When the argument over Social Security and Medicare come up, Democrats will inevitably accuse Republicans of wanting to gut the programs and turn them into vouchers. Then Republicans cower and run away from the argument and slide ever-so-faster towards total insolvency. Republicans cannot stomach the idea of having to argue for privatization for some strange reason. We are supposed to be the party of limited government, yet we have never been successful in actually rolling back the apparatchik of the federal government.
I still remember following President Bush’s victory in 2004 and the prospect of getting privatized Social Security (partially). I then lamented as the proposal went nowhere; Democrats demagogued and Republicans ran like fleeing rats from the Titanic. And here we sit with Social Security and Medicare continuing to bleed dry, our education system a mess, and the behemoth of the federal government continues to grow. Look at how people panic at the thought of even cutting off funding to PBS and NPR. This is how we got to the point of near insolvency.
Democrats, and even Republicans on occasion, can come up with a new, shiny government program that is not only unconstitutional, but it serves no function beyond creating a new bureaucracy that pays their friends a six-figure salary. If we can’t cut funding for CPB and Planned Parenthood, then we deserve to be bled into insolvency. If Romney wins (and it’s looking more and more likely every day) and the Republicans regain the Senate (which is also looking likely), they have to be proactive about laying out programs to cut, departments to abolish, and agencies and programs to privatize.
Last year, Mark Steyn wrote a book called After America: Get Ready for Armageddon, where he speaks of the looming financial crisis among many other problems we face. Upon the release of the book, he spoke with Sean Hannity (you can see that interview here), where among other things, Steyn bluntly stated, “I want a candidate who’s actually going to stand up and say, ‘This Cabinet department has got to go, this bureaucracy has got to go, this agency going to be privatized, these regulations are going to go.” Steyn recognizes the eminent threat that we face by this debt. But too many of us have tip-toed around this for too long.
President Bush ran on the urgency of fixing Social Security in 2004. Even before that, Bill Clinton ran on Social Security reform. He and Paul Tsongas battled out this issue during the 1992 Democratic primary. Clinton said that Social Security was broken and Tsongas said it wasn’t. Clinton’s honesty (did I just say that?) cost him the Florida Primary that year. But the larger point is that politicians on both sides have known that this was the case for at least 20 years. And yet, here we are no closer to any solution that has been attempted, and not for a lack of effort. But we have to have the stomach for the fight. We can’t run away when progressives accuse of wanting to “privatize Social Security.” We have to embrace privatization; especially for my generation, because we know that Social Security in its current state will not be there for us.
When arguing the merits of reform, just remember these facts: 1) when the Social Security Act was passed in 1935, the life expectancy for men was 58 and for women, it was 62. The retirement age was 65, so there wasn’t a large percentage of people who lived to see that age; and 2) on top of all of that, when you died, the government kept all the money that had not been paid out.
Think of this, at the outset of the program, the majority of the population didn’t live long enough to collect the money. People who died lost the money because the government kept it. The system perpetuated itself in this manner for 75 years, and it’s still broke? And the government thinks this kind of management gives them license to raise our taxes so they can do more of the same? Is it any wonder that we are the brokest country in the history of being broke? When the idea of privatizing Social Security came up during the Vice-Presidential debate, Townhall’s Katie Pavlich captured my sentiment with this tweet:
YES YES YES, give me the choice of privatized social security. PLEASE. #vpdebate
The date after, Ezra Klein of the Washington Post recalled that both Romney and Ryan have both previously supported partial privatization. Now, like every other Republican, they cower from the idea and let the Democrats own this argument.
It was just recently that some conservatives were actively promoting the idea. During the Republican primaries, candidates Herman Cain and Rick Perry spoke of private accounts for Social Security. Perry correctly referred to Social Security as it is currently constituted a “Ponzi scheme” and of course Republicans joined Democrats in denouncing him. But he’s right; there is no trust fund, no lock box, so people currently paying into the system are subsidizing current recipients, who when they paid in, were subsidizing the retirements of the previous generation.
In the debates, Cain often spoke of the Chilean model for Social Security reform. Among the benefits of the Chilean system: 1) it outperforms Social Security on returns, yielding about 9.23% compounded annual returns over 30 years under private management; 2) that means Chilean retirees take home pension checks four times what they would have gotten if they had remained in their old Social Security system; 3) workers choose the types of investments, the level of risk, the size of their contributions — 10% to 20% — and the day they intend to retire; and 4) unlike Social Security, accounts are, by law, property. A worker who dies early can will his account to his heirs.
Another point of note: Galveston, Texas, also has private accounts for Social Security because they opted out in the early 1980’s before the law was changed to prevent it from happening. The New York Times wrote about the Galveston system back during the primary debates. Former Galveston County Judge Ray Holbrook, who led the charge to opt out of Social Security during his 28-year tenure says, “It shouldn’t be a pay-as-you-go system, where children and grandchildren are paying for your Social Security. That’s why it’s bankrupt, and that’s why Rick Perry says it’s a Ponzi scheme, which I agree with.”
The Times also spoke with Rick Gornto, who designed the Alternate Plan and is also the president of First Financial Benefits, the company that manages the retirement accounts. The Times notes,
“In the Alternate Plan, retirement benefits are a direct result of employee contributions. In each paycheck, employees contribute 13.9 percent of the (sic) their gross pay (6.1 percent from the employee, 7.8 percent from the county) to a private account.”
If Republicans were smart, they would embrace this idea, not just for the fiscal solvency aspect, but for the freedom aspect as well. In an era where we have been talking about constitutional government, it would be good to link limited government and fiscal solvency. There is an appeal to 20 and 30-somethings in this; people who will never see the benefits of Social Security are more likely to take to an argument for protecting their wallets and their freedoms. Republicans can even make an appeal to disaffected libertarians with this one, because fiscal restraint is common ground for us.
There are many other functions of the federal government that should be privatized: Medicare, Medicaid, education, and prisons, just to name a few. I can’t make all those arguments here, but conservatives need to show how serious we are after Election Day and beyond about cutting spending and reining in the size of the leviathan federal government. It can be done, but we must have political courage, factual arguments that appeal to the mind and not the heart, and the fortitude to fight this battle for the long haul. This fight won’t be easy, but then again, doing the right thing is always harder than doing the wrong thing.