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Schaffer's Social Security Plan Attacked

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Oct 14, 2008 10:08 pm US/Mountain

Schaffer's Social Security Plan Attacked

Written by Raj Chohan
Reporting
Raj Chohan
(CBS4) The new ad by the Democratic Senatorial Campaign Committee called "Pie Chart" attacks Republican senate candidate Bob Schaffer for his support of the Bush administration's plan to change social security.

Ad: Will your social security be safe when you need it? Not if Bob Schaffer gets his way. Schaffer supports gambling with social security in the stock market

 The claim is misleading. In my opinion, gambling is when an investor puts a lot of money down on a single stock. If the stock gets crushed the investor loses big. But that's not what Bob Schaffer supported. Instead, he supports a policy that would allow people to take a portion of their social security payroll tax contribution, and invest it in the equity markets. That money would have government controls and would go into investments like mutual funds. The risk would be diversified across the market which means there would be some protection when particular stocks or industries go south.

In fact, millions of Americans invest this way in their 401-K plans, and over the long run they'll likely retire with much larger gains than they could ever hope to get from the current social security system.

Ad: But what happens if stocks crash, if the bank fails, if the company goes bankrupt. Under Schaffer's plan, your social security will be at risk.

 There is some truth to that concern. The current financial crisis is one of historic proportions. Investments have been taking a beating. If you are retiring now, it's a scary time. But the stock market does have a track record. The S&P 500 has averaged more than 11% a year since 1987. History tells us the markets come back even after bad times.

But it's not the whole story. Under the plan Schaffer supports, only a small portion of your social security contributions would go to the equity markets. The rest would remain in the current system.

Ad: Social Security is meant to be there for when you need it, not to be invested in Bob Schaffer's risky plans. 

  Here's the spin. Currently, Congress doesn't have a plan to keep social security solvent in the coming decades as baby boomers retire. While privatizing portions of social security remains controversial, it is an option some economists say would help keep the system solvent. And while there is some risk, it's certainly not the reckless gamble this ad claims it to be.

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