Last week, President Obama accused Republicans of trying to destroy Social Security, noting that they are “pushing to make privatizing Social Security a key part of their legislative agenda if they win a majority in Congress this fall.” Of course, conservative talking heads denied this, claiming, “There’s no Republican, basically, standing up and saying that,” as GOP strategist Ed Rollins told CNN.
But on CNBC this morning, former GOP House Speaker cum tea party leader Dick Armey had no qualms about calling for cutting Social Security and Medicare. He advocated making these critical programs optional — and even suggested they are “flab” and “waste” — something that would almost certainly destroy them, despite his “guarantee” that that social security under his scheme would be “as you know it today”:
ARMEY: Let me say that flab is a good word in government. It is wasteful, counter-productive flab that not only does not good for America, but actually diminishes America’s ability to function. […]
HOST: If you had your druthers, where would you cut?
ARMEY: Where would I cut? First thing I’d do…let Social Security be a choice. … I will give you a guarantee you will get your social security as you know it today, with no change other than a proper cost of living index if you choose to stay if you let those of us who want to leave it. And if it’s such a great deal, why can’t it be voluntary? Why must the government force people to accept their benefits whether they need them or not or whether they want them or not.
Let Medicare be voluntary. I mean, why is that so hard?
While this might be a winning talking point for Armey’s tea party followers, his half-baked idea would almost certainly collapse the vital American social safety net. These programs need younger, working people to contribute to them, so letting millions of people opt-out would likely yank retirement benefits from older Americans who paid into the system on the promise that they would be taken care of upon retirement. Moreover, wealthy people who can afford their own retirement plans would likely opt-out, slashing revenues and leaving less-affluent Americans stuck in underfunded or totally insolvent programs. And as former Vermont Governor Howard Dean, who was debating Armey, pointed out, some people who opt-ed out on the expectation that they would make enough money to support themselves in their old age would inevitably be unable to do so, leaving the country with a “moral obligation” to care for them, but with no means of doing so.
And much like the many other doomed conservative privatization schemes, replacing Social Security savings with private market funds could be disastrous during a period of financial turmoil. As a Center for American Progress Action Fund analysis found, under a privatization plan like the one proposed by President Bush, an October 2008 retiree would have lost $26,000 in the market plunge of that year, and if the U.S. stock market had behaved like the Japanese market during the duration of that retiree’s work life, a private account would experience “an effective -3.3 percent net annual rate of return.”
Much like the individual mandate in the Affordable Care Act, mandates for Social Security and Medicare are absolutely necessary, if unpopular, to support the entire system.