FOX News chief Washington correspondent Jim Angle suggested that Democrats were dishonest for claiming that President Bush plans to cut Social Security benefits as part of his plan to let workers divert payroll taxes into personal investment accounts.
In fact, Bush's own pledge to confront Social Security's long-term revenue shortfall requires him to cut benefits, since he has already promised not to raise payroll taxes (or, presumably, begin using general revenues to fund the system). Also, White House aides and Congressional Republicans have said in anonymous statements that Bush will propose reducing benefits (see here and here). Moreover, “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), reduces benefits by indexing the growth of initial benefit levels to prices rather than wages, as is currently done. A leaked memo about Bush's plans for Social Security from Peter H. Wehner, head of the White House Office of Strategic Initiatives, also endorsed this concept.
From the February 9 edition of FOX News' Special Report with Brit Hume:
ANGLE: Democrats are launching a broad assault on the idea of personal accounts in Social Security, claiming among other things they would need a huge cut in benefits.
[clips of Democrats criticizing benefit cuts]
ANGLE: But in fact, benefit cuts would not be required to finance personal accounts, and the president has not proposed any reduction in benefits. Nevertheless, the critics are assuming that the president will call for benefit cuts and were already blaming him for it.
While Angle is correct that “benefit cuts would not be required to finance personal accounts,” those accounts will have to be financed in some way. Specifically, the government will have to borrow trillions of dollars over several decades in so-called “transition costs” to finance these accounts, since personal accounts will be financed with payroll taxes that are now used to pay benefits for current retirees.
Moreover, as explained above, while benefit cuts would not be necessary to finance personal accounts, they will be necessary to address the Social Security's long-term solvency problem, so long as tax increases are off limits. Though an unnamed administration official admitted this fact in an official White House briefing, Bush himself has repeatedly suggested that private accounts will address the solvency problem. Rather than dispelling this confusion between private accounts and solvency, Angle exploited it to defend Bush from Democrats; by failing to distinguish the two issues -- while ignoring the transition costs associated with private accounts and denying the fact that Bush will have to cut benefits to restore solvency -- Angle created the false impression that Bush's plan to save Social Security from "crisis" will cost nothing.
Angle's report continued by casting skepticism on Democrats' additional criticism of Bush's plan to reduce guaranteed Social Security benefits even further for those workers who choose to establish private accounts. Bush's expected plan would reduce guaranteed benefits dollar for dollar by the amount that workers choose to divert from their payroll taxes into private accounts, plus interest. The Democrats labeled this feature a “privatization tax.” Angle showed a clip of Sen. Jon S. Corzine (D-NJ) criticizing this feature, then noted that “Corzine's numbers could not be verified” :
CORZINE: The privatization tax is actually going to be 70 percent of what has been accumulated in these private accounts, and only 30 percent left to you [the beneficiary].
ANGLE: Though Corzine's numbers could not be verified, those on the other side say the remaining 30 percent would be nothing to sniff at.
But the graphic that Angle displayed, which illustrate Corzine's description of the “privatization tax,” listed the Democratic staff of the Senate Finance Committee as its source. Angle's skepticism about numbers from Democratic sources contrasted starkly with his acceptance two days earlier of highly misleading figures and an accompanying chart from the White House budget office.
Following Angle's prepared report, Special Report anchor and FOX News Washington managing editor Brit Hume questioned Angle further about the purported benefit cuts. Angle acknowledged, if only implicitly, that personal accounts would do nothing to address the solvency of Social Security. Hume declined to dispute this statement, even though less than a week earlier he had "corrected" Morton M. Kondracke, a regular member of Special Report's “All-Star Panel,” when Kondracke accurately noted that private accounts do not address the solvency problem. Here's Angle's exchange with Hume on February 9:
HUME: Jim, I'm not clear. Where is the claim that the president is proposing a 46 percent cut in benefits? Where is that? I guess that's supposedly as the result of the private accounts? Where does that come from?
ANGLE: Well, it's not a result of the private accounts. It's a result of a fix for the long-term solvency in Social Security. It's one of many options that were included in the Social Security Commission, one of the many options floating around Washington for some years now. But it would happen four or five decades from now and would fall most heavily, 46 percent, on wealthy taxpayers.
Angle's claim that the benefit cut “would happen four or five decades from now” is misleading, since he declined to mention that the same is true for the proposed private accounts. Current retirees and older workers won't have the option to open such accounts at all, and while younger workers would be allowed to begin diverting payroll taxes within a few years under Bush's expected proposal, they wouldn't be allowed access to the money until decades from now, when they retire. Indeed, the entire debate over Social Security reform centers on changes that will occur “decades from now,” since Bush made clear in his State of the Union address that “for every American who is 55 or older ... the Social Security system will not change in any way.” Still, the supposed logic behind Bush's plan is precisely that earnings from private accounts will compensate for the reduction in guaranteed benefits, so the design of the system will presumably ensure that the cut in guaranteed benefits coincides with workers' access to their accounts.