Individualism v. Community: The false debate at the core of this election.

This column originally appeared at Big Jolly Politics:

I’ll return to my series on Texas Education soon, but I want to share some thoughts after digesting the rhetoric from both national political conventions.

My first and over-riding thought was how baffled Adam Smith and William Jennings Bryan would be if they had somehow been able to return to this world for the last two weeks and had attended these conventions.  Neither would understand the split that has occurred in American politics over issues they studied and championed, and both would be shocked at how misunderstood and misapplied their ideas have become.  

Smith, the Scottish professor of Moral Philosophy, built his ideas about economics and government in his Wealth of Nations on the foundation of his description of the inherent moral nature of man in The Theory of Moral Sentiments.  For the last 250 years, both proponents and opponents of the system of capitalism and free markets that evolved from Smith’s writings based their viewpoints on an analysis of economic behavior that was independent of the morality so central to Smith’s theories.  Smith would not have understood either Marx or Rand.  To him, the individual pursuing his or her self-interest did so within a context of morality and responsibility.  Smith’s total view, in turn, was consistent with the type of system that developed during the 18^th and 19^th Centuries in the United States—the one de Tocqueville observed and explained in his Democracy In America.

But today, we are more the children of Marx and Rand, than of Smith.  So, we see the answers to our problems solely through the lens of rugged individualism, or social-justice collectivism, when both individualism and community are needed for a society of free people to thrive using capitalism and free markets.  In essence, our misreading of Smith has set up a false choice between individualism and community that de Tocqueville believed we had avoided. 

As a self-proclaimed answer to this false choice, William Jennings Bryan emerged as a political force of nature in the 1890s.  Arguably, as one of the early proponents of a form of Progressivism, he was the most influential politician from the 1890s to the 1920s who never became President—though he tried four times.  He set out to impose community on rugged individualists through his “applied Christianity,” which was derisively called “Bryanism.”   Bryanism called for the federal government to become the source of social justice through interventionist and redistributionist economic policies, and by enforcing a common standard for public and private moral behavior.  Between the 1930s and the 1960s, the Democratic Party abandoned the social conservatism of Bryanism, while fully embracing the economic portion of his social justice views.   

Meanwhile, in the late 1970s, the social-conservative heirs to the morality of Bryanism turned to the Republican Party to promote their agenda, and they joined economic conservatives to support Ronald Reagan’s “New Republican Party” plan to re-establish a modern society upon the Smith/de Tocqueville model of society.  In fact, what Reagan understood was that the real choice for sustaining and improving our free society is not between individualism and community, but between the role of individual morality and responsibility and government regulations and programs in creating and maintaining community among free people.  The Smith/de Tocqueville model that Reagan tried to reinvigorate provided the right answer for that real choice. 

But instead of disappearing into history, the remnants of Bryanism are alive and well.  They are divided into two warring camps still trying to resolve the false choice between individualism and community with wrong or incomplete answers that depend on the exercise of federal government action, and that create strange fissures within both Progressivism and Conservatism in this country.

President Obama’s acceptance speech doubled-down on the economic social-justice model of Bryanism.  He recognized that our society is built on both the freedom of the individual and the interdependence of communities, but he embraced the false choice between the two.  Then, he sought to answer the false choice by providing community artificially through more government interventions, while rejecting any role for private, individual, moral character and responsibility in shaping and preserving a community.  Such an approach provides a wrong answer to the false choice, which will worsen all of the social pathologies that have arisen over the last century, and further isolate neighbors as autonomous wards of one or more federal government programs. 

Where are the Republicans in this debate?  Unfortunately, we are still arguing between the social conservatism of Bryanism and the economic conservatism of traditional and libertarian Republicans, when Smith, de Tocqueville and Reagan would have told us the choice we are arguing about is false, too.  Both are needed for our model of government to work, and we need to stop fighting among ourselves over this fundamental point. 

