Treasury Secretary Scott Bessent said Wednesday that the so-called Trump accounts Republicans created for children in their tax and spending bill are a “backdoor for privatizing Social Security.”
In making the comments, Mr. Bessent ventured into what many consider the third rail of politics by suggesting that the accounts could be a step toward withdrawing the government’s role in funding the safety net program for retirees, which faces a longstanding financing shortfall.
The government-sponsored accounts are designed to provide Americans with an opportunity to start building wealth as soon as they are born. Under the law, which President Trump signed on July 4, American babies born through 2028 are eligible to receive $1,000 from the federal government. Parents, family members and employers can contribute additional funds to the accounts, which must be invested in low-cost stock mutual funds or exchange-traded funds tracking a U.S. stock index.
Speaking at an event in Washington hosted by Breitbart, the right-wing news organization, Mr. Bessent described the accounts as a way to increase financial literacy and create wealth. He also appeared to call for letting the private investment accounts supplement or replace Social Security, drawing backlash from Democrats.
“In a way it is a backdoor for privatizing Social Security,” Mr. Bessent said. “Social Security is a defined benefit plan paid out. To the extent that if all of a sudden these accounts grow, and you have in the hundreds of thousands of dollars for your retirement, then that’s a game-changer.”
In a defined benefit plan, a recipient gets a fixed amount of money based on the history of the person’s earnings. The income from the new accounts would be based on investment returns.
In a post on X after the event, Mr. Bessent clarified his comments. “Trump Baby Accounts are an additive benefit for future generations, which will supplement the sanctity of Social Security’s guaranteed payments,” Mr. Bessent wrote. “This is not an either-or question: our Administration is committed to protecting Social Security and to making sure seniors have more money.”
The future of entitlement programs like Social Security, which are funded by workers through payroll taxes, has long been considered one of the most fraught topics in American politics. Social Security faces a stark financial challenge as a growing share of the population retires and starts collecting benefits. The costs of the program have outpaced the revenue collected from payroll taxes, a shortfall that could result in an automatic benefit cut as soon as 2033.
Suggestions of trimming benefits or raising the retirement age to make the programs more financially sustainable has been a nonstarter with older voters, who reliably show up at the polls. Mr. Bessent’s comments alluded to an idea popular among some conservatives to push more Americans to rely on financial investments, rather than government payments, to fund their retirement.
That prospect has been politically toxic for many Americans. President George W. Bush proposed partially privatizing Social Security by directing some payroll tax revenue into investment accounts, though the proposal collapsed after harsh opposition from Democrats and influential groups like the AARP.
Democrats seized on Mr. Bessent’s comments to argue that he was “saying the quiet part out loud” about the Trump administration’s intentions with the new accounts.
“They’re already ripping health care away from millions on Medicaid, and now they’ve made it clear that your Social Security is next,” Senator Jeanne Shaheen, a Democrat from New Hampshire, said.
Tim Hogan, a communications adviser for the Democratic National Committee, said: “Trump is now coming after American seniors with a ‘backdoor’ scam to take away the benefits they earned.”
Mr. Trump has said that cutting Social Security is a nonstarter. But he faced criticism early this year when the Department of Government Efficiency abruptly cut 12 percent of the agency’s work force and scaled back customer service. Elon Musk, the billionaire former head of the cost-cutting group, referred to the program as a “Ponzi scheme,” raising concerns that it might be privatized.
The Treasury secretary has spoken broadly this year about the need to pull federal support out of the U.S. economy. He said that will allow the economy to be “re-privatized,” which he says will make the private sector a bigger driver of economic activity.
The accounts are projected to cost the federal government $15 billion over a decade. They have befuddled some tax experts, who have suggested that, setting aside the free $1,000 from the government, people may be better off contributing to a traditional investment account on behalf of their children.
Still, just that $1,000 government contribution could compound until today’s infants retire decades from now, a potentially exponential increase in value for people with the accounts.
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
Andrew Duehren covers tax policy for The Times from Washington.
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