Texas Governor Rick Perry made some comments about Social Security which has some of his critics gleeful. “It is a Ponzi scheme for these young people. The idea that they’re working and paying into Social Security today, that the current program is going to be there for them, is a lie,” Perry said. “It is a monstrous lie on this generation, and we can’t do that to them.”
These are words that will come back to haunt the presidential candidate, we’re told.
Perhaps. Or perhaps not. Whatever the case, on substance, Perry is quite right. For younger people, Social Security is almost the definition of a Ponzi scheme. It takes money from the current generation in order to pay out money to support (among others) current retirees. Younger workers are led to believe they are putting money away for their retirement when in fact, they’re giving money away to others. There is no “trust fund” and no “lock box” – and because of demographics the younger generation cannot count on anything like the support past generations have received.
That is not to say Social Security is a program that wasn’t successful. It most certainly has been. The inter-generational transfer in which working-age people collectively take care of older people helped raise the elderly out of poverty, making Social Security among the most successful social programs the federal government has ever undertaken. But what worked in the past doesn’t necessarily work in the present, with fewer and fewer wage earners being asked to support more and more Social Security recipients.
Perry deserves credit, then, for speaking in an unvarnished way (that seems to be something of a habit of his). The test for him – and for the other candidates – is what they plan to do about reforming entitlement programs and the modern welfare state. Because if nothing is done, we are going to face a terrible day of reckoning, and it may come sooner than we think.
Words are, of course, not the same as reform – but before reforms can be done the case needs to be made. If Perry can make the case for entitlement (and especially for Medicare) reform, more power to him. My hope–and on my optimistic days my expectation–is the public is ready to embrace certain fiscal realities and that attacks that worked in the past won’t work today.
We’ll find out soon enough.