No Government Investment in the Market Under the Nadler Plan

[National Dialogue Moderator <moderator>]

    No Government Investment in the Market Under the Nadler Plan


I would like to briefly respond to my colleagues comments.

It is obvious that our proposals vary greatly and I appreciate their desire
to describe their plans in their own words using terms that they find most
favorable to them.  For example, they want to avoid using the term "benefit
cuts" and "Social Security tax increases" when describing their plans.  I
understand their desire to avoid using these terms, but the facts remain.

I fear they are guilty of their own misleading statements and factual errors
when describing my proposal. For example, they say that "the federal
government" would invest a portion of the Trust Fund under the President's
plan and the Nadler plan.  This is inaccurate.  H.R. 1043 sets up a wholly
independent board -- members of which would have long, staggered terms --
which would then hire several competing private managers to invest only a
small portion of the Trust Fund in broad index funds.  There would be no
picking and choosing of stocks by the President, Congress, or anyone else in
government.  The investment is completely private and fully insulated from
political influence.  In fact, several of the privatizer plans have similar
restrictions on investments which would essentially require the same type of
protections to be included in their plans.  Individuals would be severely
restricted in their investment decisions and in some cases only allowed to
invest in broad index funds approved by the government.

The real difference between this approach and private accounts is that this
approach is a lower cost, more efficient, and more prudent way of increasing
the rate of return on Social Security assets.  There are staggering
administrative costs for setting up 150 million individual accounts and
tracking them year by year for forty years with allowances made for annual
adjustments to each account.  This is an incredible burden that is
completely unnecessary and wasteful.  If it led to much higher rates of
return perhaps they could be justified, but most privatizing plans require
low risk investments that limit high returns.  If the funds being used to
pay for individual accounts are not taken directly from Social Security
again, they may be justifiable.  But, I cannot see the merit in diverting
funds from the Social Security Trust Fund into administrative expenses for
150 million individual accounts.

I am sure there are many more questions and statements that I would like to
respond to, but unfortunately my time is limited.  I look forward to
debating these issues with my colleagues again before the Ways and Means
Committee in the very near future.

Thank you.

Representative Jerrold Nadler