Romney and Perry debate Social Security — and we learn almost nothing

Mitt Romney and Rick Perry clash during Monday's CNN/Tea Party debate.
REUTERS/Scott Audette
Mitt Romney and Rick Perry clash during Monday’s CNN/Tea Party debate.

Well that certainly was a more interesting and exciting Repub debate than the one before. It’s even possible that the event shook up the race a bit. Minnesota’s own Michele Bachmann is getting some good reviews, which should help in her effort to remain politically relevant. Kudos to moderator Wolf Blitzer for not allowing the event to turn into a rerun of the “Rick and Mitt Show.”

In the end, though, what have we learned about how these guys would govern? Not much, says I.

To test that hypothesis, let’s return to the No. 1 bone of contention running across both debates, which has been Social Security, and what’s wrong with it and Gov. Rick Perry’s use of the “Ponzi scheme” metaphor and what he or any of the others would do to fix it.

For decades, long-term projections have shown that sometime in the 2030s or ‘40s, Social Security will have exhausted its “trust fund” (yes, I know, there’s nothing in the trust fund for government bonds, but we’ll leave that for another day) and will no longer to be pay all promised benefits.

(An aside that is not often enough noted: Social Security will not be “broke,” as is often stated, if broke means broke. Under this do-nothing scenario, the system would be able to pay future recipient between two-thirds and three-fourths of promised benefits. That’s not acceptable. But it’s far from broke.)

Perry has called this situation a “Ponzi scheme” and a “monstrous lie.” The Ponzi metaphor was ridiculous as this clever diagram makes clear. He should drop it, although he seems to think that manhood requires him to defend it. The “monstrous lie” is that Social Security has no problems and that today’s young workers can rest easy that their future benefits are guaranteed. I actually don’t know any monsters who are telling this lie.

Until last night, former Gov. Mitt Romney had criticized Perry mostly for the political unwisdom of his choice of metaphors. Calling Social Security a “Ponzi scheme” will scare seniors and hurt the ticket.

(A funny aside here: Seniors – unless they plan to be around in the 2050s — have the least to worry about from Social Security’s long-term financing challenges. Every single politician who speaks on the subject starts with a guarantee that those who are now at or near retirement will see no change in their benefits. But either way, the learned analysis of the implications of Perry’s metaphor choice for the Repub ticket’s chances in the key swing state of Florida — the Sunshine State where all seniors apparently live and vote — will not get us far in a search for what to substantively do about Social Security’s long-term shortfall projections.)

Romney’s challenge
Last night, Romney switched – rather brilliantly, I thought – to a more substantive challenge to Perry’s much-regretted discussion in “Fed Up,” (subtitle: “I-wouldn’t-have-written-that-book-if-I-had-known-I-would-be-running-for-president”) of Social Security.

In “Fed Up” and in his explanations of it, Perry said that in creating programs like Social Security, Congress disrespected the proper constitutional division of powers between federal and state governments. The federal government has extended its reach into many areas that should have been left to the states, under the Tenth Amendment and under the original enumeration of federal powers. That’s about an inch shy of saying the Social Security Act is unconstitutional and maybe a foot shy of suggesting that it should be struck down and replaced by a patchwork of state programs.

Romney decided to put Perry on this spot, thus:

“The real question is does Governor Perry continue to believe that Social Security should not be a federal program, that it’s unconstitutional and it should be returned to the states or is he going to retreat from that view?”

As debate theater, this bordered on brilliant. And Perry should someday give a clear, straight answer. The answer he gave last night was:

Rep. Michele Bachmann speaking during Monday night's debate.
REUTERS/Scott Audette
Rep. Michele Bachmann speaking during Monday night’s debate.

PERRY: “If what you’re trying to say is that back in the ’30s and the ’40s that the federal government made all the right decision, I disagree with you. And it’s time for us to get back to the constitution and a program that’s been there 70 or 80 years, obviously we’re not going to take that program away. But for people to stand up and support what they did in the ’30s or what they’re doing in the 2010s is not appropriate for America.”

Wow. If he keeps this up, we’ll need a name for the syndrome. No one is telling the monstrous lie that Social Security has no problems, and I’m pretty sure that Mitt Romney did not come anywhere near saying that everything done in the ‘30s and ‘40s was right.

And this utterly transparent effort to blow smoke occurred about one minute after Perry had claimed to be the ultimate straight talker, thus:

PERRY: “Well, first off, the people who are on Social Security today need to understand something. Slam-dunk guaranteed, that program is going to be there in place for those. Those individuals that are moving towards being on Social Security, that program’s going to be there for them when they arrive there.

