What is Karl Rove’s Plan for Social Security?
Karl Rove is joining the left-wing/Romney camp alliance against Rick Perry’s candid statements about Social Security in his book, Fed Up. Even Baghdad Jim McDermott is praising Karl Rove’s broadside on Perry. Earlier today, on Good Morning America, Rove had this to say about Perry’s condemnation of Social Security as a Ponzi scheme in his book:
What they’ve done thus far is, I think, inadequate. Which is to basically say, “look, we didn’t write the book with the presidential campaign in mind.” Well, okay, fine. But they are going to have to find a way to deal with these things. Because, as you say, they are toxic in a general election environment and they are also toxic in a Republican primary. If you say Social Security is a failure and ought to be replaced by a state-level program, then people are going to say: “What do you mean by that?”
Actually, Karl, the Perry campaign hasn’t done an inadequate job of disavowing his stance on Social Security. In fact, he hasn’t disavowed it at all; he has doubled-down on it. Last week, Perry reiterated his convictions by wisely clarifying his Social Security stance as directed towards younger workers: “It [Social Security] 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. It is a monstrous lie on this generation, and we can’t do that to them.”
We all know that Mr. Rove has a trenchant view of conventional wisdom, but maybe this election won’t follow conventional wisdom. Maybe this time, people are looking for someone to purvey the truth to the American people.
And what is the truth about Social Security?
- Indeed, it is unconstitutional. Stealing 12.4% of someone’s annual earnings for a forced retirement plan, in which the worker forfeits his property rights, represents the biggest infringement upon our individual liberty. Giving the federal government full control over one’s retirement is far more egregious and officious than the individual mandate in Obamacare. The only reason why it passed constitutional muster without the requirement of an amendment was FDR’s hardball tactics with the Supreme Court.
- Indeed, Social Security –as currently constituted – is a Ponzi scheme. Actually, it is worse than a Ponzi scheme. Ponzi or Madoff never had the power to force people to hand over their money. They certainly never had the power to demand more money to fix the shortfall once they got caught. Additionally, upon the death of the trustee, Ponzi and Madoff didn’t have the power to keep the money from the heirs. The federal government, which has depleted the trust fund in its entirety, is now funding Social Security benefits to retirees from the taxes of current workers. Beginning in 2010, even the entire revenue from those taxes was insufficient to pay out benefits, requiring the feds to go further into debt to fund the shortfall. Now the government has the power to force higher taxes or cut payments – a luxury that Ponzi and Madoff were not afforded. They wound up in jail. In that sense, we should all treat it like a Ponzi scheme.
- Indeed, younger workers will continue to see diminished returns on their Social Security “investments” until they evaporate completely, due to our impending national fiscal insolvency during the coming decades.
In light of the aforementioned facts, any honest politician must confront the grim reality that, barring private empowerment options, there are no good solutions to the problem; both politically and policy-wise. We can either raise taxes, raise the exemption, cut benefits is some form, force people to work until their 70 in order to see a penny of their money, or means test an already means-tested program (the government taxes the “benefits” of retirees who earn income, interest, and dividends on a graduated scale).
Or, instead of empowering government bureaucrats with even more of our money – the same bureaucrats who mismanaged it in the first place – we can empower the states or the people to control their own retirement, while maintaining our obligations to older workers, by maintaining the status quo.
So which plan sounds more draconian; granting younger workers full control and property rights over their designated retirement accounts, or forcing them to work longer, pay more, and earn less – all the while, at the mercy of those same people who run the Postal Service? Polls already show that most younger workers are relying heavily on their 401(k)s and IRAs for their retirement. Why not allow them to keep all of their earnings in accounts that will earn more than the dismal 1-2% of Social Security? Does anyone really trust these same bureaucrats to manage a $21.4 trillion unfunded liability? An articulate and intrepid conservative nominee can make this a winning issue.
Karl Rove wants to know what a 10th amendment solution would look like vis-à-vis Social Security. Well, Galveston, Texas offers a glimpse into an auspicious plan. In 1981, Galveston County opted out of Social Security and offered all of their county employees the option of investing their payroll taxes in private retirement accounts that comprised investments in commercial banking products, annuities and bonds. Thirty years later, those employees enjoy nearly a 7% average annual return on their real investment.
There are many different options for private empowerment that we can debate and analyze in a careful and prudent manner. Over thirty countries have adopted some form of successful private retirement accounts. Rep. Pete Sessions has put forth one such plan in this Congress [see more here]. However, it would require us to have a mature discourse – one that is devoid of the Mediscare demagoguery. It would be helpful if those on our side would opt out of the scare tactics of the left.
For Karl Rove’s choice candidate, a one-sentence platitude about Social Security – ensconced in page 142 of a 160-page witness protection-style economic plan – might suffice. But for most of us, we are looking for bold thinkers with the courage to purvey truthfulness and offer prudent conservative solutions.