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Which Presidential Candidate Has a Better Retirement Savings Plan?

Aired June 20, 2000 - 7:30 p.m. ET


BILL PRESS, CO-HOST: Good evening. Welcome to CROSSFIRE.

Yesterday, there was one private investment plan on the table -- George Bush's. Today, there are two. In Lexington, Kentucky, Al Gore outlined his proposal, called "retirement savings plus," to set up individual retirement accounts for low- and moderate-income Americans, and for every one dollar Americans invest, the federal government would kick in $3 for couples earning under $30,000, $1 for couples earning between $30,000 and $60,000, 33 cents for couples earning up to 100K. The payoff, Gore says, would be huge.


AL GORE, VICE PRESIDENT OF THE UNITED STATES: If a young couple saves just $20 a week, together with our tax credits and the returns on their savings, they could reasonably expect to save as much as $400,000 extra by the time they retire 35 years later.


PRESS: Bush was quick to suggest Gore was nothing but a copycat, proposing his own investment plan after calling Bush's plan "risky," but there's a big difference between the two: Bush carves his plan out of Social Security taxes; Gore's plan is totally apart from and on top of Social Security.

So tonight, let the debate begin. Two men, two plans: Which one makes more sense? To join that debate, two United States senators: Republican Kay Bailey Hutchison from the state of Texas, Democrat Richard Durbin from the state of Illinois -- Mary.

MARY MATALIN, CO-HOST: Senator -- both senators, welcome.



MATALIN: Nice to see you in a tie fir a change. I was getting kind of sick of those shirts. Let me read you read something from "Money" magazine on this topic -- quote -- "A young couple with bills to pay and children arriving will naturally find it difficult to set aside enough money for their retirement years. Indeed, they're going into debt during those years typically" -- "Money" magazine. You know who said that? Vice President Al Gore, identifying the fundamental flaw in his plan. Young and low income workers can not afford to save. Three dollars is a very generous government subsidy, but three times zero is zero. Fundamental flaw.

DURBIN: Mary, I think the bottom line is this: For those making less than $30,000 a year, it's a matter of setting aside up to $10 a week, and of course the federal government in and puts in $1,500 for the $5 you save over the course of a year. So there's an incentive for you. If you set aside $10 a week, at the end of the year, you don't have $500. You have $2,000, and that's the beginning of savings and the beginning of an investment that can lead to the nest egg that most people will count on for their retirement.

MATALIN: But this particular income group -- and this comes from the IRS, it comes from the Urban Institute -- a liberal think tank -- do not participate. They paycheck to paycheck. Ten dollars is a lot. They can not participate, and evidence says that they do not participate, or they participate at a level -- 2.4 percent, to be precise. Whereas George Bush or Gore would require people to pay money on top of Social Security, Bush's plan allows it to take out taxes already sent to the government.

DURBIN: I think the difference, Mary, is this: Those below $30,000 a year in income are going to have a tough time coming up with $10 a week, let's be honest about it. But this plan that Al Gore's proposed goes up to incomes of $100,000. So can someone making between $30,000 and $60,000 a year put aside $20 a week. It's possible. And if they do, the government will match it.

The bottom line here is that Al Gore has Social Security plus. He's saying, we're not going to take this out of Social Security. It's still there to protect you. This is an added retirement savings account that people can take advantage of, not at the expense of Social Security. That's the point that Governor Bush doesn't get.

MATALIN: You know what, Senator, it is at the expense of Social Security, because the real flaw of this plan is it does nothing to save Social Security, which will be out of cash by 2037. Indeed, this exacerbates the Social Security by elevated future federal liabilities $200 billion, plus the $100 billion that Gore has already promised for women and children. Retirement plus means nothing if there's no base retirement.

