This partial transcript from The Edge with Paula Zahn, May 2, 2001 was provided by the Federal Document Clearing House. Click here to order the complete transcript.

PAULA ZAHN, HOST: President Bush says he wants to overhaul Social Security and let you invest some of your retirement money into private accounts. The president warns that without such a move, you could be in for quite a wake-up call when you retire.

(BEGIN VIDEO CLIP)

GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES: Today, young workers who pay into Social Security might as well be saving their money in their mattresses. That's how low the return is on their contributions.

(END VIDEO CLIP)

ZAHN: And joining us now from Washington is Republican senator Mitch McConnell of Kentucky, who is the chairman of the Rules Committee.

Welcome back to THE EDGE.

SEN. MITCH MCCONNELL (R), KENTUCKY: Glad to be with you again, Paula.

ZAHN: Thank you. So, senator, as you know, even critics of privatization say in order to save the system, if we're not going to let it go broke in 2037, you got to privatize some portion of this. Explain to us where the battleground lines are being drawn when it comes to getting both sides to agree on the appropriate percentage to be set aside for privatization.

MCCONNELL: Well, the first thing I think we need to note is this doesn't affect anybody who is currently of retirement age or anyone who is near retirement age. So this whole suggested change, Paula, is targeted to younger people in America. It was vetted during the campaign last year, overwhelmingly popular among people 40 and under who were the likely beneficiaries of the new system.

The thought is -- and it will be up to the commission to make a recommendation and obviously up to Congress to pass something if something is to be passed, that a small percentage of the 12 percent payroll tax that we're all paying anyway would go into personal savings accounts much like mutual funds. You wouldn't be able to buy stock futures, but much like mutual funds. And all indications are that this would create a much wealthier group of older people when you get there.

As the president was saying in the setup that you mentioned or leading into saying, he said later in that that you only get about two percent of your Social Security paid today. You look over the last 55 years of the stock market, take the worst 20-year-period in that last 55 years, and you still got a 7.6 percent return.

ZAHN: All right, so do you think the Democrats are trying to scare Americans when they say this is risky proposition, that when you look at the volatility of the stock market, there is no guarantee that -- let's say you end up with a two percent figure of the payroll tax, a two percent percentage of that, is there any guarantee that it's going to be there when comes time to retire?

MCCONNELL: Of course, there will be a guarantee that it'll be there, and the people most likely to get scared by this are not going to be affected by it anyway. It's important to realize that this is going to be targeted to people 40 and under. And among those people, they've heard this argument, they've heard this debate during last year's campaign. They're overwhelmingly in favor of it. And the people who may be a little skittish about it, the older people, are not affected by it anyway.

ZAHN: Yeah, I'm going to put up on the screen the conclusion of a recent survey that was done by Dalbar, which is a financial services firm in Boston. They asked about a thousand voters over the age of 30 this question: If you could, would you direct a portion of your Social Security payments into your 401(k), IRA or other retirement plan if it meant reducing your Social Security benefits? Fifty-five percent said yes; 44.7 percent said no.

So let's talk about the goal of the commission. We know the president put eight Democrats and eight Republicans on there, although there are those who say it's stacked in favor of privatizing Social Security. Where are the battle lines drawn?

MCCONNELL: Well, the Democrat who's co-chairman of it is Daniel Patrick Moynihan, who knows more about Social Security than anybody in America. He's the Democratic chairman of the finance committee and ranking member of the finance committee before he retired, so certainly, I think all of the 16 members on the commission -- eight Republicans and eight Democrats -- are at least open to the idea of personal savings accounts. They certainly are open to that.

ZAHN: So you deny that this commission is stacked in favor of privatization, because that's what some Democrats are saying. Even with the eight-eight split, clearly, the president picked choice people who would be -- look favorably at his ideas?

MCCONNELL: Well, I think he did. And I don't think there's anything wrong with that, because the only alternative to providing the opportunity for personal savings accounts and real wealth -- by the way, the other thing about personal savings accounts, Paula, it's your money. You know, when you die, your Social Security check is gone. If you had a personal savings account when you died, it could be inherited by someone, so you build up some wealth. Yeah, I think all 16 members, the eight Democrats and eight Republicans are open to the idea, and what's wrong with that? That's what they're exploring is this idea.

ZAHN: All right, on to the issue of education. The Senate has already, it seems, begun to fashion an agreement on an education bill that would leave many of the programs the president pitched in the campaign intact. The one thing that was left out of the bill was school vouchers, and the president has conceded he probably wouldn't have enough votes to get that approved. Why did he let that issue go down without a fight?

MCCONNELL: Well, that amendment will be offered on the floor of the Senate. Basically, the way we're proceeding on that is we've agreed to a core package which gives the president most of what he wants on flexibility for local states and school boards and accountability. That is annual testing so we can find out whether our kids are falling behind.

The choice issue and its various ramifications will be dealt with by separate amendments on the floor. It could be that we won't be able to get private school choice, but we're going to get some enhanced opportunities in the public school area to give parents an opportunity to get their kids out of failing public schools and get tutoring or into some other public school that may give them a chance. After all, the president's goal here is to leave no child behind, and you can't leave these children trapped in these hopeless situations or they will be left behind.

ZAHN: All right, so what you're essentially telling me tonight, you do not believe that school vouchers are dead at this point? Maybe close to being dead on arrival but...

MCCONNELL: Well, not likely to be approved to go to a private school, but there will be an escape mechanism to get kids out of hopeless situations in public schools.

ZAHN: All right, and your analysis of Defense Department advisory that's just come out that says, quote, "Donald Rumsfeld has ordered the suspension of all Department of Defense programs, contracts and activities with the People's Republic of China until further notice." What does that mean?

MCCONNELL: I don't think I know yet, but I think it's clear that we are reacting to the forcing down and almost wrecking of our plane in international waters. We do have a tense relationship with the Chinese as far as national security is concerned, and I think the secretary of defense continues to send a message as the president did last week with the rather robust arms sale package to Taiwan.

ZAHN: All right, I'm reading further and this says a Pentagon official said this would include all military-to-military exchanges, attendance at military exercises and port visits.

Senator McConnell, good to have you with us tonight. Thank you for your addressing all of those issues tonight.

MCCONNELL: Thank you, Paula. Glad to be with you again.

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