Budget Cuts Vs. Social Security -- Tap Pension Funds Worth $4 Trillion, Panel Tells Clinton -- Employers Sense Danger `Once They Get Taste Of This'
WASHINGTON - A bipartisan government commission yesterday recommended to the Clinton administration that it launch an aggressive effort to tap the retirement funds of millions of Americans to help pay for rebuilding the nation's roads, bridges and highways and give the economy a lift.
President Clinton has indicated past support for the concept, which would represent an unprecedented effort by the federal government to deal with its budget woes by turning to the more than $4 trillion in cash, stocks and other investments held by pension funds.
Some opponents in the pension industry, who worry about protecting retirees, said they fear Congress might revoke the generous tax treatment afforded pensions if they actively oppose the initiative.
The recommendations by the congressionally chartered Infrastructure Investment Commission, which has had the strong support of Senate Finance Committee Chairman Daniel Patrick Moynihan, D-N.Y., include establishing the National Infrastructure Corp. It would be a new government-sponsored corporation that would encourage at least $30 billion in investment by pension funds. Several billion dollars in seed money for the new corporation would come from a new energy tax now under consideration.
Asked about the proposal, Department of Transportation spokesman Richard Mintz said: "The entire administration is committed to finding creative ways to underwrite many of the infrastructure projects we would like to pursue, with the caveat they are done in an intelligent way that protects the investment working people have made in their retirement."
In his book, "Putting People First," Clinton said he wanted to steer investment toward infrastructure by creating a Rebuild America Fund with a $20 billion annual federal investment for four years that would be "leveraged" by other sources, including pension funds.
Daniel Flanagan Jr., chairman of the commission, said the proposed corporation would offer insurance protection and, in some cases, federally guaranteed loans to enable the projects to attract retirement money without causing pension funds to lower their investment standards.
In addition, he said, high-quality bonds bearing competitive rates of interest would be issued that could be purchased by pension funds and individuals who have retirement-savings plans through their employers.
The program primarily envisions funding projects that would pay off loans from pension funds over long periods through user fees such as tolls, or through local tax revenue geared to specific initiatives.
Mark Ugoretz, head of the ERISA Industry Committee, a Washington-based association representing major corporations, said he feared the proposal might be altered to make investments by pension funds mandatory, or might set a precedent for other efforts to tap pension money.
"Once they get a taste of this pension fund money, there is going to be an effort to get more and more of it," he said. "It assumes the money is not currently being used for good social purposes. I think anybody involved with the private pension world should be very cautious to see how this thing finally gets drafted."
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