Dow Bounces Back

November 29, 2001

When, in the aftermath of the September 11 terrorist attacks, the stock market plummeted, opponents of Social Security privatization were quick to say that this proved markets were too risky to rely on for retirement. However, with the Dow once again approaching 10,000, those voices are now strangely silent.

This is not to say anything about what we can expect from the stock market in the near future. The market may continue to go up, or it could drop again. But, it does show the irrelevance of short-term market fluctuations to the debate over Social Security privatization. What really counts is the market’s long-term performance. And, for the past 75 years, the American market has averaged an annual return of nearly 8 percent per year, through good times and bad.

It is also important to remember that Social Security privatization does not necessarily mean investing in stocks. Workers should be able to invest in a wide variety of options, including bonds, annuities, and other investment vehicles, many of which provide guaranteed returns.

It is time for opponents of privatization to quit playing the “stock market” card. The reality is that long-term investing is remarkably safe. Certainly, it is safer than a Social Security system that is $21 trillion in debt, that provides workers with no property right to their benefits, and which “promises” a return of barely one percent.

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