WASHINGTON — As opponents of the idea mobilized, Treasury Secretary John W. Snow predicted Thursday that Congress would approve President Bush's still-sketchy plan to let workers shift some of their Social Security payroll tax payments into private retirement accounts that they would invest, with what Snow said would be little risk to themselves.
In an interview with the Los Angeles Times, Snow acknowledged that workers would incur investment risk if they bought stocks, as expected, in the proposed Social Security retirement accounts.
"Equities have a higher return, as you know, than the risk-free
Critics of private accounts have said that putting Social Security funds in the stock market is too risky.
But Snow said the risk could be managed. One model for the accounts, he said, would likely be the Thrift Savings Plan offered to federal employees, which offers a selection of five investment funds for workers saving for retirement. Two are bond funds, and three are stock funds.
"They're all prudent vehicles," Snow said. "That is, this isn't going and taking your money and putting it on a slot machine in Las Vegas. These are all broad-based, diversified investment funds, which of course reduces risk. Diversification reduces risk. And I'm confident that any personal accounts would be structured around highly diversified ... portfolios, which reduce risks."
"I don't see any inordinate risk in the federal employees' thrift plan," he said.
Snow spoke shortly after Bush concluded a two-day White House Conference on the Economy with a call not only for an overhaul of Social Security, but also for tax reform, regulatory relief and limits on "frivolous" lawsuits.
At the same time, a coalition of organizations announced its opposition to replacing any part of Social Security with private investment accounts. The groups included the AFL-CIO, the NAACP, the National Organization for Women, the Alliance for Retired Americans and the Consortium for Citizens With Disabilities.
At a news conference by the coalition, Julian Bond, chairman of the National Assn. for the Advancement of Colored People, noted that Social Security was the only source of income for one in three African Americans over the age of 65.
"They can't afford to see their futures raffled off in a risky stock market gamble," he said.
