WALLACE: I want to also ask you, Mr. Toomey, about entitlements, because you have talked -- and I want to be clear here -- about letting younger Americans, not those who are currently in Social Security, not those who are close to Social Security, but younger Americans use some of their payroll taxes to invest in private accounts.
What happens if we encounter another one of these financial meltdowns and millions of people lose their nest eggs? What would happen to them then?
This is a straightforward question, isn't it? Given the past two years and what happened to people's retirement accounts, it's fair to ask how that would play if Social Security were similarly invested, but Toomey never really answers the question. Instead he (with Chris Wallace's tacit permission) goes off on a riff about how Social Security and Medicare are breaking the bank.
TOOMEY: Well, first of all, let's be clear. You know, 60 percent of the entire budget is entitlement spending. It's the automatic big programs. And if we're ever going to get back on a viable fiscal path we've got to figure out what we're going to do with those programs.
I've said that we should never, under any circumstances, cut benefits for people who are already retired or close to retirement. That would be outrageous and unreasonable, and I would never go there.
No, let's be really clear and also factual. How about that? 60 percent of the entire budget is NOT entitlement spending, because Social Security is funded through 2037 at current contribution levels. Unless Mr. Toomey would like to argue that Social Security revenues via payroll taxes directly offset Social Security outlays, he's just flat wrong.
But if we're going to be honest, we've got to acknowledge that these programs cannot exist in their current form precisely indefinitely. The demographics won't sustain it. So I've argued that younger workers should have this choice. If they want to participate in the current system, that's fine. But if they want to participate in a reformed Social Security program where they can accumulate some savings, I would allow for that, too. And I think there could be tremendous upside both because it allows the government's financings to get squared away, but also giving workers ownership.
To -- specifically to your point, the simple solution is that any such investment plan would be regulated. And in the early years when a worker is quite young, in teens, 20s, 30s, the investments could be heavily weighted for stocks.
But as a person approached their retirement age, the portfolio would transition to much less volatile capital preservation instruments like bank deposits, C.D.s and Treasuries.
WALLACE: Mr. Toomey...
TOOMEY: ... so that someone approaching retirement would not be subject to the -- to the volatility that you can see in the stock market.
So we've gone from privatizing Social Security entirely to an opt-in choice to invest in the stock market so younger workers can get "ownership"? Ownership of what?
Social Security came into being in a time where people's savings evaporated after being invested in worthless stocks and bonds. The contradiction in Toomey's "answer" is clear: An anti-regulatory Tea Party/Club for Growth/Corporate candidate is arguing that all we would have to do is 'regulate' investments in order to successfully privatize Social Security. Got it.
Here's a little news flash for Mr. Toomey. Workers can do that with their 401(k) plans now, and they found out exactly how NOT secure such investments are. No investment was safe two years ago. Cash/CDs? Zero return. Stocks and bonds? Lost over half their value. There's a lot of smoke and mirrors and tea party wizardry in his answer, but reality is something else again.
All the more reason to make sure Joe Sestak wins this race. Toomey in the Senate would be a disaster.