Rick Perry’s Social Security Myth

By :: September 8th, 2011

Texas Governor Rick Perry is being rightly criticized for his loony claims about Social Security in last night’s GOP presidential debate. But what troubles me the most is this whopper: “It is a Ponzi scheme to tell our kids that are 25 or 30 years old today, you're paying into a program that's going to be there. Anybody that's for the status quo with Social Security today is involved with a monstrous lie to our kids, and it's not right.”

What’s not right is the tired myth that Social Security won’t be there for people 25 or 30 years old. And by perpetuating this alligators- in-the-sewer fable, Perry not only wrecks his own credibility but makes it harder for Congress to fix the program. 

Here is the real story of Social Security in one sentence: It is underfunded and badly needs to be modernized but even if Washington does nothing, young people will receive three-quarters of their promised benefits. And last I looked, three-quarters of promised benefits falls somewhat short of a “monstrous lie.”

Don’t believe me? Just ask the bipartisan Social Security Trustees—even those who served during George W. Bush’s administration. Here is a link to the trustees report from 2007. This year's isn't much different.   

Perry is, of course, pandering to the hard core conservatives for whom the Ponzi scheme line is akin to theological text. It is something like the belief among liberals that the U.S. invaded Iraq solely to fill the coffers of Halliburton: There is no evidence that it is true, but it sounds so good it would be a shame to stop saying it.

Make no mistake, Social Security badly needs to be modernized so it better reflects the realities of the 21st century. And it isn't hard to find the policy changes to do it. While those 30-year-olds won't get 100 percent of promised benefits, they can come pretty close. The problem is finding the political will. And Perry's demagoguery doesn't help.

Gov. Perry needs to remember that he is running for president, and not national talk show host. Social Security is a serious problem that deserves to be taken seriously.

21Comments

  1. Ralph H  ::  3:02 pm on September 8th, 2011:

    Social Security is in trouble and needs to be reformed. Perry may have exaggerated the porblem, but not the fact that it is unsustainable in its present form.

    Here’s a suggestion: Have mr Obama be booked on 60 minutes. Have a 60 Minute Host explain using a few charts the problem. Let him give a few scenarios for what happens if we do nothing. Let Mr Obama summarize the problem, and propose 1 or 2 general solutions and direct a group of Senate, House and SSI personnel to pick one and draft legislation. He has to convince liberals that SOMETHING has to change in benefits or retirement age, and conservatives that whatever changes to tax cap or rate is better than the alternative.

    I believe we all would benefit from directly viewing the truth, and it is important that this not be another speech by the president. My choice of 60 Minutes is because they have a lot of clout in exposing problems, and we have to avoid making this a purely preaidential proposal unveiling of the problem, although it is the President’s duty to propose a solution.

  2. Michael Bindner  ::  3:26 pm on September 8th, 2011:

    Social Security is only in the hole because the trustees must use conservative estimates. Realistic estimates put the shortfall lower – and raising the income cap eliminates it altogether if you raise it high enough. What would turn Social Security to a Ponzi Scheme is turning part of it over to Wall Street. The cuts they would take would make them the onl winners, with retirees being potential big losers. Imagine retiring in fall 2008 in a personal account system.

    By the way, Capitalism is a ponzi scheme – and we play it badly when we cut too many jobs and send them to China. We need a growing population of workers and spenders to keep the private economy alive, given its expectations of growth.

  3. DeWayne  ::  9:12 pm on September 8th, 2011:

    The last I looked, getting 75% of what you pay into a government program amounts a 25% taxation rate on that money. From a retirement benefit to a tax is indeed a monstrous lie.

  4. AMTbuff  ::  10:23 pm on September 8th, 2011:

    It’s nonsense to view Social Security in isolation. The entire suite of entitlement programs is unaffordable. Major cuts are needed. I expect a 100% cut in Social Security benefits for the affluent, also known as means testing, to be part of the package of cuts. Australia has already done this.

    Under the present conditions it’s ridiculous to claim that Social Security benefits for an affluent 30-year-old are safe. That person will probably never see a dime. The money will be spent on someone more needy. That’s how it should be, and that’s how it will be.

  5. James  ::  3:39 pm on September 9th, 2011:

    @DeWayne: Gleckman doesn’t say young people will get 75% of what they pay in. He says they’d get 75% of current benefit levels if nothing is done to change the system. Regardless of whether the system is changed, some will receive more than they pay in, and some will receive less. That’s true today and there’s no reason to believe it won’t be true for the foreseeable future. It’s true of all insurance, by the way, and we don’t call insurance a “monstrous lie.”