DURBIN: Good point. And that's why Al Gore has already made the commitment that 95 percent of the Social Security surplus is going to go right back into strengthening Social Security, retiring the debt in that system and strengthening Medicare. The difference, of course, is that Governor Bush says, take the money out of Social Security, some $900 billion over 10 years, and he doesn't replace it. So you have to cut benefits or dramatically change the system. Al Gore says protect Social Security. Take the surplus, and instead of giving tax cuts to the wealthy, give it to families, in terms of the savings accounts, so that they can enjoy the kind of prosperity that most Americans most Americans have seen. PRESS: Senator Hutchison, everybody believes that investing in the stock market is what people ought to do with their money these days. I think the question and the difference between these two plans is how to get there. The Bush plan says we're going to carve out -- we don't know how much -- a portion of the Social Security payroll tax, and allow people to invest that in the market. The Gore plan is different, as he pointed out this afternoon, if you'll listen please for one second.


GORE: It does not come at the expense of Social Security; it comes in addition to Social Security. We will protect Social Security.



PRESS: So if we can get to the same place without taking money from Social Security, isn't it a lot better?

HUTCHISON: It would be, but you don't get to the same place. What he said at the end is the kicker. He said, we're going to put this on top of Social Security. Well, Social Security is not going to be saved. Social Security is going to go into a deficit, and we're doing nothing under the Gore plan to shore it up. That is the beauty of the Bush plan, because what we do with the Bush plan, which is also the bipartisan plan coming from Congress, is we say, OK, first of all, you're not going to owe any more taxes, we're going to if shore up Social Security, we're going to start paying down the debt, and people are going to be able to have the choice with the 2 percent or 3 percent of the 12 percent that they pay now to determine how they would like to invest it, and build it up and then pass it to their about wife, or husband or children.

PRESS: Senator, with all due respect, I think you're mixing apples and oranges. As Senator Durbin pointed out, Al Gore says he's going to take a big chunk of the surplus and put that into fixing Social Security so it remains solvent, OK.

HUTCHISON: Where is the surplus?

PRESS: The surplus -- pardon me.

HUTCHISON: Where is the surplus if you just have a $200 billion entitlement that he has just unveiled. There won't be any surplus. We'll be going back into deficits.

PRESS: OK, whatever the surplus is, George Bush, instead of putting money in Social Security, would use all that money in some huge, across-the-board tax cut. Now that's tax cut plan. Let me come back to these two competing, private investment plans. Would you please explain to me and our viewers how taking money out of Social Security is going to strengthen the system, as you just alleged?

HUTCHISON: First of all, what president -- what George Bush is saying he will do is take 2.3...

PRESS: Not yet.


HUTCHISON: ... $2.3 billion of the surplus, and it will if go back into Social Security. That is exactly what his plan does, and then $1.3 billion gores for tax relief for hardworking Americans, and then the rest of the $4 billion surplus will be for the added spending needs to shore up our education, and our national defense and our Medicare.

PRESS: Now I'm a person out there making 30 grand a year, let's say, OK, and I start putting in five bucks whenever I can, wherever I can, and I end up with a nest egg of, oh, let's say, $200,000, on top of what I'm going to get out of Social Security. Aren't I a hell of a lot better off than I would be under George Bush's Mickey Mouse scheme?

HUTCHISON: Not if Social Security has gone under, which it will under this plan. The only about way that Vice President gore's plan is going to do anything for Social Security is if you raise the age of retirement or you have tax increases in Social Security.

PRESS: You're talking about George Bush's plan, Senator.

HUTCHISON: No, that's Vice President Gore's plan.

MATALIN: This is -- of course Bush's plan has been totally misstated. He is putting fully half of the surplus in Social Security. He saves Social Security, plus he makes structural reforms. It's a bipartisan plan. Let's keep going over this point -- Gore's does nothing to shore up the existing plan, upon which he says he's going to building. And it's not a retirement plan, senator. You can take the money out, and particularly these income groups who would be served, because it phases out, would take it out, and can take it out for their mortgages, for health care, for education needs, and they will take it out. It is not even a retirement plan.

