Government Investment in Stock Market Remains Part of Gore Plan

July 6, 2000

In an important development, Vice President Gore's advisors have acknowledged that his Social Security plan necessarily involves government investment in private markets, an idea originally proposed by the Clinton administration but which the Vice President rejected as recently as a month ago.

The Wall Street Journal reported Monday that Gore's plan to buttress Social Security by using budget surpluses to repay publicly-held debt faces a large problem: there simply isn't enough public debt to keep Social Security solvent as long as the Vice President claims. Hence, Gore advisor Alan Blinder acknowledges, "the government would have to buy some nongovernment assets... A reasonable guess is that the government will start buying index funds of stocks and bonds, so it doesn't favor one company over another."

Other Gore advisors, such as Treasury Secretary Lawrence Summers and former Congressional Budget Office director Robert Reischauer agreed that government investment in private assets would be a necessary part of the Gore plan. By 2030, the government would own assets equal to approximately 27 percent of annual GDP.

This constitutes a remarkable return to the original Clinton administration plan for Social Security, which relied on government investment in the stock market. Gore abandoned support for this plan, even going so far as to claim it had never even been proposed, in order to make it easier to attack Texas Gov. George W. Bush's proposal to allow workers to invest a portion of their payroll taxes in stocks and bonds through personal retirement accounts. The New York Times reported on May 25 that Gore claimed to have been influenced by Federal Reserve Board Chairman Alan Greenspan's strong opposition to any government investment as inviting undue political influence on capital markets and the economy as a whole. Said Gore:

The magnitude of the government's stock ownership would be such that it would at least raise the question of whether or not we had begun to change the fundamental nature of our economy. Upon reflection, it seemed to me that those problems were quite serious. The learning experience that we went through convinced all of us that it was a bad idea.

The Cato Institute/Zogby International poll on Social Security found that by a 5-to-1 margin likely voters preferred that workers, not the government, invest Social Security funds in the market. For more information, see Michael Tanner's "The Perils of Government Investing."

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