ABC News chief White House correspondent Terry Moran allowed President Bush to dodge a question about the risks of relying on personal investment accounts to provide a portion of retirees' Social Security benefits. Bush asserted that “there will be strict ... investment guidelines” restricting the types of investments that people can make using funds from their personal accounts, but also that “Over time stocks and bonds and mutual funds yield a rate of return that's much better than that which is in the Social Security trust.” Moran declined to challenge Bush on how a single system could accomplish the two competing goals of low risk and high return.

From the January 17 edition of ABC's World News Tonight:

MORAN [voiceover]: Domestically, Mr. Bush tried to calm concerns about his proposal to allow workers to take money out of Social Security and put it into the stock market.

[off camera] The stock market can be risky. What if it goes down when you're ready to retire? How do you answer that?

BUSH: There will be strict guidelines that, that, that, that investment guidelines, just like federal workers have in their thrift -- thrift accounts. Over time, stocks and bonds and mutual funds yield a rate of return that's much better than that which is in the Social Security trust.

MORAN [voiceover]: Overall, this is a president who still wants to be a uniter ...

By failing to follow up on his question, Moran allowed Bush to have it both ways. The president dismissed Moran's question about risk by asserting that "[t]here will be strict guidelines." But lower-risk investments produce lower returns, an investment truism that Bush ignored in his assertion that "[o]ver time, stocks and bonds and mutual funds yield a rate of return that's much better than that which is in the Social Security trust."

Indeed, as Media Matters for America has noted, many economists believe that President Bush's proposed private investment accounts will increase retirees' exposure to risk without producing a better rate of return than the current system. Brookings Institution senior fellow Peter R. Orszag, former special assistant to the president for economic policy (1997-98), reviewed estimates by three other economists -- including one who openly favors creating individual accounts -- and all three indicated that private accounts will typically provide a rate of return similar to that provided under the current system.

Vincenzo Galasso, a researcher at the Centre for Economic and Policy Research, argued in a paper published in the September 2002 Social Security Bulletin that the rate of return would be higher in the current system than for private accounts. He wrote: “Calculations of the median voter's return from ”investing" in Social Security suggest that for a majority of voters the U.S. Social Security system provides higher ex-post, or actual, returns than alternative assets."

While the chief Social Security actuary's assumed rate of return on equities is 6.5 percent, economists have argued that this is overly optimistic, an assumed rate of growth that is incompatible with assumptions about the rate of overall economic growth made by the Social Security trustees when they make projections regarding the future solvency of the Social Security trust fund. In other words, as Dean Baker and David Rosnick, of the Center for Economic and Policy Research, as well as others, have argued, if average rates of return on equities were to be that high in the future, then the trust fund would remain solvent significantly longer than the trustees are currently predicting, perhaps indefinitely. Thus, the very premise of the president's proposal -- that Social Security faces a funding crisis -- would be completely undermined.

Moreover, even if the estimated rate of return is correct, it's just an average, and some retirees would see a much lower rate of return.