Instead, we need to come together and seize the opportunity we’ve been given to change the debate in this election.  By shaping the debate around “community” and the social-justice model, Obama has handed us a rare opportunity to break out of the old paradigms and to reveal the false choice between individualism and community that we have been given over the last century.  As we reveal the false choice, we must argue for our Smith/de Tocqueville/Reagan model of a free society and government—an argument we have not made coherently for at least a generation because of our own internal arguments.  We need to take the “You did build that” theme, and expand on it with our ageless ideas of creating and maintaining “community” through individual, private, and local action; by showing that the individualism of moral people creates community among neighbors, and that such communities are protected and promoted by local private and public entities, rather than by a federal bureaucracy.

All of the groups we need to persuade to vote for our ticket need to hear the falsity of the choice and answer the Democrats have long promoted, and hear the real argument for the Smith/de Tocqueville/Reagan model that made us exceptional:  Latinos and other new immigrant groups who have come to this country to build a better life; African-Americans who have been abandoned to under-education, under-employment and over-incarceration; and women and young people, whose prosperity depends on the economic growth and support that strong neighborhoods provide.   

Unless some whiz kid around Romney and Ryan figures out how to make this argument effectively, Obama’s argument will win by default because the false choice has become engrained in our national thinking, and the mood of the country is looking for answers.  They’ll embrace even wrong answers to false choices if we don’t show them the choice is false and the answer is wrong, and what is really the right path.  We won’t just win this election by doubling-down on social conservatism or rugged individualism, nor do I now think we can limp into the election just focusing on jobs, the budget and government reform.  Instead, we need to show why our answers to jobs, the budget and government reform will improve the condition of this country, and to do that we need to address the interrelationship between basic morality, individualism, and strong communities for the success of our model of society and economic growth—an interrelationship that our founders, Smith and de Tocqueville understood and promoted.  Then, we need to challenge our neighbors to rebuild this model of society with us.  

If Romney articulates the Smith/de Tocqueville/Reagan model effectively, shows why it is relevant to the problems we face, shows how it can work, shows how it will improve lives in the 21^st Century, and challenges us to embrace it, he’ll win in a landslide.  If not, the public may decide to let their money ride on the wrong bet they made four years ago.

The Election Choice—Can Romney make it simple? Can Romney be Romney?

This column originally appeared at Big Jolly Politics:

Watching all of the pundits say that Romney has to make himself likable is beginning to drive me crazy. Of course no one wants to embrace a dour person (though Richard Nixon was on 4 of 5 winning national tickets, just proving that there are exceptions to every rule), but Romney is not dour, and the times require a serious, steady, positive message. I am going to say something I never thought I would say a few months ago—let’s let Romney be Romney.

What would that mean? It would mean that we should allow Romney to make the case to the American people about the choices we face, and how he is the best man at this time to help us make those choices because he has lived those choices all his life.

Romney knows the correct answer to the fundamental question of this election: Who builds this economy and this country, the federal government or private businesses and the individuals they employee?

And the answer is: private business and the individuals they employ. If you don’t understand that fundamental answer, you do not deserve the public’s trust to hold an office in our government. Period.

It is private business that generates the jobs that provide for families and that build neighborhoods. We spend more time every day with our co-workers than with our families, and the positive bonds formed through this activity ripple out in every direction. Employing people affects the lives of both the employer and the employee, from which both grow. The products or services generated by a business affect customers, and spur innovation by others through competition. But, most importantly, every paycheck signed sets aside a retirement fund, pays for health care, provides for the sustenance of a family, pays for a mortgage and a college education, pays for the charity from a church or non-profit organization, and creates the tax base for the infrastructure and protection of a community.

Government is nothing more than a service that we pay for with the taxes from our paychecks and profits. It is a service through which we have chosen to hire some of our neighbors to provide education to our children, create and maintain a physical infrastructure, provide for our defense and protection our communities and nation, and preserve a safety net for those unable through no fault of their own to help themselves (or find private charitable help), while we work and build the foundation of wealth and happiness for our families, our communities, and our country. In essence, government works for us, at our direction, and to the extent we feel we need it—we do not work for government. To increase government’s role in our society beyond providing these services effectively and efficiently, is to threaten the delicate balance among free people that this system has long maintained—and that makes our experiment in self-government so unique and exceptional.

