FactCheck.org on Obama Social Security Ad: “Rank misrepresentation,” plus more on McCain’s position

Following up on Thursday's post regarding Sen. Obama's ad attacking Sen. McCain for support of adding personal retirement accounts to Social Security, FactCheck.org has an extended discussion of the claims made in the ad. I called one of the ad's claims – that McCain supported cutting benefits in half – "a big stretch." FactCheck went a bit further, calling it a "rank misrepresentation."

Nobody now getting benefits, or even close to retirement, would have seen any reduction in benefits or cost-of-living adjustments under the plan Bush proposed in April, 2005. What Bush proposed – in addition to creating private Social Security accounts – was to hold down the growth of benefits received by those retiring in the future. He embraced a proposal for "progressive price indexing" of future benefits. This would have been a "cut" only in relation to what the current formula would produce for future retirees, assuming that taxes are increased sufficiently to keep the system going.

The "price indexing" would have tied the growth to the rate of price inflation, rather than to the growth of wages, as is the case now. Wages have historically risen faster than prices, so the current wage-indexed system pushes benefits for future retirees up faster than the rate of inflation. The "progressive" part would have held down the growth only for higher-income and middle-income workers, while allowing benefits for lower-income workers to rise in line with the current wage-based formula. 

The Obama-Biden campaign attempts to document their "cutting benefits in half" claim by citing a report by the Center on Budget and Policy Priorities written by Jason Furman, who is currently one of Obama's top economic advisers. This won't do. What Furman's study actually says is quite different from what the ad claims.

Furman's report says that the "progressive price indexing" plan Bush supported would result in benefits for the average worker who retires in 2075 that are 28 percent lower than under the current formula. Obviously 28 percent is not "half."

The Obama-Biden campaign notes that Furman's paper also says that full price indexing of benefits – even for low-income workers – would result in benefits 49 percent lower than the current formula in 2075. But that's not the plan Bush supported, and we find no evidence that McCain ever supported it either. We asked the Obama campaign to show us where McCain has ever supported full price indexing of benefits, but so far they have not done so.

The full FactCheck analysis is worth reading, not simply with reference to Obama ad but also in terms of general discussion of reform. Often seemingly straightforward claims by both sides aren't what they appear in the Social Security context, but usually this gets glossed over in campaign season.

Given the claims in Obama's ad, it's also worth checking out this post on the GOP platform on Social Security reform, which seemed to me was backing away from "carve out" accounts funded out of the existing 12.4 percent payroll tax and toward "add on" accounts that would supplement existing funding. In addition, comments McCain made to an AARP conference in early September also indicate a shift away from carve out accounts. He said, "There may be a role for private investment accounts for younger workers as long as they are not a substitute for insuring the solvency of the system and does not affect the system." The final (grammatically challenged) clause seems a further move away from carve out accounts, which would affect Social Security's financing lacking additional "offsets" to traditional benefits for account holders.