The Lie Upon Which Rubio’s Social Security Plan is Built

 

Social-Security-CardMarco Rubio has laid out his plan to save Social Security in the 21st century at National Review Online. As with pretty much every other Republican candidate’s plan save Huckabee’s, it basically entails three steps.

The first: Raise the retirement age for receipt of Social Security benefits:

With Americans now living longer than ever before, the strain on Social Security’s finances is steadily increasing. … First, we must gradually increase the retirement age for individuals under 55.

This is often (nearly always) the first idea. Were this healthcare, it would be called rationing. Yes, people live longer today than they did when the system began. The system was never designed to pay a person for 20 years of inactivity in the labor market. Well, duh: The system was never really designed to pay out at all. It was merely a tricky, feel-good way for the government to confiscate even more of a person’s wages. People were to pay into the system their entire working lives, and if they won the genetic lottery, maybe collect a few years of benefits before the Reaper made his appearance.

Well, innovation has again thwarted the money-grubbing politicians, and people are living long enough to force the system to make good on its so-called promise. The most immediate and obvious solution is to change the promise. Sure, government may have said you were paying into an “insurance” program, investing in your own future with the backing and surety of the United States Government, but it was a lie. The Supreme Court long ago decided that taxes paid into the Treasury belong to the government; the government is at liberty to spend the money as it sees fit; and taxpayers have no rightful claim on any money once the government takes possession of it. Government can, should it will, simply alter the time and amount of “return” you get after a lifetime of seeing 12.4% of your wages confiscated and squandered by the government. This leaves the question of whether or not it should.

To those who have never done physical labor, it probably makes sense just to inch up the retirement age. Sitting at a desk shuffling papers and staying awake through gawdawful PowerPoint presentations is one thing, humping load chain and slinging it over cargo on a flatbed is something altogether different. Working past 65 because you’ll live beyond that (with whatever quality of life that entails) is a completely different experience for different people in different occupations. At 43, I already fear doing my job at 53, and I cannot imagine being physically capable of performing it at 63 or 70.

This ties into Rubio’s second step, means-testing Social Security benefits:

[W]e should do more to protect seniors on the bottom of the income scale, who are too often consigned to poverty in old age. This can be done by reducing the growth of benefits for upper income seniors while making the program even stronger for lower-income seniors.

Again, this is a very common approach to the problem. Return more to those who require more. The stink of Marx is all over the idea, but that’s another problem. Those to whom this is directed are likely the very same ones the first idea tries to kill by keeping them in the labor force longer. The amount of physical exertion required in an occupation seems to often be inversely proportional to the compensation received for it. Like the first, this suggestion is rationing. It is worse because it returns more to those who contributed less financially, and makes the redistributive quality of the program more blatant without acknowledging it plainly. It embodies the Marxist maxim, “From each according to his ability, to each according to his need.”

Rubio’s third idea (also standard conservative dross) is the least bad of the set, but comes with its own negatives. He calls for private retirement:

[W]e must empower our people to save more for retirement. Social Security should be one component of retirement security along with employment-based plans and personal financial assets like IRAs, mutual funds, and personal savings accounts. Americans should also be able to save for retirement without paying taxes on their retirement investments. My tax-reform plan eliminates taxes on interest, capital gains and dividends. Educating Americans on the benefits associated with retirement saving and planning is also important.

This is a model the government is already mostly behind, at least for its own workforce. People make a big deal of federal government pensions, but for a couple of decades these have been a tripartite system comprising a small pension, Social Security, and the Thrift Savings Plan (a contribution-based retirement account with some employer matching contributions). If such a system is good enough for the Feds, surely it’s good enough for everyone else. What the Senator describes is exactly what is already in place for him and his staff. In this system, Social Security becomes less important to one’s retirement. The individual is mostly left to sink or swim based on savings and wise choices about how that money is invested and grown.