DURBIN: I think the bottom line is this, as Bill has said: George Bush starts with the premise that we have a Social Security pot of money, money that's coming in each year. He's going take 16 percent of the money that's coming into Social Security each year and divert it, let people invest it where they like, private investment. Now how are you going to make up the difference? The 16 percent that he's removed was supposed to pay the benefits of retirees, and you know what, if you follow that to its logical conclusion, over 10 years, you've lost $900 billion, and no explanation from Governor Bush about where it's coming from.

Getting back to Bill's point with Senator Hutchison, how can taking money out of the Social Security, as Governor Bush has suggested, for private investment strengthens social security. The obligation to retirees is still there as the money's being drawn away to an idea that we can privatize Social Security. MATALIN: And it's the same thing Gore is saying. If you invest in the markets this -- over this whole century, with depressions and 11 recessions, the growth for -- the real growth in the stock market has been 7.56 percent. Current and soon-to-retirees do not -- are not -- their benefits are untouched.

DURBIN: But the difference is whose money you're going to invest. Are you going to invest Social Security funds, as Governor Bush has suggested? Or are you going to have this approach which has comes from Vice President Gore that does not touch Social Security? It keeps it strong. The bottom line is this...

MATALIN: But they're general revenue funds, I mean, taxpayers don't care if their money comes out of their left or their right pocket.

DURBIN: Well, but they care.

MATALIN: It's general revenue funds: 200 billion on top of the 100 billion. It's deficit -- it's heading for deficit spending without shoring up Social Security.

DURBIN: I'm sure the people watching this program are going out to sharpen their pencils to try to figure out...

MATALIN: They understand.

DURBIN: ... what we are talking about.

MATALIN: No, they totally understand this.

DURBIN: Let me tell you what they understand.

PRESS: Social Security they understand.

DURBIN: They understand this: Governor Bush has been doing a Texas two-step trying to explain how you can take 16 percent of the proceeds out of Social Security and not cut benefits and not raise the retirement age and make it stronger in the long run. It ain't going to work.

MATALIN: Senator, you're from my home state of Illinois, which I know we don't know how to do the Texas two-step. When we come back we'll figure out, what are the political fall -- the political ramifications for both candidates as they touch what used to be the deadly third rail of politics.


MATALIN: Welcome back to CROSSFIRE. The kindlier, gentler Al Gore was detoured from his prosperity tour last week with more stories of staff shake ups and bad polls. But he did lay out two new economic policy initiatives: he doubled his tax cuts and offered a government subsidized savings plan to augment Social Security. Will Gore get traction as he focuses on economic issues, or do his plans pale in comparison to Bush's? For the vice president, off-mentioned vice presidential contender, Illinois Senator Dick Durbin. And for Governor Bush, fellow Texan, Senator Kay Bailey Hutchison -- Bill.

PRESS: Senator Hutchison's going to go straight for the president. She's not going to fool around with this vice-presidential stuff. I mean, if you read "Time" magazine this week, her eye is on the president. Why didn't you run this year?

HUTCHISON: After the Texas fatigue sets in that may be a little much.

PRESS: In "Newsweek," not in "Time," Senator.

Let's go back to these two plans. And the other big difference between them, which we touched on briefly, is that the Gore plan targets people who make under a $100,000 a year. The Bush plan is across the board.

Now let's take -- let's say you can take 2 percent of your Social Security payroll taxes. If I'm making 30 grand, and I pay -- put 2 percent in a retirement plan. And I'm making $300 grand, and I put 2 percent in, I mean the 300 grand's getting a hell of a lot more for his money than the guy making 30 grand. So the Bush plan is really welfare for the rich, isn't it?

HUTCHISON: Well, first of all, remember that the largest tax that most people pay is the Social Security tax.