“But the idea that we have not had the courage to stand up and look Americans in the face, young mid-career professionals or kids that are my children’s age and look them in the eye and said, listen, this is a broken system. It has been called a Ponzi scheme by many people long before me. But no one’s had the courage to stand up and say, here is how we’re going to reform it.

“We’re going to transform it for those in those mid-career ages, but we’re going to fix it so that our young Americans that are going out into the workforce today will know without a doubt that there were some people who came along that didn’t lie to them, that didn’t try to go around the edges and told them the truth.”

The Perry plan
So that’s the Perry plan. Tell the truth. It’s busted. It’s broke. It’s worse than broke, it’s akin to a criminal scheme. But old people have nothing to worry about and young people can rest easy, because someone finally has the courage to say here is how we’re going to reform it. Here’s how we are going to reform it. Here’s how… Gov. Perry, how are you going to reform it?

I don’t believe he’s gotten to that yet.

There is someone who got to it. It was former President George W. Bush ,who ran in 2004 on a fairly clear statement that he favored the partial privatization of Social Security. And in 2005, he put out a pretty detailed plan to get that done. I have long thought that Bush deserves more credit than he gets for his courage in putting out a plan to do what righties have long dreamed of doing, which was to privatize Social Security, to turn it from a sort of a pension into a sort of a 401K.

That plan failed. Never came anywhere near a vote in the Congress. That was partly because of the third rail stuff, but also because when you actually try it you find that the transition costs trillions of dollars that the government does not have. Y’see, every dollar that a young worker puts into his private account is one less dollar that Social Security has to keep the benefit stream going for those famous old folks who are already at or near retirement and who have been promised that nothing will change for them.

As best as I can tell, the Repub candidates all favor the Bush idea, but won’t say so clearly and don’t have an answer to the serious challenges such a plan presents, including and perhaps especially the transition costs. Herman Cain is the clearest about favoring privatization, but hasn’t, so far as I know, put any details on the plan and especially the transition challenge.

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Comments (20)

  1. Submitted by Jim Roth on 09/13/2011 - 12:38 pm.

    What’s wrong with this picture? I understood when I was a youngster that my grandparents would receive social security benefits most likely beyond the level of their personal contributions. That did not trouble me then and it does not trouble me now. I always contributed to the extent required by law and most often to the cap during my entire working life. Hopefully, if the ideologues of selfishness don’t have their way I will receive benefits. I don’t begrudge those who have received or are receiving benefits. It’s part of what makes this a great country. All you have to do is look at the stock market since 2008 (the so-called “Great Recession”) to realize that “privatizing” social security is not a great idea. It is an extreme oversimplification (which obviously appeals to some) that privatizing everything is a great idea.

  2. Submitted by Dimitri Drekonja on 09/13/2011 - 12:42 pm.

    Agreed that Romney did a nice job holding Perry to his prior writings, and he probebly helped himself among moderate republicans (if some still exist).

    Unfortunately for him, he faces quite an uphill climb in the primaries- does anyone seriously think that republican primary voters will nominate a Mormon? Multiple polls show that most of them think that Obama is a Muslim, and this somehow should disqualify him from the presidency. So they’ll now nominate someone who openly acknowledges not being a Christian? I think not. If the moderates do manage to wrest control of their party and get Romney nominated, I think the tea party wing will put up Palin or Perry as a 3rd party candidate. Then it’ll really get crazy…

  3. Submitted by Dennis Tester on 09/13/2011 - 12:59 pm.

    Quibble if you will, but listening to people debate the problem with the Fed, how to restructure the tax code, the role of personal responsibility in a free society, the proper use of executive orders, the 10th amendment’s role in health care law, how tax law affects manufacturing jobs, the benefits of a national sales tax versus an income tax, etc. etc. etc. is WAY more interesting than a democrat debate where the only things they discuss is who gets what and who’s gonna pay for it.

    Jus sayin.

  4. Submitted by Paul Udstrand on 09/13/2011 - 01:14 pm.

    I disagree, I think you learn quite a bit, well, at least confirm what you already knew. None of these guys has a clue or an ounce of integrity, the possible exception of Huntsman. You know that if these were to get into the white house they would pursue no merely extreme, but downright whacky agendas that would unleash a variety of different types of catastrophe on million of American. That’s worth knowing I think.