President Obama and the modern Democratic Party do not believe in this delicate balance. Instead, they want to transform it so that Government indeed becomes the source of all wealth and happiness in our society—and as they do so, they are putting our delicate balance in mortal jeopardy. The Democrats have long wanted to change the fundamental relationships in our private sector, and between the private sector and government, by inserting government more and more into the private relationships that a private-sector paycheck has always supported. This process has reached a tipping point now.

Because no one knows which way our system will tip—how much further the federal government will interfere in the private market and private relationships, and how much taxes will be seized to pay for the massive public spending and debt incurred to fund that interference—a cloud of uncertainty now hangs over our country (and, by extension, over the world economy). And that uncertainty keeps business from hiring people, and that cuts the paychecks that support families and communities. That uncertainty, if allowed to continue, will tip the balance toward a new pervasive government and the nation the Democrats have long tried to create.

We must bring an end to this transformation that disguises itself as “hope and change,” and “moving forward.” This transformation does not promise progress, but, instead, a benign peonage for future generations. Is that what prior generations fought for?

Through his work in the private sector, in his church, and through the charities he has supported, Romney understands, and indeed embodies the best of the balanced system I have just described. He understands the challenge and threat the Democrats’ vision has created for the delicate balance of our unique society. He just needs to be honest with us; and then challenge us to help him stop this transformation, to make the necessary reforms to remove the uncertainty, and to restore the historic balance between the private sector and government, so that private business will write those paychecks again.

It’s that simple. Great speeches by Ann Romney, Chris Christie, Condi Rice, Susana Martinez, and Paul Ryan have all paved the way for him. Now, let’s hope Romney will be Romney.

So, we now know it’s a tax—its time to abolish it!

This column originally appeared at Big Jolly Politics:

Over the last few weeks (most of which I spent on a family vacation outside the country), I read the recent U.S. Supreme Court decisions from the 2011-12 term and tried to write this post several times. However, none of the drafts seemed to convey what I felt needed to be said. I think with the passage of time and more thought, I can now say what I’ve wanted to say.

I was very disappointed by the ruling upholding “Obamacare”. However, as we conservatives near the end of our primaries and begin to approach the last lap of the campaign toward the November finish line, I believe the U.S. Supreme Court gave us a great gift this term—though, admittedly not the one we wanted—if we will now seize that gift, and then use it to defeat Obama and send Romney and the Republicans to Washington.

The Court reminded everyone in National Federation of Independent Business v. Sebelius and Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC that there are real limits to the delegated powers of the federal government contained both in the body of the original text of the Constitution, and in the Bill of Rights and the 14th Amendment. In fact, Justices Roberts’ and Kennedys’ opinions in Sebelius, in which the limits of the Commerce Clause and Spending Clause powers were clarified by a majority of the Justices, contain some of the strongest re-iterations of, and re-commitments to the Founders’ original design of Federalism to be found in any opinions from the Court in the last 100 years. Amazingly, even two of the Court’s most liberal justices (Breyer and Kagan) agreed with the limitations of the Spending Clause, and that those limitations had been violated by Congress. Moreover, the Court struck a strong balance in Arizona v. United States between the delegated powers over foreign affairs and naturalization held by the federal government and the general sovereign powers retained by the states.
Even the bizarre ruling by Justice Roberts and the four liberal justices to uphold the individual mandate (and, therefore, most of the law) was, in an odd way, a gift—maybe the most important gift of all. As he found the mandate to really be a tax, Justice Roberts had to acknowledge (expressly and implicitly) truths that Americans should know deep in their DNA, but we sometimes forget:

• when we create any government, that government has to be funded by taxes so the power to tax is given to government;
• the power to tax is the most coercive, and potentially despotic power that government holds;
• the power to tax delegated to the federal government has expanded since 1789 by constitutional amendment to include direct taxes on individuals, and it has been used to implement many coercive policies over the last 100 years; and
• the only real constraint on the exercise of the power to tax is political, not legal—that is the only effective constraint is the one exercised by the people through their right to vote and to petition their government.

