During a visit to Nebraska yesterday, President Bush made the following set of claims:

[A] personal retirement account will earn a greater rate of return than that which your money earns in the Social Security trust. That’s an important point for people to understand. If you invest your money in conservative stocks and bonds, you’re likely to get around a 4 percent rate of return, which is greater than double than the money you’re earning right now in the Social Security trust. And over time, that means your own money will grow faster than that which is in the Social Security trust. In other words, you’ll have more money when it comes time to retire. That’s what that means. And that’s an important concept.

First, it’s not necessarily true that a private account will perform better than Social Security as Bush and other White House officials repeatedly assert, though it is likely over the long run based on the historical performance of the stock market. Treasury Secretary John Snow admitted this possibility on the December 19, 2004 edition of “Fox News Sunday”:

They [younger workers] take money that would be going into the system, it gets put into these personal accounts. They reduce their claim on the system, but they get the personal accounts as a nest egg, which will grow faster, at least have the opportunity to grow faster, than the reduction in the payout from Social Security itself.

In addition, Bush is falsely implying that the appropriate comparison is between a 4 percent rate of return for private accounts and a 1-2% rate of return for the normal guaranteed benefit. But this is misleading. The “benefit offset” that he never mentions would reduce guaranteed benefits for private account holders by 3 percent per year above inflation, so workers would only increase their net benefit if their annual returns are greater than 3 percent. This isn’t fine print; it’s the way the plan would work, and Bush is directly misleading his audience about it.