Clinton exaggerates Republicans' plans to 'privatize' Social Security

During the Brooklyn presidential debate, Hillary Clinton positioned herself as a defender of Social Security while also blasting Wall Street.

The Republicans, Clinton said, "still want to privatize (Social Security). In fact, their whole idea is to turn over the Social Security trust fund to Wall Street."

However, this is exaggerated. It falls into a long tradition of politicians, including many Democrats, raising alarms over Republican plans for Social Security.

As we noted more than two years ago, Republicans have long pushed -- unsuccessfully -- for adding an element of private investment to Social Security. Proponents usually call these "personal accounts," while critics call it "privatization."

Whatever term you use, none of the remaining three GOP presidential candidates has said the United States should "turn over the Social Security trust fund to Wall Street."

A primer on privatization

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.

What the Republican candidates say

When we contacted the Clinton campaign, they sent three examples, one for each of the remaining GOP hopefuls.

For Sen. Ted Cruz, R-Texas, the Clinton campaign pointed to a remark by Cruz in the fourth Republican primary debate on Nov. 11, 2015. Cruz said, "What I’ve said is for seniors, we should make no changes whatsoever. For younger workers, we should gradually raise the retirement age. We should have benefits grow more slowly, and we should allow them to keep a portion of their taxes in a personal account that they control, and can pass on to their kids."

This makes pretty clear that Cruz is offering an idea much like Bush’s 2005 proposal. It involves a portion of taxes, and it doesn’t simply hand over money to Wall Street but rather has individuals make their own decisions about how to invest it. A rundown of Cruz statements related to Social Security collected by AARP, an advocacy group for senior citizens, produces several other statements by Cruz that echo this general approach.

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United Auto Workers

stated on October 23, 2024 in a Meta ad

Michigan U.S. Senate candidate Mike Rogers “wants to cut Medicare and Social Security.”

This is notably different than what’s communicated by Clinton’s charge -- that Cruz would "turn over the Social Security trust fund to Wall Street."

For Ohio Gov. John Kasich, the Clinton campaign pointed us to a statement in the Chicago Tribune -- from 16 years ago. The article said that Kasich, then a U.S. House member, "has introduced a plan similar to" the one for Social Security that Bush, then a candidate, was advocating. It involved Americans putting "perhaps 2 percentage points of their Social Security payroll taxes into personal retirement accounts for investment in stocks and bonds," according to the article.

But that wasn’t in line with what Clinton charged in the debate, and today, Kasich doesn’t even cite personal accounts as part of his proposal for addressing Social Security.

According to his campaign’s website, "John Kasich’s balanced budget framework does not include changes to Social Security or its benefits to achieve balance, nor does it include the costs of filling Social Security’s deficits. As president he will lead a bipartisan effort to assemble the best ideas from the various reform plans that have been proposed to preserve its solvency."

The Clinton campaign also reached back 16 years to find evidence on the other GOP candidate, Donald Trump. It pointed to his 2000 book, The America We Deserve, in which 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."

Here, too, Trump’s plan from 2000 was more nuanced than Clinton’s comment would indicate -- and more to the point, Trump appears to have said nothing about returning to the personal account idea. He does not mention Social Security among the policy issues he addresses on his website, and the AARP’s collection of Trump quotes on Social Security doesn’t provide any indication that he favors privatization now.

Finally, it’s worth noting that the partial privatization plans have typically been limited to younger workers -- not those who have reached or are approaching retirement age.

Our ruling

Clinton said Republicans "still want to privatize (Social Security). In fact, their whole idea is to turn over the Social Security trust fund to Wall Street."

At least one candidate, Cruz, has proposed a form of privatization involving personal accounts funded by a fraction of payroll taxes. Still, Clinton’s statement takes a longstanding Democratic exaggeration about the scope of GOP overhaul proposals and makes it even further off-base by implying that payroll tax revenues would flow directly to Wall Street without any input from beneficiaries. We rate the statement Mostly False.

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