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CNN Crossfire

Should Social Security Be Partially Privatized?

Aired July 24, 2001 - 19:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)

RICHARD PARSONS, CO-CHAIRMAN, SOCIAL SECURITY REFORM COMMISSION: There is a problem with our Social Security system. It is not sustainable in its current form.

(END VIDEO CLIP)

BILL PRESS, CO-HOST: Tonight: A new report says Social Security is not so secure. Is it true, or is the report just trying to scare Congress into putting Social Security dollars in the stock market?

(BEGIN VIDEO CLIP)

DR. HENRY AARON, BROOKINGS INSTITUTION: I fear that Chicken Little is alive and well and at work, drafting the Bush commission interim report.

(END VIDEO CLIP)

ANNOUNCER: Live from Washington, CROSSFIRE. On the left, Bill Press. On the right, Robert Novak. In the CROSSFIRE: Democratic Congressman Robert Matsui of California, ranking member on the Social Security subcommittee, and fellow subcommittee member, Congressman J.D. Hayworth, Republican from Arizona.

PRESS: Good evening. Welcome to CROSSFIRE. The sky is falling, and so is Social Security. So says the interim report of the president's commission on Social Security. It warns that Social Security will be out of money in 15 years and that will mean cuts in benefits, new taxes or a bigger federal debt, unless at least some of those funds are invested in the stock market. The report also claims that Social Security is unfair to women and minorities.

In Washington today, protesters marched outside the group's meeting and top Democrats accused commissioners of being on a mission to destroy Social Security. So is investing in the market the way to save Social Security? Or, given the way the market's been acting lately, is it too big of a gamble? It's an old argument, but back with more passion than ever tonight -- Bob?

ROBERT NOVAK, CO-HOST: Congressman Matsui, I cannot believe that the Democrats, quite apart from the solution to the problem, are saying that there's not a problem, that you're not running out of money, as everybody knows.

We've known each other a long time. Bob Matsui, look into my eyes and tell me that the commission isn't exactly right in saying you're going to start running out of money in the year 2016.

REP. ROBERT MATSUI (D-CA), SOCIAL SECURITY SUBCOMMITTEE: The commission, Bob, is absolutely wrong about that. The money will not actually run out until way into 2075. Benefits will be reduced in the year 2038, 37 years from now. But we will have a $5 trillion surplus in the year 2016, not running out of money.

PRESS: And Congressman Hayworth, I'd like you to look me in the eyes and tell me and the American people you will never lose money if you put it in the stock market.

REP. J.D. HAYWORTH (R-AZ), SOCIAL SECURITY SUBCOMMITTEE: See, you set up a false construct to begin with. The money doesn't have to go exclusively in the stock market. There can be other safe fiduciary accounts that Americans should have the option to use for a portion of their Social Security retirement. That's the key difference.

NOVAK: Congressman Matsui, I am absolutely stunned by your answer, because I just want to show people in America the truth, by a professional staff on a bipartisan commission, four Democrats -- four Republicans on this commission -- and I want you to take a look at the shortfalls. In the year 2016, that shortfall in cash, 17.4 billion, going up each year till 2035 -- that's not that far -- $317.6 billion. These are people that have been working in this all their life. Do you deny that?

MATSUI: Bob, the account is accumulating a surplus now, and at 2016 -- now at 2016 there will be more money going out in the form of benefits than in the form of payroll taxes. But because we've accumulated surpluses in there now, by the year 2016 we won't even be drawing anything except the interest. It won't be until the year 2024, 23 years from now, before we even tap the surplus, and then not until the year 2038 before we have to do anything significant.

Now, let me say this. We need to fix that system now, but the president should not be messing around with the commission that wants to privatize Social Security, which won't work. What the president should do is sit down with Democrats and Republicans in the House and Senate and see if we can come up with a bipartisan bill. This needs to be addressed. We need to address it now. But we don't need to come up with radical solutions, and that's the point we're trying to make, Bob.

NOVAK: You're talking about solutions, but the demagoguery, if I could use that word, is to say that these figures are incorrect. I want to read you, if I could, a quote -- I'm not going to tell you who said it. I'm going to make you guess, Bob Matsui, who said it.

