Since declaring for the presidency a few weeks ago, Rick Perry, the GOP Texas Tornado – a blast of hot air with a lot of destructive potential – has been amusing those of us with a taste for political absurdities with almost every utterance. By now, almost everyone in the civilized world has heard that Perry is convinced that not only is Social Security unconstitutional, but it is actually a big government “Ponzi scheme.” As Jonathan Bernstein observes, such an assertion means only that “Perry either doesn’t understand Social Security, doesn’t understand Ponzi schemes or is simply not telling the truth.”
Perry may not understand what a Ponzi scheme really is, but the underlying meme – that the Social Security reserve will be exhausted before today’s young workers reach retirement – is a staple of GOP rhetoric. It rears its ugly head right away in a scheme to “reform” Social Security that Missouri Senator Roy Blunt proposed on July 12:
Blunt doesn’t talk about Ponzi schemes explicitly – maybe because, unlike Perry, he actually knows what one is. He does, however, press the case that because the ratio of those paying into the system to those drawing benefits will continue to decrease for some years (he claims, falselly,that it is a permanent situation), it will not be able to support future retirees. Blunt’s argument is that half a loaf is better than none, and that we must cut the benefits of future retirees in order to ensure that they get anything at all.
Problem is, the story about a soon-to-be bankrupt Social Security is pure fiction:
The Social Security trustees project now that payroll taxes will fall below benefit payments in 2010 and 2011, exceed benefit payments from 2012 to 2014, and then continuously exceed benefit payments through 2015 . The interest and principal from the bonds in the trust funds will help to cover the cash shortfall after 2015 through 2037 . The date of final trust fund exhaustion has not changed from the trustees projections made in 2009. The program can pay on average 78 percent of its promised benefits with its tax revenue from 2037 to 2085, if nothing changes
Let’s see – twenty four years down the road Social Security will have to pay out somewhat less to beneficiaries if nothing is done. So why is Blunt claiming that we have to cut future retirees’ benefits when that will happen automatically if we do nothing? And he’s not even telling the whole story about the damage he wants to do. He’s also proposing to calculate cost of living adjustments (colas) according to a chained CPI index that will cost current retirees at least $18,000 in benefits – although he explicitly claims that his proposal will not touch anyone 55 or older. Wonder why he wants to hide that particular fact? You think maybe he wants to be reelected? Or is he just blindly glomming onto the chained CPI index that happens to be popular among the GOP political set right now.
We can actually avoid the unappealing but far from dire benefit cuts predicted for 2035 very easily. Along with cutting benefits via chained CPI and raising the retirement age, Blunt proposes means testing. However, there would be little or no need to cut benefits if the cap on income subject to Social Security taxes were to be lifted in accord with any of several scenarios that have been put forward. Instead of means testing, which weakens Social Security, make it stronger and let the wealthy pay their fair share – which, currently, is not the case:
The cap also means that higher-income individuals pay a smaller share of their income in Social Security taxes than middle-class employees. Including the employee and employer shares of Social Security and Medicare taxes, earners in the middle fifth of the income distribution pay an average effective payroll tax of about 11 percent. In contrast, the top 1 percent of earners pay just 1.5 percent on average.
At any rate, it doesn’t sound like today’s 20 and 30 year old workers really need to worry about whether or not Social Security will be there for them – as long as politicians like Roy Blunt keep their hands off the program. Nevertheless, a 2010 Gallup poll showed that 76% of Americans between 18 and 34 do not believe that they will receive Social Security benefits when they retire.
Their misapprehension is not really surprising. Listen to Blunt spin the story about how Social Security will be all gone if we don’t hand the program over to folks like him to fix, folks who, like Rick Perry, think it’s unconstitutional, or, more likely in Blunt’s case, an affront to the sensibilities of their Wall Street cronies, and it’s easy to understand why young Americans are so skeptical about the future of their benefits. Since George Bush opened the war on Social Security with his call to privatization in 2005, we have been bombarded with talk of the coming Social Security crisis. Even Democrats like Claire McCaskill are glad to join in the chorus. In such circumstances, who wouldn’t believe that Social Security will soon be moribund?
Unfortunately, this particular story is not only false, but intellectually corrupt. Speaking of Perry’s Ponzi scheme allegation, Bernstein concludes that:
In my view, saying that Social Security is a deliberate fraud – a Ponzi scheme – is about as irresponsible as truther or birther conspiracy thinking.
As far as I’m concerned, misleading rhetoric and outright falsehoods about the status of Social Security is just as irresponsible – even without the simple-minded insinuation that it’s a conscious fraud – and ultimately far more pernicious.
Addenda: Here’s what Ezra Klein has to say about Social Security vs. Ponzi schemes. Note that the only thing they have in common is GOP politicians who persist in erroneously comparing them.