In WSJ online article, du Pont falsely claimed "Social Security taxes are not invested in anything"


In his February 16 monthly column on, an online publication of The Wall Street Journal editorial page, former Republican governor of Delaware and chairman of the pro-privatization National Center for Policy Analysis Pete du Pont claimed that "Social Security taxes are not invested in anything; the government spends your money as soon as it receives it." In fact, while the majority of payroll taxes are used to honor obligations to current Social Security beneficiaries, any surplus revenue collected is, by law, invested in U.S. Treasury bonds.

The Social Security trustees predict that the long-run average annual real rate of return on the financial assets held in the system's trust fund is 3 percent. The Bush administration acknowledges that this investment exists and earns a rate of return, and has explicitly incorporated it into its plan to allow workers to divert up to two-thirds of an individual's share of Social Security payroll taxes into private accounts. The plan calls for guaranteed retirement benefits to be reduced by the amount diverted plus the 3 percent rate of return, adjusted for inflation, that it would have earned had the money been placed in the trust fund and invested in Treasury bonds. An unnamed senior Bush administration official explained this part of the plan to reporters during a February 2 background briefing:

Now, the way that election [the choice to divert Social Security taxes into private accounts] is structured, the person comes out ahead if their personal account exceeds a 3 percent real rate of return, which is the rate of return that the trust fund bonds receive. So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent real rate of return.

Posted In
Economy, Social Security
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