Rick Perry: Right Idea, Wrong Social Security Message
Texas Gov. Rick Perry has sadly taken hits from fellow Republicans for his properly skeptical outlook on Social Security. Unsurprisingly, former Massachusetts Gov. Mitt Romney has most aggressively attacked; Romney suggesting that Social Security actually doesn't violate the principle of small government.
The good news there is that Romney isn't a credible candidate over the long-term as is. If we ignore his continued defense of his state's healthcare model that served as the blueprint for Obamacare, Romney's bashing of China in concert with his elevation of "fair trade" (all trade is fair, by definition) reveals someone at worst simply clueless about economics, and at best someone willing to say anything to get elected.
Allowing for a brief digression, China's economic rise from the ashes of communism, a rise aided by its currency's peg to the dollar, has been profoundly brilliant for the U.S. economy. Either unaware of the latter, or too political to care, Romney's stance reveals someone not serious about economic policy at a time when we need serious thinkers.
Back to Perry and Social Security, the Texas governor questions the constitutionality of Social Security. He's right to do so considering our founding document nowhere enumerated to the federal government power over how we as individuals plan for our retirement. Secondly, if the Right correctly believes that the individual mandate within Obamacare is unconstitutional, then isn't forced saving for retirement similarly questionable from a constitutional angle?
Naturally it is, but there's no way we're going to get rid of Social Security, which means Perry should acknowledge as much. As it happens, he stressed that the program would be maintained in the GOP debates this week, making those at or near retirement aware that the Social Security portion of their overall retirement plan would be funded. So while it's a shame that our federal government - meaning every American citizen - is on the hook to fund the retirements of others, at present we'll have to swallow past mistakes that began with FDR.
As to the question of whether Social Security is a Ponzi scheme, AEI resident scholar Andrew Biggs reminds us that those are created with intent to defraud. Wrongheaded as the whole concept of Social Security is, it wasn't created with fraudulent intentions, though possibly unlawful ones.
Ponzi schemes ultimately fail due to the unwillingness of new fools to fund that which is fraudulent. After that, they fail because there's no coercive power driving their funding ability. Social Security sadly doesn't suffer under such limits.
Indeed, if American workers and employers choose to not pay into the Social Security system, they face jail time. Though he might have wished in the end that he could have bled money from others with force, eventually Bernie Madoff's lie was exposed when he ran out of individuals willing to be duped. Social Security will never have that problem given the police powers of our federal government.
Looked at more broadly, wrongheaded as Social Security will always be, its unfunded liabilities could be easily paid based on a return to historical U.S. economic growth patterns that could be achieved with a better policy mix: think a flatter income tax rate, reduced regulations, unfettered trade, and a strong, stable dollar.
Sure enough, if Perry follows through on his more general economic rhetoric, it's entirely possible that growth under a President Perry would make fears of Social Security solvency something of the past. Maybe so, but the latter doesn't excuse the program itself.
All of which brings us to what should be Perry's message. He should acknowledge that it's here to stay, and that even beyond those at or near retirement, all Americans can stay in the Social Security system if they choose, but with one essential variation.
The variation should not be a riff on privatization, but instead a message of choice. Perry should say that if elected those who like Social Security will be able to continue to pay into the program, but those that don't will be able to opt out.
Perry should phrase the above as a costless way to reduce the federal government's - meaning our - liabilities. Americans that desire to fund their own retirement without help from government will be free of the FICA tax (as should their employers be), but in freeing themselves of it they also absolve the federal government - meaning us - of any long-term liability relating to their retirement.
Those at or close to retirement will logically stay in the present system, and economic growth will make it easy to pay what's owed them. Those that are congenitally socialist will similarly stay in the system, but the cost of their doing so will be FICA taxes they'll have to continue paying, along with their employers.
Under such a scenario Social Security wouldn't be scrapped, nor would it be privatized. It would remain the same, but given the desire among some Americans to have greater control over their retirement, or better yet, not save at all, they won't be forced into a system they find objectionable. And if they opt out, their retirement will no longer be a responsibility of the federal government; meaning, once again, us.
While Gov. Rick Perry's many critiques of Social Security signal a politician who has the right idea, his message of fixing it won't pass Congress, nor does it necessarily make sense. Voters allowed this monstrosity to happen so voters should fund its continuation right up until the politicians voters elect scrap it. But if Perry inserts choice into the matter, sentient minds will quickly exit a program that will still be maintained; albeit at a much lower cost.