  5. Submitted by Thomas Swift on 09/13/2011 - 01:28 pm.

    ” Y’see, every dollar that a young worker puts into his private account is one less dollar that Social Security has to keep the benefit stream going for those famous old folks who are already at or near retirement and who have been promised that nothing will change for them.”

    Right, which y’see, is where all Ponzi schemes collapse.

  6. Submitted by Alec Timmerman on 09/13/2011 - 02:02 pm.

    Mormon’s are Christian.

  7. Submitted by Joe Musich on 09/13/2011 - 04:24 pm.

    The only ponzi scheme here is the ponzi scheme of the ideas coming from the right. In the end nothing to back up the loud arrogant smoke.

  8. Submitted by Bernice Vetsch on 09/13/2011 - 04:31 pm.

    And, on every dollar a young person puts into his/her private account, some of it would go to the financial services giant the government would select to do such work. Knowing the reputation of our large banks, I certainly wouldn’t want to entrust a retirement account to one of them.

    If said young person then retired in a year when the market has just crashed, as it does now and then, a large portion of the balance on hand will have disappeared.

    Privatization is a bad idea. But a private savings or investment account in addition to Social Security is a good one.

  9. Submitted by Dennis Tester on 09/13/2011 - 06:04 pm.

    Bernice, don’t look now but the vast majority of retirement accounts, probably even yours, is invested in the stock market and managed by those evil banks. And you know what’s even worse Bernice? I bet your retirement account holds some oil and gas stocks. Horrors!

  10. Submitted by Richard Schulze on 09/13/2011 - 10:30 pm.

    I really wish one of these candidates would have the courage to note that Bush tried to implement the Social Security reform proposals they are putting forth and was heavily rebuked. Was that a dream I had?

  11. Submitted by Frank Meyer on 09/14/2011 - 07:24 am.

    I’m not a Perry enthusiast, but why is Perry an economic illiterate for calling Social Security a Ponzi scheme when most of the same people who spout that line, like this poster, follow Paul Krugman’s columns and nod their heads in approval, though Krugman made the same point in 1997 ?

    Perhaps the difference is that Krugman (if you read the reference found by ZH) is fine with running a Ponzi to accomplish redistributionist goals, whereas Perry is not. Moreover, Krugman is also fine with “death panels” as part of the solution to Medicare’s much larger unfunded promises (from reader feedback to the ZH posting) :

    ‘he did come out supporting death panels back on Nov 14 2010:’

    “Some years down the pike, we’re going to get the real solution, which is going to be a combination of death panels and sales taxes. It’s going to be that we’re actually going to take Medicare under control, and we’re going to have to get some additional revenue, probably from a VAT. But it’s not going to happen now.” video ABC Amanpour

    So, ponzi schemes, death panels to cut off care funding for medical spending deemed excessive by . . . somebody, all fine with Paul as long as his cherished redistributionist goals are met.

  12. Submitted by Richard Schulze on 09/14/2011 - 07:51 am.

    Social Security is in theory quite healthy, but in practice excess Social Security taxes have reduced our outstanding debt by $2.5 trillion dollars over the past three decades. If we have to actually pay back what we owe the trust fund, taxes will have to rise substantially, or Medicaid will have to stop paying for retirement homes for the poor, or something else drastic. So Social Security would be in pretty good shape if we could afford to pay it what we owe it, but we can’t, because of health care.

    Medicare and Medicaid are the only problems that really count. Either the US comes up with a way to reduce the growth in costs, or we start defaulting on debt. As the saying goes, if something can’t continue forever, then it won’t. We will stop the growth of Medicare and Medicaid, because we must. I suspect that the federal government will, in a burst of federalism, make both programs into a block grant, hand them off to the states, then limit the growth of the block grant. The states, forced to balance their budgets, will make the painful cuts that the federal government won’t. There are, in fact, lots of ways to cut medical spending. They all are painful to someone.

  13. Submitted by Paul Udstrand on 09/14/2011 - 08:36 am.


    A bad idea is a bad idea no matter who proposes it, liberal or conservative. Pointing out that a liberal somewhere shares an opinion with conservative does not place any horns on any dilemma’s. It would be nice however if your comparisons were accurate and reliable… but it’s not actually necessary. If Krugman had made the arguments you describe, he’d be just as wrong as Perry.

  14. Submitted by Frank Meyer on 09/14/2011 - 08:49 am.

    “There are, in fact, lots of ways to cut medical spending. They all are painful to someone.”

