News Release

September 22, 2004

Media Contact: (202) 789-5200

Cato Social Security expert disputes Kerry on individual accounts
When financial industry benefits, individuals benefit

WASHINGTON--Presidential candidate Sen. John Kerry today is expected to use a study released by The University of Chicago to campaign against President Bush's plan to allow younger workers to invest a portion of their Social Security tax in individual accounts. The Kerry campaign alleges the Bush plan will provide $940 billion to the financial industry in the form of administrative costs "while cutting benefits for seniors."

Michael Tanner, director of the Cato Institute's Project on Social Security Choice, made the following comments today regarding The University of Chicago study, Kerry's attack, and individual Social Security accounts:

"What does it matter if Wall Street makes money as long as workers receive better and higher retirement benefits? Our goal should not be to impoverish Wall Street, but to provide the best possible retirement income for workers. Sen. Kerry's efforts reveal a deep-seated hostility to the American free enterprise system.

"Sen. Kerry has still not told us what he would do to fix Social Security. Remember, it was former President Bill Clinton who spelled out the limited options for reform: raise taxes, cut benefits, or invest privately. Since Sen. Kerry is opposed to private investment, he should tell us what taxes he plans to raise or what benefits he will cut.

"Further, Prof. Goolsbee's study is based on administrative costs far higher than other studies have shown. The Social Security Administration puts administrative costs for individual accounts at only 30 basis points, one-third of Goolsbee's estimate. The Cato Institute has estimated administrative costs at between 30 and 65 basis points.

"Administrative costs cannot be considered in a vaccum. What counts is not cost alone, but the quality of what you get. Individual accounts would provide higher benefits, even after administrative costs, than what Social Security can actually pay. Moreover, individual accounts would give workers ownership and control over their retirement income. That is a value that cannot be measured in terms of administrative costs."

Michael Tanner is the author of "The 6.2 Percent Solution: A Plan for Reforming Social Security". He is available for additional comment on Social Security reform. Please contact the media relations department at 202-789-5200 to arrange an interview.