but to push its social agenda, the so-called 
     ``ownership society.''
       Funny, median family income adjusted for inflation--the 
     most important measure of how typical Americans are doing--
     has fallen three straight years and is headed for a fourth as 
     Bush showers tax breaks on companies that aren't hiring. 
     Whose ownership society is this?
       Democrats and their allies at AARP in the Social Security 
     debate have offered little in the way of real solutions. John 
     Rother, director of policy and strategy for AARP--defending 
     his hilariously exaggerated, slam-dunk anti-personal account 
     TV ad campaign--told me the idea of allowing the trust fund 
     to invest more broadly makes sense.
       But he said the public isn't ready for that discussion.
       Despite the lack of a cohesive public debate, the trust 
     fund investment idea may emerge as a dark horse. On Monday, 
     the Yale School of Management announced a working paper by 
     finance professor Will Goetzmann that shows exactly how such 
     a system might work.
       Goetzmann envisioned an independent agency, similar to 
     Fannie Mae, that would manage the Social Security fund. It 
     could issue its own bonds and sell contracts, like annuities. 
     It could invest in all sorts of sophisticated instruments 
     that individual accounts couldn't touch, such as commercial 
     real estate, commodity indexes and short-term Treasury notes.
       Goetzmann calculated a portfolio mix that would most 
     closely mirror the rise in U.S. wages. That's the measure 
     Social Security uses to set payouts to retirees.
       ``It's a fairly broadly diversified portfolio,'' Goetzmann 
     said Monday.
       Setting the right investment mix, he said, ``is a very 
     sophisticated question that is not going to be answered with 
     a few oversimplified choices on a menu.''
       And getting to that point in the debate will not happen as 
     long as we have officials on both sides who give us an 
     oversimplified menu of political arguments, and nothing more.

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