A Project of The Annenberg Public Policy Center

Obama’s (Latest) Social Security Whopper

The president claims Republican leaders are as eager to 'privatize' Social Security as they are to repeal his health care law. That's not true.


Summary

President Obama claimed that Republican leaders are pushing to make “privatizing Social Security a key part of their legislative agenda” should they regain control of the House and Senate. He said this is “right up there on their to-do list with repealing” parts of the new health care law.

We find the president’s claim to be mostly false.

  • Few if any Republicans now in Congress have ever pushed for total “privatization” of Social Security. What President Bush proposed in 2005 was to allow workers under the age of 55 to invest a portion of their Social Security taxes in private accounts. Most of their taxes would have continued to go into traditional Social Security.
  • Bush’s proposal to create private accounts had so little Republican support in 2005 — when the GOP controlled both the House and Senate — that it was never introduced as formal legislation. We’ve seen no evidence to suggest the idea is any more popular among Republicans now.
  • Only one Republican “leader” is currently pushing publicly for Bush-style private accounts, as part of an overall budget plan. He is Rep. Paul Ryan of Wisconsin, the senior GOP member of the House Budget Committee. His plan currently has only 13 cosponsors, none of them in the GOP House leadership.

The president further distorted the Republican position when he claimed that the GOP plan would “[tie] your benefits to the whims of Wall Street traders.” That’s not true of the private accounts Bush proposed. Those would have been invested in strictly regulated, broadly based mutual funds, much like the funds in which millions of federal workers invest their own retirement funds.

Analysis

In his Aug. 14 weekly address, President Barack Obama promised to protect Social Security from unnamed GOP “leaders” who he said were bent on “privatizing” the system and “tying your benefits to the whims of Wall Street traders and the ups and downs of the stock market.”

The president said:

Obama, Aug. 14: [S]ome Republican leaders in Congress don’t seem to have learned any lessons from the past few years. They’re pushing to make privatizing Social Security a key part of their legislative agenda if they win a majority in Congress this fall. It’s right up there on their to-do list with repealing some of the Medicare benefits and reforms that are adding at least a dozen years to the fiscal health of Medicare – the single longest extension in history.

That’s mostly false. It’s simply not true that the Republican leadership of either the House or the Senate is currently pushing to allow any portion of Social Security taxes — let alone all Social Security taxes — to be invested in the stock market. Only one House member who could be characterized as a GOP “leader” — Rep. Paul Ryan of Wisconsin — is currently voicing public support for limited, voluntary private accounts for workers age 55 and under.

Let’s review the bidding on this issue.

Misleading Label, Dead Plan

Obama gives his weekly addressNo current Republican leader has proposed to put Social Security completely into private hands, as the South American nation of Chile has done. Chile’s system can fairly be called “privatized,” but Democrats who use that word to describe the 2005 Bush proposal are guilty of misleading labeling. And in any case, even Bush’s rather limited plan is showing no signs of coming back from the dead.

There’s very little support for a fully privatized system, to the disappointment of some who have argued for it. One such proponent, Michael Tanner of the libertarian-leaning Cato Institute, told us in an exchange of e-mails:

Cato’s Michael Tanner, Aug. 16: There hasn’t been a proposal for full Chilean-style privatization in years. Even under President Bush all the proposals called for a hybrid system, with a continued government safety-net, and heavy regulation.

What President Bush proposed in February 2005 was a small step in comparison to Chile’s system. Bush’s plan would have given workers under age 55 the option of investing a portion of their payroll taxes in private accounts maintained by the government. Even when fully phased in, less than one-third of anyone’s Social Security taxes could have been put into private accounts. Taxes now amount to 12.4 percent of taxable wages (half paid by the worker, and half by the employer). Bush would have allowed 4 percent to go to private accounts, with the remaining 8.2 percent continuing to go into the traditional Social Security system.

But even that limited proposal was too much for the Republican leadership in Congress in 2005, when the GOP had a 55-seat majority in the 100-member Senate and outnumbered Democrats 232 to 202 in the House. There was so little support for Bush’s plan, even among members of his own party, that it died without ever being introduced as a formal piece of legislation.

Furthermore, we’ve seen no evidence that Republicans are any more enthusiastic about the idea now than they were the last time they had control of Congress. Last week, House Speaker Nancy Pelosi posted a list of Republicans who had voiced support for what she called “the latest Republican assault” on Social Security. Tellingly, nearly all were quotes from 2005 or earlier. In fact, of the 66 quotes in Pelosi’s news release, only one is a recent, clear expression of support for private accounts. Rep. Bob Inglis of South Carolina says on his website that private accounts would allow for a “greater return” than the current system.

The closest Pelosi could come to producing evidence of support by the GOP leadership was a July 21 blog item from the Washington Post’s Ruth Marcus, who quoted GOP Minority Leader John Boehner as saying a wide-ranging budget plan offered by Rep. Ryan was “a pretty good list of options.” It’s true that Ryan’s plan would revive the idea of Bush-style private accounts. But Boehner most certainly did not endorse that part of Ryan’s plan. Here’s the rest of what the Post‘s Marcus reported:

Washington Post‘s Ruth Marcus, July 21: But Boehner didn’t specify what Ryan cuts he liked or didn’t like, and he pointedly refused to say whether or not he bought into Ryan’s broader, and rather audacious, plan to balance the budget. “Parts of it I like, parts of it I have my doubts about,” he said. Not exactly enlightening.

