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A Project of The Annenberg Public Policy Center

Ernst and ‘Privatizing’ Social Security

Democratic TV ads in Iowa have repeatedly misrepresented Republican Joni Ernst’s position on Social Security, claiming she “would privatize Social Security” or that she has “proposed privatizing Social Security.” But Ernst hasn’t proposed or endorsed any plan to change Social Security.

At most, Ernst has said that she would consider allowing “younger workers,” or those “just entering the workforce,” to put some portion of their Social Security payroll taxes into interest-bearing or stock market-based “personal savings accounts” for their retirement. And, despite ad images that suggest otherwise, Ernst opposes any changes in Social Security for current seniors or workers nearing retirement age.

Ernst is facing Democratic Rep. Bruce Braley in a tight race to fill the seat of retiring Iowa Sen. Tom Harkin. Back when she was competing for the GOP nomination, Ernst let it be known that she would at least be willing to “look” at changing the way Social Security works for “younger workers.”

During an Iowa Press primary debate in April, Ernst said: “I think we have to keep the promises that have been made to our seniors but we do have to change the way we do business with our younger workers or those that are just entering the workforce. And I agree, we do have to look at some sort of a personal savings account.”

She again said that she would explore transitioning “younger workers” to “individual savings accounts” during a KCCI News 8 primary debate in May:

Ernst, May 29: I do think we have to keep the promises that are made to today’s seniors, absolutely. So to do this, we do have to reform Medicare, Medicaid and Social Security. And the way we do that with Social Security is by looking at transitioning our younger workers onto individual plans or individual savings accounts, whether that’s tied to the market, whether it’s based on interest rates — however we want to do that, we can have that discussion. But the way we are protecting our seniors is by transitioning our younger workers. And we can do that, but we have to keep our promises to seniors.

Democrats have hammered Ernst for wanting to “privatize Social Security” ever since. And the ads attacking Ernst on the issue appear to be working, as 56 percent of likely voters see her position on Social Security as “a problem,” according to a Des Moines Register poll taken between Sept. 21 and Sept. 24.

The Democratic Senatorial Campaign Committee aired a TV ad in August called “Team,” saying that Ernst “would privatize Social Security.” But that goes too far.

Ernst hasn’t advocated for a completely privatized program, and she certainly hasn’t talked about making changes for seniors currently collecting benefits or those nearing retirement, such as the white-haired man featured in the DSCC’s ad.

Ernst has only talked about allowing private accounts for younger Americans as just one possible way to make sure that the Social Security program is around for future generations.

‘As An Option’

In fact, in its ad titled “Talked,” which aired through much of September, the DSCC shows a clip of Ernst saying, “Yes, I have talked about privatizing Social Security,” editing out the next three words, “as an option.” Here is what Ernst actually said at a seniors event in Des Moines, Iowa, on Sept. 3:

Ernst, Sept. 3: Yes, I have talked about privatizing Social Security as an option. Again, that is one solution. So what I recommend is that we look at a number of solutions because we really don’t know which way is the best way to go yet. But if we do take Social Security and privatize that, if that would be decided that that is the solution, it needs to be so that there is a protection in place for our seniors so that they are not losing the benefits that they have. Again, if we’ve made promises, we need to keep those promises.

She went on to say: “It is a solution to privatize. Is it the solution? We don’t know that yet. We really have to look into it.”

The ad also links Ernst to billionaire brothers David and Charles Koch, co-owners of Koch Industries, who the ad says “spent millions trying to privatize Social Security” and “millions more trying to elect Joni Ernst.” The ad cites a Feb. 12, 2012, “Need to Know” document from Americans for Prosperity, a conservative issue advocacy group founded by David Koch, that also talked about “personal savings accounts for Social Security.”

According to the document, “instead of seeing their hard-earned dollars funneled through Washington to pay for current retirees’ benefits, workers would truly own and control the accumulated funds and could invest them with a wide variety of investment funds offering different mixes of stocks and bonds and different levels of risk and reward.”

But AFP’s suggested plan wouldn’t totally privatize Social Security, either. It was a voluntary plan that allowed workers to choose to invest with private accounts or avoid the risk and stick with traditional Social Security.

A Proposal from Ernst?

Ernst hasn’t actually outlined a concrete plan to “privatize Social Security” at all.

In July, the DSCC ran an ad called “Stand,” which claimed that Ernst “proposed privatizing Social Security, gambling our savings in the stock market” that “experts say that could be a windfall for Wall Street.” But besides saying that “personal savings accounts” for “young workers” should be considered, Ernst hasn’t offered many specifics.

How much of their Social Security taxes would those “younger workers” be able to put into those private savings accounts? All of it, like in Chile, which has a truly privatized system? Just a minor percentage of tax contributions, perhaps one-third, like President George W. Bush and Wisconsin Rep. Paul Ryan proposed in years past? Would it be a mandatory or voluntary program? Would the accounts be managed by the government or by private companies? Would the accounts be invested in the stock market, U.S. Treasury bonds or something else?

We don’t know the answers to those questions because Ernst hasn’t said, and we didn’t hear back from her campaign when we reached out to ask for more details.

The Social Security page of Ernst’s campaign website only quotes her as saying, “I believe that we must first and foremost protect the promises made to our seniors, like my own mom and dad, and those middle class parents who are already paying into the system on their own pathway toward retirement. But we need real solutions for those young workers about to enter the workforce in order to ensure this safety net is there for future generations that include my own daughter and grandchildren.”

The ad’s reference to a “windfall for Wall Street,” refers to a 2004 NBC News article that said “President Bush’s plan to partly privatize Social Security could be a windfall for Wall Street, generating billions of dollars in management fees for brokerages and mutual fund companies.” However, in March 2005, we found that “the type of private Social Security accounts being proposed by President Bush would yield very little profit to the securities industry, contrary to persistent claims of a potentially huge ‘windfall’ to Wall Street.” And Ernst hasn’t said whether she would back a similar plan or not.

Yes, Ernst has talked about possibly having private Social Security accounts for younger workers, but only as something that should be on the table for consideration. She hasn’t committed to a fully “privatized” Social Security system, or even a partial one, as some Democratic TV ads would have viewers believe. That is a point that Ernst made in her first televised debate with Braley on Sept. 28, when she said, “I haven’t endorsed one option over another, but we need to come together in a bipartisan manner to solve these issues.”

In fact, the only thing that Ernst has committed to is keeping the “sacred promises” made to “today’s seniors” collecting Social Security benefits.

D’Angelo Gore