Fred Barnes and Benjamin L. Ginsberg both falsely claimed that allowing workers to divert payroll taxes from Social Security into private investment accounts would address the program's long-term solvency problem. Appearing on MSNBC's Hardball with Chris Matthews on March 9, Ginsberg, a GOP lawyer and MSNBC contributor, claimed that “the personal accounts -- well, it's going to be part of the solution. What this is all about is putting the whole program in a solvent way.” On Fox News' Special Report with Brit Hume, Barnes, executive editor of The Weekly Standard and Fox News political contributor, claimed that private accounts “are part, not the whole, but they are a part of the solvency issue.”
In fact, even the Bush administration has admitted that private accounts would do nothing to address the long-term solvency of Social Security. Rather, President Bush's plan will likely address the solvency of the program through substantial cuts in guaranteed benefits.
Defending his false assertion, Barnes explained that private accounts would mean “that the unfunded liability of Social Security shrinks, and less money has to come out of the system, which is financed by taxes. And more money will come out of being earned in the regular economy in America.” But without a cut in guaranteed benefits, which Barnes never mentioned, Social Security would face the same unfunded future obligations; diverting payroll taxes would simply reduce the revenue available to meet these obligations. Indeed, far from improving Social Security's financial outlook, creating private accounts would exacerbate the solvency problem. Social Security's chief actuary recently informed the White House that under Bush's proposal to let workers divert a portion of payroll taxes into private accounts, "[a]nnual cash-flow deficits (negative annual balances) appear in 2012, or six years earlier than under current law," as The Wall Street Journal reported on February 8.
From the March 9 edition of Hardball:
GINSBERG: Now you've got -- now you've got the Democrats moving to the point where they admit there's a problem.
CHRIS MATTHEWS (host): -- accounts the solution?
GINSBERG: And the personal accounts -- well, it's going to be part of the solution. What this is all about is putting the whole program in a solvent way, where people buy into the -- into the system --
MATTHEWS: How do those personal accounts -- do those personal accounts, like I just described them, solve the problem of the fact there's going to be so many more retirees than there are workers in the next 20 or 30 years?
GINSBERG: It doesn't solve it alone. But it lets people --
MATTHEWS: Does it solve it at all?
GINSBERG: Yes, because it lets people vest into the system in a way they're not now. People don't believe that there will be anything there for them when they retire. That's my kids' viewpoint of it.
GINSBERG: Personal retirement accounts also allow people of that generation to have a real stake in the system, in its sanctity. And that will help restore the solvency to it, if the Democrats will get off the bench and actually come up with a plan, instead of sticking their heads in the sand and defending --
From the March 9 edition of Fox News' Special Report with Brit Hume:
BARNES: No. Well, some are, some haven't. Some are still saying that, that there's no crisis there. We don't have to do anything. It's years off and so on. And that's not what the American people believe.
You know, the Republicans and Bush in particular should be heartened by that poll number you mentioned from that Republican -- from those focus groups finding out that only 20 percent of Americans have heard or even know anything about these private investment accounts. Because I think selling them is the way to get Social Security reform.
In truth, they are part, not the whole, but they are a part of the solvency issue. And they do --
BRIT HUME (anchor): In what sense?
BARNES: Well, in the sense that eventually people getting -- rather than money from the Social Security system and from taxes, their retirement will be funded in part by their earnings from where they've invested their money.
HUME: In private accounts.
BARNES: Yes. Their payroll tax money in private accounts.
HUME: So a different part of Social Security --
BARNES: So it means that the unfunded liability of Social Security shrinks, and less money has to come out of the system, which is financed by taxes. And more money will come out of being earned in the regular economy in America.
MORTON M. KONDRACKE (Roll Call executive editor and Fox News contributor): But there's a --
BARNES: So they are a part of it. They're just not the whole part.