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Show AA4 The Salt Lake Tribune OPINION Sunday, January 31, 1999 Should Social Security Money Be Invested in the Stock Markets as Clinton Wants? Retirementfunds should be invested tion be rewarded and foes punished? Byindividuals, not by bureaucrats not invest in companies or indt groups on the basis of social desirability as defined by the govern- President’s plan is first step toward Fixing a program too long ignored Wecan be suretherewill be pressures to invest or ment. Would the funds be withheld if Washington deemed Microsoft to be too monopolistic? Or would BY PETE DUPONT KNIGHT-RIDDER NEWSSERVICE DOVER, Del. — Letting the government invest $700 billion of Social Security funds in the stock market is a terrible idea. Perhaps Federal Reserve Chairman Alan Greenspan summed it up best when hesaid he did “not believethatit is politically feasi- ble to insulate such huge funds from government direction.” President Clinton and Treasury Secretary Robert Rubin have both given assurancesthat there won't be anypolitical interference. Thereare no details yet from the administration, but Brookings Institution economists Henry Aaron and Robert Reischauer have proposed that the money beinvested for the government byprivate managersofdiversified mu- tual funds, withtheiractivities to be supervised by a newly created board. That's not good enough. Two big concerns immediately come to mind. First of all, what government gives, government can take away — andcantry to flim-flamus into thinking thatit’s doing something else. Foran example, weneed to look nofurther than a few months back. The president declared that every pennyof the budgetsurplus should be used “‘to save Social Security.” Congress agreed But then the president and Congress agreed that, well, maybe not every pennyafter all. There was the matter of “emergency” spending, so they agreed to big reason was that they tended to investtoo politically — basing decisions onsocial desirability of the investment(social desirability in the minds of the portfolio managers, thatis). A University of Wisconsin study found that the university's long-term composite investments earned about 7.7 percent morethan they would have if invested in “socially responsible” funds. If the Social Security funds get into index funds, which index funds? The Standard & Poor’s 500, a market composite, the Russell 1000, 2000 and 3000, the Wilshire 5000, or some other? And what about more mid-cap and small-cap stocks? Investing in in- dex funds doesn’t create the desired firewall, be- cause of the potential pressures on an index to change, adding or dropping issues. Mr. Greenspan hadit right. There is no way to insulate such huge funds from government direc- tion. However, that doesn’t meanthereisn’t another, better approach. Direct a part of every taxpayer's Social Security tax to an individual account owned by the taxpayerbut not accessible until retirement. Private professional money managers couldstill do the investing, but the president and Congress couldn't tamper with the money in the accountbecauseit would be the property of the taxpayer. “emergency” spending. Similarly, there is absolutely no reason to expect door to reforming Social Security. But government — will keep their hands off the returns that the in- vested Social Security funds earn. If the money comesin, they will find a wayto spendit. The other concernis howthe Social Security money will be invested. Will friends of the administra- The president deserves credit for opening the investment in the market is the wrong way to go aboutit. du Pont is a former governor of Delaware andthe policy chairman of the Dallas-based National Center for Policy Analysis. beenpiling up a surplusin the Social Security Trust Fundsince 1984. Any shortfall that might occur after the baby boomers are retired — in 2032 — is really not much to worry about. In fact, the whole projected shortfall over the pro- WASHINGTON— There were sighs ofrelief all over Washington when thepresident announced his Social Security plan last week. Those of us who wantto protect and preserve the program were expecting much worse. Most of the plans that have been put forth by think-tanks or members of Congress havecalled for either some sort of privatization, or benefit cuts that would push tirementplans found that they under performed the overall average for both stocks and bonds — and one take out about $20 billion of the surplus for the thatthe president and Congress — of whateverparty BY MARK WEISBROT KNIGHT-RIDDER NEWSSERVICE there be objections to investing in tobacco stocks? A World Bank study of government managedre- the baby boomers’ retirement — that’s why we have millions of seniorcitizens below the poverty line — or both. The president's plan did neither of these two things, but it’s a bit too early to pop the cork on the champagne. Privatization remainsa real and present danger. Here’s why: the president proposed to invest about $700 billion of the Social Security Trust Fund’sassets in the stock market. Congressional Republicans probably won't swal- lowthis part. But they may very well come back and say, “OK, you wantto put someofSocial Security's revenuein the stock market? Fine, but let’s put the moneyinto individual