WA-02: Republican Koster boasts of advocating for Social Security privatization for ten years

John Koster, the Republican challenger in Washington’s 2nd Congressional District doesn’t like to talk about Social Security “privatization,” unless, you know, he’s convinced he’s talking to a room full of fellow Republicans.

And that was exactly the situation on February 16, 2010, when Koster not only explained how confident he was that privatization would work, but even boasted about advocating for it a decade early:

“Individual retirement accounts will work. I advocated for those ten years ago, and you look at where Medicare and Social Security and those entitlement programs are going to soon consume nearly twenty percent of our annual federal budget. Twenty percent. And phasing those individual retirement accounts in will work.”

Of course, that’s total bullshit. Social Security ran a $180 billion surplus last year—the only federal program to run a surplus—and has an accumulated reserve of over $2.4 trillion. If we do absolutely nothing at all to “fix” Social Security it can continue to pay full benefits through 2037, and benefits at only a slightly reduced level indefinitely thereafter. So when Republicans like Koster talk about Social Security being a drain on the federal budget, they’re really talking about the federal government’s obligation to pay back the money it borrowed from the Social Security trust fund.

Koster’s solution? Privatize Social Security and then gradually eliminate federal benefits for retirees. That’s what he means by “phasing in” individual retirement accounts. In other words, he’d rather push retirees into the maws of Wall Street so that he can extend the Bush tax cuts to Wall Street billionaires and the rest of the top two percent of American households.

Meaning this isn’t just class warfare, but intergenerational warfare. Something WA-02 voters of all ages might want to consider as they mark their ballots in the race between Koster and Democratic incumbent Rep. Rick Larsen

Comments

  1. 1

    rhp6033 spews:

    I wish we had seen more on the Kostner/Larson campaign. Larson has been advertising that Kostner is supported by groups wanting to abolish Social Security, but Kostner denied he ever wanted to do that. This video is pretty damning evidence, but it’s a bit late – I suspect over half the ballots have already been completed and mailed back.

    Why in 2010 any politician would ever admit to a crowd, friendly or not, that he was ever in favor of Social Security privatazation is beyond me. It really wasn’t that long ago that lots of us saw our 401(k)’s and IRA’s shrink to halve their value in a few short weeks, only to slowly crawl back most of the way over the past year and a half.

    At one point my own 401(k) declined to a level where it would just barely sustain me through one year of retirement. Fortunately, I didn’t have to spend any of that money then, so it was all there to take advantage of the slow recovery.

  2. 2

    spews:

    rhp6033 @1,

    My guess is, Koster admitted he supports privatization because he supports privatization… whatever his handlers insist he must now say for the sake of expediency.

  3. 5

    Politically Incorrect spews:

    After people complete their initial 40 quarters of participation in Social Security, they should be allowed, if they choose, to divert their monies withheld from their paychecks for Social Security to individual accounts. Those accounts could be certificates of deposit, mutual funds, annuity contracts or other types of investments. The contributions their employers make to Social Security would not be included in this idea because the funds come from the employer, not the employee.

    Choice and diversity are good, right?

  4. 6

    rhp6033 spews:

    # 5: This makes sense only if you completely mis-understand how the Social Security system works. It’s not an “invest now, withdraw later” program, although many confuse it as such. It’s a program to pay current retirees from taxes on current worker’s paychecks.

    That’s the way it’s always been, except for the slight deviation made to accumulate more money due to the population bulge caused by the baby boom generation.

    So if you allow contributions into the general social security fund to cease after 40 weeks, after which you pay only into a privatized account, then there would be a huge “unfunded” group of retirees moving through the system. In effect, the Baby Boomers, who paid for their parent’s and grandparent’s retirments in the system, would then have their own children choose to pay for only a fraction of their retirement, after which they would keep the rest of the money for themselves.

    Not exactly fair, is it?

    But why are people continually trying to fix a program which is enormously popular and isn’t broken? The answer is simple – Wall Street can’t stand the thought that money is outside of their control, where they can continually skim a cut off it until it’s gone. So they keep trying to scare people into believing that the system is in danger, or that they could do a better job of handling the money than the government. After 2008, there’s no way I’m going to let them get anywhere near my last-chance safety net.

  5. 7

    rhp6033 spews:

    By the way, my wife used to work at a large brokerage firm (in the administrative area, not as a broker). I was rather amazed at the world view-point of those people. Many were rather nice and friendly on a personal level, but they were all infused with the idea that if someone else had a dollar, it really belonged to them, and the person holding it had no right to it.