    Perhaps the whole medical services funding debate is barking up the wrong tree:

    As Phillip Longman wrote in a March 2003 Washington Monthly article:

    “To get an idea of how wildly ineffective our health-care system is, consider this: The United States spends roughly $4,500 per person on health care each year. Costa Rica spends just $273. That small Central American country also has half as many doctors per capita as the United States. Yet the life expectancy of the average Costa Rican is virtually the same as the average American’s: 76.1 years.

    How can that be? According to public health researchers, the biggest reasons are behavior and environment. Costa Ricans consume about half as many cigarettes per person as we do. Not surprisingly, they are four times less likely to die of lung cancer. The car ownership rate in Costa Rica is a fraction of what it is in the United States. That not only means that fewer Costa Ricans die in auto accidents, but that they do a lot more walking, and hence they get more exercise. Thanks to a much lower McDonald’s-to-citizen ratio, the average Costa Rican thrives on a traditional diet of rice, beans, fruits, vegetables, and a moderate amount of fried food–and therefore enjoys one of the world’s lowest rates of heart disease and other stress-related illnesses.

    The simple comparison between the health of Costa Ricans and Americans suggests a whole new way to think about how to fix America’s increasingly dysfunctional health-care system–a system that these days seems to combine spiraling costs, declining coverage, and growing dissatisfaction with the quality of care. But instead of offering new ideas, both political parties in Washington are stuck in a hopeless rut, each trying to hawk plans that essentially expand the current system.”

    The current combatants in Congress could do worse than carefully reading and digesting Sagan’s 22 year old treatise, and Longman’s illuminating article, and reflecting more deeply on what it is they are attempting to “reform”.

    This later article by Longman might be worth a read too:
    The Best Care Anywhere
    Ten years ago, veterans hospitals were dangerous, dirty, and scandal-ridden. Today, they’re producing the highest quality care in the country. Their turnaround points the way toward solving America’s health-care crisis.

    My takeaway from the above: bloatocracy is not a monopoly of government institutions – it can happen, and be perpetuated, in ‘private’ institutions as well (provided they have access to an steady supply of “other people’s money” to keep the game afloat).

    From the conclusion to the earlier article:
    “In Greek mythology, the god of medicine, Asclepios, had two daughters. Hygeia was the daughter responsible for prevention, while, Panacea was responsible for cure. Today, to the detriment of our nation’s health, we’re fixated on the idea that medicine will produce a panacea. It’s time to listen to her more powerful sister.”

  15. Submitted by Frank Meyer on 09/14/2011 - 09:30 am.

    “A bad idea is a bad idea no matter who proposes it, liberal or conservative.”

    @Paul – or perhaps they are both correct?

    Simply calling it a “bad idea” proves nothing except that this is your opinion. Having followed this discussion since the early 1980’s, when I witnessed a debate between the original chief actuary of the Social Security system and one of his successors, and thus became aware of the issue, I’m inclined to think that both Perry and Krugman are casting light rather than blowing smoke on this topic. The “reset” of SS in 1986, the last time it was on the verge of “busting”, and its subsequent history have only strengthened that assessment.

    Admittedly, there are (at least) two material differences between the Social Security arrangement and Bernie Madoff’s scheme:

    1. Participation in Madoff’s scheme was voluntary; SS is mandatory for virtually everyone who has income from work or manages a payroll, and

    2. Up to a point, the operators of SS can ‘print’ money or raise the tax bite on all participants and their employers to cover developing gaps in payouts, while admitting new waves of non-contributing or minimally contributing beneficiaries to keep buying votes to support their re-election and maintain popularity of the system. Meanwhile, Bernie and his fellow con artists earn themselves additional sentences for counterfeiting money if they try to follow the money printing gambit, and do not have access to the other strategies for staving off the mismatch between new marks paying in, and earlier participants collecting their ‘winnings’.

    The “print more money” and “raise FICA rates” gambits (including taxing retiree’s ‘winnings’ from the system, which was one of the many original promises by backers of the system that have been broken by successors) are reaching their limits of effectiveness. Perhaps the “add more non-contributing participants” gambit still has a few years to run. As one who is only a couple of years away from “full retirement age” for SS benefits calculation, I’m not counting on it. Oh, the checks will no doubt arrive, but what will they buy, after a few more years, other than some percent of the Medicare / Medigap premiums?

