Rick Perry in USA Today: I am going to be honest with the American people
posted at 12:05 pm on September 12, 2011 by Tina Korbe
For too long, politicians have been afraid to speak honestly about entitlement reform — but the American people deserve the facts, Texas Gov. Rick Perry writes in an op-ed that appeared Monday in USA Today. Perry provides the cold, hard truth:
Social Security’s unfunded liability is calculated in the trillions of dollars. Last year, annual Social Security outlays exceeded annual revenues for the first time since 1983. The Congressional Budget Office projects that outlays will be roughly 5% greater than revenues over the next five years, worsening as more and more Baby Boomers retire.
By 2037, retirees will only get roughly 76 cents back for every dollar that is put into Social Security unless reforms are implemented. Imagine how long a traditional retirement or investment plan could survive if it projected investors would lose 24% of their money?
I am going to be honest with the American people. Our elected leaders must have the strength to speak frankly about entitlement reform if we are to right our nation’s financial course and get the USA working again.
The piece appeared opposite an editorial from the USA Today board. The view of the paper? “Social Security far from a Ponzi scheme.” The board writes:
Yes, Social Security has major funding problems. It pays out more in benefits than it takes in, and the gap will grow steadily worse as Baby Boomers retire. To that extent, Perry has a point. Congress, under both Republican and Democratic control, has been negligent in making necessary adjustments to bolster Social Security’s balance sheet for the long term. But the program’s problems are largely the result of people living longer, and therefore collecting more in benefits, rather than some inherent structural shortcoming or constitutional failing.
Social Security is most certainly not a Ponzi scheme, which is an undertaking designed to swindle people out of their money by using incoming revenue to produce bogus investment returns to attract more money (see Ponzi, Charles and Madoff, Bernard).
Ponzi schemes have two salient features. First, they are criminal enterprises, which Social Security is not. Second, they work only until people get wind of what is going on, at which point they inevitably collapse. Social Security’s finances are plainly visible for all to see. The imbalances emerging now are a surprise to no one, and modest adjustments in tax rates, benefit formulas and the retirement age can ensure the program’s viability for generations to come.
Perry is playing to fears among younger voters that Social Security won’t be around for them; polls have shown that more than 60% over those under 30 don’t expect to collect. But even if nothing is done, the program could still pay about three-quarters of promised benefits at mid-century.
The term “Ponzi scheme” attracts such attention because it does typically refer to a criminal enterprise. In that respect, the USA Today editorial board is right. Social Security is not illegal. But the board’s second point — that SS is not a Ponzi scheme because it hasn’t collapsed, because investors continue to invest — makes little to no sense. Social Security doesn’t have to attract investors with the soundness of its returns; the government mandates that every single worker invest in the program. If SS did have to attract investors, the program very well would collapse in true Ponzi-scheme fashion as soon as current workers found out they’d be lucky to receive as much in benefits as they invested in payroll taxes.
When Perry calls Social Security a Ponzi scheme, he’s referring to the structure of the program, which relies on new investors to ensure old investors receive a handsome return on their investment. Michael Tanner, senior fellow at the Cato Institute, explains in greater detail:
Social Security … forces people to invest in it through a mandatory payroll tax. A small portion of that money is used to buy special-issue Treasury bonds that the government will eventually have to repay, but the vast majority of the money you pay in Social Security taxes is not invested in anything. Instead, the money you pay into the system is used to pay benefits to those “early investors” who are retired today. When you retire, you will have to rely on the next generation of workers behind you to pay the taxes that will finance your benefits.
As with Ponzi’s scheme, this turns out to be a very good deal for those who got in early. The very first Social Security recipient, Ida Mae Fuller of Vermont, paid just $44 in Social Security taxes, but the long-lived Mrs. Fuller collected $20,993 in benefits. Such high returns were possible because there were many workers paying into the system and only a few retirees taking benefits out of it. In 1950, for instance, there were 16 workers supporting every retiree. Today, there are just over three. By around 2030, we will be down to just two.
As with Ponzi’s scheme, when the number of new contributors dries up, it will become impossible to continue to pay the promised benefits. Those early windfall returns are long gone. When today’s young workers retire, they will receive returns far below what private investments could provide. Many will be lucky to break even.
Eventually the pyramid crumbles.
So, sure, Social Security is not a Ponzi scheme insofar as the government is able to force investors to enroll, as well as to pay more when slowed population growth results in fewer investors — but, absent that, it is. Milton Friedman put it this way in a 1999 New York Times article: The “guaranteed” benefits of the entitlement program exist “solely on the expectation that future Congresses will honor promises made by earlier Congresses — what supporters call ‘a compact between the generations’ and opponents call a Ponzi scheme.” Charles Blahous, Ph.D., a member of the Board of Trustees of the Social Security Trust Fund, has also admitted the program is a Ponzi scheme:
As I’ve written before, Perry’s comments aren’t problematic because they’re false: They’re problematic because Social Security is a popular program, because “the people want their treats” and because other politicians are willing to continue to pander. But Perry’s rhetoric is also enormously helpful because it’s generating this conversation, just as he hoped.
P.S. TheStreet.com is presently polling readers as to whether they think SS is a Ponzi scheme, in case you want to participate.
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Religious conservatives wanted someone who didn’t pivot on his principles. If you were to forget for a moment that Mitt Romney was a Mormon and just look at how attractive he was as a candidate to religious conservatives, you’d see that they wouldn’t have wanted to vote for him no matter what his religion was. He pivoted on abortion, believed in big government healthcare, and not only surrendered on same sex marriage but actually gave the left more than they were asking.
