Arnold Schwarzenegger wants to privatize California's pension plan for state employees and teachers. I'll be watching this story closely because a) Now that I live in California I should probably pay attention to what goes on here, and b) it has ramifications for the future of other public pension programs. Hint, hint, nudge nudge. As Stephen Moore of the pro-privatization Club for Growth says, "If California moves from a traditional defined-benefit pension plan to a 401(k)-style defined contribution plan, the nation is likely to follow." The stakes are high!

Here's one thing I don't quite get, though. Critics of the California state pension system complain that CALPERS gets very political with its investments, often meddling in boardrooms and whatnot. Now Tyler Cowen argues that this is one reason why we should think twice about investing the Social Security Trust Fund in equities.

Okay, but can't Congress quite easily pass laws to avoid this sort of meddling? They could, for instance, bar any and all Social Security stocks from voting in boardrooms. Or they could set explicit fiduciary standards saying that whatever independent investment board managed the Trust Fund follow a policy that was solely for the economic well-being of Social Security, and not for any other social or political objective. (The so-called "sole purpose" doctrine.) Now it appears that CALPERS follows a similar standard, but either the standards aren't written explicitly enough, or something shady is going on. Or am I just naïve and fiduciary standards aren't worth the paper they're printed on?

One more thing: Yes, if the government invested the Trust Fund in equities, it could be pressured into "activist" investing, as Tyler Cowen fears. But couldn't the exact same thing happen under Bush's privatization plan? As Rep. Bill Thomas helpfully explained, these are "personal" accounts, not "private" accounts, so there's nothing really stopping the government from monkeying around with the index of equities in which our "personal" accounts will be invested. If the government wanted to punish tobacco companies, for instance, it could pretty easily mandate that no private account carry tobacco stocks. So what the deuce is the difference?