- The Washington Times - Wednesday, August 22, 2001

Following today's testimony before the President's Commission to Strengthen Social Security, Democratic congressional leaders who have been attacking the panel's mission and its work will have two very big questions to answer. Why is it appropriate for Congress members and their staffs, as well as other federal government workers, to build substantial retirement pensions by investing a portion of their incomes in stocks and bonds while many of these same congressmen insist that private-sector workers be denied the same opportunity? Why should Congress members and other federal workers be permitted to obtain returns in their retirement funds that are consistently higher than the returns that lower-income private workers obtain from Social Security?
Today, the eight Democrats and eight Republicans who comprise the Social Security commission will hear testimony from Roger Mehle, executive director of the Federal Retirement Thrift Investment Board and architect of the Thrift Savings Plan (TSP). That's the 401(k)-style retirement plan for federal employees. Designed in 1986 by Mr. Mehle for the benefit of more than 2.5 million federal employee investors, including congressmen, the TSP has become the world's largest defined contributions pension plan.
The TSP enables federal employees to invest in corporate stocks and bonds and U.S. Treasury bonds. One of the most popular TSP funds is the "C Fund," which invests mostly in S&P; 500 stocks. As Donald Lambro recently reported in The Washington Times, the "C Fund" has generated an average annual return of 17.43 percent during the past 10 years, which happens to include a negative 9.14 percent return last year.
Indeed, even the experience of the high-yielding "C Fund" confirms that stock investments may rise and fall from one year to the next. Democrats opposed to privatizing a portion of Social Security have used this fact to charge that permitting workers to allocate, say, 2 percentage points of the 12.4 percent Social Security payroll tax to personal investment accounts would expose them to "great financial risk." In fact, the average annual return from money invested in personal accounts has been 5 percent to 7 percent, which compares quite favorably to the 1.2 percent annual return generated by Social Security.
The "great financial risk" Democrats use as a scare tactic effectively disappears over the long run, during which the funds in private retirement accounts would be invested. For example, during the last 75 years, including the Great Depression, large-company stocks, such as those in the S&P; 500 stock index, have generated positive average annual returns over any 20-year period. Since 1950, moreover, the S&P; 500 stock index itself has generated an average annual return of 13.5 percent.
After Mr. Mehle's testimony is heard, it would be instructive if the Democratic congressional leadership would answer the questions posed above.


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