There is something missing from America’s growing debate over socialism.

Your 401(k).

Millions of Americans don’t think of themselves as investors.

They go to work. Their employer deducts money from every paycheck. Maybe the company matches part of it. The money goes into a target-date fund, an S&P 500 index fund or another collection of stocks and bonds.

They may rarely look at it.

But they are investors.

Teachers are investors.

Truck drivers are investors.

Nurses are investors.

Police officers are investors.

Factory workers are investors.

Office workers are investors.

And increasingly, younger Americans are investors.

That means when politicians talk about dramatically changing the relationship between government, corporations, profits, ownership and investment, they aren’t merely talking about Wall Street.

They’re talking about your retirement.

YOUR 401(k) DEPENDS ON SOMETHING VERY SIMPLE

Strip away all the financial terminology and the basic proposition behind a 401(k) is remarkably straightforward.

You postpone spending some of your money today.

That money is invested.

Businesses use capital to expand, invent, hire, build and produce.

Successful businesses generate earnings.

Those earnings can increase the value of the businesses owned through your retirement funds.

Over decades, those returns can compound.

That is the free enterprise system working inside your retirement account.

You may never have started a corporation.

You may never have bought an individual stock.

You may never have walked onto the floor of the New York Stock Exchange.

But if you own an S&P 500 index fund in your 401(k), you indirectly own pieces of hundreds of American businesses.

YOU ARE AN OWNER.

NOW CONSIDER THE DSA ECONOMIC AGENDA

The Democratic Socialists of America advocate policies that would substantially increase government’s role in the economy.

The organization’s broader political program has supported policies involving greater public or social ownership in portions of the economy, stronger organized labor, increased taxation of corporations and wealthy individuals, and major expansions of government-funded programs.

Supporters argue that these policies could reduce economic inequality, strengthen workers, expand access to essential services and distribute economic gains more broadly.

That’s an argument Americans are perfectly capable of debating.

But there is another side of the equation that receives considerably less attention:

WHAT HAPPENS TO THE PEOPLE WHO OWN THE BUSINESSES?

Because millions of those owners aren’t billionaires.

They’re Americans with retirement accounts.

PROFITS AREN’T JUST GOING TO BILLIONAIRES

This is one of the greatest misunderstandings in modern economic politics.

When a corporation earns a profit, that money doesn’t simply disappear into the bank account of some billionaire.

Profits can be reinvested into factories, equipment, research, acquisitions, technology and employees.

Companies can pay dividends.

They can repurchase shares.

And expectations about future profits help determine what investors are willing to pay for ownership of those businesses.

Reduce expected after-tax corporate earnings significantly enough and, everything else being equal, investors may value those businesses less highly.

And who owns those shares?

Pension funds.

Mutual funds.

IRAs.

401(k)s.

College savings accounts.

Individual investors.

WORKING AMERICANS.

THE CORPORATE TAX DOESN’T STOP AT THE CORPORATE DOOR

Consider proposals to substantially increase corporate taxation.

Politically, the message sounds simple:

MAKE CORPORATIONS PAY MORE.

Economically, it is considerably more complicated.

A corporation isn’t a human being with a wallet.

Ultimately, the economic burden of corporate taxes can be distributed among shareholders, workers and customers through some combination of lower investment returns, wages, employment, higher prices and changes in business investment.

Economists disagree about exactly how those burdens are divided, and the effects can vary depending upon the tax, industry and economic environment.

But shareholders clearly matter.

And your retirement fund may be one of those shareholders.

Your 401(k) doesn’t receive an exemption from the mathematics of earnings and valuation.

WHAT ABOUT PUBLIC OWNERSHIP?

Now we reach a more consequential question.

Some democratic-socialist proposals envision moving particular industries, utilities or essential services away from traditional private ownership toward various forms of public, cooperative or social ownership.

Supporters may argue that essential services should be operated primarily for public benefit rather than private profit.

Investors should nevertheless ask:

WHAT HAPPENS TO EXISTING PRIVATE CAPITAL?

Suppose government fundamentally restructures an industry in which retirement funds own billions of dollars of stock.

How are existing shareholders compensated?

At what valuation?

What happens to companies supplying that industry?

What happens to their debt?

What precedent does the transaction establish for investment elsewhere?

Financial markets don’t merely price what government has already done.

They price expectations about what government might do next.

THE OTHER SIDE OF THE ARGUMENT

There is an important counterargument.

