The future of Social Security has been a subject of contention between GOP presidential frontrunners Rick Perry and Mitt Romney. Perry was audacious enough to call Social Security a Ponzi scheme for which he was criticized by Romney and other figures across the political spectrum. Social Security is one of those subjects that it is nearly impossible to have an adult conversation about due to Democratic Party demagoguery and scaremongering. When the Social Security Act was first passed in 1935 the average life expectancy for American men was 59.9 and 63.9 for women. The most recent life expectancy statistics from the National Center for Health Statistics say the these figures have risen to 75 for men and 80 for women. Consequently, you have a larger number of people living longer and the number of workers paying into this system is not keeping pace. While Perry is being hyperbolic in calling Social Security a Ponzi scheme, he is right to emphasize that it is not financially sustainable in its present form, needs drastic reforms, and is an integral part of the burgeoning growth in entitlement expenditures creating our national fiscal profligacy. Romney is also right in saying that older Americans who have paid into Social Security should be able to receive their contributions for financial security in their sunset years. He is also correct in warning that even the appearance of tampering with Social Security is electorally injurious given the higher voting rates of elderly Americans.
This debate should be an opportunity for Romney and Perry to promote the vital importance of saving for the future to Americans. Social Security needs significant reforms such as raising the present retirement age of 65, means testing, and prudent investment policies yielding higher investment returns than the present system to give Americans at least a minimum level of financial security. However, it is long overdue to start promoting the importance of savings in American economic activity and beginning retirement planning at an early age. In his well-written and thought out economic plan, Romney promotes the importance of Americans earning less than $200,000 annually to have their savings exempt from federal income tax. In a recent GOP debate, Herman Cain correctly pointed out how Chile has moved all of its retirement planning to the private sector giving its workers the option of choosing from multiple retirement plans. We should retain Social Security as a minimal retirement safety net, with significant reforms, but give workers tax incentives to develop a diversified portfolio of prudent long-term savings options to plan for their retirement.
The idea of Social Security actually originated in Bismarckian Germany in the late 1800s and fit the domestic political and economic environment present in Germany at that time. When it was enacted in the U.S, it sought to protect workers from the ravages of the depression. Unfortunately, to many political figures remain trapped in a 1930s time warp and do not account for the diversified retirement planning options available in today's global economy and the extensive amount of information available to individuals today to make wise decisions about their individual financial future and that of their families. Federal and state governments, and private sector financial institutions, should work together to promote transparent and easily understandable laws and regulations to protect us from unscrupulous financial hucksters while also empowering us to make the retirement planning decisions that are in our own best interests. We can not rely on the "one size fits all" formula of Social Security but include Social Security in a diverse and multifaceted spectrum of retirement planning options. You won't hear such economic wisdom and prudence from Barack Obama and the Democrats so this is a wonderful opportunity for Perry, Romney, and other GOP presidential aspirants to step up to the plate and provide Americans with the intellectual and moral leadership necessary to promote sensible and liberating retirement policy reforms in our political debate.