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Michele Bachmann’s deceptions on Social Security

The DFL put out a memo Monday reviewing Michele Bachmann’s past support for Social Security privatization. As I mentioned in a recent post, I had a goodly bit of experience with Bachmann in 2006-07, during her transition from legislator to U.S. Rep. and gained some insights into both her Social Security position and her problems being straightforward about it, which I’ll describe but first two politically incorrect observations.

1. Playing the Social Security privatization card has become a standard Dem scare tactic, and it seems fairly outlandish in the current moment. As Bush leaves office and the congressional Repubs worry about facing a 60-40 Dem majority in both houses of Congress, Social Security privatization will not be given serious consideration any time soon.

2. I don’t favor the Bush plan for privatizing Social Security, but it’s not as bad an idea as the typical demonization of it suggests. It’s true (as Al Franken has suggested in several recent talks and debates) that if that if Social Security had been a system of private accounts over the past 40 years or so, a lot of people would have just taken a 20 or 30 percent hit in their retirement nest eggs. But if they had been steadily investing some of their FICA contributions into an S&P index fund for the past 40 years, most people would be in pretty good shape, even with the recent unpleasantness in the stock market. The main problem with partial privatization is that you can’t get there from here without borrowing trillions more dollars to keep the system going during the transition. I do think those who trash the idea should put forward their own ideas for addressing the long-term solvency issues. (And Franken did embrace one of those ideas in the last debate.)

But back to Bachmann. When I started covering her 2006 race for Congress I knew she was ultra-conservative, but I had the impression she was refreshingly straightforward about it. I found out otherwise on the latter impression.

Bachmann and the ‘Fair Tax’
Take, for example, Bachmann’s enthusiasm for the so-called “Fair Tax.” Rep. Bachmann seems to think tax is a four-letter word. She favors cutting all of them except for those she favors eliminating. She says the federal tax system is “totally broken” and in need of a “complete overhaul.” She speaks enthusiastically of the so-called “fair tax” idea.

This radical proposal would scrap the IRS and replace the entire tax code with a national sales tax (some say it would have to be 27 percent, some say more like 30) on pretty much everything (cars, houses, the works). In fairness to the fair tax, the proposal includes a so-called “prebate” provision that would give every household a monthly payment big enough so that families living at the poverty line would get all their tax money refunded.

Fair tax proponents (I’m not one, but I’m open-minded enough to enjoy such radical proposals) say this last bit saves it from being regressive (which is the first big objection of fair tax critics). Anyway, I’ve heard Bachmann wax poetic about how great this would be, so I write that she “favors” the idea. She calls to complain, and ask for a correction. Says she thinks the flat tax is an idea “worthy of debate.” But she isn’t quite “for” it. My notes aren’t clear about whether she used the word “for” so I write a clarification (smuggled into a hard-hitting fact-check of one of her opponents misleading attacks on her. (Although I seriously question whether I mischaracterized Bachmann’s position on the “Fair Tax,” I can’t prove I’m right and I’m trying very hard to be fair to her in my coverage of this race.)

Then I locate an op-ed, signed by Bachmann and a co-author, advocating the fair tax approach for Minnesota, to replace the state income tax. What, your humble ink-stained wretch inquires of the candidate, is up with that? Bachmann says she was working on the piece with the co-author but never authorized its submission and it ran without her approval. You getting the idea? I no longer believe I am dealing with a straightforward person and start taping the interviews whenever possible.

OK, on partial privatization of Social Security (I always make a point of saying “partial,” which Bush’s proposal was. I try very hard to be fair to this idea, which I do not favor but consider “worthy of debate.”) On this one, Bachmann was clear as a bell. She explicitly embraced the Bush plan, which would have given younger workers an option to invest a portion of their FICA taxes through a personal investment account in exchange for accepting a reduced benefit from the conventional Social Security formula. (And frankly, whether you hate it or not, that’s how it should be described, although the long version of the argument gets much more complicated.)

The AARP (the powerful lobby for Americans over 50) hates privatization, partial, voluntary or otherwise. It’s the life or death issue when seeking their endorsement. They ask all candidates seeking endorsement to fill out a questionnaire asking whether the candidate favors “using Social Security taxes for private accounts.” This is exactly what Bachmann does favor. But she leaves the question blank (through the miracle of the web, you can still see it here) and then writes, lower on the form: “Social Security must be protected. At the same time, I believe Social Security must be strengthened so that it remains able to pay retirement benefits for years to come.… Whatever reforms we adopt, we must find a way to strengthen and protect Social Security without raising payroll taxes, without reducing benefits, without raising the retirement age and without privatizing the system.”

