Scott A. Hodge and Curtis S. Dubay at the non-partisan Tax Foundation explain that the same leftist groups who brutally denounce President Bush's Social Security modernization plan trust their futures to pension systems that are based on the same principles.
The debate over allowing younger workers to invest a portion of their Social Security payroll taxes in personal retirement accounts has become increasingly politicized, with some groups charging that the plan will amount to “gambling” in the stock market and giving billions in Social Security dollars to Wall Street pension fund managers. ...
Despite these harsh attacks, in reality pension fund investing is anything but a political exercise. Fund managers have a fiduciary responsibility to maximize the rate of return on the fund’s investments by carefully balancing short-term and long-term risk in order to assure enough assets to pay future retirement benefits.
Some of the largest pension funds in America today are public employee and union pension funds. Most of these funds are managed on a contract basis by private investment houses such as Alliance Capital, Goldman Sachs, Morgan Stanley, and Solomon Smith Barney. Very few are managed in-house.
According to the Federal Reserve Board, public employee pension plans alone had nearly $2 trillion in assets as of September 2004. Overall, 54.8 percent of these assets were invested in corporate equities, 36.1 percent were invested in fixed income instruments (such as corporate and foreign bonds), with the remaining funds in cash or other investments.
I've already written about the "transition cost" myth which explains why implementing a modern Social Security system is affordable, and these existing pension plans demonstrate that a modern Social Security system will be effective.
Hat tip to Larry Kudlow, who also links to a Peter Ferrara piece warning against a potential Bush sell-out. Mr. Kudlow also writes that unions are pressuring pension managers to oppose Social Security modernization. Some of my commenters who worry so much about hypocrisy should take a look.