    The firm would regularly bring in “trainees” and taught the ropes, but what was really important was to bring in money for the firm to handle. They could always hire stock analysts and brokers to handle the mechanics, they wanted people who could play golf, attend country-club functions, and otherwise find ways to weasil in and seperate clients from their money.

    Those from modest backgrounds (upper-middle class, or lower) were usually kept in the firm just long enough to bring in the IRA’s and 401(k)’s and other savings from every one of their friends and relatives, then once they were exhausted they would be let go – along with a reminder of the “non-compete” agreement they signed at the beginning, which prohibited them from ever managing the money of their friends and families by themselves. If they couldn’t bring in a half-million dollars of new money EVERY MONTH, they would be first given a warning, then escorted off the premises by the security guard.

  6. 8

    J. Boner (pronounced bayner) spews:

    re 5:

    The contributions their employers make to Social Security would not be included in this idea because the funds come from the employer, not the employee.

    It may look that way on paper, but it is not so in reality — just like the sales taxes that Macy’s will ‘pay’ to the government.

  7. 9

    Politically Incorrect spews:

    “It’s a program to pay current retirees from taxes on current worker’s paychecks.

    Yeah, so what do you do when the current workers are out of work and are not well-educated enough to find good jobs? Unfortunately, our education system is producing a lot of functional illiterates.

    “After 2008, there’s no way I’m going to let them get anywhere near my last-chance safety net.”

    Withholdings from paychecks don’t necessarily have to be invested in the stock market. How about certificates of deposits or a government bond fund? There are lots of opportunities in the private investment world that don’t have anything to do with Wall Street.

    Why don’t we just admit that what government really, really wants is control and power. Allowing workers to go off on their own with their own money chaps the statists’ asses really badly. They want total government control over all aspects of life because they “know better” than any of the rest of us.

  8. 10

    Politically Incorrect spews:

    “It’s a program to pay current retirees from taxes on current worker’s paychecks.”

    Did Bernie Madoff get his ideas from this?

  9. 11

    Politically Incorrect spews:

    Don’t sweat it, guys. I wouldn’t want to allow people to take control of their Social Security now. I make it applicable to people born after December 31, 2019. That way, we’d have lots of time for the baby boomers to die before the first people who get control of their own money even enter the work force. Heck these people wouldn’t even start making any earnings until around 204 or so. By that time, most of the baby boomers will be gone!

  10. 13

    Perfect Voter spews:

    I already have my private retirement account and it is well funded by my employer and me. No need to tap into my Social Security contributions.

    And people should remember, Social Security funds way more than just retirement benefits. It also pays out death, disability, and survivor benefits. Defunding the Social Security system would hurt all of those, not just retirement benefits.

  11. 14

    MikeBoyScout spews:

    The question WA-02 voters need (or needed to ask before they) complete their ballots is why is Koster double speaking on Social Security?

    If you’re a conservative, libertarian teabagger can you really trust this guy?

    If your not stupid (see above), do you really have the money to live without Social Security in your golden years? And given what we saw in 2008, is that big pile of money you do have as safe as it needs to be?

    Oh, and if you live in WA-02 and work for the Boeing Company, how’s your 401K fund choices with the new Boeing match of Boeing stock (vice cash) working out for you now that the Boeing company is funding your pension (if you have one!) with stock instead of cash?

  12. 15

    Hal Fonts spews:

    Check the many real stats on the Social Security/Medicare website. It’s a remarkably well run program (at minimal mgmt expense, providing way more than just retirement (as a safety-net) for each of us).

    Then check the Management Fees and 2008 risk performance from your 401k or equivalent managed “Retirement Plans” There’s no comparison.

    My plan kept growing; however, if I took out MY contributions, it was going nowhere; gains were being eaten-up by management fees.

    With Social Security as my safety-net, once I retired I took control of my 401k’s — broadly diversifying in very low-expense indexed ETFs. (I only lost 10% in the 2008 crash — relatively good, many folks did far worse.

    Investments, managed by individuals or professionals are no security for most individuals. And in most of the world without secure retirement plans, if you are disabled or old, you wind up either supported by your kids, or begging on the street.

    Don’t be fooled by the hustlers who just want access to your savings. Social Security ain’t broke, and it only needs occasional tuning, due to demographic cycles.

    It’s your most secure life-long BASE. Defend it from the thieves; and manage (gamble) the other half (or more) of what you WILL need yourself, any way you wish. Been there; done that.