In the end it is that last power—the rights of the people to alter or abolish their government through their votes and through their direct petitions to their elected officials—retained by individual citizens, which we always have exercised to control taxation. All Justice Roberts’ opinion did was to remove the final decision as to the Democrat’s abuse of the taxation power from the courts and return it where it belongs—to the people to punish and change. In doing so, he pitched that ball right into our wheelhouse; all we have to do now is control the swing of our bat and make contact.

From the original Boston Tea Party, to the Coolidge and Kennedy tax reductions, to Howard Jarvis’ Proposition 13, to Kemp-Roth and the Reagan Revolution, and now to the Tea Party Movement, we have met the challenge of excessive taxation and defeated it. We must be vigilant and do so again with our votes this fall. In the meantime, we must support those state politicians, including Governor Perry of Texas and Governor Scott of Florida, who are using the clarification of the limits of the Spending Clause to fight the expansion of the federal strings of Medicaid into their states; and petition other state governments to do the same.

So, we now know our mission for the fall election (if any of us out there still were confused)—to abolish Democrats’ abuses of the tax and spending authority by abolishing both the Obama administration the Democratic majority in the U.S. Senate. As we’ve now been reminded, we still have the power to correct these abuses, let’s exercise it.

My Letter to Mitt Romney

This letter originally appeared at Big Jolly Politics:

Well, as the Republican Presidential roadshow moves on to South Carolina, I must admit that the disappointment I expressed in my last post is turning, slowly, to a begrudging acceptance of the looming reality we face. No matter how much I still hope that another candidate will emerge during the primaries, or at the convention, whose views and experience show him or her to be a real Conservative reformer, history shows that such a development is highly unlikely now. Therefore, I must prepare to support Mitt Romney if he wins the nomination, because I can not stand by and let Obama’s Democratic Party win this election.

But, bowing to such reality does not mean that I, and those of you who agree with me, must drop our desire for reform based on Reagan’s New Republican Party blueprint of 1977, and the recent 10^th Amendment movement. Instead, we should work to give Governor Romney (or whoever may still emerge from this process) the tools and support he will need to make the reforms we want: retention of the GOP’s House majority; gaining a GOP majority in the Senate and changing the filibuster rules once and for all to allow the basic business of government, like the passage of a budget, to be done; and retention and expansion of our majority in state houses and governorships. Above all else, we must continue to remind Governor Romney of what we want to see our party accomplish if it wins this election.

To that last end, here is my open letter to the Governor:

Dear Governor Romney:

As a supporter of another candidate in the GOP field this year, I congratulate you on your victories to date, and on the progress you are making toward winning the nomination of our party for the Presidency. Though there are many contests still to be fought in this process, and through those contests I will remain part of the loyal opposition, I want you to know that, as a Reagan Conservative, I will support you and work for your election if you win the GOP nomination. That said, I want to share some thoughts with you about this race from someone who has not supported you to date.

I have been told from a close friend who worked with you after you took over the 2002 Winter Olympics, that you are one of the finest managers of people and of business with whom he has ever worked. That is high praise, indeed. Moreover, your history of accomplishments in the private sector, and as Governor of a very Democratic state, supports this praise of your managerial skills. But, many of us believe that we need more than just a better manager to fix what ails this country, and we desperately hope that you are ready for the challenges you must face if you win this election. In light of this concern, I, for one, was impressed by one of the answers you gave in a recent debate in which you outlined what you believed to be the core issue against Obama as a conflict of visions of this country and for its future.

I hope you will expand on this theme over the coming months in the context of addressing the deep, structural problems that we as a people must address, debate, and resolve if we are to climb out of the whole we have dug for ourselves over the last few years. Although others may articulate these problems differently, I believe we face three fundamental problems that underlie virtually every problem you and your fellow Republican candidates have been discussing and debating during this campaign:

• The American people need to decide what role they want government to have in their lives, in the lives of their families, and in the lives of their communities—and why government should have such a role. To make this decision, we will need to take a hard look at how and where we (currently, and will in the future) live and work in the 21^st Century, and what activities must remain within the responsibility of individuals, their families, and their private organizations and churches to address. Once we take that hard look, we then will need to determine what activities need the attention of the collective responsibility of government (by itself or in coordination with the private sector), as opposed to remaining solely within the responsibility of the private sector. My guess is that the outcome of this debate will result in a different allocation of responsibility than what our ancestors, and even our parents, would have made, but we will never be able to address the future spending and revenue needs of the public sector of this country unless we have a candid discussion of this issue.
• Once this basic decision is made, we need to determine which responsibilities involve international or interstate activities, and which involve local or intrastate activities. Based on that determination, we need to apply our constitutional rules to determine which level of government should address each responsibility.
• Once this determination is made, the federal government needs to be reformed—branch by branch, and department by department—to address its international and interstate responsibilities efficiently and cost-effectively, and state and local governments need to be encouraged to do the same. Then, budget and tax policies need to be reformed to provide the resources needed to address these responsibilities in a manner that recognizes that wealth and property, in the first instance, belong to those who created them.

Governor, my guess is that most people will want government to continue to take responsibility for many of the activities that government programs currently attempt to address. The difference will be that such responsibilities should be, and will be re-allocated so that they are addressed more efficiently and cost-effectively at the local and state levels, and at those levels will be more likely to share their work with the private sector in each community. Moreover, such re-allocation will naturally cut from government much of the bureaucratic duplication that leads to the growth in the size, cost and debt of government at all levels. Finally, if people realize that the GOP doesn’t want to throw their grandparents into poverty, or abandon safety nets for our neighbors in true need, but, instead, wants to reform government consistent with its properly limited structure to make it more effective and to engage our citizens again to become active participants in the lives of the neighbors and neighborhoods, much of the wind will be taken from the sails of the great Democratic argument that has portrayed Republicans as unfeeling and uncaring extremists for generations.

That last point leads me to the final part of this letter. You recently have been criticized over the activities of Bain Capital while you managed that company. While some conservative commentators are wringing their hands over this development, I believe that this criticism, coming now, is a blessing to your candidacy, because it gives you an opportunity to turn this criticism into a strength during the rest of the election cycle. To create this strength, you need to understand the fears that the stereotypes underlying these criticisms arouse, and address the country about how the free market works and how you would apply your experience from your role in the free market to reform the government.

Ever since Commodore Vanderbilt took advantage of the economic depression of the late 1830s at the dawn of the railroad boom, Americans have had a love-hate relationship with those who have provided the financial capital within our free market system. We know that we have needed the Vanderbilts, the Morgans, the Carnegies, the Mellons, … and the Bain Capitals, along with banks and bondholders, to provide the loans, the bonds and the equity entrepreneurs need to turn their ideas into products and services—and wealth. In turn, we know that the wealth that is created employs people, whose earnings support their families, their communities and their states, and the nation. But most Americans have never embraced the bankers and investors as the positive image of the free market.

Instead, we tend to identify the free market with the “Horatio Alger” story of the entrepreneur—the man or woman who has the initial idea, who puts his or her own money and labor into the development of the idea into a product or service, and who creates a successful business that employs people, and builds and spreads wealth, from such efforts. Meanwhile, we have come to view the bankers and the investors as necessary evils in the free-market process who obtain their wealth without rolling-up their sleeves and building a business, and who retain the interest and dividends they were paid even after the businesses fail. Indeed, a popular post-war novel that was later made into a popular movie—Cash McCall—had as its central character such an investor, who endured many of the same criticisms that are now being leveled at you and Bain Capital.

But the ending of that story is instructive. McCall buys a business that appears to be about to fail, and then merges it with its main customer and receives what appears to be a fast, windfall return for his investors. The founder of the business who sold it to McCall is irate and feels swindled, until he realizes that McCall’s fresh set of eyes found a nugget of value that the founder never understood and would have never marketed—patents on the products he had developed. Those patents, locked away and forgotten, had hidden value in the market for the company, and it took an outsider to find it. Companies like Bain Capital bring that fresh pair of outside eyes that are able to objectively reassess the value of an entity and reform it to make it more effective, in return for a fee and/or a dividend.

