Matsui Fails to Heed Own Call to "Put Aside False Rhetoric"

December 17, 2002

In a Roll Call op-ed, Rep. Robert Matsui (D-CA) argues that personal accounts would harm the Social Security program rather than making its problems easier to solve. Unfortunately, while Matsui calls for a reasoned debate, his own claims regarding personal accounts do not stand up to close attention.

The text of Matsui's op-ed is below, followed by analysis by Cato Institute Social Security analyst Andrew Biggs:

"An unfortunate result of any campaign season is that complex and important issues are reduced to confusing and often misleading television ads and slogans. There was no greater casualty this year than the debate over the future of Social Security.

"Although the debate over how to deal with Social Security's long-term financial challenges is real and pressing, the issue became clouded in election-year tactics. Voters were treated to a meaningless debate about the semantic definition of the word "privatization" instead of a genuine and thoughtful debate over the policy itself. But obscuring the issue did not make it go away. It is now up to President Bush and Congressional Republicans to move beyond electioneering and semantics and begin the hard work of solving this problem. There must be no preconditions on the outcome of the debate, and the fiscal consequences of creating private accounts in Social Security must be acknowledged.

"Whatever one chooses to call the approach, diverting a portion of Social Security tax revenue into personal retirement accounts would cut benefits for current and future retirees and drain trillions of dollars from the Social Security trust fund. Beyond the enormous costs associated with privatization, turning Social Security into another 401(k) would negate a contract that enables millions of Americans to live in security and dignity. In this age of shrinking pensions and volatile markets, Social Security is one of the last remaining defined-benefit programs that families can count on no matter what. Privatization would eliminate this guarantee.

"Privatization proponents suggest that Social Security is on its deathbed and that radical surgery is necessary. Neither claim is true. According to the Social Security trustees, the program's financial health has improved every year for the past five years. New economic and demographic projections show that Social Security can pay full benefits until 2041 and three-quarters of benefits thereafter. Clearly, filling this gap is a challenge, but it is hardly the crisis that critics of Social Security make it out to be.

"To solve the problem, lawmakers from both parties will have to come together to find common ground. But the guiding principle must be to do no additional harm to Social Security's finances. It is on this most fundamental point that proposals to privatize the system fail. The simple fact is that privatization will only make Social Security's financial problems worse. By diverting a portion of Social Security taxes into individual accounts, privatization would actually hasten the date at which Social Security is no longer able to pay full benefits by more than a decade.

"Since Social Security taxes are immediately paid out to current beneficiaries (it's a 'pay as you go' system), money taken out of the program would come directly out of our parents' and grandparents' pockets. That's why privatization will mean benefit cuts. These cuts would affect all recipients - retirees, disabled workers and survivors alike. And since privatization opens a dramatic hole in Social Security's finances, trillions of dollars would be needed to make up the difference. Some of the plans on the table would more than double the national debt. With the federal budget once again running hefty deficits, where would we find the trillions needed to finance private accounts, while funding other priorities such as the war on terrorism, homeland security, prescription drugs, health care and education? This money simply does not exist. Even the president's handpicked commission failed to meet its objective of devising a system of private accounts that would not raise taxes or cut benefits. Each of the three plans presented by the commission calls for significant benefit cuts and trillions of dollars in unspecified revenue.

"Many who favor privatization have asserted that there would be no downside to private accounts since those accounts would be "voluntary." But the reality is that the cuts required by privatization are so large that everyone will face them - regardless of whether they choose to set up private accounts. In essence, privatization offers workers the illusion of choice while actually robbing them of benefits that had once been guaranteed by law.

"If we are serious about addressing this issue in a truly open and bipartisan way, leaders of both parties should acknowledge the real problems facing Social Security and put aside false rhetoric about bankruptcy and crisis. We should dismiss proposals that will exacerbate rather than solve the problems, and come together for an open and honest discussion without a predetermined agenda. Only by approaching this issue from a policy perspective, rather than a political one, will we be able to forge a bipartisan majority that will protect and strengthen Social Security for future generations."

Cato Social Security analyst Andrew Biggs responds:

"Rep. Matsui urges that we 'put aside false rhetoric' and 'come together for an open and honest discussion' on Social Security. Regrettably, Matsui's own op-ed often fails to reach those standards."

"For instance, Matsui claims that personal account plans would inevitably cut benefits for current retirees. The Social Security Administration has analyzed a number of account proposals. Can Matsui point to one – let alone, many – that does so?

"Likewise, Matsui maintains that personal accounts would 'drain trillions of dollars from the Social Security trust fund.' Yet non-partisan SSA analysis shows all account legislation improving the trust fund's balance and solvency date.

"Matsui also asserts that personal account proposals 'will only make Social Security's financial problems worse.' It is strange, then, that while numerous personal account plans are confirmed to keep Social Security solvent indefinitely, there is no – repeat, no – existing non-account legislation that would do so.

"Personal accounts are not a free lunch. But as a recent SSA study shows, dollar-for- dollar, personal accounts can pay significantly higher total retirement benefits than the traditional program. If all the faults Rep. Matsui attributes to personal account plans are true, it should not be difficult for him to construct a non-account proposal that is superior. It is my firm prediction he will not do so."

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