  13. 16

    CC "Bud" Baxter spews:

    Ponder this interesting fact. The supposed 75 year shortfall in Social Security, which is very pessimistic to begin with, is equal to the tax cuts republicans want to give to the upper 2% of wage earners over these same 75 years. So in order to make sure that the upper 2% don’t have to pay 3% more in taxes, they would rather gut Social Security and make the bottom 98% suffer. The hypocrisy could not be more stark. Like my Dad always said, republicans only care about rich people.

    Finally, remember that Social Security is not a savings or investment program. It is an insurance program. And when compared to privately run investment or insurance companies, it is remarkable efficient, spending way less on overhead than any private company. And because the overhead is remarkably small, and there is no need to make a profit, all of the money goes to the people who need and deserve it.

    All of this privatize talk is really about steering money to corrupt brokers who can rape the working class of their hard earned money, all so a few people at the top can get stinking rich. These corrupt assholes want to insert money-grubbing middle men in between your retirement security and you. This greedy system really worked well for health insurance, didn’t it?

    They don’t attack Social Security because it is weak, they attack it because it is incredibly strong financially. They want to rob 2.5 trillion dollars from the working class and hand to a few corrupt hedge fund managers at the top.

    People who call it a “ponzi scheme” are in fact incredibly ignorant, or they are morally corrupt.

  14. 17

    CC "Bud" Baxter spews:

    And don’t forget that all americans already have perfectly fine savings programs. They all have access to personal IRA accounts. And many people have access to company 401K’s. Many of these 401K’s have the company match your contribution dollar for dollar. These are the best possible investment you can make because it is automatically doubled right from the start. All kinds of people ignore and don’t contribute to their 401K. And you want these people to divert money from Social Security to the same thing as a 401K without matching funds from the company? Anyone who would choose this for their Social Security, while not funding a much better 401k is a complete idiot.

  15. 18

    Roger Rabbit spews:

    @1 So now your 401(k) will support two years of retirement? My Social Security isn’t enough to live on, except maybe at poverty level — fortunately, it isn’t my only income, but it’s an essential piece of my income — but I know it’ll keep coming even if I live to be 100 years old (like my Pop Rabbit is about to do) … provided the Republicans don’t succeed in destroying it.

    I don’t have a 401(k), so I haven’t really looked at the math, but it occurs to me that if you want to pull out a relatively modest $40,000 a year for 25 years of retirement, you’ll need to salt away a million dollars. How many people can do that? Sure, the amount you need is less, and your savings accumulate faster, if you factor in compound interest; but at today’s interest rates, the interest effect on savings is much less than it used to be, which means you need to save a lot more to draw out the same amount. And then there’s market uncertainty; what if you save a million dollars, and then, right when you need it, market forces slash your savings in half? That’s exactly what happened to investment-dependent retirees during this recession.

    No, there’s just no substitute for Social Security. Don’t let the Republicans try to sell you stock in some Chinese factory. Your retirement is too important to entrust it to anyone other than the full faith and credit of the U.S. government, which is still the most rock-solid, default-proof, investment in the world.

  16. 19

    Roger Rabbit spews:

    @17 Have you looked at wages and the cost of living recently? Many people don’t fund their 401(k)’s because they can’t make basic ends meet. I’m not dissing on your comment, I’m simply pointing out the reality that our economic system works well for only about 10% of our population and leaves everyone else in perpetual debt.

  17. 20

    Roger Rabbit spews:

    U.S. corporations are accumulating vast cash hoards from the profits they made by selling us overpriced and substandard goods, and they’re not using a penny of it to hire American workers. For the most part, they’re not giving it to shareholders (read: retirees), either. They’re just piling it up and sitting on it like Scrooge McDuck in his money bin.

  18. 21

    Roger Rabbit spews:

    @16 “tax cuts republicans want to give to the upper 2% of wage earners over these same 75 years”

    Let’s clarify something here. When you talk about the upper 2%, you’re not talking about wages. That kind of money doesn’t come from working for it. It comes from owning capital and/or being in a position to grab it (e.g., bankers, dealmakers, and CEOs with captive boards).

  19. 22

    rhp6033 spews:

    RR @ 18: “@1 So now your 401(k) will support two years of retirement? ”

    That’s about it. After contributing 15% of my salary for over 15 years into the plan (which I started the moment I was eligible), my 401(k) is now equal to about two years of my salary. At this rate, when I retire in about fifteen years (well past age 65), I should have a total of about six years of salary accumulated. I’d have done just about as well if I had taken the cash and stuffed it under the mattress (excluding tax deferrment calculations).