Like McCall, sometimes Bain’s efforts work, and sometimes there is no long-term value to find or develop and the company fails. Anyone who has ever laid-off or fired an employee, or closed a business, knows how hard that is—you’re not just asking a person to leave, you are ending a source of income and benefits that supports a family, and that indirectly supports a community. When that happens, stresses are put on families, neighborhoods, schools and churches—and governments—to help these people through their time of transition. In part, investors use many of the dividends they receive to pay, through contributions and taxes, to support the organizations and governments that provide the support to individuals in time of need and to create the infrastructure in our communities. In the end, investors and banks that provide capital play an indispensible role in the creation of wealth and employment in a free market, and in the maintenance of our communities.

Your experience from providing that fresh pair of eyes in the evaluation of businesses can translate well to the need we now have for reform—and you need to tell the American people about the relevance of that experience to the challenges we face. We need a fresh pair of eyes to look at the responsibilities that the federal government has assumed, and to re-allocate them; to look at how the federal government is structured, and to reform it; and to look at how the money is raised and spent by the federal government, and to stop deficit spending. The only difference between your time at Bain and the challenge you face is this—you can’t just close the federal government; but you can, and you must, close agencies and departments, and stop paying for activities, if their missions no longer fit the proper allocation of federal responsibility or an efficient allocation of federal resources.

Governor, you have been given a great opportunity to tell this story of the free market, of how your experience in the free market (coupled with your unique experience as a Republican Governor of an archetypal Democratic state) applies to the challenges you will have to address, and how our Republican vision contrasts with the economic vision of the Democrats. Please use the criticism you are now getting to further refine a positive narrative before the general election campaign, so that we truly can present a vision to the American people this fall that competes with the socialist vision of capitalists and the free market as evil. If you develop such a positive message that dovetails with a positive plan for government reform, you can carry the Reagan mantle into the fall election. I hope you will.

Sincerely,

Ed Hubbard

Is it a Ponzi Scheme?

This column originally appeared at Big Jolly Politics:

I don’t know about the rest of you, but I thought the last two Republican Presidential debates on MSNBC and CNN have produced pretty good political theater, in large part because of the participation of Governor Perry.  Although I may be a little biased, I think he has more than held his own and is, right now, the best candidate among the field (and I am still more than just a little amazed by all of this).  That is not to say that the other candidates would not make better Presidents than our current Commander-In-Chief—they all would—but Perry has impressed me the most so far.

The dust-up in the last debate over the vaccination-mandate fiasco of 2007 was to be expected, for it was one of the biggest blunders of Perry’s tenure as Governor.  To his credit, he has responded to the criticism the only way he should—he has explained why he did it, and acknowledged his mistake.  There will be some who will never forgive him for this blunder and try to decipher corrupt motives from his actions; but, for many others (including those, like me, who often have been skeptical of his leadership over the years), he showed in the last debate that he learned a lesson from his mistake and has grown from the experience—a valuable and, indeed, necessary trait for a leader in the times we face.

But the really interesting debate that has emerged is over Social Security—and what a welcome and instructive debate this has become.  Essentially, three lines of debate have formed:

1. Governor Perry has framed the debate by calling the current system a “Ponzi scheme” and a “monstrous lie”, by saying it was an improper use of federal authority when it was first enacted, and by committing himself to fixing the system for future beneficiaries;


2. Mitt Romney has confronted both Perry’s descriptions of the system, and his reflection on its history, as being too provocative, while also committing himself to fixing the system; and


3. The rest of the candidates have committed to fixing the system one way or another, while trying not to get in the middle of the argument over the wisdom of Perry’s remarks.

So, what is the net outcome of this debate so far?  It is now refreshingly clear that Republicans are united in fixing the Social Security system to make it solvent for future beneficiaries; but, so far, only a few of the candidates are willing to confront and describe the actual problem with the system and give us an indication as to how they would approach fixing the problem.  It is clear that Perry—and probably Cain and Gingrich, too—realize that you can’t fix Social Security by tinkering around the edges.  Instead, you have to be honest with the American people about the problem at the core of the system, and how it needs to be fixed.