He said -- quote -- "Today Social Security is strong, but by 2013 payroll taxes will no longer be sufficient to cover monthly payments and by 2032, the trust fund will be exhausted and Social Security will be unable to pay out the benefits older Americans have been promised." Who said that? Do you know? Who said it?

MATSUI: That may have been the president, probably.

NOVAK: What president?

MATSUI: Well, I would imagine, you always like to attack President Clinton. Probably President Clinton. Was it?

NOVAK: You know what? You get the cigar. That was President Bill Clinton. State of the Union.

MATSUI: That was before we started to accumulate the surpluses, and that's -- well, Bob, every year the actuaries come up with different numbers. I mean, it depends upon the state of the economy over the next 10, 20, 30 years. I mean, after all...

PRESS: Congressman Hayworth, before we get into the details of these proposals and these recommendations, I want to look at the commission itself. I mean, these are good people, headed by one of our bosses, headed by Former Senator Moynihan. But the point is, all of these good people, the only way they could get into the commission was to agree ahead of time that they wanted to privatize at least part of Social Security.

So this is not an honest debate. This is a stacked deck.

HAYWORTH: You know, I guess it shows the level of desperation, that you'll attack not only one of your directors at AOL Time Warner, the parent company of CNN...

NOVAK: And this may be his last show!

(LAUGHTER)

PRESS: Pretty brave, don't you think?

HAYWORTH: Also, known as a Democratic icon, Senator Daniel Patrick Moynihan, a guy who, in the midst of the welfare reform debate stuck to his guns, said it was the wrong idea. Can you seriously imagine anybody pushing Pat Moynihan around? No. He is there because a panel of distinguished Americans from across the political spectrum have gathered to take a look at the serious challenges.

And you mentioned, who is disputing what? Bob Matsui said in a recent newsletter -- quote -- "When the baby boomers begin to retire in the next 10 years, Social Security will begin to pay out more in benefits than it receives in revenue." He goes on to say "Congress absolutely must act to protect this vital program." We agree on that, Bob.

MATSUI: And let me just say this. I agree. But the problem is, is privatization is not the way to go. Privatization is going to ruin Social Security.

(CROSSTALK) HAYWORTH: We're not talking about privatization.

MATSUI: The system is going to actually end up privatized, and that's what these seven -- eight commissioners are all about.

HAYWORTH: Already, the roar of the grease paint, the smell of the crowd -- instead of saying, let's solve this problem because we don't have an R&D on our Social Security cards, we've got numbers. And the numbers show we need to act now to save this vital program.

PRESS: Let me come back to my point, which you totally ignored. I'm not attacking Pat Moynihan, I'm not attacking Mr. Parsons. What I'm looking at is what this commission is all about. We do need an honest debate. My point is, you're not going to get it from this commission.

Let me read to you, if I can, from "The Washington Post" this morning, talking about the commission's interim report: "As a first step, Bush asked the commission to prepare an interim report that documented the weaknesses of the existing program and developed specific criteria, consistent with the president's thinking, for evaluating proposed changes."

So you see what I mean? The president has said, here you go, guys. Here's what I want, and they're coming back to him. It's just a setup. It's a scam.

HAYWORTH: Bill, I'm surprised at you. You understand in a free society that a specific course of recommendations can be recommended and it's not exclusive. It doesn't occur in a vacuum. Why, we just saw Henry Aaron of the Brookings Institution offer his different point of view. And the fact is, whether it's the president's bipartisan commission or outside groups like the Brookings Institution, or the Cato Institute or other folks, Bob Matsui and I ultimately will have to write policy as members of the Social Security...

PRESS: But this group is all one-sided, you admit that.

HAYWORTH: No, I don't admit that at all.

NOVAK: Congressman Matsui, I think there is some ground rules of decorum that have to be followed in civil debate, and I think you've always followed those ground rules, at least until now. I used to think that the new majority leader of the Senate, Senator Tom Daschle of South Dakota followed those rules, until today. And let's listen to something that Senator Daschle said that just is absolutely incredible. Let's listen to him.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: Your Social Security benefits will be cut under the president's commissioned report by 41 percent, nearly 1/2.

