"Clinton Leads Toward a Plan to Invest Some Soc. Sec. Taxes i n Market"

[Carl Remick]

Re Josh's:  "If pensions haven't been able to depart from fiduciary
rules even though
the arguments have made over and over, and there's a real constituency
pushing for it, what makes you think Social Security will when no one is
even talking about it?"

Well, *we* are talking about it.  The right managed to hijack healthcare
reform and create the insurance-industry boondoggle known as managed
care.  I think it would be great if the left could swipe the right's pet
notion of social security reform and use it as means to introduce
socialized control of the economy.  The key is to raise public
consciousness about what is at stake. That's obviously a daunting task,
but if it's a hopeless one, there seems to be little point for forums
such as this list.

Carl Remick


-----Original Message-----
From: joshua william mason [mailto:jwm7 at midway.uchicago.edu]
Sent: Friday, December 11, 1998 9:35 AM
To: lbo-talk at lists.panix.com
Subject: Re: "Clinton Leads Toward a Plan to Invest Some Soc. Sec. Taxes
in Market"


Nathan Newman writes:

> From: Carl Remick <cremick at rlmnet.com>
> -Twenty years ago, Peter Drucker wrote a hysterical (in every sense of
> -the word) book called _The Unseen Revolution : How Pension Fund
> -Socialism Came to America_.  Maybe the equitization of Social
Security
> -could make that revolution *really* happen.  I know it's a long shot
but
> -seems worth considering.

> Carl makes a good point.  Any privatization plan in the end will
probably
> specify that all proceeds go to a specific list of mutual funds (even
if
> there is some provision for opt-out).  The reason there has to be a
core
> set of funds is that administering individual accounts for most
working
> class SS savers would be an administrative nightmare

But isn't exactly that "administrative nightmare" the motivation for
privatization in the first place? 

I should add that according to some recent Peter Hart polls, it's the
security of an account with their name on it, rather than higher
returns,
that gets people interested in privatization. So private accounts might
actually go down more easily than the kind of "partial privatization"
schemes you're talking about.

> One other kicker to this debate that few mention is that Social
Security
> invested funds, unlike normal investments, should not follow
traditional
> fiduciary rules of looking for the highest return.  Given the choice
> between capital-heavy, low-wage industries and labor-heavy, high-wage
> industries, Social Security funds should be invested in the later for
the
> simple fact that promoting the later itself increases the FICA taxes
paid
> back into the system.

Interesting idea, but are you aware of *anyone* who's actually
advocating
this? The AFL-CIO sure isn't, nor are any of the big affiliates, and
they'd be the logical candidates. 

Interest in pension fund socialism comes and goes. Around the same time
the Drucker wrote the book referenced above, Randy Barber and Jeremy
Rifkin (always a good barometer for the fancies of foundation
intellectuals) wrote The North Will Rise Again making the same arguments
(though they liked the idea of pension fund socialism). Go back to the
late 50s, and you can find reports from the Fund for the Republic and
the
Twentieth Century Fund talking about how the rise of pensions creates
the
possibility of a "people's capitalism." Paul Harbrecht, author of the
Twentieth Century paper, went so far as to ask if the spread of pension
funds meant that workers were becoming owners of the means of
production.

But in fact, unions have *never* been able to use their pension funds in
the ways you suggest. In the early 60s the UMW tried to use investments
in
utilities as a way to get leverage over the coal companies, and were
slapped down by the courts. Today, under ERISA, accepting concessionary
returns to achieve some other goal is simply illegal, even in cases
where
your argument about a better overall performance because of higher
payments into the fund applies, e.g. building-trades funds investments
in
union construction projects. 

If pensions haven't been able to depart from fiduciary rules even though
the arguments have made over and over, and there's a real constituency
pushing for it, what makes you think Social Security will when no one is
even talking about it?

Josh