GOP wannabes revive privatizing Social Security

Texas Gov. Rick Perry (AP Photo/Charlie Neibergall)

Most of the top Republicans running for president are embracing plans to partially privatize Social Security, reviving a contentious issue that fizzled under President George W. Bush after Democrats relentlessly attacked it.

As President Barack Obama sidesteps ways to keep the retirement system viable, his would-be rivals are keen on letting younger workers divert part of their payroll taxes into some type of personal account to be invested separately from Social Security.

Former Massachusetts Gov. Mitt Romney has a version. Reps. Michele Bachmann of Minnesota and Ron Paul of Texas have said younger workers should be allowed to invest in alternative plans. Texas Gov. Rick Perry has raised the idea of letting whole groups, such as state and local government workers, opt out of Social Security.

These proposals are popular among conservatives who believe workers could get a better return from investing in publicly traded securities. But most in the Republican race have been careful to say they would fight to preserve traditional Social Security for current retirees and those approaching retirement. Younger workers, they say, should have more options.

Romney says the stock market collapse in 2008 shouldn’t scare workers away from investing in private accounts, but acknowledges it’s an issue.

“Given the volatility of investment values that we have just experienced, I would prefer that individual accounts were added to Social Security, not diverted from it, and that they were voluntary,” Romney wrote in his book, “No Apology.”

Any kind privatization, however, is sacrilegious for liberals and many moderates. They say it would drain resources from the more than 50 million people who now receive benefits. Social Security experts say raising the privatization issue could give Democrats a potent political weapon.

“Any Republican who pushes personal accounts too hard will ensure Obama’s re-election,” said Kent Smetters, a business and public policy professor at the University of Pennsylvania’s Wharton business school. “That’s bad news for the Social Security system because President Obama refuses to take a leadership position in dealing with the nation’s entitlement overspending.”

In 2005, Bush made a push to give workers the option to privately invest a portion of their payroll taxes to provide a supplement to government benefits. Republican lawmakers were reluctant to jump aboard as Democrats argued that Bush was trying to “end Social Security as we know it.”

“We’ll fight that fight anytime,” said Rep. Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, which oversees Social Security. “Bad policy is usually terrible politics, and that’s terrible politics.”

Perry has helped make Social Security a leading issue in the campaign by writing in his book, “Fed Up!” that the program is a “Ponzi scheme” and a “failure.”

Perry boasts that his provocative language is forcing the candidates to talk about an important issue. “Other candidates in this race were content on continuing to sweep it under the rug and continuing the status quo,” Perry spokesman Mark Miner said.

Obama mostly has avoided the issue in the first three years of his presidency, arguing that Social Security has not been a major contributor to the nation’s fiscal problems. As a candidate in 2008, Obama proposed increasing payroll taxes on high-income workers to help shore up the system, but he hasn’t pushed the idea since taking office.

All the top Republican candidates have denounced tax increases.

Despite Perry’s rhetoric, he hasn’t released a comprehensive plan to address Social Security’s financial problems. Perry says personal accounts “ought to be on the table,” along with raising the retirement age.

Perry says state and local governments should be able to opt out of Social Security and enroll workers in alternative retirement plans. As an example, Perry talks about a plan in Galveston, Texas, that allows county employees to invest a portion of their income in annuities and bonds.

Nationwide, about 4 percent of workers, mostly state and local government employees, are in alternative retirement plans.

Bachmann made the case for personal accounts in a television interview last year, saying young workers “need to have some options in their life, so that going forward they can have ownership of their own Social Security, their own retirement, something that they can pass on to the beneficiary of their choice.”

Paul drew applause during last week’s GOP presidential debate when he said, “What I would like to do is to allow all the young people to get out of Social Security and go on their own! Now the big question is, how would the funding occur?”

Social Security is facing long-term financial problems largely because aging baby boomers are starting to retire, leaving fewer workers to pay into a system that is supporting a growing number of retirees. In 1950, more than 16 workers paid into Social Security for every person who received benefits. Today, the ratio is down to three workers paying in for every beneficiary taking out.

