Campaigns/Elections

The New York Times Corrects Rick Perry's Misconceptions About the Social Security Trust Fund

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As Shikha Dalmia and Peter Suderman noted yesterday, Rick Perry stood by his description of Social Security as "a Ponzi scheme" during last night's Republican debate. This despite New York Times reporter Michael Shear's recent efforts to set Perry straight:

Touching a potential political minefield, Mr. Perry unleashes a critique against Social Security as "a crumbling monument to the failure of the New Deal" [in his book Fed Up!].

Mr. Perry's assault on the retirement program is not a throwaway line or two. He asserts that the social programs of the New Deal—including Social Security—"never died, and like a bad disease, they have spread." He says the Social Security trust fund is an "elaborate illusion cooked up by government magicians."

Asked about the book recently, Mr. Perry went even further, calling Social Security a "Ponzi scheme for these young people" and a "monstrous lie on this generation."

But his words skim over the financial reality of Social Security. Economists of all stripes agree that the program, while stressed, would exhaust the money in the trust fund by 2037. But even then, taxes would pay for close to 80 percent of the benefits currently promised.

According to Shear, then, Social Security's "financial reality" includes a "trust fund" that "economists of all stripes agree" won't run out of money for another quarter century or so. But as the Times itself occasionally concedes, the trust fund is no more than "an accounting device" that represents how much the government owes itself—or, in other words, how much must be extracted from taxpayers to cover all the surplus Social Security money Congress has squandered over the years. The surpluses themselves are long gone, replaced by Treasury bonds that can be redeemed only through higher taxes or further borrowing (which eventually translates into higher taxes). So the "reality" that Shear is asserting as a matter of verifiable fact in a news story is actually the "elaborate illusion" to which Perry is calling attention. The year of reckoning is not 2037, when the notional trust fund is expected to reach zero, but 2010, when Social Security's benefits began to exceed its annual revenues, meaning that the program has to be subsidized by other sources of money, which contributes to the national debt instead of making it seem smaller.