Not every policy associated with democratic socialism necessarily hurts financial markets.

Government infrastructure spending can benefit businesses.

Supporters of universal healthcare argue that changing how healthcare is financed could reduce costs borne by some employers and households.

Higher household incomes can increase consumer spending.

Education, childcare and infrastructure investments can potentially increase labor-force participation or productivity.

A healthier, better-educated and more productive workforce can certainly benefit businesses and investors.

So the legitimate argument isn’t:

GOVERNMENT SPENDING = STOCKS GO DOWN.

That’s far too simplistic.

The real question is whether the additional economic benefits created by a policy exceed the costs imposed through taxation, regulation, borrowing, reduced incentives or displacement of private investment.

That is the debate worth having.

DON’T FORGET THE BOND SIDE OF YOUR 401(k)

Many Americans approaching retirement don’t have all their money invested in stocks.

They own bonds.

Target-date retirement funds commonly increase their bond allocations as investors approach retirement.

Suppose enormously expanded government programs contribute to substantially greater federal borrowing.

If investors demand higher yields to absorb additional debt, existing longer-duration bonds can decline in market value.

Higher Treasury yields can also change the relative attractiveness of stocks.

When investors can earn attractive yields from government securities, they may demand greater potential returns before taking the additional risk of owning businesses.

Higher interest rates can simultaneously increase the cost of mortgages, corporate borrowing, construction, acquisitions and business investment.

Eventually, some of those effects can work their way into corporate earnings.

AND THEREFORE INTO YOUR 401(k).

NOW THINK ABOUT THE AI BOOM

America may be entering one of the largest private investment cycles in modern history.

Artificial intelligence requires semiconductors.

Servers.

Data centers.

Power generation.

Transmission.

Cooling systems.

Networking equipment.

Construction.

Real estate.

And enormous amounts of financing.

Potentially trillions of dollars could ultimately be deployed building the infrastructure underlying the AI economy.

That capital is being deployed because investors expect a return.

This is the free enterprise system doing what it does remarkably well: taking accumulated savings and directing capital toward people and businesses attempting to build something more valuable.

Some of those investments will succeed spectacularly.

Others will fail.

But the possibility of earning a return is what attracts private capital in the first place.

Government policies that significantly alter those expected returns can therefore alter investment behavior.

YOUNG PEOPLE NEED TO UNDERSTAND SOMETHING

There is an interesting tension between growing interest in socialist ideas among some younger Americans and the way millions of those same Americans will prepare for retirement.

They may spend their entire working lives participating in one of the greatest mechanisms of widespread private capital ownership ever created:

THE 401(k).

Every paycheck can turn an employee into a shareholder.

Every employer match gives that worker additional investment capital.

Every reinvested dividend can purchase additional ownership.

Every decade of compounding potentially increases that ownership.

You don’t have to be a billionaire to own corporate America. You can own it $100 at a time.

THIS ISN’T ABOUT PROTECTING BILLIONAIRES

That’s the political trap.

Criticize policies that may discourage private investment and somebody inevitably responds:

“YOU’RE JUST PROTECTING THE RICH.”

I see it differently.

I want ordinary people accumulating capital.

I want the waitress to own stocks.

I want the mechanic to own stocks.

I want the schoolteacher to own stocks.

I want the 22-year-old starting a first job to put $50 into an index fund and watch decades of saving and compounding turn small investments into meaningful ownership.

I want millions more Americans to become owners.

THAT ISN’T SOMETHING WE SHOULD APOLOGIZE FOR.

WE SHOULD EXPAND IT.

BEFORE YOU VOTE, OPEN YOUR 401(k) STATEMENT

Look at what you actually own.

American companies.

International companies.

Government bonds.

Corporate bonds.

Real estate securities.

Perhaps thousands of individual investments bundled into a handful of funds.

Then remember something the next time a politician promises to dramatically restructure American business:

YOU MAY BE ONE OF THE OWNERS THEY’RE TALKING ABOUT.

The question isn’t whether America should have taxes, regulations or a social safety net.

The question is where we draw the line between government establishing the rules of a free economy and government gradually replacing private economic decision-making.

Americans have spent decades building a retirement system in which ordinary workers can become owners simply by saving part of every paycheck.

We should be extremely careful about policies that could unintentionally weaken that system.

Your 401(k) isn’t merely a retirement account.

It is your personal piece of the American free enterprise system.

And before we dramatically change that system, every American worker deserves to understand what could happen to their piece of it.