And, we will add, not exactly honest of Pelosi, either. She is trying to pass off a noncommittal response as evidence of support for “privatizing” Social Security.

As for the GOP’s Senate leader, Mitch McConnell of Kentucky, he’s not currently “pushing” for private accounts either. His spokesman Don Stewart told us in an exchange of e-mails: “The President is simply making things up,” adding:

McConnell spokesman Don Stewart, Aug. 16: [McConnell has] said that he hopes that the President’s deficit reduction commission can find a sensible approach to Social Security reform that he and his members can support. He’s not “pushing” for any particular outcome until they report.

The most significant current support for private accounts comes from Rep. Ryan. He’s not actually part of the formal GOP House leadership team, but as the highest-ranking Republican on the House Budget Committee, he can fairly be said to be a “leader” in the area of budget policy. Ryan issued his own budget plan earlier this year. His “Roadmap for America’s Future” does include a proposal for private accounts that is similar if not identical to Bush’s plan. But few Republicans support it publicly. Ryan’s bill, H.R. 4529, had attracted only 13 cosponsors as of Aug. 16, all of them Republicans but none of them in the leadership.

We can’t say what Republicans might propose next year, should they win control of Congress. But so far they’ve voiced little enthusiasm for private accounts, and none for complete “privatization.” Says Cato’s Tanner: “Unfortunately, Republicans have shown little interest in tackling Social Security this year, and even less in personal accounts.”

‘Whims’ of Wall Street Traders?

Obama also misled his audience when he said the Republicans favored “tying your benefits to the whims of Wall Street traders and the ups and downs of the stock market.”

It’s quite true that private accounts would be subject to the “ups and downs of the stock market” — for those who chose to take that risk. But the plan proposed by Bush (and currently by Ryan) was optional. Nobody would have been forced to participate.

Furthermore, the plan Bush proposed would have allowed investment only in government-approved mutual funds, and only a relatively small portion of total benefits upon retirement would have depended on the performance of these funds. For those who chose to participate, the bulk of benefits still would have continued to come from the government-run Social Security system. So Obama’s remark about “the whims of Wall Street traders” is an exaggeration, to say the least. (For more details, see the transcript of a briefing given to reporters by a senior White House official at the time Bush put his plan forward. Since Bush’s plan never made it into the form of a bill, that briefing remains the most detailed description of the plan.)

This is not the first time Obama has misrepresented the Republican position on this issue. During the 2008 campaign, he told Florida voters that “if my opponent had his way, the millions of Floridians who rely on it would’ve had their Social Security tied up in the stock market this week.” That was simply not true. Obama was trying to squeeze political mileage out of a plunge in stock market prices that had just taken place. But the truth is that nobody who was getting Social Security benefits at the time would have had a dime of their benefits pegged to the market, even if Bush’s plan, which Obama’s rival Sen. John McCain had supported, had become law. That’s because nobody over the age of 55 would have been allowed to invest, and younger workers would still be years away from retirement. See our article, “Obama’s Social Security Whopper,” Sept. 20, 2008.

Obama also claimed in a TV ad during 2008 that McCain supported “cutting benefits in half” for Social Security recipients, another false claim. See “Scaring Seniors,” Sept. 19, 2008.

Back then, Obama waited until less than two months before Election Day to make his distorted Social Security claims. This time he’s starting earlier.

— by Brooks Jackson

Sources

Obama, Barack. “Weekly Address: President Obama Promises to Protect Social Security from Republican Plans to Privatize It.” The White House. 14 Aug 2010.

Tanner, Michael. Exchange of emails with FactCheck.org.  Cato Institute. 16 Aug 2010.

Fact Sheet: Strengthening Social Security for the 21st Century.” The White House. 10 Feb 2005.

Strengthening Social Security for the 21st Century.” Policy document. The White House. Feb 2005.

Pelosi, Nancy. “Social Security at 75: The Latest Republican Assault.” press release, office of Speaker Nancy Pelosi. 13 Aug 2010.

Marcus, Ruth. “Leader of the Not-Democrats Party.” Item on “Post Partisan” blog, Washingtonpost.com. 21 Jul 2010.

Ryan, Rep. Paul. “A Roadmap for America’s Future.” Jan 2010.

111th Congress, 2nd Session H. R. 4529. “A bill to provide for the reform of health care, the Social Security system, the tax code for individuals and business, job training, and the budget process.” 27 Jan 2010.

Background press briefing on Social Security.” Office of the Press Secretary, The White House. 2 Feb 2010.

Jackson, Brooks. “Obama’s Social Security Whopper.” FactCheck.org. 20 Sep 2008.

Robertson, Lori and Brooks Jackson. “Scaring Seniors.” FactCheck.org. 19 Sep 2008.