RadioBDC Logo
| Listen Live

Romney, Perry are faulted on Social Security

Program isn’t in dire straits, actuaries say

By Tracy Jan and Alex Katz
Globe Staff | Globe Correspondent / September 9, 2011

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

Text size +

WASHINGTON - Rick Perry refers to Social Security as a “Ponzi scheme’’ that the federal government has no business in. Mitt Romney says the Republican Party needs a nominee “committed to saving Social Security’’ not “abolishing’’ it. The decades-old retirement program has emerged as the most divisive issue between those two GOP presidential contenders after Wednesday night’s debate.

Yet, while both candidates are seeking to make significant changes to the 76-year-old entitlement, the situation is not nearly as dire as either candidate makes it out to be. Actuaries project that retirees will be paid every penny that is due them through 2036. After that, they will receive 78 percent of what they are owed for an indefinite period - and that is without any change to the current program.

“There’s a lot of fearmongering,’’ said John Rother, executive vice president of policy and strategy at AARP, a lobbying group for the elderly. “Social Security is a solid program that needs a few tweaks going forward. The idea that it’s somehow facing collapse is a gross overstatement.’’

Perry has suggested Social Security is unconstitutional and should be turned over to the states. In his 2010 book “Fed Up!’’ Perry calls Social Security “a crumbling monument to the failure of the New Deal’’ and likened it and other New Deal programs to a “bad disease’’ that spreads instead of dies - a view his advisers have unsuccessfully tried to distance the campaign from.

Romney has outlined a variety of fixes for Social Security, including raising the retirement age by several years, changing the way benefits are indexed to inflation for high-income retirees, and introducing a private option - a policy that President George W. Bush had pushed for.

The Romney campaign issued a statement yesterday chastising Perry as “reckless’’ and “wrong’’ for calling the retirement system a “failure’’ and a “monstrous lie to our kids,’’ and sought to position Romney as the candidate most committed to saving the system.

Perry campaign spokesman Ray Sullivan said Perry wanted to preserve the system and said Romney was simply posturing during the debate, noting that in his 2010 book “No Apology: The Case for American Greatness,’’ Romney compared Social Security administrators to “criminals’’ because of the system’s “looming bankruptcy.’’

House majority leader Eric Cantor also defended Perry’s statements yesterday. “I think the point the governor is trying to make is that the math doesn’t lie and the numbers don’t add up,’’ Cantor said.

But Social Security advocates and other analysts yesterday joined Romney in criticizing Perry for his remarks.

“There will be a shortfall in 2037 that needs to be addressed, but to claim Social Security is bankrupt is really completely out of touch with reality,’’ said Max Richtman, president and chief executive of the National Committee to Preserve Social Security and Medicare.

Henry Aaron, a senior fellow at the Brookings Institute, said the projected revenue shortfalls facing the system in the future could easily be fixed.

“The idea that this is somehow a fraud or that it’s in deep crisis is false,’’ Aaron said.

In 1981, with experts warning that Social Security could run out of money, President Reagan and Congress appointed a special bipartisan commission that helped usher in Reagan’s Social Security Reform Act of 1983. Among other things, the new law called for a gradual increase in the retirement age from 65 to 67.

Richtman criticized Romney for supporting the privatization of Social Security by allowing workers to direct a portion of their payroll tax into individual investment accounts instead of adding to the pool to pay for current retiree benefits. During a primary debate in 2007, Romney praised Bush’s privatization push - a position Romney’s campaign sought to clarify yesterday.

“Governor Romney has never supported privatization of Social Security as it is commonly understood, meaning the total privatization of all Social Security,’’ said Andrea Saul, a Romney spokeswoman. “He does believe in allowing individuals, on a voluntary basis, to invest in private accounts.’’

Richtman said, “If you’re diverting money that would normally go into the Social Security system into another account, that’s by definition privatization. That would diminish the pool and subject retirement security to undue risk.’’

The reason Social Security is lumped in with programs that are truly in financial trouble, such as Medicare, is that exaggerated claims about its health open the door for privatizing the program, said Representative Peter Welch, a Vermont Democrat.

Senator Richard G. Lugar, an Indiana Republican, also said he is confident in the system and its stability.

“It’s in reasonably good shape, but with many more people living longer, there will need to be provisions for strengthening it in years to come,’’ Lugar said.

Doug Holtz-Eakin, president of the American Action Forum and an adviser to GOP presidential candidate John McCain in 2008, said he does not see significant difference between Perry’s and Romney’s positions.

“There’s less of a difference than there was theatrics,’’ he said. “What you hear Mr. Perry saying is this program relies on new entrants who pick up the tab for people who have been in the system. That’s true. And that’s what a so-called Ponzi scheme does. What Mr. Romney says is ‘We can fix this.’ That’s also true.’’

Tracy Jan can be reached at Theo Emery of the Globe staff also contributed to this article.