RE: No Government Investment in the Market Under the Nadler Plan

[Javier Jimenez <jimenj@yahoo.com>]

>>>>> PANELIST: Rep. Jerrold Nadler wrote:
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.
<<<<<<
Alan Greespan, as well as many other experts, have warned against any kind of government directed investment, in any way.  I believe, like they do, that there is no way that political forces can be insulated from these investments.  Mr Nadler's insistance seems to go against the tide; popular opposition is clear against the government directing investments in the private economy in any way (The Senate voted 99-0 against any government investing).  A majority of the people is asking for the ability to personally invest their payroll contributions and become owners with property righs to their pension, something that SS does not provide today, and which the Nadler plan will not provide.  It's time for true reform.

>>>>> PANELIST: Rep. Jerrold Nadler wrote:
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.
<<<<<<
Why would cost under a system of PRAs be higher than the present custodian cost for an IRA account? At the Janus group of funds, IRA custodian fees are $12 per fund not to exceed $24 per account, and management fees for their combination funds are as follow: Janus Balanced Fund, 1.03%; Janus Equity Income Fund, 1.21%; Janus Growth and Income Fund, 0.96%. So, a worker making $23,000 per year, using the current total SS payroll taxes, would contribute $2852 per year. In the best case scenario, using the Growth and Income fund, the worker would pay $27.38 + $12 = $39.38 or 1.38%, and, using the Equity Income fund, $34.51 + $12 = $46.51 or 1.63%. This assumes no return on investment, sounds like SS. Many other funds exist with both higher and lower fees, as well as higher and lower risk levels, and many other fund companies also exist with higher and lower fees. This helps illustrate the futility of the administrative cost issue since the costs under the present system are said to be 1% with the low return, high intrusiveness, and lack of freedom and security. Workers who need the guidance to understand "preservation of capital", "current income", "long-term growth of capital", etc. can be easily educated in these financial industry terms just as I was 6 years ago. In the end, the wealth workers generate and coveted by the financial industry will enable workers to get the education they need, the low cost of these accounts, the better return from the private markets, and the freedom and security away from government dependence that PRAs will provide to all workers, those making $200,000 per year, as well as those making $15000 per year.

Under a privatized system, like in many other private pension systems here in the United States, workers will enjoy greater benefits, greater flexibility, greater freedom, and greater security.  All of these, without dependence on the government, politicians, or future taxpayers.  Look around, we have many examples in the United States alone, as well as contries around the world that have had the vision to move away from government run pay-as-you-go unfunded systems.
Thank you.