HUTCHISON: So I think Mary's point earlier that the people at the lower end probably are not going to be able to participate as much in the Gore plan because they're not going to have that extra money. But if you allow them to take money that they're already paying in now, that they have already budgeted for, and have a choice that will grow with them and their families, then I think you're going to have more participation by people at the lower levels who would never have gotten the kind of stability that this will give them.

PRESS: But Sen...

HUTCHISON: And furthermore, it allows them to pass that stability to the next generation. So every -- and this is a point Senator Moynihan has made -- every working American should have the chance to participate in the economy, in the stock market if they choose, and have the ability to create some stability for their children.

PRESS: But Senator, I -- you know, I certainly agree with that. At the same time, not all American workers are on the same playing field. And I mean, look, I make a lot of money. I've got a 401(k) plan. I don't need any handout from George Bush, and I don't deserve one.

With the funds that we have, no matter how big the surplus is, why isn't it better -- I just don't understand this difference -- why isn't it better to help the "have-nots" rather than to further fatten the "haves"?

HUTCHISON: Well, first of all, George Bush's plan gives you the choice. So if you don't need it and you don't want it, you don't have to take it.

PRESS: I'll take it.

HUTCHISON: You can take the regular...

PRESS: You think I'm going to turn it away?

HUTCHISON: Of course.

PRESS: You think I'm a fool?


HUTCHISON: You see, that's a little bit -- that's a little bit different approach. But you -- anyone who wants to stay in Social Security as it is today, getting the same benefits that they would get under today's plan, has that option. But, Bill, most people are going to look at this and say: Hallelujah. I have a chance to do better for my family and to pass it to my children.

PRESS: One other quick question. Mary critic -- one other aspect of the Gore plan says that you set up this retirement account -- which the government is kicking in three bucks for every dollar you put in, sounds like a pretty good deal to me -- and then, after five years, if you need money to pay for a college education, if you need money to buy your first house, if you need money because of a catastrophic illness in your family, you can take it out tax free. Don't you think that's a good idea, not a bad idea? I mean, I think it's a great opportunity for people.

HUTCHISON: Well, if we could afford it, and if it would also shore up Social Security, I think that would be a wonderful thing. And, in fact, we are giving tax cuts for people to be able to have scholarships to send their children to college. We're doing more and more of that.

But tacking a $200 billion entitlement and -- on top of Social Security and not shoring up Social Security, I think is the worst of all worlds. And I think it's going to destabilize Social Security and it's not going to give the stability that you are saying it will to people if they're not able to participate.

PRESS: I know you want to jump in.

DURBIN: Well, I just -- I think the bottom line we get back to over and over -- you can't take 16 percent of the proceeds out of Social Security and say you're making it stronger. You're making it weaker.

HUTCHISON: You're now taking it out, though. DURBIN: Of course you are.

HUTCHISON: No, you're not, Dick.

DURBIN: Because if you say that a person can convert...

HUTCHISON: You're allowing to it grow at a greater rate.

DURBIN: No. No. No. It's growing in private accounts, but the Social Security trust fund -- you're allowing people to divert 2 percent of their payroll tax -- which is what has been suggested, 2 percent of their Social Security, been suggested by Governor Bush -- and as they take that money out of Social Security, who is paying today's retirees? There's less money available .

HUTCHISON: The rest of the 12 percent.

DURBIN: No, it doesn't. It doesn't...

HUTCHISON: You take (UNINTELLIGIBLE) percent out...

DURBIN: It is...


MATALIN: It goes to retirees...

HUTCHISON: And the rest goes to shore up for the transition.

DURBIN: It is a deficiency over 10 years of $900 billion, and every time they stop George Bush and say, "How do you pay for it?" he says, oh, talk about it later. But you know...

MATALIN: Do you know...

DURBIN: ... later is today for retirees.

MATALIN: ... what the biggest benefit cut would be? The biggest benefit -- and this is under current law, which Gore does nothing to affect, it would result in a 30 percent benefit cut. That's Al Gore's risky redistribution scheme.

DURBIN: No, no.

MATALIN: Let's go on to Gore's plan.