Mind you, the same disparity exists here as it does in the other points of reform. Those who make less have less to save; their physically useful work life limits the amount of time they can contribute to their own savings; and, let’s face reality here, they may not have the wherewithal to give appropriate attention to the husbandry of their retirement accounts. The same people who work harder will still have less to show for it, and they will be just as dependent on the benevolence of government in the end. Things could turn out better for them, but there’s no guarantee. So it’s easy to see why Huckabee’s call to keep the status quo is appealing to the blue-collar segment of the electorate. Of course, using the tax code to compel desired behaviors is yet another un-conservative idea that’s widely accepted when couched in the right terms.

Well, smarty Prawn, you might ask, what exactly is your prescription? I can’t lay out a nice three-point plan to save Social Security or provide comfort in old age to the populace. I hate to point out a problem without suggesting a solution, but this matter is way bigger than me. The key thing, in my uninformed opinion, is to start hacking away at the very root of the problem: The entire Social Security system is a lie. This is not an insurance plan where you pay your premiums and receive your reward when it’s your turn.

Social Security is a direct payment welfare program. The wages of the barista at Starbucks, struggling through on $11/hour (or $15 in Seattle), are confiscated and given immediately to her grandmother. The young are taxed to subsidize the old. This often takes from those with the greatest need and just as often gives to those with the least. If we really believe this program satisfies a collective moral obligation, then let’s treat it as such. Let’s abolish the myriad taxes and replace them with “one tax to rule them all.” Take from all without bias or favor, give to those actually in need. If we must redistribute wealth, if we must ration the redistribution, then let’s do it all above-board and honestly. If we want our elderly population to live in dignity, if we believe a redistributive welfare program accomplishes that goal, then let’s do exactly that and nothing else with the taxes we confiscate for that purpose.

Rubio’s plan is tinkering around the edges and playing with the balance sheets. But never touches the real problem, which is the lie upon which the system is built.

There are 199 comments.

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  1. DocJay Inactive
    DocJay
    @DocJay

    Nice essay. There’s no easy answer and Medicare is a worse problem by far. I’d be surprised if some variant of the Rubio plan isn’t adopted. SS is here to stay but I wish it didn’t exist.

    • #1
  2. Michael Kelly Inactive
    Michael Kelly
    @MGK

    KP,

    Well written  and thoughtful as always.  Politics being the art of the possible, I don’t think Rubio’s plan is a bad one but SS is called the third rail for a reason.  There is literally no way short of it going bankrupt for SS to go away and even then I can imagine the ways that they’ll try to bail out SS.  I’ve always wished I could just opt out, keep my own money and fend for myself.  Fact of the matter is, there is no solution to this problem that anyone in America will ever accept.

    • #2
  3. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    DocJay:Nice essay.There’s no easy answer and Medicare is a worse problem by far. I’d be surprised if some variant of the Rubio plan isn’t adopted.SS is here to stay but I wish it didn’t exist.

    Even in the healthcare profession the disparities become obvious. I’ve no doubt you’d be just as capable at 70 as you’d be at 55 to provide your services to some 400 pound behemoth. The same may not be the case with your nurse who has to flip the whale over.

    • #3
  4. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.
    @Claire

    Very interesting and a compelling argument, KP. I found this proposal quite thoughtless and shoddily written compared to his fluent on-stage persona; I’m likewise unimpressed.

    • #4
  5. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Claire Berlinski, Ed.:Very interesting and a compelling argument, KP. I found this proposal quite thoughtless and shoddily written compared to his fluent on-stage persona; I’m likewise unimpressed.

    I chose the to include the word “dross” for a reason. This is pablum. It’s the appearance of substance without the reality of it. It looks to draw out the inevitable collapse to some time after the current crop of politicians is dead and no longer accountable to the electorate. It is a Trumpian proposal in far more words than “my plan will be amazing.”

    • #5
  6. Claire Berlinski, Ed. Editor
    Claire Berlinski, Ed.
    @Claire

    The King Prawn:

    I chose the to include the word “dross” for a reason. This is pablum.

    It also sounds badly ghost-written. The cheap references to his mom sit poorly with me. “I have a mom. I wouldn’t hurt my mom.” Look, someone who’s running for President is never going to be the ordinary guy-on-the-street who worries his mom will end up on the street. The pretence that he is or will be is annoying and cloying.