Half-truths and deceptions
In those days, I argued that journalists should be very reluctant to use the word “lie” to describe half-truths, deceptions and other prevarications by politicians, and I managed to write about this without using those words. I was aware that several politicians who favored the idea long known as “privatization” (or partial privatization) of Social Security had decided to abandon that word in favor of words like “private accounts” or even “individual investment accounts.”

(Norm Coleman, by the way, has also attempted this dodge during his 2002 Senate race. He aired an ad asserting that “I don’t support privatizing Social Security and I’ll fight against anybody who would do that.” He actually favored, and still favors, the idea that has, for decades, been called Social Security privatization. His denial was based on his argument that “privatization” was not a proper word choice.)

Anyway, back then, when Bachmann would still take my questions, I asked her how she could square her clear position in favor of the idea that had been for decades called Social Security privatization with her responses to the AARP questionnaire. (AARP, you may have noticed, was also aware of the dodge and didn’t ask whether people favored privatization, but whether they favored “private accounts,” which should have robbed Bachmann of even the Coleman dodge.)

In response to my questions, Bachmann ran a merry race. She said that for younger workers “we should look at the idea of who will own our retirement.” She said that “the idea of allowing young people to invest their own funds is something worth debating.” And “we need to look at those options” but “that’s not privatization.” If the AARP (and other groups, like the Cato Institute Project on Social Security Privatization, that actually favored the idea) choose to call the idea privatization, “that’s their problem.”

My interviews with Bachmann were at this point no longer as polite as they had once been. As far as I can tell from reviewing my old Strib blog, this may have been the last time she actually took one of my calls. I accused her of giving me the run-around. I asked her: “Without use of the word ‘privatization,’ do you support allowing younger workers the option of using a portion of their FICA contributions to invest in stocks and bonds?”

She replied: “To invest. Put the period after invest.”

I asked her what investment she might have in mind other than stocks and bonds. But she had to go.

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Comments (7)

  1. Submitted by Bernice Vetsch on 10/28/2008 - 11:31 am.

    Actually, Barack Obama (among other Democrats) has proposed a way to save Social Security from the FALSE right-wing-privatizers’ (beginning with partial privatization) claim that it is going “bankrupt.” George Bush decried its $12 billion shortfall without mentioning that it would take place over 75 years. Hardly an emergency, although you wouldn’t know that from listening to right-wing political candidates.

    In 1983, Alan Greenspan and others prepared for the coming flood of baby boomer Social Security recipients by raising the cap on the amount of earnings subject to taxation to support this program.

    In 2009, Obama and a Democratic Congress will again raise that cap to assure Social Security’s solvency for many decades into the future without putting today’s young workers’ retirement income at risk. (Private accounts on top of Social Security but not replacing it are recommended by Dems and, I’m sure, many Republicans.)

  2. Submitted by Grace McGarvie on 10/28/2008 - 11:53 am.

    The words that pass her lips, do not necessarily come from her heart. She who thinks with her lips, skips the brain and attributes the words to her heart, because she has no idea where these thoughts come from. Amazing!!!

  3. Submitted by Tony Wagner on 10/28/2008 - 05:30 pm.

    I actually feel for Bachmann on this issue. Social Security is a severely flawed system, and any serious “fix” for it will either require a huge infusion of cash (i.e. a tax hike) or a dramatic redefinition of how the benefits are accrued and distributed. Even hinting at either of these options, though, has become political poison, so politicians of all stripes are forced to perform an artful dodge while the real solutions languish on the sidelines. It’s a testament to the most powerful, yet least recognized, “special interest” influencing politics today: the gray lobby.

    So, I’ll give Bachmann a mulligan on this one: she didn’t perform the dodge very artfully, but it’s in the nation’s best interest that no one is forced to perform the dodge at all. That said, even if there were no restrictions on the public debate, I would have zero confidence that Bachmann could be responsible for forming or supporting the best solution to the Social Security mess, given her erratic statements and behavior elsewhere.

  4. Submitted by Tom Anderson on 10/28/2008 - 10:17 pm.

    Good call on the “gray lobby”. Since there will soon be more retireds than workers, no one will dare say anything to upset the larger block of voters. Raising the limit will certainly work, as it will to fund all the rest of the new spending (taxing the more wealthy). Reducing benefits would work too but again, it would offend the larger block of voters. Bachmann appears to be a quick study, her ability to say pretty much nothing almost equals Obam, McCain, Franken, Coleman, etc.

