SOCIAL SECURITY AND
THE STOCK MARKET
Federal Reserve Board Chairman Alan Greenspan, usually given credit for the current extended run of prosperity in this country, may inadvertently be effecting the upcoming battle concerning Social Security and the stock market. Until recently, the stock market certainly has been "the place to be" for many Americans, and certainly for many more Americans than ever before. Now, the Fed-induced correction has acted like a cold shower for many investors, and opponents to equitizing Social Security are using the last couple of months as an example of why people shouldn't be allowed to invest a portion of their Social Security funds in the stock market.
I could not disagree more. First of all, what is this "shouldn't be allowed" mentality? It is Big Brother in its most blatant form. What the critics of "equitizing," i.e., allowing stock investments in a Social Security account, are saying, is that you and I are not responsible enough to act prudently and take such an important step on our own. That is Old Guard, Big Brother thinking. The critics conveniently forget that today nearly half of the country's 100 million-plus households own shares in the stock market. That is a 50% increase in the last 10 years, and I think it is extremely healthy. It means that millions of Americans have, in effect, become worker-capitalists as well as wage earners.
The critics forget that currently many people are saving for their retirements with 401(k)s, 403(b)s or IRAs through their places of work, and a lot of those people are putting a lot of money into the stock market. Who are the Big Brothers in Washington who think that this is imprudent? What is the basis for that feeling, and whether they are right or wrong, what and who gives them the power to prevent a person from voluntarily redirecting their retirement funds? Why is it automatically assumed that we would squander that money rather than invest it prudently?
Let's take a look at the facts. If measured by the S&P 500, a broadly based, old-time and highly respected market average, the stock market has been a pretty darn good place to be since Social Security's inception. In fact, since1926 the stock market has averaged, as measured by the S&P 500, a gain of 11.33% through the end of last year. That is more than double the rate of return for Social Security funds over the same period. I'm not referring to the last two or three years and trying to make a case based on some short-term progress. That 11.3% gain is solid through the crash of '29, the Depression of the 30s, World War II, Korea, Vietnam; we've had presidential assassinations, impeachments, and more than a half dozen recessions after World War II.
To understand that the current system is the wrong way to go is to understand that it keeps going broke! The critics who want to keep Social Security the way it is, are basically saying, 'Don't confuse me with the last seven and a half decades of facts. My mind is made up. You people out there are just too irresponsible to manage your own destiny.' That should be an insult to any American.
Remember too, all Social Security plans that are now afoot involving the stock market are VOLUNTARY, AND ONLY FOR A SMALL PORTION OF THE SOCIAL SECURITY FUNDS. If you do not want to participate in the stock market, no one is going to force you. But for those of us who would like to have a vote in our future, and some control over at least part of our long-term financial future, we must ask 'Who are the dictators in Washington who think we're not good enough to handle the job?' Well, in case you haven't guessed, one of them is a big believer in big government and is also a probable nominee of a party that generally thinks Big Brother is a better answer, i.e., Al Gore. Savers and investors ought to make the equitization of Social Security a key issue in the upcoming presidential election. Too often we have candidates who are too similar on too many issues. Now you have Al Gore saying, 'You're not worthy,' and the other probable nominee, George W. Bush saying, 'The current system doesn't work, so let's try this with just a small portion of Social Security money to see if we can't solve some of its problems by investing in America.' Sounds like a terrific idea to me.
(Tom Butenhoff is a First Vice President with J. E.
Liss & Company in Milwaukee. The views are his and not necessarily
those of Liss Financial Services or the Job Connection/Hiring
Network.)