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Could Individual Accounts Lead to Government Interference in the Stock Market?

A number of recent proposals to reform Social Security rely on equity investment as a way to increase returns to investment. Yet, participants in the debate have generally accepted the argument that stock investment through the Social Security trust funds could lead to political manipulation of stocks, whereas stock investment through individual accounts would be safe from manipulation. This premise is false...

Individual accounts entail a risk that the government will intervene in investment decisions along political lines; they do not necessary shield against government political intervention in investments. Consequently, individual accounts would need to be implemented alongside special mechanisms to insulate assets from pressures to favor some stocks over others, whether these accounts are centrally managed by the government or structured to resemble IRAs.

— from the AARP Public Policy Institute Issue Brief by Alison Shelton (11 pages)