NCPA - National Center for Policy Analysis

Government Would Own Stocks Under Social Security Plan

January 20, 1999

If President Clinton has his way, the federal government would control 4 percent of the nation's stocks 15 years after the Social Security Trust Fund starts investing a portion of its surplus in the stock market, according to White House figures. Republican leaders were quick to voice their misgivings. "No. No. A thousand times no," said House Ways and Means Chairman Bill Archer (R-Texas) in a statement.

In his State of the Union message, Clinton proposed that the government invest hundreds of billions of taxpayer dollars in the market. In addition, he proposed that taxpayers be allowed to contribute tax-free to 401(k)-type individual savings plans, with the government matching some contributions.

  • The Clinton plan and some congressional alternatives would channel between $650 billion and $1.2 trillion into stocks over the next 15 years.
  • An investment of $650 billion over that period would amount to about $3.6 billion in new money a month.
  • By comparison, individual investors have put $1.1 trillion into the stock market since 1991 through mutual funds -- or about $11.5 billion a month, according to the Investment Company Institute.
  • Since 1996, those mutual fund inflows have averaged $17.1 billion a month.

Critics, such as Federal Reserve Board Chairman Alan Greenspan, are distrustful of any scheme which allows the federal government to decide how such vast sums are invested -- fearing that this would be a form of backdoor socialism. Last year, Greenspan called such a plan "very dangerous" because of the difficulty of insulating it from political meddling.

Sources: Bob Davis, Greg Hitt and Greg Ip, "More Social Security or Less? Clinton Plan Faces Lots of Questions," Wall Street Journal, January 20, 1999.


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