Former Vice President Mike Pence, a possible 2024 presidential candidate, has voiced support for a Social Security privatization scheme that the George W. Bush administration unsuccessfully pushed nearly two decades ago.
In a closed-door event Thursday hosted by the National Association of Wholesale-Distributors, a corporate trade group, Pence said he believes that “the day could come when we can replace the New Deal with a better deal, literally give younger Americans the ability to take a portion of their Social Security withholdings and put that into a private savings account that the government would oversee.”
“I mean, a very simple fund that could generate 2% would give the average American twice what they’re going to get back on their Social Security today. And it could save the government money doing it,” Pence said, according to video footage obtained by the Democratic-aligned group American Bridge 21st Century.’
Mike Pence calls for privatizing Social Security for young people as a way to cut spending on public benefits. "We could replace the New Deal with a better deal," he told a conference of business executives. pic.twitter.com/wSmE0Oyl9N
— More Perfect Union (@MorePerfectUS) February 3, 2023
Experts have forcefully rejected the notion that private savings accounts of the kind Pence endorsed—which would allow workers to divert a portion of their payroll tax contributions into private investment accounts—would be more beneficial than Social Security’s guaranteed benefits, as the former vice president suggested.
“The popular argument that Social Security privatization would provide higher returns for all current and future workers is misleading, because it ignores transition costs and differences across programs in the allocation of aggregate and household risk,” Olivia Mitchell, John Geanakopolos, and Stephen Zeldes—economists sympathetic to the idea of privatization—wrote in a 2000 paper.
Experts have also said private accounts would not, as Pence put it, “save the government money.”
In 2005, analysts with the Center on Budget and Policy Priorities (CBPP) estimated that a privatization plan put forth by former Sen. John Sununu (R-N.H.) and former Rep. Paul Ryan (R-Wis.) would “create $85.8 trillion in additional debt (equal to 93.7% of GDP) by 2050” while not boosting Social Security’s long-term solvency—something Republicans claim they want to do.
“Creation of a system of private accounts would not change the amount of revenue coming into the federal government, but it would increase government spending, because the federal government would be making regular payments into the private accounts,” the CBPP analysts explained. “These payments would represent new government spending. This increase in spending, unaccompanied by an increase in revenues, would widen annual deficits.”
Despite the myriad drawbacks of private accounts as a partial or full-scale alternative to Social Security, Republicans have continued to promote them.
Last year, the Republican Study Committee—a panel that Pence chaired during the Bush administration—released a budget proposal that urged lawmakers to “consider legislative options that allow employers and employees to reduce their payroll tax liability and use those savings to invest in private retirement options.”
Pence’s remarks Thursday came as the White House and House Republicans are locked in a high-stakes standoff over the debt ceiling, which the GOP does not want to raise without also inflicting steep cuts to federal spending.
As part of their sweeping austerity push, House Republicans have suggested raising the retirement age, which would cut Social Security benefits across the board.
“Republicans keeping saying the quiet part out loud: They want to cut and privatize Social Security and take away our young people’s futures,” Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, tweeted late Saturday. “Democrats will never let this happen.”