Industry Leader Advocates Privatization
October 23, 2000
NEW YORK - Running against the tenets of his political party and possibly the best interests of his company, Wade Dokken, president and CEO of American Skandia of Shelton, Conn., has come out strongly in favor of privatization of Social Security. Dokken's views also stand out from those of the industry, which as an organized group, has been noncommittal on the issue.
Dokken's views on the subject are explained in a new book, "New Century, New Deal," published by Regnery Publishing of Washington, D.C., on Oct. 1.
If the Social Security system continues unchecked, it will be $21 trillion in debt by 2075, Dokken wrote.
So, as a step towards saving it, Dokken recommends taking a small portion - six percent to begin with - of Social Security taxes and investing them in the U.S. financial markets through 500 or so investment firms such as his own. He believes that by doing so, investors will get much better returns on their money. He also is recommending that individuals be able to pass on their invested assets to beneficiaries.
"It's time to shift our focus from poverty prevention to wealth creation," Dokken wrote in his book. "It's time to turn every worker into an owner, a stakeholder in the greatest economic enterprise in the history of mankind. . . . It's time to give all workers the freedom to direct a portion of their Social Security taxes into prudent, production investments in the dynamic American economy through their own personal retirement accounts - new Social Security accounts very similar to private IRAs or 401(k) plans - so they can truly become stakeholders in the American experiment."
Dokken gives few further details on how to privatize Social Security. He said he is just trying to spark a discussion of the issue.
"This book is more about putting the issue on the table than offering a solution," said Dokken, during an interview recently. "This, in terms of dollars, is the largest issue that we have today."
"I've taken this up because protecting Social Security really interests me. I am concerned about it," Dokken said.
But, he does not believe Social Security should be entirely privatized. His father spent his lifetime working in a variety of labor jobs, including mining and the Social Security system was indispensable to him, Dokken said.
"Social Security has eradicated aged poverty in this country," he said.
"We certainly want a Social Security net," he wrote. "No question about that. . . . It's about the promises we've made to our parents and grandparents and how we're going to keep them."
Dokken, a lifelong Democrat, said he is disappointed with Al Gore's unwillingness to support privatization of Social Security.
"Gore has dug himself a deep hole on this," Dokken said. "His record had shown that he would move toward privatization of Social Security, but then, he seems to have made a calculated electoral decision to move away from it. Bush had said two years ago that he would not endorse choice accounts," and, now, even Bush's position has changed, he said.
Privatization could, on balance, either hurt or be a bonanza for Dokken's company.
It could mean more business for American Skandia if it were to be designated as one of the 500 companies into which individuals could place their investments. And, even if American Skandia were not designated as one of the 500, the accumulated wealth from the investments that had been made, could eventually find its way into American Skandia products. But, if the plan included Dokken's suggestion that individuals could designate beneficiaries for their Social Security accounts, the funds that might otherwise be used to invest in the annuities and life insurance that is the core of American Skandia's business could be diminished.
Dokken shrugged off the potential conflict between his proposal and the interests of his company.
Dokken said the mutual fund industry has not come out in favor of privatization for fear of appearing self-serving.
The last time the Investment Company Institute said anything on the subject was two years ago at a White House meeting on Social Security, said John Collins, a spokesperson for the ICI. At that time, the ICI neither advocated nor condemned a privatization plan, Collins said. However, the ICI did say that if such as plan were enacted, it would have to be accompanied by a massive public education program and the funds at least initially handled by the U.S. government.
Dokken, in his book, argues vehemently against having the government having any power over how the funds are invested.