    But still, I’ll wait to see what else he has to say.

    • #6
  7. SParker Member
    SParker
    @SParker

    Agreed that the current system is a bad deal for everyone but the Federal Government (cheap source of funding), but I think you dismiss privatization too easily.  Note only that the Chilean system guarantees the old benefit for those Chileans given to disastrous choices.  As far as I know it doesn’t have to make good on the pledge very often, but that would certainly be a question to investigate.

    The tinkering that Rubio and anyone else who wants to move towards privatization is due to the equity problem (you’ve paid in for some amount of time and you’re owed your money with interest over that time).  Before 2008 and the Great Spend Fest, Steve Forbes estimated the buyout was south of $10 trillion, which was doable at the time.  Possibly not now, which calls for at least a little fancy thinking as to the alternatives.

    I don’t mind not getting a specific proposal in the OP.  But honestly, can you see any glimmer of a solution not involving pixie dust and unicorns (in short supply and on strike as always)?

    • #7
  8. Jojo Inactive
    Jojo
    @TheDowagerJojo

    Thank you, KP.  I first joined Ricochet in order to say to a prominent contributor from the academic world that he did not know what he was talking about when he said he thought there was no problem further raising the age for Social Security because hardly anyone is doing physical work in their mid 60’s.

    Not only are plenty of people doing physical work at 65, plenty of people are living off savings long before they hit 65 or 66- having either already become physically unable to work or having been laid off and unable to find work.

    Raising the retirement age is a solution that works to the benefit of privileged white-collar workers with the fortune to be healthy.

    Twenty plus years ago Ross Perot suggested something like buying annuities for those 50-60 and ending it for under 50.  The older Boomers were in their early 40s then.  Now I agree the solution has to involve treating it as welfare, i.e. means testing.

    That is a disappointing bit of blahblahblah from Rubio.

    I saw an Obamacare fix plan from Jindal that affected me similarly.  Full of complicated government tinkering.

    • #8
  9. Hoyacon Member
    Hoyacon
    @Hoyacon

    The Social Security system is indeed a lie–primarily because of the “trust fund” fiction.  However, that doesn’t add up to the fact that plans such as Rubio’s, designed to make the system marginally financially viable, are bad.  We are now 30+ years from the last time some adjustment was made in the “normal” retirement age (whatever that is), and people continue to live longer.  It’s somewhat disingenuous, IMO, to question a plan without proposing a viable alternative since I haven’t seen one viable option that did not include 1) raising the age for benefit collection, and 2) means testing.  There are certainly legitimate arguments as to what to do within those reform elements,  but let’s at least have something else in mind if there’s disagreement as to where to start.

    • #9
  10. Western Chauvinist Member
    Western Chauvinist
    @WesternChauvinist

    LoVe this post! Sanders and Trump are doing so well because so many of us are so sick of the condescension and pandering.

    I’ll be interested to see if Carly talks “common sense” (seems to be her theme) on the issue.

    • #10
  11. Jojo Inactive
    Jojo
    @TheDowagerJojo

    Now, I would really enjoy hearing Sanders Bernie and Trump Donald on what to do about Social Security!

    And Carly too, but I set a higher bar for sanity from her.

    • #11
  12. Manfred Arcane Inactive
    Manfred Arcane
    @ManfredArcane

    The King Prawn: I can’t lay out a nice three-point plan to save Social Security or provide comfort in old age to the populace.

    So you shouldn’t criticize then.  Sorry, this is not a legitimate excuse: “I hate to point out a problem without suggesting a solution, but this matter is way bigger than me.

    • #12
  13. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Western Chauvinist:LoVe this post! Sanders and Trump are doing so well because so many of us are so sick of the condescension and pandering.

    I’ll be interested to see if Carly talks “common sense” (seems to be her theme) on the issue.

    Outing the lie is only half the solution. Bragging that one has an awesome plan without actually having one is not the other half.

