Texas Gov. Rick Perry, the current frontrunner for the Republican presidential nomination in 2012, doesn't like Social Security
During the Republican presidential debate on September 7 , Perry said Social Security "is a Ponzi scheme. It is a monstrous lie. It is a Ponzi scheme to tell our kids that are 25 or 30 years old today, 'You've paid 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 that's not right."
Is Perry correct? Well, yes and no. Mostly no.
Social Security No Ponzi Scheme
Social Security is not a Ponzi scheme. Not even close.
In 1920, when the stock market was booming and Americans with any savings at all were dying to invest, a charismatic Italian swindler named Charles Ponzi told people they could make big money fast by allowing him to invest their money in international postal coupons.
Ponzi promised his investors enormous short-term returns, and thousands of people took the bait. He pocketed the money, making modest payments to a few of his early investors with money he collected from people who invested later. It only took about six months for the number of investors trying to cash out to exceed the number paying in. The whole scheme collapsed, Ponzi went to prison, and was later deported.
The reason Perry calls Social Security a Ponzi scheme, and gets away with it in some circles, is that Social Security uses money from today's taxpayers to provide benefits to older Americans who have been paying Social Security taxes for years. But a Ponzi scheme is fraud, plain and simple, and there is nothing fraudulent about Social Security.
How Social Security Works
Social Security has been a pay-as-you-go system from the start. It is neither a savings account nor an investment portfolio; it's a government program that is financed by taxes that were specifically levied for that purpose. Most Americans are not confused about that.
Perry calls Social Security "a monstrous lie," but who's lying? Because Social Security relies on today's taxes for today's benefits, and always has, the system is likely to reach a point sometime in the next couple of decades when the number of baby boomer retirees will exceed the number of workers who are paying Social Security taxes. Left unaddressed, that could eventually create a situation where retirees could receive fewer benefits or be forced to retire later. But the government has been pretty up front about that, so where is the lie? Besides, the so-called Social Security crisis isn't as imminent as politicians like Perry make sound. Money in the Social Security Trust Fund, built up by baby boomers' taxes during their working years (albeit not as much or as fast as it should have been due to government spending on other programs) will push the eventual crisis out a few more decades.
Most Americans Need Social Security
But Rick Perry doesn't like Social Security, and he can afford to take that position because it is unlikely he'll ever really need Social Security benefits.
Perry is a millionaire. Compared to some of the other presidential contenders, Perry is a man of modest means. But compared to most of the people he's asking to vote for him, and whose Social Security benefits he wants to reduce or eliminate, he's rich. According to his tax records, Perry accumulated most of his wealth through real-estate speculation, in deals that his personal and political friends steered him into over the years.
Unlike Perry, most Americans need Social Security to help make ends meet after they retire. According to a report by the Employee Benefit Research Institute, Americans 65 and older rely on Social Security benefits for nearly 40 percent of their income. Low-income seniors, a group that often includes the most elderly Americans, receive more than 88 percent of their income from Social Security. Even for seniors in the higher income brackets, Social Security represents a significant portion of their income (18.6 percent).
Ironically, Perry didn't start getting rich until after he was elected to public office and became a government employee. The government pensions Perry will receive are another reason why Social Security benefits may not be a big factor in determining his quality of life after he retires. And if Perry is elected president in 2012, he'll be set for life, with American taxpayers footing the bill. Why should he deny much less lucrative government assistance to the many seniors who have earned it?
My Take on Perry and Social Security
Since 1935 when Social Security was established, it has been a critical safety net for older Americans; it has done more than anything else to lift America's elderly population out of poverty. If Perry believes Social Security is broken, he should be leading the effort to fix it.
Calling Social Security a scam and a lie is an insult to the millions of Americans-past, present and future-who support the program with their taxes throughout their careers, and then rely on its benefits to help preserve their independence and dignity when working is no longer an option.