Social Security already pays out more in benefits than it collects in payroll taxes. The system has built up a $2.6 trillion surplus, which was invested in Treasury bonds. But that surplus is projected to run out in 2036, unless Congress acts. At that point, Social Security will collect only enough payroll taxes to pay about three-fourths of benefits, according to the trustees who oversee the program.

Experts say allowing people to opt out of Social Security, or to divert a portion of their payroll taxes into private accounts, would drain even more resources from the system, at least in the short term.

“If you’re looking at narrow self-interest, then there is an argument that can be made for being out of it,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. “But it’s a national program. The reason that unfunded liability is there is that all our grandparents got benefits in excess of what they put in, and so everybody should be in and contributing to pay that off.”

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Online:

Social Security Administration: http://www.ssa.gov

Center for Retirement Research: http://crr.bc.edu

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3 Responses to "GOP wannabes revive privatizing Social Security"

  1. CA Leeson  September 18, 2011 at 11:21 am

    Let me see if I’ve got this straight. Social Security has been robbed blind by Congress and now the GOP wannabes want to let Wall Street rob the investments of a newer generation. So Congress will team up with Wall Street. Now that is two institutions that nobody should trust unless you are a Corporate loving Repubublican. Yeah, buddy, way to go Repubs!

  2. Carl Nemo **==  September 18, 2011 at 12:33 pm

    Glass Steagall was repealed and replaced by Gramm-Leach-Bliley in the late 90’s which allowed the unholy business alliance between banking and brokerage to bloom in the first decade of this century with catastrophic consequences.

    This was done during the last days of an eight year reign of Democrats in D.C. The Clinton administration paved the way for eight years of free-booting under Bush/Cheney only to end in the housing meltdown, mega-insurer, banking disaster in the final days of their administration.

    Now ‘rethugs’ are scheming on how get their mitts on SS revenues and hand them directly over to unethical crooks on Wall Street so they can both pilfer and squander these assets too; linked to malinvestment, insider trading, front running, puffed IPO’s etc. When the markets go bust as now and in the future, so too will this massive ‘investment program’ on future generations. SS can be fixed by simply raising the income ceiling on the tax and also increasing the tax itself and also revert the fund into an ironclad “locked box” that no president or Congress can pilfer in the future regardless of the circumstances. The fund is also being used for far too many catchall social crises for which it wasn’t designed. It needs some tweaks concerning this issue.

    Social Security was fine until LBJ & Co. schemed the idea to raid the trust fund and pitch treasury backed IOU’s in the form of bonds redeemable at some date in the future in order to fund the Nam debacle. So too they implemented a 10% surcharge on one’s taxes to fund the same during that era never having enough money to piss down a SE Asian rathole. Seemingly anything goes to support engineered, ‘no win’ wars in far off places for the benefit of their patrons in the MIC. Every president since has pilfered the fund for their funding needs.

    Last year the SS Trust fund came up short to the tune of 28 billion and the shortfall this year is 130 billion forcing them to redeem these IOU’s at the worst possible time in our nation’s financial history.

    The reason this crisis with SS exists is due to our spendthrift crimpols in Congress and Presidential Executives that pay politically expedient lip service to seniors concerning the fund which is simply suffering from an engineered crisis on behalf of our lame leadership over many presidencies and Congress of the same stripe.

    Carl Nemo **==

  3. Jon  September 19, 2011 at 1:59 am

    You may be giving them too much credit. I think the reasoning is far simpler.

    If Social Security monies were suddenly shifted from the government into publicly traded markets, that would result in a lot more money chasing around the same amount of stuff.

    Stock prices would skyrocket.

    This is wonderful for those who already own lots of stocks. The Dow Industrial Average would hit 20,000. Everyone would be happy…

    Um, no.

    SS has already been called a Ponzi scheme (with some justification), but at least so far the beneficiary has been the government. Basically, private industry wants a cut of that Ponzi profit.

    SS goes public, huge short-term gains for a few, who bail out and leave the rest of us to pick up the bill.

    No, it’s not a complicated plan to fiddle around – It’s just another way to run up the market for huge short-term gains (which, incidentally, look wonderful on paper, especially for those elected at the time) before the collapse.

    Jon

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