There is, on the other hand, lots of evidence that Democrats were not about to vote for a Mormon. But that doesn’t advance the narrative, does it?
There Goes The Neighborhood on March 21, 2013 at 7:26 PM
Anti-Mormon evangelical bigots cost Romney the election. OK, how many scapegoats does that make? Let’s see: Latinos; Sarah Palin; Candy Crowley; Chris Christie; evangelical bigots (no doubt from the South, which Romney incredibly carried); anti-abortion zealots; Todd Akin; Christine O’Donnell; Sharron Angle; the primaries; Newt Gingrich…everyone except that weak, unelectable nominee himself.
ddrintn on March 21, 2013 at 9:57 PM
Nor does the fact that about 60% of moderates voted for Obama.
ddrintn on March 21, 2013 at 9:58 PM
Blah. Don’t bother. Asked her (?) hours ago for a cite or at least where that meme came from and I’m still waiting.
kim roy on March 21, 2013 at 10:05 PM
SukieTawdry on March 21, 2013 at 3:13 PM
shove your concern up your wedge driving pie hole loser.
tom daschle concerned on March 22, 2013 at 5:08 AM
There are a great number of us who’d like to feel more comfortable voting for Republicans out there who have to flog ourselves to make it to the polls. Ya see, we’re as deeply troubled by a big religious government as we are by a big secular government.
The big religious government “might” be our kind of religion or it might be something else more extreme or not extreme enough. But, being a Big Government we either abide by its Big Government laws its way or spend time in the big house, have our property taken, and so forth. No thanks. It’s no worse if a Calvinist dominated government does this than if a Mohammedan dominated government does it or if a secular government does it.
I want a government small enough it doesn’t make a practical difference if it tries to make stupid religious based laws about not working on Tuesday because its the Great God Wumpus’ sacred day. It should be too small to make such laws and too tightly constrained to even consider trying.
I’ve nothing against lawmakers being “informed” by their religion. But, I do insist that if they make a law it be a law that has solid secular reasoning behind it. If some religion figures it’s not legal to bathe your feet on Thursdays for some silly reason they MUST be free to exhort their members to follow that stricture and free to expel those who disobey it. But they must not be allowed, for example, to stone violators to death.
This requires a non-negligible government. But it certainly does not need a government with sheaves of regulations large enough to fill the Statue of Liberty to overflowing. That rather violates the spirit of Liberty, doesn’t it?
{^_^}
herself on March 22, 2013 at 5:12 AM
herself on March 22, 2013 at 5:12 AM
I asm assuming you are talking about socons when you say “big religious government.” Here’s a hint, not all socons are religious. Many of us and I know several of us on Hotair are agnostic and atheist. We just see the world the way it is and not in theoretical terms.
I never wanted to be a socon. You think as an agnostic, I want to keep being compared to the church lady? I was forced to become a socon basically by Republicans like you who scream “let’s get out of social issues and let’s the states decide.” The problem is you people completely ignore the fact that we have an opposing party that ignores these rules. I was happy to live in my conservative state and vote on things like abortion and gay marrriage just in my state. It was not me who made that a federal issue. My position as a socon came as a direct response to the Democrats and the liberals using federal legislature and judicial fiat to make Massachusetts and California values federal values. You may be okay living by those state’s values because you agree with them, but I am don’t. If fighting to keep the littlest among us from keeping from having their spine snipped with scissors or thining children deserve to grow up with a mom and a dad makes me an extremist- so be it.
melle1228 on March 22, 2013 at 7:27 AM
In answering the opening question just think of the media and that includes all TV, radio, magazines, newspapers that are heavy progressive agenda screamers and the question answers its self. The only unedited TV we saw were the debates but immediately after these debates the crews of the left were falling all over themselves saying what was really said, the code words used, the lies that Mitt used and now the media asks a question as to what went wrong with the election? Gimme a break!
mixplix on March 22, 2013 at 8:04 AM
Probably because the Republican Party has morphed into Democratic Party Lite.
TulsAmerican on March 22, 2013 at 10:56 AM
It is because anti-liberty states have an undue influence on the primary elections. Hold the primaries in order from most to least conservative/red and we will have a great candidate. Stop rewarding the douchebags by allowing them precedence over the reddest states like Texas.
TXJenny on March 22, 2013 at 4:19 PM
Close the primaries and than see what happens.
Did you ever wonder why the GOP won’t close the primaries to only republicans voting?
oldyeller on March 23, 2013 at 8:43 AM
Because the RINO leadership in the RNC blocks them in every possible way, and works hard to disenfranchise conservative voters.
The RNC is the problem.
landlines on March 23, 2013 at 1:09 PM
.
Y . E . S . ! ! !
.
ABOLISH OPEN PRIMARIES !
listens2glenn on March 23, 2013 at 2:19 PM
Why? Bcause conservatives eat their own and RINOs don’t!
redware on March 23, 2013 at 7:04 PM
I’ve never heard anyone offer even a passable argument for why Iowa & New Hampshire must always be first in line in the primaries. I live in Texas, the biggest red state in the union no less, and by the time I vote in the primaries the nomination is essentially wrapped up already.
Again, does anything make sense about this?
Reggie1971 on March 24, 2013 at 3:12 PM
because the liberal wing of the republican party don’t want a conservative.
mmcnamer1 on March 25, 2013 at 7:00 AM
This was not correct, it was veteran’s groups who thought we could not possibly have a commander in cheif that had not served in the military service, that put the kabosh on the Romney campaign starting with the N.H. primary. The veterans groups were organized by the McCain campaign staff. At that time they thought the dem candidate would be Hilary; the fiscal meltdown had not happened.
Fleuries on March 25, 2013 at 11:38 AM
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