(END VIDEO CLIP) NOVAK: Now, that -- I hate to use the word with my good friend Tom Daschle -- that's a lie. I'll tell you why it's a lie. They put a lot of options of things that will have to be done if you don't have a constructive reform. It could cut benefits, could raise taxes, could borrow the money, but even under the option of cutting benefits, it's only 26 percent, not 41 percent. But that was not anything they recommended. They were just showing what's going to happen if you don't take action, That is demagoguery, Bob, isn't it?

MATSUI: No, it isn't, let me tell you. If in fact you take 2 percent off the top on the payroll taxes for private accounts, which the president wants to do, what the commission will probably recommend, and you take the current problem, because we do have a demographic problem now -- we will have not a 40 percent cut, a 54 percent cut for current retirees' benefits.

NOVAK: That's what you say, but that's not in this report.

MATSUI: Well, of course. The report won't mention that...

NOVAK: Well, you said it was in the report!

MATSUI: No, because the report actually wants to have privatization, which will be a bad program. You're going to take away the defined benefit program for senior citizens and put it into a defined contributions -- you're going to put them at risk in the stock market by doing something like that. That is...

HAYWORTH: That's not true.

MATSUI: Then what's your solution?

HAYWORTH: Well, that's exactly the point.

MATSUI: OK, well, what's the point?

(CROSSTALK)

NOVAK: You don't -- you don't have any respect for me, Bob.

MATSUI: I love you, Bob, you know that. I have great respect for you.

NOVAK: You think I'm just a right-wing journalist.

MATSUI: No. No, I do not.

NOVAK: But I want you to listen to what is said about you by one your fellow Democrats, Bob Johnson, a great entrepreneur, a loyal Clinton-Gore Democrat, a big contributor to the Democratic Party, the first black billionaire in America, the founder of Black Entertainment Television. Let's listen to what he says about you.

(BEGIN VIDEO CLIP)

ROBERT JOHNSON (D), COMMISSION MEMBER: As a member of the Democratic Party and as a Democratic appointee to this committee, I would urge my fellow Democrats to lower the rhetoric, stop the kill- the-messenger strategy and focus on trying to address a very serious problem that will not go away simply by calling out names, or trying to hide in the sand.

(END VIDEO CLIP)

NOVAK: Isn't that good advice from a very loyal and generous Democrat?

MATSUI: I'm honored, actually, but let me just make an observation here. Bob Johnson at the first meeting said that minorities suffer under the current system. That is not true. In fact, minorities end up getting a greater rate of return than the general population -- African-Americans and Latinos.

And secondly, because 30 percent of all Social Security benefits are in the form of -- in the form of survivors' benefits disability benefits, and minorities just because of the jobs they have, they have a greater incident of those -- those two programs. And so, minorities actually benefit at a greater rate than the general population, so Bob Johnson doesn't know what he is talking about.

NOVAK: He does know what he is talking about, and you ought to read the report, because it explains what he is talking about.

But we are going to have to take a break, and when we come back, we will turn to what should be done to fix this broken system?

(COMMERCIAL BREAK)

NOVAK: Welcome back to CROSSFIRE. Is Social Security in trouble, and should individuals be able to own their own funds? That's our debate between two members of the House Ways and Means Social Security Subcommittee, where all legislation on the question begins. Democrat Robert Matsui of California answers to the two questions no and no. Republican J.d. Hayworth of Arizona says yes and yes -- Bill Press.

PRESS: Says no and no. Congressman Hayworth, now, as Congressman Matsui pointed out, we know what this commission is going to recommend. The president has already told them 2 percent in -- of the Social Security into these private accounts, into the market. The market -- the Dow today down 183 points, it was just barely over 10,000. Nasdaq down 29, under 2,000, 40 percent loss in the market in the last six months. I mean, congressman, seriously, isn't this a little too risky for a system that cannot fail the people who depend on it?

HAYWORTH: You must not have heard me earlier. I established very clearly that what you were saying was mistaken.

