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pensions are entitlements granted by governments that can be

modified or taken away."25

Because workers have no ownership right to their pen-

sion funds, the government has no fiduciary duty to the

workers.  The situation may be even worse for a government-

invested Social Security system.  For all the social invest-

ment practices discussed above, state employee pension funds

have been somewhat restrained by the "exclusive benefit

rule," an Internal Revenue Service ruling that requires tax-

exempt trusts to operate solely for the benefit of the

trustees.26  The applicability of that rule to government

pension funds is extremely limited, however, since the tax

exemption status of the trust is irrelevant.  The employer--

being the government--is already tax exempt.  Therefore, the

only potential enforcement mechanism is for the IRS to

disqualify the plan, meaning that workers would be taxed on

the employer's contribution.  Because such a penalty would

fall on innocent third parties, the threat is seldom in-

voked.  It is even more unlikely to be invoked in the case

of a government-invested Social Security system.  It would

certainly be unfair to do so--to impose a huge new tax on

every American worker because the government mismanages the

investment of its funds.  Of course, that assumes an IRS

independent enough to take action against the federal gov-

ernment's own investment decisions.  As a result, unlike the

TSP, there appears to be no legal barrier to social invest-

ing under a government-invested Social Security program.

Second, as a defined-contribution program, the TSP is

transparent. Benefits are dependent on the return to their

investment, not on an arbitrary benefit formula.  Therefore,

the workers have a direct interest in ensuring that invest-

ments are made solely to maximize their returns.  Workers

can see exactly how an investment decision impacts their

retirement benefits.  Under a government-invested Social

Security program, benefits would be defined by law and would

be only indirectly affected by individual investment deci-

sions.  Therefore, workers would have little incentive to

resist social investing.  They would have no direct interest

in whether investments are made solely to maximize returns

or for other purposes.

Finally, the TSP is a voluntary program.  If workers

are dissatisfied with investment practices under the pro-

gram, they can refuse to participate.  Therefore, fund

managers have an incentive to maximize returns.  Failure to

do so will result in a loss of business.  In contrast, a

government-invested Social Security system would be mandato-

ry.  Workers would be forced to continue contributing 12.4