accounts.” That would seriously undermine the guaranteed benefits andstability that Social Security has always provided for America’s elderly, while creating enor- mous administrative waste. And thereis notellin, whether the president would sign suchlegislation if it were to pass Congress. Afterall, the whole point of his planis to get him- self a legacy other than being thefirst president to be impeachedin 130 years. I have to emphasize this, because most Americans have been misled to believe that Social Security faces serious financial problems when the baby boomers beginto retire in 2008. But in fact the program has already provided for gram’s 75-year planning period amounts to less than onepercentof our national income. So Social Security was never in any real danger, except from those who have beentryingto “fix” it. Nonetheless, if the president wants to shovel $2.7 trillion of future budget surplusesinto Social Security’s Trust Fund, that’s fine. It would take care of mostof the projected short- fall, and if President Clinton wants to claim that he has “saved” Social Security — so be it. Putting part of this money in the stock marketis another story. The whole justification for this move is to earn higherrateof return onthe Social Securi- ty Trust Fund’s assets, but the logic here is fundamentally flawed. The Clinton administration is assuming that stocks will get the samerate of return in the future that they had in the past. But they are also assuming that the economywill growless than haifas fast as it used to grow. These two assumptionscannotbe reconciled. And, of course, if the economy were to grow fast enough to provide the stock market returns that the Admin- istration is assuming, then the Social Security Trust Fund would pile up an enormous surplus,indefinitely — without having to invest anything in stocks. ‘The bottom lineis that Social Securityis financial- ly sound, and would be even sounder with the com- mitment of funds from future federal budget surluses. But the stock market has nothing to contribute to securing America’s largest and most successful social insurance program. Weisbrotis research director at the Preamble Center in Washington, D.C., and a research associate of the Economic Policy Institute. American Public Takes Role Of Clinton’s Ever-Loyal Wife BY PAUL CAMPOS FOR THE LOS ANGELES TIMES In the final scene of Francis Ford Coppola's “The Godfather,” Michael Corleone’s wife, Kay, asks himif it is true that he ordered the murderof his sister's husband. At first he refuses to an- swer, eventuallyexploding in anger at her: “Don't ever ask me about my business!” Seeing the hurtand fear his response has inflicted, he unexpectedlyrelents, telling his wife that “this one time” he will permit her to ask him about his business affairs. ate committee. In the course of that testimony, we see Michael perjure himself again and again Nevertheless,we still feel sympa- thy for the harried witnessashe is forcedtolisten to the hypocritical posturingof a senator who a few weeks earlier had attempted to extract a bribe from him. Of course, thelies and evasions that are commonfeatures of such legal proceedings remain for the most part morally indefensible. Still, these sorts of evasionsare in some sense understood to be part of the game, especially whenthat ay meekly repeats her question gametakes on the corruptcharac- unbearablecinematic tension, he lets it hang intheair. Then hesays ingness to mix power politics with cynical exploitation. and for a long moment of almost the words sheis so desperate to hear: “No. No, it’s not true.” The look of profoundlove and even deeperrelief that sweeps over Kay's face provides the perfect tionpoint tothefilm’sclibetrayal noment of corruption and ter that marks our current will- When President Clinton ap- pearedto lie under oath, he may have brokenthe law. But when he waggedhisfinger at the American people, assuring us that he had “not had sexual relations with that woman, Ms. Lewinsky,” he tening to the senatorial sparring broke something even more important: the almost personal bond that this president had labored to to an impeachable brand of perju- the people who elected him. This was an egregious lie, told directly to the American people, many of I thought of this scene while lis. over whether thepresident’s endlesslyslippery evasions before a federal grandjury have added up ry. The brillianceof the concluding image in “The Godfather” is blank lie to his wife that fully that after witnessing three hours of murder, mayhem and every conceivable form of treachery, it is nevertheless Michael's point makesclear the depthof his moral depravity The president's impeachment trial also brings to mind the con: trast between Michael's lie to Kay andhis appearancebefore a Sen debt Maybe you should be looking for a construct between himself and whom understand the difference between misleading and evasive answers given in a deposition and betraying the trust of a friend ora spouse. That this lie represented nothing morenoble than a craven attempt to save its speaker's polit- ical skin would seem to makeitall the more unforgivable. Campos, a lawprofessor,is the author of “Jurismania: The Madness of American Law.” Is Your Child Hyperactive ? 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