Originally published Tuesday, October 12, 2010 at 10:00 PM

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The Truth Needle | The Seattle Times has launched a new feature to help voters discern fact from fiction between now and the November election. The Truth Needle will examine the claims of candidates and campaigns in the top races and decide whether they are true or false.

Truth Needle | Half-true: Larsen's ad interpretation of 'Koster Plan' on Social Security

Half true: U.S. Rep. Rick Larsen's radio and TV ads say his Republican opponent, Snohomish County Councilman John Koster, wants to privatize Social Security.

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Rick Larsen ad

John Koster ad


The claim: U.S. Rep. Rick Larsen's radio and TV ads accuse his Republican opponent, Snohomish County Councilman John Koster, of wanting to privatize Social Security.

What we found: In the television ad, the camera pans across what seem to be position papers and news stories with prominent headlines, including one that says: "Koster Plan: Privatize Social Security." These don't come from any actual position papers or newspapers but were created for the ad.

Koster has never advocated completely replacing Social Security with investments in the stock market, and since Larsen started attacking his position, Koster has insisted that he's against "privatizing" the retirement program. But Koster has spoken about creating voluntary personal retirement accounts for younger workers who could invest a portion of their payroll taxes in stocks and bonds.

Critics say that amounts to a partial privatization of Social Security. Because Larsen's ad implies that Koster wants to privatize the whole system, we find the ad is half true.

At a February talk to Whidbey Island Republicans, Koster said, "We have to have the courage to talk about entitlement programs, what we're going to do about Social Security, Medicaid and Medicare. I think individual retirement accounts are a solution. Individual retirement accounts will work. I advocated for those 10 years ago."

The idea of personal retirement accounts as a part of a Social Security overhaul dates back to President Clinton's efforts in the mid-1990s to create a bipartisan plan that would combine changes to benefits with a voluntary savings component for workers.

Under that proposal, a small portion of a worker's payroll taxes could go into a government-managed investment plan that could potentially generate more money for retirement and ease the government's benefit load. That argument had appeal in a booming economy in which the stock market vastly outpaced traditional savings plans.

President Bush resurrected the idea in 2005, calling for an overhaul of Social Security that included what he called "private investment accounts."

The accounts would be overseen by the government, participation would be voluntary, they would involve a small percentage of the taxes paid into Social Security, and the money would be managed by investment professionals, said David John, senior fellow for the Heritage Foundation, a conservative Washington, D.C., think tank.

Democrats argued that diverting even a small amount of contributions away from Social Security would reduce the money available for benefits and make a trusted safety net dependent on Wall Street fluctuations. They labeled it "privatization," and public opinion turned against the proposal. That negative response was only heightened after the financial collapse of 2008, in which millions of workers saw the value of their 401(k) plans cut in half.

"The 401(k) meltdown brought home the risk of market investing," said Will Marshall, president of the Progressive Policy Institute, the think tank of the centrist Democratic Leadership Council. "The idea of privatization became politically radioactive."

Koster says he supports diverting up to one-third of workers' Social Security withholdings and investing them in stocks and bonds. An individual worker could choose where his or her money would be invested, but the investments would be managed by professionals and "controlled by the government," Koster said. The assets could be inherited, unlike current Social Security benefits.

Koster said participation would be voluntary and would not affect the benefits of workers who already have paid into the system or retired. Essentially, he is supporting a plan similar to the one Bush put forward.

In his own counter-ad airing on cable television, Koster argues that "reckless spending" by House Majority Leader Nancy Pelosi and Larsen (depicted with green-tinged skin, like a pair of wicked witches) is the biggest threat to Social Security. It also accuses Larsen of lying about his opponent's position and says, "Koster opposes privatizing Social Security."

Except, of course, for personal retirement accounts. Since the same charge of privatization was leveled at the Bush proposal in 2005 and again at John McCain during the presidential campaign in 2008, Koster may have been naive in thinking his proposal wouldn't draw a similar attack.

The most frequently discussed means of shoring up Social Security's finances include raising payroll taxes, raising the age of retirement and reducing benefits.

Neither Larsen nor Koster was willing to say which options he favored. Koster reiterated that federal spending has to be brought under control and that the Social Security surplus should not be raided to pay for other government programs. Larsen said he would await the recommendations of a fiscal commission created by President Obama.

Reported and written by Seattle Times staff reporter Lynn Thompson: 206-464-8305 or

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