    But, of course, I’m not counting on my 401(k) entirely. My retirement plan includes paying off my mortgage and remaining debt-free by the time I retire. Any social security benefits I receive will extend the fund for a longer period of time – perhaps ten or twelve years, based on current contribution levels.

    And due to some limitations on my 401(k) plan, including duplicative management fees and limited investment choices, I’m going to be scaling back my contributions to the plan and instead investing a larger share of my contributions directly. Since my employer’s 50% match is limited to 6% of my salary, I should be able to do that without any other loss.

  20. 23

    kmq1 spews:

    Thanks for shedding some light on this race up here in the wilds of the Snohomish County! Koster has been a stealth candidate all his life, slowly building name recognition for himself by running for positions with little impact. He has ran against Larsen before, but lost in a close race.

    The Everett Herald, the largest newspaper in the district, has ran stories trying to explain his views and positions, but then he complains that they are being partisan by portraying him as extremist.

    He is fairly extreme to the conservative side. Problem is he won’t man up and admit his views. That’s why he avoids debates that where he doesn’t get the questions in advance.

    When I explain his views to my Republican friends they can’t believe that he is that far out there, their impression is that he is much more benign.

    This is one of those races that really makes a difference in the balance in the house. Larson holds a slim lead but only if people get out and vote.

  21. 24

    CC "Bud" Baxter spews:

    Regarding 401Ks and non-participation, I have talked with many people at Boeing, who were obviously earning better than average wages, who didn’t contribute one penny to their 401K plan, which the company would match dollar for dollar. Like the smart Boeing workers told me, this was basically like throwing free money away. While the economy is bad now, people were doing the exact same stupid stuff during the best of times. You can lead a horse to water, but you can’t make it drink.

    Just because people are too stupid to invest in their company 401K, doesn’t make raiding Social Security for their savings a smart thing to do.

    As for the 2% of people who would be affected if they put the top rates at what they were under Clinton, this will save $700 billion over ten years. If you times this money by 7.5 decades, this equals over 5 trillion dollars. Coincidentally, the pessimistic 75 year shortfall in Social Security is right around this total, actually I think it is closer to 4 trillion.

    So what do you think is more socially responsible, giving the upper 2% an extra 5 trillion dollars over the next 75 years? Or do you think it is better to invest this money in the retirement security of the vast majority of Americans? As someone who has never made more than 50K a year in my life, I have absolutely no sympathy for the upper 2%, who are doing fabulously well by any reasonable standard.

    I am lucky enough to have a small defined pension plan, but because I got laid off, it won’t be what I want. Between this and Social Security it will barely be enough to pay my bills. This is where my retirement savings supplements this. So most people have three things supporting their retirement. If you gut Social Security, it becomes nothing but another 401K, which means it is subject to the whims of the market, and in bad times, it will get exhausted and spent well before retirement.

    The 15% Social Security is usually paid half by you and half by your employer. Make no mistake about it, the portion the employer pays is part of your personal compensation. If they gut Social Security, the first thing to go will be the employer portion, which means you are totally on your own, while the corporation invests that 7.5% savings in out-sourcing your jobs.

  22. 25

    ArtFart spews:

    Part of the “solution” which the right-wing hucksters don’t talk about depends on two things. If they manage to completely gut Social Security, they’re depending on not only repealing our first attempt at health care reform, but actually making the present system even worse than it is. That way, if most retirees only have enough to live on for a few years, the hope is that we’ll all get sick and croak before that runs out.

  23. 26

    spews:

    As usual, Goldy is a liar.

    Koster was talking in that commercial about individual accounts for Social Security, NOT about privatizing Social Security. Those are two very different things, as Larsen himself knows, since LARSEN ALSO favored individual accounts for Social Security.

    Larsen and Goldy just hope enough people are ignorant enough to not understand the difference … and that Larsen supported exactly what Koster does.

    Also, yes, Social Security earns a surplus … but within a few years no longer will. It’s going to begin being a drain on our general fund — as it will no longer be able to buy bonds from the surplus, since there won’t be any, and the general fund will have to be paying back those existing bonds — within this decade, at a cost of hundreds of billions of dollars.

    That is, what Goldy doesn’t tell you is that this “reserve” of the Trust Fund, while it means Social Security is solvent for many years to come, is almost all owed to the Trust Fund by the General Fund. On paper, the Trust Fund is doing OK until 2040-ish, but that $2.4 trillion is what WE OWE to the Trust Fund, and we’ll begin paying for it out of our taxes within this decade.