With that said, is Perry’s criticism correct?  And, if it is, what should we be seeking as a fix to the system?

To answer the first question, we need to understand how Social Security has been marketed to the voters over the years.  Since its inception, the creators and supporters of the current Social Security system have referred to it as an old-age insurance system, as a public pension system, as a trust account, as a contractual promise to pay out in retirement an amount based on what was contributed during working years, and as a social safety net to protect the elderly from poverty.  Are any of these descriptions correct?  Upon close scrutiny, the answer is “no”.  It is neither insurance, nor a pension, nor a trust account because it is not based on either actuarial, investment, or fiduciary criteria that provides for a return to the taxpayer of what he or she paid into the system plus investment growth.  It is not even a promise to receive what you paid into the system, because the dollars you paid into the system were received by other beneficiaries as you paid your tax, and you will receive payments from other taxpayers when you retire.  Finally, there is no real correlation between Social Security payments and poverty prevention—Warren Buffet gets the same benefit that your Uncle Fred and Aunt Martha receive, who, in turn, get the same benefit the poorest of our elderly receive.

So, what is this system, really?  You and I are asked to pay into a system and are told periodically that we will receive an amount of money at a certain age based on these payments.  Our future payments are not derived from the amount we paid into the system plus investment growth, but rather from new payments into the system from other people.  The fact and amount of our future payments are based on whether new people continue to pay into the system, and are dictated by the decisions of the person(s) controlling the system—not by the market.  These are characteristics common to illegal Pyramid and Ponzi schemes.  The only differences are that

1. the Social Security system is not only legal, participation is mandatory; and
2. payments can continue, even if new taxpayers don’t materialize, because the federal government can print money to cover the shortfall.

That means, that, unlike a classic Pyramid or Ponzi scheme, payments can continue with freshly printed dollars—though the value of those dollars will plummet as more are printed.  Eventually, though, you’ll arrive at the same result:  if you rely on the printing press at the Mint to save the system, you really won’t get back the money you were promised (just like how a Pyramid or Ponzi scheme ends—though a little less abruptly).

Quite frankly, if you measure the promises surrounding Social Security against its reality, Governor Perry’s descriptions are fairly accurate—it’s like a Ponzi scheme, and the marketing of Social Security has been a “monstrous lie”.

Well, then…what’s the answer to the second question—what should we be seeking as a fix to the system?  As all of the Republican candidates have acknowledged, the promise of this system, and its protection for many elderly Americans, has existed too long with too much public reliance to end it now, if ever.  But I think it would be immoral to continue lying to each other about this system and to not address and fix its faults.  Over the last 30 years there have been a lot of good ideas floated and even practiced—as in the case of Chile (as Herman Cain often notes) and a handful of other nations in Eastern Europe, including Russia—so we don’t have to come up with answers out of thin air.  Whatever fix we adopt should incorporate most, if not all, of the following basic principles:

1. A cut-off age for beneficiaries should be set above which the system will continue as presently structured, and below which fundamental changes will be made;
2. The age at which benefits are to be paid eventually must be re-set to an older age, and then indexed to the life expectancy of the population, so that both the age at which benefits are received and the average projected period for receiving benefits can be affordably subsidized by the working population;
3. Incentives should be created for allowing older Americans to continue to contribute to the economy through paid or volunteer work, after they have reached a point when they physically may not be able to continue working in their original professions but prior to their receipt of benefits;
4. The system should be re-structured so that younger workers are able to split their Social Security tax payments between support for a safety net for means-tested elderly and the younger workers’ own personal retirement accounts; and
5. Eventually, the payment of benefits from a safety net that is fully supported by current tax dollars should be based on means-testing, so that those who have the means to support their own retirements through their private and public accounts do not receive direct transfer payments from the government; such direct transfer payments should be received only by those who are truly in need.

These principles are neither controversial, nor hard to implement, but for the vested interests and expectations surrounding the politics of Social Security.  Those vested interests and expectations will only be broken through candor coupled with new commitments.  To the extent Governor Perry has forced the Republican field of 2012 candidates to face and debate this issue, he has already met an important test for the leadership we will need over the next few years.