Why Is Private Accounts Such a Bad Idea--It's Not New

As I wrote my previous post, I was struck by a thought--private accounts are not new and government investing is not new. All over the country, states manage pension funds through private investement. In fact, one of the largest, if not the largest, institutional investor is CalPers, the California pension fund manager. Calpers is a defined benefit plan, like Social Security, based upon age, years of service and a few other variables. They provide financial and health benefits. Members of the pension plan pay into the system, at a rate of $2.2 billion in 2003-2004. Those funds are then managed by the CalPers board in an attempt to increase the revenue through investments. I 2003-2004, the plan earned some $24.2 billion in investment income. The system did lose money in investment incomein 20000-2002, about $21 billion, but have obviously made that up.

If they system works for California public employees, why can't it work for all Americans? By the way, CalPers was created by the California legislature in 1932, which is about the time the Social Security Program was making its way through Congress. Hmmmmm.....

by the way, are you worried about corproate scandals and malfeasance affecting public investments. Never fear, if the federal government becomes the largest institutional investor in the country, you can bet that it will have the clout to ensure proper corprate governance among the companies it invests in. CalPers has a corporate governance program where is contiually seeks to improve the corporate governance practices of the companies it invests in. The influence is huge and the program, proven over time.