    • #13
  14. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Manfred Arcane:

    The King Prawn: I can’t lay out a nice three-point plan to save Social Security or provide comfort in old age to the populace.

    So you shouldn’t criticize then. Sorry, this is not a legitimate excuse: “

    Provide yours then or quit criticizing my criticism. I don’t have a neat plan, but I have suggested the beginnings of one.

    • #14
  15. Valiuth Inactive
    Valiuth
    @Valiuth

    Isn’t it almost pointless to have a detailed proposal on Social Security. To get any kind of legislation passed on it will require a level of compromise and horse trading that will make any initial plan meaningless. It seems to me that with respect to Social Security demonstrating a clear idea of what the inherit fiscal problems of the system are means that if committed to solving those something may actually be done.

    I wonder though if the system really needs a full overall, or just a good enough patch to get us over the Baby Boomer hump. Basically once the these vile Boomers die off they system will be in more equilibrium as you won’t have a sudden glut of retirees. The system worked well enough when people didn’t live that long and you had eight payers to one recipient.

    • #15
  16. Manfred Arcane Inactive
    Manfred Arcane
    @ManfredArcane

    The King Prawn:

    Manfred Arcane:

    The King Prawn: I can’t lay out a nice three-point plan to save Social Security or provide comfort in old age to the populace.

    So you shouldn’t criticize then. Sorry, this is not a legitimate excuse: “

    Provide yours then or quit criticizing my criticism. I don’t have a neat plan, but I have suggested the beginnings of one.

    I’m not the one doing the criticizing, you are.  What’s your solution?  Until you try and work it out to completion yourself, you have no business criticizing Rubio or anyone else.  Seriously, that is not how it’s done.

    • #16
  17. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Manfred Arcane:

    The King Prawn:

    Manfred Arcane:

    The King Prawn: I can’t lay out a nice three-point plan to save Social Security or provide comfort in old age to the populace.

    So you shouldn’t criticize then. Sorry, this is not a legitimate excuse: “

    Provide yours then or quit criticizing my criticism. I don’t have a neat plan, but I have suggested the beginnings of one.

    I’m not the one doing the criticizing, you are. What’s your solution? Until you try and work it out to completion yourself, you have no business criticizing Rubio or anyone else. Seriously, that is not how it’s done.

    Or we can open things up for a discussion, you know, kind of the whole point of Ricochet to begin with.

    • #17
  18. Vice-Potentate Inactive
    Vice-Potentate
    @VicePotentate

    You really think someone can get elected in 2016 promising to end social security? I guess it lends itself to a catchy campaign slogan.

    Rand Paul 2016: Burn it to the ground.

    • #18
  19. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Valiuth:Isn’t it almost pointless to have a detailed proposal on Social Security. To get any kind of legislation passed on it will require a level of compromise and horse trading that will make any initial plan meaningless. It seems to me that with respect to Social Security demonstrating a clear idea of what the inherit fiscal problems of the system are means that if committed to solving those something may actually be done.

    I wonder though if the system really needs a full overall, or just a good enough patch to get us over the Baby Boomer hump. Basically once the these vile Boomers die off they system will be in more equilibrium as you won’t have a sudden glut of retirees. The system worked well enough when people didn’t live that long and you had eight payers to one recipient.

    I don’t know how we achieve any kind of equilibrium when the very premise of the program is essentially a ponzi scheme. Reducing the load on the system via the boomers exiting is a start, but I don’t think it gets us there. The only real solution I can see is succumbing to the reality that it is a redestributive, direct payment welfare system and operate it as such.

    • #19
  20. Manfred Arcane Inactive
    Manfred Arcane
    @ManfredArcane

    Valiuth:Isn’t it almost pointless to have a detailed proposal on Social Security. To get any kind of legislation passed on it will require a level of compromise and horse trading that will make any initial plan meaningless. It seems to me that with respect to Social Security demonstrating a clear idea of what the inherit fiscal problems of the system are means that if committed to solving those something may actually be done.

