Another Myth about Social Security (Part 4) (Dick Armey comments on Social Security)

Author Biography

Eric Schurenberg is Editor-in-Chief of and Editorial Director of CBS Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.

In his article “5 Social Security Myths That Have to Go, ” Schurenberg notes:

Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.

A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:

Myth: The trust fund is invested in Treasury bonds, the most secure investments in the world. To suggest that the trust fund wouldn’t pay is blatant fear mongering.


The trust fund’s IOUs are entered on the Treasuries books as non-trading “special issue” bonds, paying interest at a rate equal to an average of outstanding Treasuries. And yes, the Treasury will undoubtedly pay if Social Security asks.

But that’s not the issue. The issue is whether taxpayers think it’s so important to maintain Social Security benefits that they will gladly absorb the burden of paying off those bonds on the current schedule. Remember, Congress (that is, you know, taxpayers) can cut benefits-and thus postpone the need for Social Security to redeem any bonds–just by passing a law.

In other words, the myth misses the point. Whether Social Security continues to pay benefits at today’s rates isn’t a question of credit quality. It’s a question of politics and priorities.


Social Security Ponzi Scheme

Wednesday, Jul. 25, 2007

REFORMING retirement security in America is the greatest political opportunity — and responsibility — of our generation. Yet the topic of Social Security and Medicare is shockingly absent from Presidential hustings.

Simply ignoring the problem does not mean it is going away. Thomas Saving, a trustee of the Social Security and Medicare programs, estimates a breathtaking $83.6 trillion unfunded liability in the two entitlements, which is a tremendous gap between promised obligations and what the government will actually collect in payroll taxes.

Serious reforms of these broken government programs based on personal ownership have fallen victim to Republicans who don’t dare and Democrats who don’t care. Washington simply will not take the issue of retirement security seriously, until the American people force them to do so.

After all of the political demagoguery and tactical missteps of last year’s failed debate, what do the American people actually think about their retirement security under Social Security and Medicare? New survey data released by McLaughlin and Associates found that nearly nine in 10 likely voters are concerned about “catastrophic problems with Social Security and Medicare in the future that could directly affect the quality of [their] retirement.” These findings transcended party lines.

The core problem is not merely one of solvency. We could balance the books tomorrow by drastically slashing benefits and raising taxes. Paying more and getting less is considered a “bipartisan fix,” but such painful solutions only temporarily solve the government’s problem and do nothing to improve the retirement security of Americans. Such a fix will force younger workers to pay a double penalty of higher taxes during their working life, only to receive less of a benefit in retirement.

The McLaughlin survey makes it clear that voters want entitlement reform to be a major part of the national conversation during the 2008 presidential campaign. Ninety-six percent of voters said it is important that “a candidate for President in 2008 concentrates on the present and future problems with Social Security and Medicare by discussing and demonstrating a realistic plan to provide retirement security for current and future retirees.”

Voters also want elected officials to take a broad look at the problem, with a strong super-majority of 84 percent of voters agreeing that a national retirement security program should include provisions for health care, as well as income.
Voters are not afraid of change, with seven in 10 approving of “changing our current retirement system so that their payroll taxes are placed in a secure account that they own and control and are allowed to grow until they retire when they can withdraw the funds as they need for income and health care expenses.”It is time to give American workers the chance to create and fund protected retirement accounts that they can own, control and pass on to their children. The government would provide the structure and appropriate safeguards, but the individuals would have control over their own retirement destiny.

Outside of government, there is an ownership revolution, with bankrupt defined-benefit pension plans being replaced with individually owned defined-contribution retirement plans, which are portable, interest-earning and secure. Let us also be clear that leaving federally sponsored entitlement plans should be optional; individuals would simply be given the choice between federal or personal control.

This is where the voters of New Hampshire have a special responsibility. If primary voters demand action on entitlements, politicians will respond. On June 6, when asked by activists from Students for Saving Social Security whether he would support giving people more control over their retirement accounts, Mayor Rudy Giuliani responded, “I’m going to tell you my overall philosophy that applies to Social Security, health care, jobs, school choice: It’s your money. You should have as much control over it as I can give you. You can do a better job with your money than the mess in Washington. When we give you more control over Social Security, we move forward.”

Sen. John McCain and Gov. Mitt Romney have made similar public statements in support of personal accounts, but the issue is unfortunately not mentioned on the issue pages of their respective campaign Web sites. Social Security is also conspicuously absent from the issue pages of the leading Democratic candidates.

I believe that pocketbook voters in New Hampshire — Democrats, Republicans and independents — are looking for a political entrepreneur willing to break convention by offering a serious, adult policy solution to the federal government’s failing retirement programs. If voters build the political stage for real change, will the next President have the wisdom to step up?

Dick Armey, U.S. House majority leader from 1995 to 2002, is chairman of FreedomWorks Foundation.

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