DURBIN: This money does not come out of Social Security. It's Bush that takes the money out of Social Security. Gore's is separate.

MATALIN: Gore takes it out of general revenue. Taxes are taxes.

DURBIN: $200 billion as opposed to 900 billion...

MATALIN: Can I just...

DURBIN: ... George Bush. MATALIN: Let me just ask you another question about your would be presidential -- you may be on the ticket with this guy.


MATALIN: Maybe you can explain this to me, senator.

This is -- today is -- what? -- June 20th. A month ago, Al Gore had this to say about George Bush's Social Security program.


GORE: You shouldn't be asked to play stock market roulette with your retirement savings in the Social Security program.


MATALIN: Stock market roulette, risky scheme, reckless, irresponsible, naive, produces winners and losers. Now he's saying it's fine to invest your retirement money.

DURBIN: Mary, Mary, you're Illinois-educated: You must have followed this. He suggested the money that he's going to put into savings is not coming out of Social Security. It's the George Bush plan that takes it out of Social Security.

MATALIN: He's saying the stock market is too risky to put your retirement funds, and that's what he said about Bush.

DURBIN: Too risky to put Social Security in. But he says, if you want to create a mutual fund, which is what this is all about on a voluntary basis, we'll help you pay for it. We'll increase savings.

MATALIN: Are you going to be on the ticket? You did very good in the press.

DURBIN: No. Let me tell you, I love -- love what I'm doing.

HUTCHISON: He's tuning up right now for that vice presidential debate.



PRESS: Just one quick final question: There are all these questions, as Senator Durbin indicates -- for example, how much money under the Bush plan, how much, how much of the payroll tax goes into that private fund? Are you going to have to raise taxes to make up for the loss? Are you going to have to cut benefits? Are you going to have to raise the retirement age?

If somebody invests in the stock market and they lose out, do we bail them out?

And Governor Bush says we'll have a presidential commission to decide all of that. Don't you think the American people deserve some answers before the election, not after the election?

HUTCHISON: I think you can see the answers in the bipartisan congressional plan, and it is that you would have 2 to 3 percent that would go in. It will grow at a greater rate than it's growing in Social Security today.

Today, your return on Social Security is probably going to be 1.2 percent. We know we can do better than that, and we know that people should be able to have a choice in where the biggest tax they pay goes.

PRESS: Two senators, two plans, the debate continues. Thank you for getting us started tonight.

Senator Hutchison, Senator Durbin, good to have you both back. Mary Matalin and I will wrap it up. We'll take our choice between the two plans in our closing comments.


MATALIN: We do not have time for me to correct every one of the false statements you made about Bush's plan. Let me just say this: The greatest percentage of benefits goes to the lowest-income groups.

Now, let me talk about Gore's plan. It's not a new plan. It's status quo. Worse, it's liberal status quo. It's a huge entitlement. It's redistribution. And it's government-controlled.

He's following Bush around. He can't come up with new ideas, just old, old liberal thinking.

PRESS: You know what your problem is, Mary, you were snookered. I mean, I feel sorry for you, I feel sorry for George W. Bush, because you popped off too soon. He didn't know what he was talking about, and now Al Gore comes along with a stronger plan, a better plan, and it doesn't touch Social Security. It shows a difference between the two candidates.

MATALIN: It doesn't touch it is right. It doesn't reform it one whit. It doesn't in any way comport with the six bipartisan plans that are on the Hill today.

PRESS: He already pays off the debt and then he doesn't touch Social Security. The difference between the two candidates is one's done his homework and the other hasn't. One's prepared to be president, and the other isn't.

MATALIN: Well, one is going nowhere fast...

PRESS: Yes, you watch.

MATALIN: ... and the other is winning.

PRESS: From the left, I'm Bill Press. Good night for CROSSFIRE.

MATALIN: And from the right, I'm Mary Matalin. Join us again tomorrow for more CROSSFIRE.



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