Scott Bessent called Trump accounts for newborns 'a backdoor for privatizing Social Security'

Treasury Secretary Scott Bessent on Wednesday described a new investment account for newborns included in a Republican law as a method to shrink the federal government's management of Social Security.

"In a way, it is a backdoor for privatizing Social Security,” Bessent said during a Breitbart podcast taping. “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, that's a game-changer too."

President Donald Trump campaigned twice on not cutting Social Security, a program providing benefits to about one in five Americans, most of whom are retired or disabled. Still, there have been some occasions over the years when he’s floated reforms to entitlement programs only to row it back shortly after. Social Security has long grappled with a financial shortfall that will cause a sharp cut to benefit checks unless Congress intervenes before 2034.

Democrats were quick to jump on Bessent’s comments to try to paint the Trump administration as one that’s tilted towards the super-rich and not serving the interests of the middle-class. Recently, they’ve pummeled Trump’s tax law as a giveaway to the richest slice of Americans, and Bessent's remarks could further expose the Trump administration to a fresh wave of political attacks.

"This is just the latest example of the broken promises and terrible path the flawed Republican megabill sets us on," said Brendan Duke, a former Biden administration economist now at the left-leaning Center on Budget and Policy Priorities. "And now the Trump Administration is putting Social Security privatization on the table and saying that their new bill is the first step on that road."

A day later, Bessent sought to clarify his comments. "Over time, the compounding is going to be an incredible supplement to Social Security, not a replacement," Bessent said in a CNBC interview. "It is a complement. And what I said was Social Security will continue as it is. It is intact."

"Social Security is a critical safety net for Americans and always will be," a Treasury spokesman said.

The new tax and spending law signed earlier this month established a tax-deferred investment account with $1,000 for every child born in the U.S. during Trump's second term. The program will kick in for children born after Dec. 31, 2024 and before Jan. 1, 2029. The benefits do have several strings attached that render it similar to an individual retirement account.

Parents and employers can contribute up to $5,000 annually, though there’s only a tax deduction for firms providing up to half that amount. An account holder can start accessing the cash at age 18, and withdrawals are still taxed at regular income tax rates. 

In Congress, there’s been little appetite to overhaul Social Security and Medicare due to their popularity with Americans and the explosive political risks associated with even modest changes. A bipartisan Senate group studied the creation of an investment fund and eventually raising the Social Security retirement age in 2023. But it quickly fizzled out since then-President Biden vowed to protect Social Security in its current form.