PERRY WALKS THE THIRD RAIL

By Dick Morris on September 12, 2011

Rick Perry was cruising in the Wednesday GOP presidential debate. He had weathered a sharp exchange with Mitt Romney over job creation and made the point well that his record as governor was better than Mitt’s. Romney’s counter – that his experience as a businessman makes him better able to create jobs than Perry’s life in politics – may eventually nullify Perry’s edge, but its got a way to go.

Then Rick stepped on the third rail – he called Social Security a “Ponzi scheme”, a “failed program”, and said it was a “monstrous lie” that young people would collect retirement benefits from the system. He might as well have come out against motherhood and apple pie. Whether you agree with Perry or not, who wants to spend the entire fall season of 2012 defending his Social Security comments. Obama and the Democrats are famous for creating issues that don’t exist. Look at how all Democratic candidates in 2010 campaigned against Congressman Paul Ryan’s roadmap proposals to cut Medicare when they were not yet in play in Congress.

Polling shows that Republican primary voters this year are very sophisticated and are much more interested in finding a candidate who can beat Obama than in finding one that suits every bit of their ideological convictions. Hence, Romney’s dalliance with an individual mandate for buying health insurance in Massachusetts does not make him radioactive in the GOP primary. As long as he can win.

Perry could have easily sidestepped the question and distanced himself from his remarks in his book on the subject. He could have said that perhaps he was overly heated in his rhetoric in using the terms “Ponzi scheme” and underscored his support for George W. Bush-style reforms in the system. But, no way. He surged right ahead and embraced his former words. Now he owns them for all time.

Is Social Security a Ponzi scheme? It was sold politically as a form of social insurance where the “premiums” paid each year of a working person’s life were saved up and entitled him to retirement benefits. To underscore this point, FDR started collecting Social Security taxes in 1937 but did not distribute benefits until 1941.

But, under the weight of the automatic cost of living adjustments started under Nixon, the benefits have long outstripped the amounts that have been paid in by each retiree. Social Security functions like any other cash transfer program, taking from younger generations and paying the money to the older ones. The collected payroll tax deductions of the average retiree account for only a small part of his total pension. In that sense it is a Ponzi scheme – it sells itself as a savings and investment plan but it uses each new generations’ revenues to fund the older one’s benefits.

But it’s a Ponzi scheme with the power to tax. If Bernie Madoff had that capability, he wouldn’t be in jail today. A Ponzi scheme is only bad when the new money dries up. With the power to tax, it need never do so.

Is Social Security a failure? Hell no! It is the most successful anti-poverty program of all time. From FDR’s second inaugural where he said that one-third of the nation was “ill clothed, ill housed, and ill fed” until the early 60s when Michael Harrington alerted the nation to its high poverty level, the elderly constituted about half of America’s poor. Now there is no such thing as an impoverished senior citizen and our poverty rate has dropped from one-third to one-eighth, largely due to Social Security (and partly due to welfare reform).

Now Perry is flying in the face of the deeply held opinions of the entire American electorate. Rasmussen Reports shows that only 17% of Americans agree that Social Security is a Ponzi scheme. Rick Perry would do well to side with the 83%, not the 17% if he wants to get elected.

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