PRESS: I heard you.

HAYWORTH: I'm sure not on purpose, but when you say the only alternative is the stock market, you are wrong. The fact is, with personalization -- and quick math question, 2 percent from 100 leaves how much? Ninety-eight percent.

(CROSSTALK)

PRESS: ... even for partial privatization, J.D.?

HAYWORTH: Again, for personalization of Social Security, it does not mean that you have to run to Wall Street. There are other accounts, reasonable, solid accounts, in a fiduciary status that Americans can depend on. And no, I'm not talking about beach front property in Yuma, Arizona. I'm talking about standard programs of sound rational investment because after all Albert Einstein told us the world's most powerful force is compound interest.

PRESS: Give me -- two questions then, OK? Give me an example of one investment that is bound never to fail. And No. 2, what happens when you pick one that does fail. Who bails you out?

HAYWORTH: Well, see, that is another good thing about the program, because we'll have a safety net involving our Social Security plan that will take care of folks if they make an improper decision.

PRESS: Why should you? Why should you reward stupidity? If you are going to give them the freedom to make a bad investment, why should you bail them out?

NOVAK: Oh!

(CROSSTALK)

HAYWORTH: There we have it, I think we have history tonight. Ladies and gentlemen, Bill Press now says there is no need for a social safety net! This is the 21st century...

(CROSSTALK)

PRESS: Our safety net is Social Security. Keep it!

NOVAK: Congressman Matsui, I want to make one more question -- I know you understand Social Security and what a fraud it is, but I want you to admit it, because -- let me just read from the Social Security commission report -- have you read the report, by the way, in entirety?

MATSUI: I have read the report -- yes, the report -- this sham report that just came out? Yeah. Yeah.

NOVAK: Then this won't be news to you, it's news to our viewers, though. It says: "Bonds were credited to the Trust Fund over time, resulting in a Fund balance now exceeding $1 trillion." That's what you're talking about. "The problem is that when Social Security begins running cash deficits in 2016 and must begin redeeming the Fund's bonds, the nation will face the same difficult choices as if there had been no Trust Fund at all," because these so-called bonds are paper IOUs, and there is no trust fund. Won't you admit that?

MATSUI: Bob, you have stock? If you have stock, you have a piece of paper. But it's backed up, and so you have an asset. There is assets in the Social Security trust fund. In fact, for them to say that actually diminishes the credibility of that commission report. Anybody that would think that -- that U.S. bonds are meaningless and have no asset value, that is ludicrous!

NOVAK: These aren't bonds...

MATSUI: That's ludicrous!

NOVAK: ... these are these special little IOUs, those are non- negotiable bonds, you can't sell them!

MATSUI: But they are bonds, Bob! They are backed up by the U.S. government. I don't know how you can even think that. You are smarter than that, Robert.

NOVAK: I feel like Alice in Wonderland and you are the Mad Hatter, but Bob -- Bob Matsui, I want you to listen to the person who is even a greater Democrat than you, and you are a great Democrat. That's a former chairman of the Senate Finance Committee. Let's listen to what he says.

(BEGIN VIDEO CLIP)

DANIEL PATRICK MOYNIHAN, CO-CHAIRMAN, SOCIAL SECURITY REFORM COMMISSION: We are concerned about the people who are left out, the people who are left out. They work all their lives and end up with nothing, save indeed something to live with -- live off, but nothing to leave.

(END VIDEO CLIP)

NOVAK: So what -- Senator Moynihan has been pushing this for many, many years. One time I thought he had a lot of support in the Democratic Party to give people who are ordinary people, not as rich as you and Press but people to give them -- some ordinary people -- some stake. They don't own any of this stuff that they are taxed on now but they would own -- and isn't the problem that you don't want these ordinary people to have wealth because they might become Republicans?

MATSUI: Bob, what we want to do is make sure that these ordinary people do have a benefit when they retire. That is the key because we want to have a defined benefit, so they know exactly when they retire that there fund of money available on a monthly basis, and that's what Social Security provides.

