Memo to CBS' Bob Schieffer: It's not just critics; Bush administration admits private accounts cost a bundle, don't address solvency

Written by Gabe Wildau & Nicole Casta

Published

While questioning Senator John E. Sununu (R-NH) about the effect on the federal budget of partially privatizing Social Security, CBS Face the Nation host Bob Schieffer stated on the program's February 27 broadcast that "critics say that the plan to create these personal savings accounts will cost $1 trillion to $2 trillion down the line and does nothing to resolve the problem of solvency with the system [emphasis added]." But these claims do not depend on the credibility of unnamed “critics”; the Bush administration itself has confirmed that they are accurate.

An official White House outline of Bush's proposal admits that partial privatization will cost $754 billion in its first ten years, through 2015. But this estimate is misleadingly low since under this proposal, private accounts are not fully phased in until the last five years of the ten-year window, and the administration did not provide cost estimates for subsequent decades. Using the same assumptions as the administration, the Center on Budget and Policy Priorities calculated that the proposal would cost $4.9 trillion through 2028.

On the February 6 broadcast of FOX Broadcasting Company's FOX News Sunday, Vice President Dick Cheney confirmed that partial privatization would cost “trillions more” in transition costs after 2015:

CHENEY: Well, but, again, remember how much we're going to borrow. We're going to borrow $758 million [sic] over the next ten years to set up the personal retirement accounts. We think that's a manageable amount.

WALLACE: But trillions more after.

CHENEY: That's right. Trillions more after that.

Similarly, an unnamed senior administration official acknowledged on February 2 that the administration's proposal to let workers divert payroll taxes into private accounts will do nothing to address Social Security's long-term revenue shortfall. From a February 2 White House background briefing:

QUESTION: Can you give us a second ten-year estimate on the revenue effect? Can you tell us how you would pay for that, in the first ten years' revenue loss? And am I right in assuming that in the way you describe this, because it's a wash in terms of the net effect on Social Security from the accounts by themselves, that it would be fair to describe this as having -- the personal accounts by themselves as having no effect whatsoever on the solvency issue?

SENIOR ADMINISTRATION OFFICIAL: On the second point, that's a fair inference.