January 25, 1999
A New Pandora's Box
Government invest in market must be opposed
resident Clinton raised a number of bad ideas last week in his State of the Union address. His theme for the evening was "more," as in more government intrusion, more government spending, more taxes and more violations of the Constitution.
Perhaps the worst of his propositions is the proposal to allow the federal government to invest in the stock market. Under the Clinton plan, a quarter of the Social Security funds would be invested in the stock market.
This is an unreasonable proposal for several reasons; it fails the critical tests of constitutionality, rational economics, and pragmatic planning.
As it is, Social Security is approaching bankruptcy and doesn't have any cash to invest. For decades congresses and presidents have raided the fund to bolster big-government programs. The president's shady investment plan hinges on investing cash that simply isn't there.
The president and congress have for several years been bragging about great budget surpluses, and, of course, the outlandish claim that the budget is balanced. The federal debt is continuing to rise, by more than $100 billion a year. It is impossible for the budget to be truly balanced while debt continues to rise unless the president has different understanding of the meaning of the word "balanced" than most Americans.
Constitutionally, there is simply no provision for allowing the federal government to become a "part owner" in private companies.
One does not set money on a table at Wall Street, leave it there, then come back a few days later to collect the loot and call it investment. When one invests, they are becoming a part owner in the company or companies. With ownership comes the benefit of sharing in the profits, the risk of sharing in losses, and, perhaps most importantly, responsibility in making decisions.
It is that last component which is perhaps the most troubling aspect of the president's plan. Are we to assume that the government will invest billions of dollars in stocks, and yet not want to have a voice in the way the companies operate? That would deny the way our government operates. Look at education; the federal government, unconstitutionally, subsidizes approximately eight percent of the public education budget. Yet the strings attached to that small percentage gives the federal government near-absolute control in one way or another over nearly every aspect of the operations in individual school districts.
Under the president's plan, government will become a very loud part-owner of thousands of companies. And because government will want to ensure a return on its investments (which is fundamentally impossible), one shudders at the potential rules and regulations that would be imposed on the marketplace in general, and those companies specifically.
This president firmly believes government knows best -- in everything. While he would deny individual Americans the right to divert a portion of their Social Security taxes to savings and investment programs of their choosing, this president would dump billions into the stock market so he and his cronies can effectively nationalize our economy, while using the proceeds to pay for more needless government programs.
While Federal Reserve chairman Alan Greenspan and I are often at odds on issues of monetary policy, he perhaps best described the president's plan. "Let me just say it's not so much a trade-off of benefits versus costs. I'm frankly just hard-pressed to find any benefits there are in doing it."
Such plans not only bode wretched possibilities for the nation and economy in general, but are also harmful to the individual. Mr. Greenspan has pointed out, correctly, that some state government's already have pension plans for their employees, and that these accounts have an average return two percent or worse than privately run accounts.
Government investment in the stock market is a path that must not be taken, and a Pandora's Box that should never be opened. The results could be unimaginably dangerous for the nation, and simply unprofitable for the individual.