Medicare for All Bill
Don’t Gamble with Our Social Security
By: Kay Tillow
Andy Stern, a key member of the president’s deficit commission, proposes to invest a part of our Social Security funds in the stock market. Dean Baker, Co-Director of the Center for Economic and Policy Research, a liberal think tank, has expressed approval for Stern’s proposal. “I don’t think it’s necessarily a bad idea,” said Baker. “If he’s talking about getting money out of the trust fund for that purpose, I could live with it. You’d get a higher return now that stocks are falling.”
Alarmed at Baker’s statement, I wrote to him:
“Did you really assert (as Ryan Grim reported in the June 30th Huff Post) that it would be okay to invest part of our Social Security funds in Wall Street? Please say it isn’t so.
I regularly distribute updates on health care and the movement for single payer to 20,000 unionists across the country, and I have shared with them some of your analyses on the economic crisis. Your work has been helpful to union members struggling to understand the complex economic forces that are battering us. We have to find our way through the barrage of misinformation that comes at us from the journalists who are bought and paid for.
Where are we to go for economic analysis, if you now propose turning over a portion of Social Security to a gamble on Wall Street?
The need to stand on principle to protect our precious safety net programs far outweighs the gaining of a few bucks in the short run. Don’t you agree?”
I heard from Dr. Baker who has confirmed his support for investing a part of the Social Security Trust fund in the stock market as a way to get higher returns.
Social Security and Medicare are under a many-sided attack. I believe that if the door is opened to invest Social Security, even a small part, in the stock market, that the program will suffer irreparable damage.
I invite Dr. Baker or anyone else who wants to invest social security assets in Wall Street to respond to these concerns:
Social Security is a trust and not an investment vehicle. The resources taken in for collective purposes should be held with no risk, not little or minimal risk.
Policy makers have no license to break into this trust for any reason other than to distribute its assets fairly and equitably. Social Security is held in trust for the people, not as gambling stakes.
The proper way to grow the trust is through mechanisms that fairly and equitably obtain the funds through taxes or assessments.
Funding should be solely a matter of social justice and not financial manipulation.
The market has no mechanism to insure the vitality of the trust. The Standard & Poor’s 500 stock index has fallen at an annualized rate of 3% a year over the past 10 years. The market will always be a gamble.
Investment requires investment managers. Their interest in the fund is to make money through management fees – a cost to the trust – and their incentive to grow the trust is based upon personal gain, a goal that encourages speculation and risk to the trust.
The aggregate performance of the market is one thing; the performance of particular investments is another. Like mutual funds, a Social Security investment bundle will depend on the skills and decisions of managers. Some are winners, some losers. There is no way of deciding in advance if we pick a winner. Even winners are later losers. Short of catastrophic default, the cost, recovery and return on treasury bonds are guaranteed.
In the long run, the dips and rises in the market do not correlate with the demographic dips and rises that determined funding requirements. As with the overall economy, these market-induced imbalances would guarantee periodic social security crises, whether real or politically manipulated, inviting the call for privatization.
The very success of a “little” investment of Social Security funds in the market will be followed by a cry for more and more, and in our very limited two party system, it will be very difficult to call a halt to enlarging the investment in a Wall Street that is temporarily producing gains. Private investment of a part of the trust fund will only grease this slippery slope.
Private sector investment will invite the charge that since public funds are now invested in private markets, why shouldn’t individuals make their own investment decisions with “their” funds? In other words, private sector investment will lead to the call for privatization.
Mary Katharine Ham of the Weekly Standard is ecstatic over the possibilities. Citing some liberal support for the partial privatization of Social Security, Ham asserts, “Improbably, Obama’s unifying rhetoric and bipartisan vision can now be applied more accurately to the formerly toxic idea of Social Security reform than it can to his own agenda.”
We can’t let it happen!