    I wonder though if the system really needs a full overall, or just a good enough patch to get us over the Baby Boomer hump. Basically once the these vile Boomers die off they system will be in more equilibrium as you won’t have a sudden glut of retirees. The system worked well enough when people didn’t live that long and you had eight payers to one recipient.

    I’d be nice if someone smart like Kudlow or Pethokoukas could review Christie’s plan and critique it for us.  Otherwise, you are right, we have no idea what it will take.

    • #20
  21. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Vice-Potentate:You really think someone can get elected in 2016 promising to end social security? I guess it lends itself to a catchy campaign slogan.

    Rand Paul 2016: Burn it to the ground.

    I don’t see championing it as an electoral strategy, but it is a time bomb waiting to go off and destroy the nation. It is something that must be dealt with. Pablum might get one elected, but it won’t solve the problem.

    • #21
  22. Vice-Potentate Inactive
    Vice-Potentate
    @VicePotentate

    The King Prawn:

     The only real solution I can see is succumbing to the reality that it is a redestributive, direct payment welfare system and operate it as such.

    That is point 2 of Rubio’s plan.

    • #22
  23. Vice-Potentate Inactive
    Vice-Potentate
    @VicePotentate

    The King Prawn:

    Vice-Potentate:You really think someone can get elected in 2016 promising to end social security? I guess it lends itself to a catchy campaign slogan.

    Rand Paul 2016: Burn it to the ground.

    I don’t see championing it as an electoral strategy, but it is a time bomb waiting to go off and destroy the nation. It is something that must be dealt with. Pablum might get one elected, but it won’t solve the problem.

    It’s probably not going to destroy the nation just slowly whither away as it runs out of money. Eventually only the poorest will be eligible and everyone sensible won’t count on it. Go ask someone under 30 whether they think social security will be around when they retire. Most just laugh.

    • #23
  24. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Vice-Potentate:

    The King Prawn:

    Vice-Potentate:You really think someone can get elected in 2016 promising to end social security? I guess it lends itself to a catchy campaign slogan.

    Rand Paul 2016: Burn it to the ground.

    I don’t see championing it as an electoral strategy, but it is a time bomb waiting to go off and destroy the nation. It is something that must be dealt with. Pablum might get one elected, but it won’t solve the problem.

    It’s probably not going to destroy the nation just slowly whither away as it runs out of money. Eventually only the poorest will be eligible and everyone sensible won’t count on it. Go ask someone under 30 whether they think social security will be around when they retire. Most just laugh.

    We all agree that this is the outcome eventually, so why not save ourselves the headache and embarrassment of having reality force the outcome on us? Why not actively work to achieve the same ends with some level of control over the matter?

    • #24
  25. Leigh Inactive
    Leigh
    @Leigh

    But, KP, isn’t gradually raising the retirement age the one thing that comes closest to addressing that original lie?

    If social security were ended, we would still face that same dilemma at the age when our jobs become unworkable.  That is a problem that exists in the world apart from government — it is not one Social Security created.

    Raising the retirement age means primarily that, by starting later, we are going to subsidize and redistribute less.  I realize that is bitterly unfair for those who are approaching the cutoff — but would it hurt more than the inevitable massive benefit cut and likely tax increase that would result otherwise?

    Indeed, I’m afraid that is a lens we have to use in evaluating all these plans: not just “is this good” (it’s not) but “what happens otherwise.”  Because — unless Jeb Bush or Scott Walker or Jon Kasich has some brilliant option hidden — that’s probably the choice: this kind of tinkering, or something far worse.

    • #25
  26. Vice-Potentate Inactive
    Vice-Potentate
    @VicePotentate

    The King Prawn:

    We all agree that this is the outcome eventually, so why not save ourselves the headache and embarrassment of having reality force the outcome on us? Why not actively work to achieve the same ends with some level of control over the matter?

    I don’t see the political will, even in a nascent form, for dealing with the problem before reality sets in. Sooner or later the reality that older voters control elections and are almost immune to sense when it comes to social security sets in and the options left are to tinker with the system a bit, i.e Rubio’s plan, or do nothing. Hence, the frustration with not offering an alternative while denigrating Rubio’s plan, which is shallow at best and doesn’t get to the root of the problem, but is a step towards reform rather than flailing in the dark.

