ACTIVIST SHARKS SMELL SOCIAL SECURITY BLOOD

The blood isn’t even in the water, and already the sharks are circling, planning to take a bite out of any Social Security reform program in Congress.

The sharks are the social activists who see any pool of money, public or private, as something that needs to be “redistributed.” Of course, they get to do the redistributing.

They’ve already had a partial victory in a campaign to extend the Community Reinvestment Act to securities firms, insurance companies and mutual fund companies by inserting a CRA provision in the financial deregulation bill that passed the House of Representatives in May.

Now they’re setting their sights on Social Security. At present, since Social Security tax revenues are immediately handed over to the Treasury and spent to finance the federal government’s deficit, there is nothing for the activists to redistribute. But if individuals get to invest part of their Social Security taxes in the capital markets, as most reform plans propose, the activists will demand a slice, probably through something like the CRA.

Even worse, if a short-sighted Congress should decide not to let individuals keep part of their Social Security tax to invest for themselves, but instead create a government board to invest part of the assets in the capital markets, watch for the sharks to demand that some of that money go to “social investments” that meet some appealing political needs but pay below market rates of return.

The mind-set is clearly expressed by John Taylor, president and chief executive of the National Community Reinvestment Coalition in Washington, who last week told InvestmentNews: “Anytime the government allows the private sector to benefit from holding and distributing public revenues there ought to be an obligation attached to that privilege, to meet the credit needs of traditionally underserved people.”

What’s wrong with this statement?

Well, for a start, we’re not talking about “public revenues” in the case of either the money the financial service companies now deal with or any individually directed Social Security accounts. These are private savings, not “public revenues.”

And it implies the private sector is somehow the handmaiden, the servant, the underling of the government, existing and operating only on the sufferance of the government. Seems to us the U.S. Constitution holds the reverse to be true.

Next week: some sensible proposals to privatize Social Security so that the “traditionally underserved people” are no longer shark bait for the social activists and politicians who claim to represent them.