    The differences noted are insufficient to dismiss the label of “a ponzi” from the “social insurance” systems. Like other ponzis, it eventually runs short of new contributors to keep the payouts to the earlier contributors flowing (current US ratio of workers to pensioners is less than 2; at inception it was over 40 ). Watch Europe, where the mismatch between revenue and payouts is further advanced in countries with rapidly aging populations and declining birth rates, for a preview of the challenge to our current generation of “kick the can down the road” experts.

  16. Submitted by Paul Brandon on 09/14/2011 - 10:58 am.

    A minor point– health and mortality are not the same thing. The fact that Costa Ricans (or Cubans, for that matter) live as long as we do does not mean that they are as healthy as we are.
    Western Europe might be a more apt comparison.

    and re: Paul Krugman and Ponzi:
    Here is the actual quotation:
    “practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).”

    First of all, the quote is 14 years old — some people do learn.
    Second, note that Krugman does not in fact characterize Social Security as a Ponzi Scheme; he simply points out that some elements of it resemble a Ponzi scheme (the idea that it should be self funding).
    He has spent the last fourteen years suggesting ways in which Social Security could be made permanently solvent (now it is good only until 2038, after which it would under present funding be able to pay only three quarters of the amount scheduled).
    But simple adjustments such as raising the limit on SS taxable income and means testing would make it permanently solvent without putting an undue burden on taxpayers.

  17. Submitted by David Greene on 09/14/2011 - 02:24 pm.


    ‘Western Europe might be a more apt comparison.’

    Western European nations spend half or less than what the U.S. does per capital for health care and they get far better outcomes. This has been known for years if not decades.

    Dr. Anthony Iton at CDC has looked into this extensively and concludes exactly the sort of thing Frank outlines. We have to fundamentally shift the way our society works to improve health outcomes. It turns out that walking instead of driving, having parks and recreation spaces accessible to everyone, making sure that quality fresh produce is affordable and available and other such things are more fundamentally important to health than the simple analysis of “personal choice.”

    Dr. Iton has made the case that if we shift a portion of our excess health care spending (that above what western European nations spend) to things like improving public transportation, building parks, reducing crime, providing job opportunities, combating racism and so on, we will get better health outcomes than we do today at a lower cost.

    Our health problem isn’t that we don’t spend enough on health care. It’s that we don’t invest in the common good anymore.

  18. Submitted by Paul Brandon on 09/14/2011 - 04:58 pm.

    and Paul Krugman just posted this — basically the point that I made above.
    Apparently #11 was repeating something posted in conservative blogs:

    “Paul Krugman – New York Times Blog
    September 14, 2011, 4:25 pm
    The Ponzi Thing

    Well, I gather that a lot of right-wingers are quoting selectively from a piece I wrote 15 years ago in the Boston Review, in which I said that Social Security had a “Ponzi game aspect.” As always, you should read what I actually wrote. Here’s the passage:

    Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

    Notice what I didn’t say. I didn’t say that the system was a fraud; I didn’t say that it would collapse. I said that in the past it had benefited from the fact that each generation paying in to the system was bigger than the generation that preceded it, and that this luxury would be ending in the years ahead.

    So why did I use the P-word? Basically because Paul Samuelson had done the same; he was basically just being cute, and I was emulating him — which now turns out to be a mistake.

    But anyway, anyone who uses my statement as some kind of defense of Rick Perry and all that is playing word games. I explained what I meant in that Boston Review article, and it was nothing at all like the claims that Social Security is a fraud, is destined to collapse, and all that. Social Security is and always has been mainly a pay-as-you-go system, which is nothing at all like a classic Ponzi scheme.

    Of course, the usual suspects won’t pay any attention to what I’ve just said. But if anyone is actually listening …”

  19. Submitted by rolf westgard on 09/15/2011 - 06:19 am.

    Dennis: I manage my own retirement funds; those of my children;and some for relatives. And fortunately quite a bit of those funds are in oil and gas stocks.

  20. Submitted by Paul Udstrand on 09/15/2011 - 09:41 am.

    Frank #15,

    //Simply calling it a “bad idea” proves nothing except that this is your opinion.

    Anyone who describes the Social Security Trust Fund as a Ponzi scheme is wrong. Promoting misinformation and ignorance is always a bad idea, no matter who does it.

    I would be impressed by the fact that you’ve been following this issue since 1980 were it not for the fact you’ve apparently failed to come across the fact that even if we do nothing at all, the SSTF is 100% funded until 2036. Like all Republican hysteria’s this is a contrived crises. There are a number of minimal steps we could take to fund SS indefinitely. The easiest would be to simply extend the exemption cap up to $125,000 a year.

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