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During the vice presidential debate, Tim Kaine deployed a longstanding Democratic talking point against his Republican rivals -- that Republicans can’t wait to privatize Social Security.
Kaine said, "Here's what Hillary (Clinton) and I will not do. And I want to make this very plain. We will never, ever engage in a risky scheme to privatize Social Security. Donald Trump wrote a book and he said Social Security is a Ponzi scheme and privatization would be good for all of us."
Pence’s response was that "all Donald Trump and I have said about Social Security is we're going to meet our obligations to our seniors. That's it." Kaine countered, "Go read the book."
Kaine’s wording was careful, but he left a clear impression that Trump would privatize the retirement program while Kaine and Clinton would protect the existing system.
As it turns out, Kaine is on target with the reference to a Ponzi scheme in Trump’s book. But it’s a big stretch for Kaine to use a 16-year-old book as evidence that the Trump-Pence ticket would "engage in a risky scheme to privatize Social Security."
A primer on privatization
As we’ve noted before, Social Security benefits for today’s recipients come from the proceeds of payroll taxes paid by younger and middle-aged workers. But over the years, some conservatives have pushed for turning Social Security into a system where workers invest at least a portion of their money to provide for retirement.
The upside, supporters argue, is retirement nest eggs could be much higher, given that historical rates of return from private investments are higher than those for Social Security.
The downside is the possibility of market losses. Even though Social Security funds would likely be invested more conservatively than many private investments, doing so would still carry risk that beneficiaries could lose value or, in a worst-case scenario, see their savings wiped out entirely. Neither outcome is possible under the current Social Security program.
The most high-profile proposal along these lines came in 2005, when President George W. Bush floated a plan to allow workers under 55 to invest a portion of their Social Security taxes into "personal retirement accounts." Even though Republicans controlled Congress at the time, the idea never gathered much steam, and it died without even being introduced as legislation.
A few years after that, Rep. Paul Ryan, R-Wis. -- who would in 2012 become the running mate for GOP presidential nominee Mitt Romney and now serves as House speaker -- offered a similar proposal, allowing workers under 55 to begin investing a portion of their Social Security taxes in a series of funds managed by the government. This idea also went nowhere in Congress.
These two failures reinforced the longstanding conventional wisdom that changing the way Social Security operates is the "third rail" of politics (that is, touch it and you die). This opposition to change is particularly strong among older voters, who are both reliant on Social Security and who tend to vote at higher-than-average rates.
For this reason, Social Security-themed attack ads have been prevalent over the years, often aired by Democrats, though sometimes by Republicans. Attacks against plans such as Bush’s and Ryan’s have often played up the term "privatization" as a scary concept -- so much so that supporters of this type of proposal have taken pains to distance their plans from that terminology.
In Trump’s 2000 book, The America We Deserve, he directly compares Social Security to a Ponzi scheme. "The workers of America have been forced to invest a sixth of our wages into a huge Ponzi scheme," Trump writes at one point. "The pyramids are made of papier-mache."
He also wrote in the book, according to BuzzFeed, "This is the second year Social Security benefits have been paid. The first recipients of Social Security, even once inflation was factored in, got the equivalent of a 36.5 percent annual interest rate on their initial contributions into the Social Security Trust Fund. For those retiring in 1956, their inflation-adjusted rate of return was still a respectable 12 percent. Julie Kosterlitz, in the National Journal, compares that figure with this: For those who are working now and looking to retire after 2015, their returns will be below 2 percent. And that’s if they ever get paid at all. Does the name Ponzi all of a sudden come to mind?"
In his book, Trump proposed allowing "every American to dedicate some portion of their payroll taxes to a personal Social Security account that they could own and invest in stocks and bonds. Federal guidelines could make sure that your money is diversified, that it is invested in sound mutual funds or bond funds, and not in emu ranches."
So Kaine has a point that Trump once supported partial privatization of Social Security and called it a Ponzi scheme. But that was 16 years ago, and the Clinton campaign did not provide us with any more recent evidence after the debate concluded.
So what about Trump’s position today?
Trump's views on Social Security as a candidate
As we’ve reported, Trump has been somewhat unusual among major Republicans in flatly rejecting any calls for entitlement reform, including Social Security. He’s also been fairly consistent during the campaign -- a statement we can’t make about other policy issues.
In September 2015, he said on CBS’ 60 Minutes, "What I want to do is take money back from other countries that are killing us and I want to save Social Security. And we’re going to save it without increases. We’re not going to raise the age and it will be just fine."
He told a crowd in Georgia in February, "We're gonna save your Social Security without making any cuts. Mark my words."
He also responded to a June AARP questionnaire on making Social Security solvent in the future by essentially focusing on economic reforms, and didn’t mention any proposals to change the structure of the entitlement program.
"If we are able to grow the economy, increase the tax base, bring capital and jobs back to the United States and encourage foreign direct investment, we will shore up our entitlement programs for the time being," he said.
Kaine said that Trump would "engage in a risky scheme to privatize Social Security."
Kaine cited an old stance, but it needs updating. Back in 2000, Trump did support privatization and call Social Security a Ponzi scheme. But now, 16 years later, Trump has offered relatively vague -- but relatively consistent -- statements that support keeping the structure of the program as is, without enacting changes as significant as private accounts.
The statement contains an element of truth but ignores critical facts that would give a different impression, so we rate it Mostly False.
Donald Trump, The America We Deserve, 2000 (via Google Books)
PolitiFact, "Clinton exaggerates Republicans' plans to 'privatize' Social Security," April 15, 2016
PolitiFact, "Harry Reid says Trump, Pence want to 'gamble' with Americans' retirement benefits," July 27, 2016
BuzzFeed, "Trump On Social Security In His 2000 Book: A Ponzi Scheme We Must Privatize," Sept. 29, 2015
The Oregonian, "Donald Trump, Hillary Clinton want to save Social Security, but agreement on the issue ends there," Oct. 3, 2016
Email interview with Josh Schwerin, spokesman for Hillary Clinton, Oct. 4, 2016
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