  6. Dan  ::  4:55 pm on September 9th, 2011:

    If a private trustee or some other private investment advisor could only pay 75% of promised benefits to millions of retirees, he’d be put in jail, or maybe even worse, since he’d be infinitely worse than Bernie Madoff. But if the government does it, it’s “short of a monstrous lie?” Perry’s no libertarian’s delight, but he’s right on this point.

  7. Jason  ::  5:34 pm on September 9th, 2011:

    Why aren’t more people challenging Republicans when they use this terminology like “ponzi scheme” “timebomb” and “monsterous lie”. They are clearly doing it to make younger-than-Boomers believe they will get NOTHING and scrap or privatize the system.

    Getting 75% of what you expected would be shitty. I get it. However, that is the DO NOTHING scenario. A ticking time bomb is when you show up for work and the employers doors are shut with an out-of-business sign, not a 25% salary cut.

    Plus, this is just the demographic hump when all the Boomers are retired. Boomers will die and the system will correct itself. Does the system need tweaked to help us get over the demographic hump? Of course, but it’s hardly a monsterous lie or a timebomb. The Worse Case Scenario isn’t even close to what Perry and most Republicans say it is. Democrats may be guilty of using scare tactics with Boomers and the elderly, but Republicans have pushing the “social security won’t be there” lie to young people to convince them to scrap the system.

  8. JC  ::  6:37 pm on September 9th, 2011:

    ARTICLE: The problem is finding the political will. And Perry’s demagoguery doesn’t help.
    _______________

    Perry’s “Ponzi Scheme” point is a lot closer to the truth than numerous Democrats who speak of “the Social Security Fund Lock Box” that is 100% FARCICAL and non-existent. How helpful is that “demagoguery”, Mr. Gleckman?

  9. molly  ::  8:44 pm on September 9th, 2011:

    The most important modernization would be to cease spousal benefits, which are unfunded and go almost exclusively to the wealthy. They used to be available only to people who had children. Now, even DINKs can qualify. A complete handout.

    We also need to means-test widow and widowers benefits. People who did not work for these benefits should not receive them unless they can show dire need. People who own property and other assets and did not need to work for a living should not be subsidized by those who did work and were taxed.

  10. Joshua  ::  12:49 am on September 10th, 2011:

    In what universe is 75% “infinitely worse” then 0 (Bernie Madoff’s payout)? Go home fool.

  11. Joshua  ::  12:55 am on September 10th, 2011:

    I’d like a brief explanation of just how small a change needs to be made to fix it. My understanding is if you do something very small (like raise the age to 68-69 and tax the first 200k of a person’s income instead of the first 100k) that the whole problem goes away – even without the means testing (which I personally think will add unnecessary overhead and people trying to cheat the system).

  12. Joshie  ::  2:55 am on September 10th, 2011:

    Anyone pretending a 25% tax rate a “monstrous lie” is delusional beyond belief, and has no sense of perspective.

  13. Michael T  ::  12:19 am on September 11th, 2011:

    Right now, any income over $106,8000 is not taxed for SS. Bernie Sanders introduced a bill that would re-instate the SS tax on incomes over $250K… So, if you make between $106,800 and $250K, you’re not paying any additional tax on that income… Over $250K, the SS tax kicks in again…

    The chief actuary for Social Security says the senator’s proposal to make the payroll tax applicable at higher income levels would create enough new revenue to keep the program solvent for the next 75 years.

    There’s the fix.

  14. Michael T  ::  12:22 am on September 11th, 2011:

    Moreover, turning our retirement over to Wall Street allows those sleaze bags to skim off the top in the form of fees to administer the private accounts. Accounts that would resemble 401ks. Has anyone taken a look at their 401k lately? Did you like what you saw? That’s what I thought.

  15. DCLawyer68  ::  10:45 am on September 13th, 2011:

    I’d say paying me only 75% of the money you told me you were going to pay me when we entered into our arrangement is a lie.

    It’s certainly less of a lie than the “everything’s all right with Social Security” we’re hearing from other quarters.

  16. Very Quick Thoughts on President Obama’s Jobs Speech – Forbes  ::  4:47 pm on September 14th, 2011:

    […] while Perry was denying that it existed.   Romney was right on the merits (Howard Gleckman has a nice post on this), but it will be interesting to see how it plays in the  Republican […]

  17. lch56  ::  10:56 am on September 15th, 2011:

    Who is saying “everything’s all right with Social Security”? No one that I’ve ever heard – or at least no one who is well-informed.

    And the comment was “If we do NOTHING, young people will receive three-quarters of their benefit.” Every economist or advisor, and any intelligent politician, acknowledges that we need to choose a fix. I don’t say “find” a fix because there are several, all quite well known. We can raise the retirement level. We can re-institute SS taxes on income over $250. We can means test. We can eliminate spousal coverage on the wealthy. We can (and probably should) do some combination of all the above.

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