During Monday night’s GOP presidential primary debate, several the candidates called for privatizing Social Security, with former corporate CEO Herman Cain pointing to a system of privatized accounts for government employees that was implemented by Galveston, Texas. “In 1981, the Galveston County employees, they opted out because that was a very short window of opportunity. They took it. Today, when people retire in Galveston County, Texas, they retire making at least 50 percent more than they would ever get out of Social Security,” Cain claimed.
Texas Gov. Rick Perry has also praised the Galveston system, saying in his 2010 book Fed Up! that “employees in those private plans, having exercised their liberty at Washington’s sufferance, are reaping the benefits,” and adding in Monday’s debate “the issue is, are there ways to move the states into Social Security for state employees or for retirees? We did in the state of Texas back in the 1980s.”
As it turns out, this system did work well for some people: the wealthy. Everyone else would have been better off sticking with Social Security:
For the highest-earning workers in the Gulf Coast county, the personal accounts have yielded nearly double what they might have collected under Social Security. But according to independent studies, the results have been less favorable to those on the lower end of the income spectrum.
In 1999, the Social Security Administration and the General Accounting Office (now the Government Accountability Office) separately examined the program adopted by Galveston and surrounding counties and found that its benefits depended on income and longevity: The lower one’s income and the longer one lived after retirement, the less advantage there was to participating in the program compared with Social Security. Also, Social Security payments increased with inflation, while payments under the Galveston plan did not.
“If you’re single, if you’re well off and you die within 10 years [of retirement], maybe you’ve done better,” said Eric Kingson, a professor of social work at Syracuse University and a vocal critic of the Galveston alternative. “For most people, it’s somewhere between ‘very bad’ and ‘not very good.’ ”
“Low-income working persons do not receive anything approaching the kind of protection they receive under Social Security” under the Galveston plan, said Syracuse University professor Eric Kingson. Keith Brainard, the research director for the National Association of State Retirement Administrators, added that the problem “lies in Cain’s implication that Social Security should be a wealth-producing vehicle, when that’s not what it’s supposed to be. Social Security is supposed to be old-age insurance. That should be the emphasis of the program, not ‘retiring with a lot more money.’”
But for the GOP, it seems, Social Security (which kept 14 million seniors out of poverty last year) should no longer be a guarantee, but a program subjected to the whims of the stock market. And that would mean real trouble for retirees.