FOX News host Bill O'Reilly claimed that liberal opposition to President Bush's Social Security reform plan is irrational because under Bush's proposal "people who don't want" to divert their payroll taxes into private accounts will "still ... get what the government promises 'em." In fact, while Bush has not yet laid out a specific plan, his administration has indicated that all beneficiaries will face substantial benefit cuts compared to what current law promises, and those who choose to set up private accounts will face additional cuts in guaranteed benefits beyond that.
"Model 2" from Bush's 2001 Commission to Strengthen Social Security, widely expected to form the basis of the reform plan Bush will propose (see here, here, here, and here), involves a benefit cut for all beneficiaries. This cut will be the result of changing the formula used to calculate initial benefits so that initial benefit levels are set according to the rate of inflation, not according to the rate of wage growth during a worker's lifetime, as under current law. But those who take the option of diverting some payroll taxes into personal accounts will face an additional cut in guaranteed benefits.
From the Commission to Strengthen Social Security report's summary of Model 2:
Workers can voluntarily redirect 4 percent of their payroll taxes [sic] up to $1000 (indexed annually to wage growth) to a personal account. ... In exchange, traditional Social Security benefits are offset [i.e., reduced] by the worker's personal account contributions compounded at an interest rate of 2 percent above inflation. ... Benefits under the traditional component of Social Security [that is, without personal accounts] would be price indexed, beginning in 2009. [p. 83]
On the January 21 broadcast of Westwood One's The Radio Factor with Bill O'Reilly, O'Reilly explained that "liberals" oppose Bush's Social Security plan because "they don't want individual Americans to have power over their pensions ... because they don't trust you to do the right thing":
O'REILLY: He [Bush] wants to have legislation to give you power over your retirement and power over your medical expenditures. So, that's basically his philosophy -- Bush's philosophy. Now, the liberals don't like that. They don't want individual Americans to have power over their pensions -- you know, as far as the government is concerned -- or, basically, callin' their own shots, because they don't trust you to do the right thing. They want the big government apparatus. ... I don't know what the fear is. If you give people some private investment power over their Social Security, that's not gonna dismantle it for the people who don't want that. The entitlement's still gonna be there.
I mean, that's what I thought that speech [Bush's inaugural address] was all about. And then, look: "I wanna give you more control over your pension and health care costs." I'm down with that. I'm okay with that. It's not gonna wreck Social Security. People who don't want it [are] still gonna get what the government promises 'em.