Perry's Criticism of Social Security as 'Ponzi Scheme' Dogs Him in Debate
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As Gov. Rick Perry of Texas was attacked by some rivals for the Republican presidential nomination at Monday night's debate for his exaggerated claim that Social Security is a "Ponzi scheme," he also seemed to be debating himself at times.
Mr. Perry used the debate to talk about the need to shore up Social Security, which politicians on the left and the right agree is needed if the program is to continue paying out full benefits a quarter century from now. But in making his case, Mr. Perry both overstated the problems facing Social Security and adopted a very different tone than he did in his book "Fed Up" just a year ago, when he described Social Security as a failure that "we have been forced to accept for more than 70 years now."
Mr. Perry said Social Security had to be fixed so that "our children actually know that there's going to be a retirement program there for them."
But in the past, as Mitt Romney, the former Massachusetts governor, correctly pointed out, Mr. Perry has repeatedly suggested that Social Security, which pays benefits to 56 million Americans, is undesirable, and that it may even be unconstitutional.
In "Fed Up" (Little, Brown and Company, 2010) Mr. Perry wrote that "by any measure, Social Security is a failure." He described it as "a crumbling monument to the failure of the New Deal, in stark contrast to the mythical notion of salvation to which it has wrongly been attached for too long, all at the expense of respect for the Constitution and limited government."
Promoting the book on MSNBC last November, Mr. Perry asked: "Why is the federal government even in the pension program or the health care delivery program? Let the states do it."
When pressed by Mr. Romney on those statements, Mr. Perry responded: "If what you're trying to say is back in the '30s and the '40s that the federal government made all the right decisions, I disagree with it." As the audience of Tea Party activists applauded, he continued: "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."
Mr. Perry countered that Mr. Romney had used tough words for Social Security in his own book "No Apology."
"You said if people did it in the private sector, it would be called criminal," Mr. Perry told Mr. Romney. "That's in your book."
In the section he was apparently referring to, Mr. Romney was criticizing Congress for spending the Social Security surplus on other things. He asks what would happen if a private bank administering a trust fund did the same thing, and answers, "They would go to jail."
Mr. Perry repeated his description of Social Security, saying, "It has been called a Ponzi scheme by many people long before me."
But while there are some superficial similarities, it is ultimately a misleading exaggeration to describe Social Security as a Ponzi scheme.
Charles Ponzi was a Boston con man who promised investors impossibly high interest rates in the 1920s, and who paid off his early investors by taking money from later investors -- a pyramid scheme that can work only if an ever-increasing pool of investors puts in money.
Social Security, by contrast, is a pay-as-you-go retirement system by design. Current workers and employers pay taxes that are used to pay benefits to current retirees. For many years, the program took in more money than it paid out, and invested the surplus -- the "Social Security trust fund" -- in Treasury bonds. In 2010, Social Security began paying out more in benefits than it received in taxes. As more baby boomers retire, and new workers do not keep pace, that shortfall is expected to grow.
Mr. Perry spoke approvingly Monday of how some municipalities in Texas had opted out of Social Security, saying that they got a better deal. But that is for their government employees. It is not clear what his vision of letting states handle retirements would mean for private sector workers.
And opting out is not always a good idea: when the City of Central Falls, R.I., filed for bankruptcy this year, it moved to cut the pensions of its police officers and firefighters by as much as half -- and, since they opted out of Social Security, many have no other income to rely on.
First Published September 13, 2011 12:01 am