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Greenspan warns on Soc Sec
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March 3, 1999: 1:42 p.m. ET
Calls investing Social Security funds a 'zero-sum game', cautions Net investors
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NEW YORK (CNNfn) - Federal Reserve Chairman Alan Greenspan Wednesday blasted the proposal to invest Social Security trust fund assets in equities as a "zero-sum game."
Separately, Greenspan, speaking to a House Commerce Committee hearing on the Social Security system, advised older investors to refrain from putting all their savings into Internet-related companies.
"If you have everything in equities, if you have everything in Internet stocks, you're in real trouble," he said.
During his testimony, Greenspan repeated his opposition to investing money from ongoing budget surpluses in equity markets for the benefit of Social Security.
"Investing Social Security assets in equities is…largely a zero-sum game," Greenspan said. "Only an increase in national saving or an increase in efficiency with which we use our savings can help us meet the retirement requirements of the coming years."
As Greenspan spoke, Wall Street listened and backed off by midday Wednesday.
Greenspan stressed his concerns that such an arrangement could operate free of political pressures. However, he said, even if this could be done, it still wouldn't be enough.
"Investing the Social Security trust funds in equities does little or nothing to improve the overall ability of the U.S. economy to meet the retirement needs of the next century," Greenspan said.
On Tuesday, Republican leaders began discussing the idea of gradually walling off Social Security from the rest of the federal budget, but allowing some money to be spent over the next few years.
When asked why he thought the plan could be subject to political influence, Greenspan said, "I've been around this town a long time."
Greenspan suggested an increase in Social Security taxes or an allocation of general revenue to the Social Security system if a transfer of private retirement sources to Social Security is deemed necessary.
"Whatever the Congress does," he said, "it would be best not to obscure the choice of real resource allocation with complex financial structures that merely reshuffle claims to real resources without increasing them." 
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Federal Reserve Board
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