In addition to that, if they happen to be in the work force today, and they were disabled, or if they die, or the breadwinner dies, at least they know their family will be partially taken care of with the survivors and disability benefits. That's something that you can get but most people can't get that kind of insurance, and as a result of that obviously, it helps middle little income Americans and retired employees -- today, the current system.

PRESS: Congressman Hayworth, I want to come back to these personal accounts that you want to set up, whatever percentage of the Social Security...

NOVAK: (UNINTELLIGIBLE)

PRESS: It is. There's no free ride. This does not come cheap. In fact, President Bush when he was a candidate never told us how he was going to pay for it, but it was estimated that it was going to cost a trillion dollars to set up these new accounts. There's just one little problem which I think Majority Leader Tom Daschle, whom I consider a great Democrat, pointed out today at his news conference. Please listen.

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: There has to be a better way. There's something else the commission's report leaves out -- the trillion dollars it would cost to create those private accounts is gone. The president just spent it on his tax cut.

(END VIDEO CLIP)

PRESS: How are you going to pay for them, Mr. Hayworth?

HAYWORTH: Tom is a very gifted politician. He is not much of an accountant. And I'll tell you this, it is so sad about this whole question. With you guys every day is Halloween and you want to make the ceiling and the floor synonymous. Americans can never succeed. They can never have more of their own money to save spend an invest.

Dick Gephardt this weekend in Des Moines said we shouldn't have the tax cut. You guys, if you get back into power will raise taxes.

NOVAK: Raise taxes.

HAYWORTH: The fact is, there is only one solution for the Democratic Party and that's fine. I guess it's a noble thing in your mind and that is to take more and more money from more and more people, and lock it into a government program, instead of realizing the wave of the future is to give people some control over some of their own resources. It's called freedom.

PRESS: You know, the people are smarter than you think they are. They recognize that you don't answer questions, you just attack the Democrats. You ducked the question. You don't know how you are going to pay for them. Let me show you how smart the American people are. They know this is going to cost them. Here is a protester -- random protester -- off the street...

NOVAK: Straight form Genoa.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: If you look at the fees that Wall Street firms charge for small private accounts, given the rate that I'm putting money in, the fees would almost wipe out any gains from the market.

(END VIDEO CLIP)

PRESS: People are going to have to pay fees, big deal. Great plan. HAYWORTH: First of all, let me thank the AFL-CIO for sending their summer interns down to march in front of this hearing today. It was beautiful, Saul Alinsky's "Rules for Radicals" politics. But it doesn't solve the problem that we face and the challenge and opportunity at hand, and that is to give young workers a portion of freedom and wise investments to make on their own behalf for their set -- for themselves and their future while saving this program for today's seniors.

PRESS: Looks like we are going to have to continue the debate. I have a feeling we will, Congressman Matsui, great have you back. Congressman J.D. Hayworth. You guys, don't settle it without us.

Bob Novak and I, we will tell what you what we are going to do with our Social Security checks when we come right back, closing comments.

(COMMERCIAL BREAK)

PRESS: So Bob, let me get this straight. What you are saying is I can take a little bit of my money and I can invest it anywhere I want in these options that you are going to give me. And then when I lose my shirt I can come back to the federal government and the federal government is going to bail me out? Why don't you just let me go to Las Vegas and throw it away on machines?

NOVAK: Because we will have limited options, nobody has ever lost money over the long haul on those options even if you started with the great depression. But I will tell you something else, Bill, I think sometimes you act half-way responsible. It is irresponsible for the Democrats to go to the senior citizens like me, who are receiving Social Security and say they are going to take away your check. Because -- just a minute -- none of this affects people now on Social Security -- none of it -- none of it! Not one cent!

PRESS: And it is a lie to say that the system is going to be belly up in 2016. These are scare tactics, Bob, on the part of the Bush Administration to undermine Social Security. That's exactly what it is.

NOVAK: It's a lie to tell the present beneficiaries they may lose it.

PRESS: Form the left I am Bill Press. Good night for CROSSFIRE.

NOVAK: From the right I am Robert Novak. Join us again next time for another edition of CROSSFIRE.

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