With the stock market on a roller coaster last week, Sen. Barack Obama decided it was a good time to take a shot at Sen. John McCain on Social Security. McCain has, in the past, supported plans that would allow workers, if they want, to have a portion of their Social Security put into personal retirement accounts that allow investment in the stock market.
"And I’ll protect Social Security, while John McCain wants to privatize it," Obama said in a speech in Daytona Beach, Fla., on Sept. 20, 2008. "Without Social Security half of elderly women would be living in poverty — half. But if my opponent had his way, the millions of Floridians who rely on it would’ve had their Social Security tied up in the stock market this week. Millions would’ve watched as the market tumbled and their nest egg disappeared before their eyes. Millions of families would’ve been scrambling to figure out how to give their mothers and fathers, their grandmothers and grandfathers, the secure retirement that every American deserves. So I know Senator McCain is talking about a 'casino culture' on Wall Street — but the fact is, he’s the one who wants to gamble with your life savings."
To be sure, it was a volatile week on Wall Street. Down 504 points Monday; up 141 Tuesday; down again, 449 points Wednesday; then back up again 410 points Thursday; and up another 319 Friday.
The market ended up down just 34 points for the week. But whew, there was certainly a lot of angst.
But there are a couple problems with Obama’s attack on McCain’s plans for Social Security. First and foremost is that McCain hasn’t actually laid out his plan for Social Security.
In July, McCain was asked it. "I cannot tell you what I would do, except to put everything on the table," he told reporters. A few weeks later, he was asked about new taxes to shore up Social Security. "There is nothing that’s off the table. I have my positions, and I’ll articulate them. But nothing’s off the table," McCain said. "I don’t want tax increases. But that doesn’t mean that anything is off the table."
We’re still waiting to hear McCain articulate his positions.
"No one really knows what his plan is, including him," said John Rother, policy director at AARP. McCain’s statements on Social Security so far have been "too contradictory or too vague," to pin down, he said. To make any statements about McCain’s plan going forward would require a bit of mind-reading, Rother said.
In lieu of that, we think it’s fair for Obama to take aim at McCain’s previous support for personal retirement accounts.
In 1998, McCain voted in favor of a budget amendment to express "the sense of Senate" that any budget surplus should be used to reduce Social Security payroll tax and to establish personal retirement accounts. The vote — 50-48 in favor — largely came down along partisan lines.
And in 2005, McCain supported President George W. Bush’s push to allow workers to divert a portion of the program’s payroll taxes to personal investment accounts. McCain supported Bush’s plan, going so far as to accompany the president on a series of town hall meetings in March 2005. The plan fizzled, though, and the initiative went down as one of Bush’s biggest defeats in domestic policy.
McCain has since modified his stance.
When we wrote about McCain’s plan back in April, McCain’s campaign Web site stated that McCain "supports supplementing the current Social Security system with personal accounts — but not as a substitute for addressing benefit promises that cannot be kept. John McCain will reach across the aisle, but if the Democrats do not act, he will." That’s no longer on the Web site, and the McCain campaign did not respond to an e-mail seeking to clarify his position on Social Security.
We’re not inclined to give McCain a pass just because he has failed to articulate his plan. But Obama’s statement is misleading, even when judged against McCain’s earlier support for Bush’s plan.
First, Obama seems to be suggesting that today’s retirees would have had their Social Security tied up in the volatile stock market this week.
The Bush plan for personal investment accounts would not have applied to those retirees currently getting Social Security. No one born before 1950 would have been eligible to participate in the investment plan; so only people 58 or younger.
McCain stressed that point in a town hall meeting in New Hampshire on June 12, 2008.
"I will not privatize Social Security, and it’s not true when I’m accused of that," McCain said. "But I would like for younger workers, younger workers only, to have an opportunity to take a few of their tax dollars, and maybe put it into an account with their name on it. That’s their money. ... And we will make sure that present-day retirees, I will commit, have the benefits that they have earned."
We also think Obama may have been guilty of using some scare tactics here. For one, participation in the Bush program would have been entirely voluntary. Second, without signing a waiver, upon turning 47, the accounts would have been invested in a "life cycle portfolio," shifting from higher risk growth funds to secure bonds as people neared retirement (and thereby protecting near-retirees from sudden market swings).
And last, people would have been able to set aside in their investment accounts only up to 4 percentage points of their payroll taxes (currently 12.4 percent), so only a little over a quarter of one’s Social Security taxes could have been invested. In short, it would have been impossible to see one’s entire nest egg disappear in a down market. And people would have been allowed to choose only from a small number of diversified index funds, preventing people from putting large portions of their retirement savings in just a few stocks.
Obama spokesman Tommy Vietor told PolitiFact that Obama wasn’t necessarily talking about current retirees.
"You don’t have to be retired to rely on Social Security," Vietor said. "Millions of people who will one day retire rely on Social Security as they plan their futures. Senator Obama’s bottom line is absolutely true. If McCain got his way and we had private accounts (a position he started articulating as early as 1998), people who are relying on that money for their retirement would be in a very difficult situation."
There is a legitimate point to be made that to the extent that a person's Social Security plan is tied up in investment accounts, it is certainly subject to the vagaries of the stock market. But we are of the opinion that when Obama talked about "the millions of Floridians who rely on it" he was talking about current retirees.
While McCain has remained vague about his plans for Social Security, he has never expressed support for a plan that would allow current retirees to invest a portion of their Social Security in stocks, and neither did the Bush plan McCain once backed. We rule Obama's statement False.