Social Security: Bush Sales Pitch Curves Around Facts, Critics Say

Author: Miles Benson

Published: February 23, 2005

The sales pitch President Bush is making to voters across the country for his Social Security reform plan is being called outright deception by critics.

As Bush explained his proposal for younger workers to make personal investments in stocks and bonds with part of their Social Security taxes at nine different stops across the country recently, he repeatedly said the private accounts would work like the 401(k)-type retirement plan available to federal workers the Federal Employees Thrift Savings Plan.

But as the president traveled, his language changed until some listeners thought he was claiming federal employees already have the personal accounts he is proposing. They don't.

Money for the Federal Employees Thrift Savings Plan doesn't come from the workers' Social Security payroll deductions, and they will receive their TSP distribution on top of their regular full Social Security benefits. That's not what Bush is proposing in his Social Security reform for younger workers.

"He is being extraordinarily misleading," said William G. Gale, an expert on Social Security for the Urban Institute and the Brookings Institution, both liberal-leaning think tanks here.

"TSP is an add-on plan, not a substitute for Social Security" benefits like Bush's proposal, Gale said. "He wants to take away their Social Security benefits if they participate in the thrift plan. That's the crux of the debate. No federal employee loses Social Security money by putting money into the thrift plan."

The White House denies any effort at deception, insisting Bush was simply citing the TSP as proof that stocks and bonds can be safe and profitable investments.

Here are Bush's words about his Social Security reform plan in New Hampshire on Feb. 16:

"Now, I've got an idea that I'd like for Congress to consider, and I want to share this idea with you here. It's a novel idea. Oh, it's really not that novel. As a matter of fact, it's part of the federal employee retirement plan. It's a thrift benefit plan. It's a plan that allows federal employees to set aside some of their money and put it in safe stocks and bonds, so they get a better rate of return on their money than they would otherwise.

"So it's not new; the idea of allowing people to invest their money, their own money, is not a new thought. That's what's already happening with federal employees. I'm the kind of fellow who believes if it's good enough for federal employees, it ought to be considered for younger workers. In other words, there ought to be (applause) and that's the idea of letting younger workers set aside some of their own payroll taxes in a personal savings account."

Under his plan, Bush said, workers under 55 would be allowed to put up to 4 percent of their Social Security payroll taxes into the personal investment accounts "and receive a better rate of return" than they could expect from Social Security.

Jason Furman, a Social Security expert at the Center for Budget and Policy Priorities, says he wishes the president's reform plan actually did work like the TSP, in which 3.4 million current and former government workers, including members of Congress, participate.

"That would be fabulous, and that's something he could get done this year," Furman said. "But it is critical to understand that he is not offering the same deal, the deal that members of Congress have. If he sets up private accounts, you get your Social Security benefits reduced by every dollar you put into that account, plus 3 percent interest," Furman said.

Moreover, under the Federal Employees Thrift Savings Plan, the government as is the case with some employers offering 401(k) plans sweetens the pot for its workers with a matching contribution to their TSP accounts of up to 4 percent of their pay.

"Everyone already has the option of investing in the stock market," Gale said. "Anyone can go to a discount broker and open an account. They already have that option. The distinguishing feature of the president's plan is its guaranteed reduction in Social Security benefits if you do invest."

White House spokesman Trent Duffy said Bush points to the federal workers thrift plan "as a direct response to the scare tactics that there is too much risk in a personal account system, as an example of the kind of investment choices that would be available" under his Social Security reform plan.

Duffy challenged the notion that everyone already has the option of investing in the stock market. "When you're living paycheck to paycheck, you don't have an extra dollar to set aside," Duffy said.

"The president wants to give lower-income workers, and some middle-income workers, who do live check to check, the chance to use the magic of compound interest from what we all know is the great value of long-term investment."

Two Democratic House members from North Carolina, where Bush made one of his recent visits, remain unconvinced.

"The parallel is spurious," said Rep. David Price. "I think he (Bush) feels he can perpetuate the notion that federal employees are getting some kind of special treatment and that he wants the same for ordinary people, and he's hoping people won't look too closely at the claim."

"The president continues to leave important details out," said Rep. Bob Etheridge. "Americans need to read the fine print on the Thrift Savings Plan and all the aspects of the president's privatization blueprint for Social Security."

John Rother, policy director of AARP, the lobbying group for older Americans, said Bush knows "most Americans would love to have what federal employees have, but of course that's not what the president is proposing. He's pointing to the thrift savings part of the plan but not mentioning their regular pension plan and their Social Security benefits that lie underneath it."