What Al Gore Says About Social Security Reform…And the Truth

The Hotline, May 5, 2000

Gore: “There’s nothing compassionate about privatizing Social Security if you lose your retirement in a risky market.”

Question to Gore: Then why does virtually every union pension fund in America invest the bulk of their assets in the “risky” stock market? According to the Federal Reserve, state and local government employee pension funds have nearly $3 trillion in assets, 66 percent of which is invested in corporate equities (i.e.: stocks).

Indeed, 30 of the nation’s 50 largest pension funds are public employee pension funds. According to Pensions and Investment Magazine Online, these 30 funds have $1.5 trillion in assets, 60 percent of which is invested in the stock market. Remarkably, 13 percent of their assets are invested in foreign stocks. So much for “buy American.”

How about federal employees, who can choose where to invest their money through the Federal Thrift Savings Plan. The TSP now has more than $85 billion in assets, 59 percent of which is invested in the stock market. Although federal employees can also choose to invest in government bonds, they’ve chosen to invest only 5 percent of their TSP funds in government bonds. Meaning, when given the choice between the stock market and government bonds, federal employees overwhelmingly choose the market.

Where does Al Gore invest his money?

The Hotline, May 4, 2000

“Gore accused Bush of ‘devising a ‘secret plan’ that could bankrupt the Social Security system.’”

Question to Gore: Are you aware that the system is already going broke? According to Social Security’s own Trustees, the system will begin running cash deficits in 2015 and faces $22 trillion in unfunded cash liabilities over the next 60 years. To most Americans, $22 trillion in liabilities is the definition of “bankruptcy.” As bad as this is, the Congressional Budget Office recently testified that the Administration’s plan for Social Security is worse than doing nothing:

“Proposals like the President’s to redirect general revenues to the Social Security trust funds address the narrow issue of trust fund solvency but not the broader one of overall fiscal soundness. Adding to the trust fund balances does nothing to ensure that the necessary economic resources will be there to support the programs; it simply shifts money from one government pocket to another…and make it easier to delay the spending and revenue changes necessary to sustain the program in the long run.” — Statement of Dan L. Crippen, Director, Congressional Budget Office, November 9, 1999

CNN, May 8, 2000

Gore: “I think [Bush’s plan is] bad for American families and bad for our economy because it takes away from our ability to pay down the national debt.”

Truth: Paying down the national debt has no effect on Social Security’s long-term finances and does nothing to prevent the system from deficit spending in 2015.

Gore and Clinton say their plan would use more than $3 trillion in Social Security surpluses over the next 15 years to retire the national debt. In exchange, the Social Security “trust fund” gets another $3 trillion worth of IOUs which, may make the system look healthier on paper, but does nothing to create any real assets that can be drawn on to cover the system’s shortfalls.

Remember, Social Security’s surpluses are a surplus of FICA tax payments. In fact, $3 trillion in surpluses is equal to roughly $20,000 in excess FICA taxes for every worker in America. Gore wants to spend these surplus FICA tax dollars on reducing government debt, rather than allow workers to put those surplus tax dollars into personal retirement accounts that will build real wealth for their retirement nest egg.

Even if these new IOUs were real, they would cover just 13 percent of the program’s long-term cash shortfall. So, obviously the problem is greater than just buying down debt.

But If workers were allowed to invest the money Gore now wants to spend to buy down debt, they would have more than $6 trillion in assets in their personal retirement accounts by the time Social Security begins deficit spending.