Gov. Rick Perry has drawn a lot of criticism for calling Social Security a “Ponzi scheme,” but the fact is that it bears more than a passing resemblance to one. In both cases earlier participants can only get their money back if new participants join; in both cases no wealth is actually created; in both cases the earlier participants get a better return than the later ones; and in both cases the system is unsustainable. But of course there are also differences. Ponzi schemes are run to make their originators a profit. The federal government is running Social Security at a loss that is set to increase.
And Social Security, unlike a Ponzi scheme, can be reformed to be made sustainable. Slow the growth of benefits sufficiently, for example, and the program’s fiscal gap will disappear. Its disincentive effect on saving, and on delaying retirement, would also diminish. But neither Governor Perry nor his principal critic, former governor Mitt Romney, has offered any specific proposals on Social Security, and both of them run the risk of setting back the cause of reform.
In Perry’s case, the risk comes from the combination of rhetorical maximalism with policy vagueness. He says that program is unconstitutional, a failure, and a lie. These claims would seem to imply that the program should be abolished. He has mused about the idea, and his advisers have refused to rule it out. But he has not endorsed it either, doubtless because he knows it would be an act of political suicide. As such, it would make it impossible for him to accomplish any practical reforms to the program and, for that matter, to accomplish anything else on his agenda. “Maybe it’s time to have some provocative language,” says Governor Perry. We hope it provokes him to explain how he would bring the program’s benefits in line with its revenues — and his proposals in line with his premises. In last night’s debate he wisely suggested that his campaign will not relitigate the political battles of 70 years ago. If he wants to move the discussion to the future, as he should, he needs to start talking about a plan.
Governor Romney correctly notes that the public, while aware that Social Security’s financing is unsound, remains extremely attached to the program. “Our nominee has to be someone who isn’t committed to abolishing Social Security, but who is committed to saving Social Security,” he says. But is he that man? At the debate he refused to say how he would save it. In subsequent remarks he expressed openness to raising the eligibility age, imposing a means-test on the program, and instituting voluntary personal accounts. But unless he unveils his own plan, the effect of his attacks on Perry will be to strengthen the political taboo against candid and realistic discussion of the program’s flaws. Romney has a choice to make: He can run as a realistic reformer, or he can say “me, too” to Democratic criticisms of conservatives.
What either or both of them should say is that Social Security is a program on which millions of Americans rely, that people who are in retirement or near retirement will not be asked to make a sudden change in their plans, and that to secure the program’s future the benefits formula will have to be gradually adjusted. As it stands, the feud between Perry and Romney is accomplishing nothing for anyone outside the White House.