Despite Enron Debacle, Bush Still Favors Investing Social Security
By Tucker Sutherland, Editor, SeniorJournal.com
March 1, 2002 - Many thought the Enron collapse and the devastating loss of employee pension funds as the company's stock declined would be the end of the campaign proposal by President Bush to allow Americans to invest part of their Social Security funds in corporate stocks. Yet, the President is back pushing for this idea.
Today, he spoke in Des Moines, Iowa, and again said he wants to allow workers to put part of their Social Security taxes into personal retirement accounts, with financial advisers to help with their investment decisions.
"You ought to be trusted with your own money," Bush said to workers at a Des Moines printing business that offers 401(k) plans, according to a report by the Associated Press.. "A 401(k) recognizes who owns the money. Watching that money grow on a tax-free basis makes a lot of sense."
Social Security will have to start paying benefits out of its own fund in 2016, when the baby boomer retirements peak. It will increase the demand above the funds collected by Social Security. It is projected the fund will then be broke by 2038, without changes to the program by Congress.
What has given the President some breathing room and a better footing on this issue is legislation Republicans are pushing to regulate retirement funds, as well as, the increased emphasis on helping people get professional investment advice.
Speaking earlier this week at the Labor Department sponsored National Summit on Retirement Savings, Bush said, "Today, Social Security is not a personal savings program. Retirees' benefits are paid directly from the taxes paid each year by current workers. The average return on Social Security is less than 2 percent. And in the long run, Social Security can pay retirees less than 30 percent of what they earned before retiring. And that's not good enough as we head into the 21st century.
"We can do better, and a lot of people know this. Someone retiring today after 45 years of work would be entitled to a monthly benefit of $1,128 a month from Social Security. If that same retiree, if those Social Security taxes had been invested in the stock market over the last 45 years, during the same period of time, that person would now have a nest egg of $590,000, or income of more than $3,700 a month."
"Americans would own these assets," Bush said. "After all, it is their money. They would see more retirement income, and that's necessary as people live longer lives."
Opponents worry, however, that declines in the stock market - or a giant firm like Enron - could diminish retirement income under Social Security.
Bush is backing the Republican retirement reform package. He said, "This legislation would protect workers by giving them freedom to manage their own retirement savings, fair notice of any blackout period, better access to sound investment advice, and is consistent with the retirement security principles I previously outlined. This bill also assures that corporate officers would be held to the same restrictions as those imposed on workers."
He also said he wants to end pension practices brought to light by the collapse of the Texas energy trading company, Enron Corp. "Companies that contribute stock to employee 401(k)s should not be permitted to lock their employees into owning that stock for years and years," Bush said. "Company officers should not be allowed to sell their own company stock when workers cannot.
"Even when people are saving enough, they need to feel more secure about the laws protecting their savings," Bush said. "In recent months, we've seen how workers can lose a lifetime's worth of savings if their company were to fail."