"Never before in the history of this country has there been a proposal to hand over this much power to unelected officials with this little responsibility attached to it."
"Social Security's dire financial problems are now being acknowledged by even the most diehard supporters of the system," reports Krzysztof Ostaszewski of the Cato Institute. "Unless the system is reformed," he warns, "it will be forced to either raise taxes or slash benefits. Because both of those choices are likely to be politically unpopular, defenders of the current system have had to scramble for other ways to restore the program to solvency. One proposal currently gaining in popularity is to have the government invest funds from the Social Security trust fund in private capital markets."
Ostaszewski charges that such a practice "would amount to the 'socialization' of at least a large portion of the U.S. economy. It would put ownership rights over much of the American economy in the hands of the U.S. government." The government would then be able to "use tax money to pick winners and losers."
Ostaszewski acknowledges that "private capital markets earn a much higher rate of return than the government bonds that currently make up the trust fund." The question is, How long will those markets remain private once the government starts investing enormous sums of money in them? "Many Western European governments were once owners of large enterprises through nationalization," Ostaszewski observes. "However, because of negative experience with government ownership, the worldwide movement has been away from such ownership toward privatization, through selling shares to the public. Proposals to allow the government, through the Social Security trust fund, to purchase stock go directly against this trend."
Can't we learn from the socialistic mistakes of other nations, or are we destined to repeat them ourselves? "Despite its superficial attractiveness, it would be a serious mistake to allow the government to invest the Social Security trust fund in private markets," concludes Ostaszewski. "Such an approach would make the federal government the nation's largest shareholder, with a controlling interest in nearly every American company. With ownership would come serious problems of control and social investment policy and threats to the efficiency and competitiveness of the American economy. Experience in other countries has shown that government investment seldom achieves the rates of return seen in private investment. Attempts by the government to manipulate the markets could further undermine returns and threaten general market stability."
Krzysztof Ostaszewski argues that individuals should be allowed "to invest their own retirement money through true privatization. A system of individual private investment accounts," he argues, "would allow people to benefit from higher market returns without risking increased government involvement in the economy." After all, the federal government has already proven itself incapable of fiduciary responsibility. That's why Social Security is in the mess it's in. The last thing we want to do is give the federal government more power to interfere in the economy.
