Prepared Testimony of Senator Richard Shelby (R-AL)

Oversight Hearing on Social Security Investment in the Securities Markets

April 30, 1997


Mr. Chairman, thank you for calling this hearing. As a member of the Special Committee on Aging, I am very interested in this topic. The investment of the Social Security Trust Fund is clearly an important and sensitive issue. It is a well known fact, that Social Security tax revenue will be insufficient to pay current benefits as early as year 2012. Every year, we are reminded of the seriousness of the matter by an annual report that consistently concludes the long term health of the Trust Fund is in jeopardy and that it "should be addressed in a timely way." A prudent, well-designed plan to invest at least some of the Trust Fund in securities may be the only way out of the quandary we currently face.

I know some critics categorically deny that investment in securities markets is a legitimate alternative to the way we run Social Security today.

I would ask those critics to take a strong look at the experience of those who have invested in securities markets. Chile privatized its social security system in 1981 and has witnessed an increase in returns on private accounts by approximately 50 to 70 percent. Singapore has a private retirement system that has helped them achieve recognition for possessing the highest savings rate in the world as well as the highest home ownership rate in the world. We also have the successful privatized retirement program in Texas which we will hear about today. My point is that we know it can be done. The question we want to address today is how can it be done in America?

Chairman Gramm has put together an experienced and knowledgeable panel that will provide insight into the mechanics of making such a system work for America. I look forward to the testimony and thank Chairman Gramm for his leadership on this issue.

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