For too long, politicians afraid to face hard facts have been patching Social Security together with Band-Aids. They have been making fraudulent promises to the American people in order to perpetuate their own political careers, and now the chickens are coming home to roost, as the saying goes. An aging population with large numbers of retirees now want to cash in on those promises.
Ponzi schemes -- like the one that sent Bernard Madoff to prison -- are illegal in this country for a reason. They are fraudulent systems designed to take in a lot of money in a lot of money at the front and pay out none in the end. This unsustainable fiscal insanity is the true legacy of Social Security and the New Deal. Deceptive accounting has hoodwinked the American public into thinking that Social Security is a retirement system and financially sound, when clearly it is not.
If only the New Dealers had been kind enough to allow workers to make their own choice about whether to participate. As we know from experience, individuals would have done better on their own. Indeed many private pension plans return 8 percent per year, compared to Social Security's paltry 2 percent or less. Also, before the government padlocked the door in 1983, municipal governments were allowed to opt out of the system. Fittingly, three texas counties -- Galveston, Matagorda, and Brazoria -- did so. In 1981, Galveston county employees, for example, voted 78 percent to 22 percent to leave Social Security for a private option.
If you think Social Security is fraudulent, and unconstitutional, presumably you want to get rid of it or dramatically overhaul it. But those sorts of radical changes are extremely unpopular, and Perry would be better off politically having kept his powder dry on that score. The problem is he's outlined a vision of a different kind of retirement system based on private pension plans that he thinks would be preferable.
Separately, he argues that Social Security is unsustainable. Social Security will be solvent for about a quarter of a century, at which point, if nothing is done, benefits will drop by about 25 percent, to keep benefits in line with incoming revenues. Fairly modest changes to revenue and benefits could fix this long-term shortfall indefinitely. Eliminating the cap on the payroll tax cap would close the gap entirely.
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