    • #26
  27. Manfred Arcane Inactive
    Manfred Arcane
    @ManfredArcane

    (BoyitwashardtofindthesedetailsonGoogle!)

    Christie’s plan curbs benefits for future retirees earning more than $80,000 in non-Social Security income; benefits would phase out entirely for those making >$200,000.

    How many Americans … are pulling in more than $80,000 before their SS benefits are included?

    … between 5 -11% of people who are at least 62 years old, or between 2.4 million and 5.3 million Americans, could fall above the $80,000 threshold, …

    Between 0.7 – 2% of seniors have more than $200,000 in non-Social Security income, < 1 million Americans might be ineligible to collect SS because they make too much money.

    Other proposals by CC affecting everyone (not just top 1%) …raising retirement age to 69–currently, retirement age is set to rise to 67 by 2027–and he would raise the early retirement age to 64. Currently, seniors can begin claiming benefits at 62, though they receive a smaller payout. He would also change the way cost-of-living increases in payments are calculated, using a less generous formula, but proposal would include a larger bump for seniors when they turn 85.

    Finally, Mr. Christie would eliminate the payroll tax for Americans who work past the age of 62 in order to encourage broader labor-force participation.

    … estimate that the totality of Mr. Christie’s changes would eliminate around 60% of the shortfall that the Social Security program faces over the next 75 years. The largest piece of savings comes from raising the retirement age

    • #27
  28. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Leigh: Indeed, I’m afraid that is a lens we have to use in evaluating all these plans: not just “is this good” (it’s not) but “what happens otherwise.”  Because — unless Jeb Bush or Scott Walker or Jon Kasich has some brilliant option hidden – that’s probably the choice: this kind of tinkering, or something far worse.

    I fear you are right.

    Leigh: Raising the retirement age means primarily that, by starting later, we are going to subsidize and redistribute less.

    My idea is to be honest about the redistribution and do more of it. I don’t think it’s necessarily the way we should operate as a nation, but it’s clear that mine is not the majority opinion. We, as a nation, have said that the elderly should live in dignity with a certain basic level of means. We created a system to provide that, but to sell it we made it for everyone, including those with zero need for it. Now there’s not enough to go around because we’ve made it welfare for all rather than welfare for those truly in need. We’ve undermined the program’s ability to achieve its designed ends. If we really believe in those ends then the system must undergo a serious redesign.

    • #28
  29. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Manfred Arcane: The largest piece of savings comes from raising the retirement age

    Doesn’t address one of my main concerns that those who need the program the most suffer the greatest from working longer. On the whole, however, the Christie plan points towards the idea I have in mind of making it a truly means tested program. We’re a wealthy and generous nation. We have enough to care for the truly needy, but not if we give the majority of it to those without need just to maintain some farcical idea of fairness.

    • #29
  30. Big Green Inactive
    Big Green
    @BigGreen

    This post is less satisfying than Rubio’s plan.  It sounds like any solution you would support must include informing the American people that the entire SS system is a lie?  Talk about pablum…

    Many politicians have said it is a lie and/or an unaffordable promise (including Rubio…hell, Christie and Huckabee said it during the debate, although Huckabee’s plan is entirely ridiculous since his “solution” is to do nothing because….wait for it….it was built on a lie).

    As Christie said, the lie has already happened, the question what is to be done about it?  Ending the program is not….going….to…happen no matter how much any us may desire it.  Rubio’s plan is a sensible way to deal with it it (although I agree with Claire and the “mom” stuff…just pandering and unnecessary).  It is a mathematical problem in most respects and there are only so many moving parts and anyone that is relying on it for most of their retirement needs (given all that we have known about it over the past 20 years) is a bit out to lunch to begin with.

    I doubt it will ever receive a complete overhaul, at least not in our lifetimes.  It will bump along a receive a semi-permanent fix or two.  Quite undesirable but not the end of the world either.

    • #30
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