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The Social Security debate
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January 20, 1999: 1:37 p.m. ET
Critics of Clinton's plan say feds could manipulate private equity market
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NEW YORK (CNNfn) - It didn't take long.
Less than 24 hours after President Clinton proposed a controversial plan to save Social Security by making the government an investor in the stock market, some of the nation's heaviest hitting opponents already are speaking out.
"This is supposed to be a republic and not a socialist [nation]," said Dorman Cordell, senior scholar with the National Center for Policy Analysis in Dallas. "Our government does not need to be involved in the private sector any further."
He noted, too, that with additional government intervention comes greater regulatory control.
"The government would be picking winners and losers, and the danger is that government leaders might say there are certain investments that are much more worthwhile than others and therefore we should invest in things that are socially desirable," he said.
For example, Cordell suggested, if the government were investing taxpayer funds in the stock market today, politicians might be tempted to "do something to boost the steel industry."
The NCPA, instead, supports a proposal to keep the government involved in Social Security, but transitioning the system from a pay-as-you-go to an investment-based plan, where contributors save for their own retirement. The plan would be phased in over 50 years.
Federal Reserve Chairman Alan Greenspan also said Wednesday he opposes the idea of investing Social Security funds in the stock market.
"I find it difficult to find rational arguments for that particular initiative," Greenspan told the House Ways and Means Committee.
Along the same lines, Michael Tanner, director of the Cato Project on Social Security Privatization, said allowing the government to become "a major stockholder in American corporations is a recipe for back-door socialism."
"President Clinton has labored mightily and brought forth a mouse," he said. "After a year of building expectations for his plans for Social Security reform, the president's actual proposal falls far short of the reform necessary to fix the nation's troubled retirement system."
He said two-thirds of Clinton's proposal do nothing to reform Social Security and the "other third is a bad idea."
"Using general revenues to increase the size of the Social Security trust fund is an accounting gimmick that simply increases the number of IOUs held by the fund," he said. "It does nothing to fund future benefits or change the date, currently 2013, when the system goes into deficit."
The Cato Institute, under Tanner's direction, is developing a plan to create a 'blueprint' for privatizing the Social Security system.
And in this corner…
But Clinton does have his supporters.
Max Richtman, executive vice president of the National Committee to Preserve Social Security and Medicare, the nation's second- largest senior association, said the president's plan has its merits.
"We actively support using the budget surplus, which is really the Social Security surplus to begin with, to bolster the program," he said. "Investing a relatively small portion [of that surplus] in the private market is better than a cut in benefits."
He further stated that the notion of intentional government interference in the private equity markets is "absurd."
"There are so many state pension funds out there that invest all, or at least a much larger percentage, of their money in mutual funds, bonds and the stock market already," he said. "I think that's a phony argument. It's really about people who don't like the government in general."
Richtman pointed to the Federal Reserve, which controls economic growth by adjusting interest rates, as an example of how government can work successfully with Wall Street and the broader economy.
"We don't worry about the Fed doing or saying things to manipulate the markets," he said, adding the government could guard against market manipulation by designating a group of trustees to make investment decisions.
That group, he suggested, could be set up "in a way that is not political. Have them insulated in the way they are nominated, or their term lengths. I'm sure there's a way it can be devised."
In his State of the Union address Tuesday night, Clinton said he favored setting aside 62 percent of the projected budget surpluses -- or about $2.7 trillion -- to replenish the dwindling coffers of Social Security.
Republicans, arguing the American public deserves a break, are pushing for a tax cut instead. 
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