Clinton May Use Wall Street To Ease Social Security Ills

By: Richard W. Stevenson
The New York Times, July 28, 1998

President Clinton said today that he was seriously considering relying on the financial markets to help solve Social Security's long-term problems but said he had not made up his mind about any of the details. Speaking at a forum and town hall meeting here on Social Security, Mr. Clinton discussed the pros and cons of establishing individual investment accounts within the retirement system or having the Government itself invest a chunk of Social Security's reserves in stocks and bonds. "I honestly don't know what I would do today," Mr. Clinton said when asked which option he would choose if forced to make a decision.

But he all but endorsed the general notion of seeking higher investment returns on Wall Street to reduce the need for benefit cuts, tax increases or other changes to insure that Social Security will be able to pay promised retirement benefits in coming decades to the baby boom generation. Without any changes, Social Security will run short of money starting in 2032. "If there's any way we can get a higher rate of return in a market economy, while minimizing the risk, whether it's in either one of these approaches, we ought to go for it, because the other alternatives were much less pleasant already," Mr. Clinton said.

The President has not made any final decisions, his aides said, and some of his advisers still argue that Social Security should not invest at all in stocks and corporate bonds. Currently Social Security's reserves are invested in safe but relatively low-yielding Government bonds.

But White House officials said investing in the markets will more than likely be a component of whatever approach Mr. Clinton ultimately supports. "The President was very much making clear that he is seriously considering some form of equity investment as part of Social Security reform," said Gene Sperling, the White House economic policy advisor. "But he is holding out the caveat that the public and Congress and the Administration are going to have to be willing to deal with the potential downsides of the risk."

Nearly all proposals for shoring up Social Security rely to some degree on reaping the presumed gains available on Wall Street. But there is a vast gulf between one camp -- led by Republicans but including a number of prominent Democrats -- that wants to allow individuals to invest a portion of their Social Security payroll taxes and another camp led by liberal Democrats in the House that is pushing for the Government to invest the retirement system's reserves.

The differing approaches were vigorously debated today by politicians of both parties and a panel of experts assembled here for the third in a series of Social Security forums organized this year by the White House.

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