Clinton on Social Security

December 10, 2002

At a December 3 Democratic Leadership Council event held at New York University, former President Bill Clinton offered his views on where his party should move on Social Security reform:

If you don't like privatizing Social Security, and I don't like it very much, but you want to do something to try to increase the rate of return, what are your options? Well one thing you could do is to give people one or two percent of the payroll tax, with the same options that Federal employees have with their retirement accounts; where you have three mutual funds that almost always perform as well or better than the market and a fourth option to buy government bonds, so you get the guaranteed social security return and a hundred percent safety just like you have with Social Security.

Click here for the full text of Clinton's remarks.

Cato Social Security analyst Andrew Biggs says, "It's not clear that Clinton was advocating true Social Security accounts rather than the supplemental investment accounts he favored in the past. But these are interesting days for Social Security reform, so anything is possible. If Clinton is looking to resuscitate his reputation, as well as strengthen centrist Democrats against the party's recent shift to the left, opening a dialogue on Social Security reform might be the way to do it."

Three points hint that Clinton was pointing at "real" Social Security accounts:

• First, Clinton refers to increasing Social Security's rate of return. Supplemental accounts, which are totally outside the Social Security structure, would do nothing in this regard.



• Second, Clinton refers to accounts funded out of the payroll tax, as Social Security accounts would be, rather than out of general tax revenues.



• Third, Clinton's defense of accounts regarding risk – that workers could choose to invest them solely in government bonds, giving a guarantee as strong as Social Security's – is one that applies to Social Security accounts much more so than supplemental accounts.

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