  5. Submitted by Vonya Ereye on 10/29/2008 - 11:38 am.

    Social Security is the largest Ponzi scheme ever devised. It was designed and intented as a temporary measure and used a 1% tax to work. It went from having 16 workers support 1 retiree to today’s figure of 2 workers supporting 1 retiree. Clearly, that’s not sustainable. Yet, no one is willing to admit it and do something about it.

    Originally, Social security set up a benefits plan that kicked in only when you beat the average lifespan, essentially rewarding those that lived above average. Half of the people never saw a dime, so it was more of an insurance policy in case you lived too long. Now, the age requirement has not kept up with the original intent and the vast majority of people collect on this insurance policy.

    Whenever a private business sets up a program like Social Security that allows other new money to pay benefits for old promises, they get thrown in jail ie: Tom Petters in now the poster boy.

    Social Security is no different. It doesn’t work.

    Social Security needs to be voluntarily partially privatized, redesigned as an insurance policy to pay out to only those that need it and rolled into actual performing assets like life insurance, which when structured properly, can actually provide a much better benefit. Let’s put it this way, if you were able to take all your social security money you put in over your lifetime and buy special designed whole life insurance policies with it instead, you could retire at 65 and start drawing on your life insurance policy at a rate 3x that of current social security benefits for as long as you live (tax free) plus still have a payout to your beneficiaries of $150,000-$350,000 after you pass. Cost to taxpayer, zero. Who owns the policy? You do. What if you don’t make it to 65? your beneficiaries get ALL the money in a lump sum, tax free.

    Hard to understand, but far superior to the illegal system we have now. Go to findoutmorenow.com for more info. The private marketplace always comes up with better products than government. Always.

  6. Submitted by Craig Westover on 10/29/2008 - 11:55 am.

    Too bad there is such a Bachmann obsession out there, Eric, because you raise some good points about social security privatization (I don’t run from “privatization,” but would prefer social security “choice” because it more accurately describes serious proposals for social security reform, which offer people the option of remaining in the existing system). Social security reform is the thoughtful issue that ought to be discussed.

    Not room here for that discussion, but some quick points.

    The “trillions of dollars for transition costs” is not actually new money; it is simply putting on the books the existing obligations of social security that aren’t currently accounted for. For example, social security is going to owe you and me a couple of hundred thousand dollars if we live to survive to a ripe old age, Eric. Yet that obligation is not currently in the government budget anywhere. All the yous and mes add up to trillions of dollars of unrecorded obligations. Privatization would make those costs transparent.

    You got it right that people who have been investing consistently for 40 years are pretty well off even in light of the recent stock market fluctuations. Time does a pretty good job of taking care of even the deepest market fluctuations. The other factor to consider is portfolio balance. Young people can be more aggressive, but as a person ages, he tends to move funds to more conservative investments, including annuities (which a key element of social security privatization plans). To use my self as an example, the market is down over 40 percent for the year, but my private retirement accounts in aggregate are down about 20 percent – a big bite, yes, but included in that 20 percent are some annuity funds whose surrender value is down but which will pay out over my retirement based on a guaranteed annual growth rate or the market valuation whichever is greater. So I’m protected in a down market, make out well in an up market, but pay a slightly higher management fee for that security. That some Wall Street firm makes money off me (a common objection to social security choice)is not bad if it makes or saves more money for me than I could make or save on my own).

    Unlike under social security, should I have a fatal heart attack on election night, my adult children inherit all of my savings; they will receive nothing from all the social security I paid.

    In order to have a true market place of ideas, people must be free to choose different options not simply vote for the imposition of the popular option. To use the word du jour “socialism,” a socialized program cannot allow freedom of choice; a program based on choice can allow a government-run option, provided only those choosing it pay for it. Which option seems most “American”?

  7. Submitted by Ian Repley on 10/29/2008 - 08:24 pm.

    The FairTax has been around, as H.R. 25 since 1999. Today, it enjoys co-sponsorship by 70 members of Congress. I’ve posted references to professional research showing significant benefits of moving to a consumption tax; read them here: http://snipr.com/fairtaxslate Any perceived deficits that people care to observe about the FairTax plan pale in comparison to the waste, abuse, intrusiveness, and the potential liability (audits, interest, penalties) that average wage-earning families are subjected to under the present income tax system. Under FairTax, the gov’t does NOT “get theirs” until those who produce the wealth meet their personal and family needs.

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