The Dog Food Economics of Rick Perry

Have you noticed how few senior citizens are eating dog food these days?

Apparently Rick Perry hasn't. 

Instead, in a kind of right-wing reflexology, he decided to blurt out, in last night's GOP candidate's debate, that Social Security is a "Ponzi scheme."

It is? 

Actually, it isn't. 

I know a little bit about Ponzi schemes as I was involved a little on the periphery of the Bernie Madoff Ponzi scheme fraud investigations. You can read a bit about that here or check out the movie (Chasing Madoff) which is playing in theatres now.

I know quite a bit about Social Security too.  Social Security is not a Ponzi scheme; It's a progressive, inter-generational retirement insurance system and it is, to be clear, one of the best funded retirement insurance systems in the world. 

Read that last statement again. 

Social Security is almost certainly better funded and more robust than any defined benefit retirement system you have ever paid into, and it is almost certainly doing better than your 401K defined contribution plan which has, no doubt, taken a massive bullet in the head thanks to the failed economic policies of the last Texas Governor we elected to the Oval Office. 

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By way of background, let me say that back in the Clinton era, I spent eight years defending Medicare and Social Security from attack, initiating the conversation (still ongoing) about drug reimportation from overseas, and trying to derail misguided efforts to privatize Social Security.

I bring this up not to rehash the past but because since then a lot has happened, including the collapse of the financial markets under the George W. Bush Administration, the collapse of the housing market under the George W. Bush Administration, and the wholesale shedding of U.S. jobs, which began under the George W. Bush Administration.

What does any of that have to do with Social Security?

Actually, quite a lot.

You see, back in 1996, the folks who were pushing to privatize Social Security were Wall Street firms like Merrill Lynch, Morgan Stanley, and Goldman Sachs.

Brokerage houses were salivating at the prospect of skimming off hundreds of millions of dollars a year in commissions and transaction fees from a privatized system.

All that had to occur for that to happen, was to sing the siren song of greed.

And, of course, the stage was well set. Back in the mid-1990s, everyone from cab drivers to fresh-scrubbed college grads were convinced they were stock-picking geniuses. The market was roaring! Surely any fool could make a mint on Wall Street? It was simply a matter of tossing a dart, and never mind if anyone said differently!

Wall Street knew an opportunity when it saw one, and so it pumped hundreds of millions of dollars into a campaign designed to leverage fear, resentment, and greed into a new profit center for the hyper-rich.

The fear being fanned was the notion that Social Security was "going to go broke." And never mind that it was not true.

The resentment being fanned was the notion that someone, somewhere, might be getting something they did not quite deserve.

The big emotional driver, of course, was greed.

Think about how much money you could be making if you invested in such sure-fire winners as Hewlett-Packard or Pets.com or Tenet Healthcare!

What could go wrong? Nothing! Stocks were soaring!

Of course, to buy the cure you first had to buy the disease.

Social Security was terribly sick said Wall Street.

The cause of the disease, said the stock market sages, was that America was aging.

We were going to go broke because we were growing old.

And so Merrill Lynch and other brokerage firms ran full page ads, such as the one below, talking about the demographic "time bomb" of Social Security.
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Click on the ad, above, to read the full text. And click here to read the annotations, numbered in blue, to read how Merrill Lynch was trying to fear-monger us into killing Social Security.


Of course it was all nonsense, but it was potentially lucrative nonsense for Wall Street traders, and so it was asserted, repeated, parroted and echoed across the landscape by folks who overtly or covertly were taking vast sums of money from Wall Street.

Not everyone was on the take, of course. A lot of people were simply ignorant.

The ignorant did not know the benefits of an aging population, nor did they understand the liabilities of a rapidly growing one.

Casual pundits did not know the difference between one kind of dependency ratio and another.

And Wall Street knew that.

They sought to tell a simple story, no matter if it was a lie.

It was enough if it sounded true. Greed, fear and resentment would do the rest.

We were told "Social Security was like the Titanic."

Which was true, except that we were 30 miles from the iceberg, we were sailing on a clear day, and we had an attentive watchman on deck. If we made a quarter of a degree change in course, we would sail so far from the iceberg we would never know it was there.

But Wall Street traders wanted us to panic. They wanted us to sink the boat NOW in order to avoid hitting the iceberg 30, 40 or 60 years into the future.

Now, it's true that if you sink the boat, you will not hit the iceberg. But that's cold comfort when you're treading water, alone, in the North Atlantic.

The good news is that through sheer force of fact, rhetoric and some luck, those of us working to derail Wall Street privatization efforts manged to stall things long enough that the stock market had a major "correction."

Which is a nice way of saying that a few million people who thought they were geniuses, lost their shirts and learned a fundamental mathematical fact: If you lose 50% of your portfolio's assets during a "correction," it takes 100% growth in that same portfolio just to be made whole again.

A small lesson was learned. But it was a small lesson, and not everyone learned it. And, truth be told, we are a nation of amnesiacs. We have rafts of politicians who are slow learners and quick forgetters.

And Wall Street is nothing if not patient.

And behind it all, always just out of sight, remain the discrete men and women with bags of cash who are only too eager to lubricate the wheels of Capitol Hill.

They are people like the professional Wall Street lobbyists surrounding Rick Perry.

And so, because we still have Wall Street rats in the grain pile, we still have folks like Rick Perry staggering up to podiums to talk about Social Security as a "Ponzi scheme" whose solution is privatization.

A politician expressing dismay that Social Security is a multi-generational transfer program is a bit like a a mechanic saying he is terrified that explosions occur inside a gasoline engine; it is a statement that does not inspire confidence in the repair job being suggested.  Does this Bozo even know how the system works??

And, of course, the answer is NO. 

Nor does Rick Perry know the first thing about demographics.  Demographic change is not going to bankrupt this nation. And I guess I would know: I am a demographer who has spent a lot of time with the Social Security actuarial and economic-variable tables.

Social Security is sound now, and it will be sound into the future.

But you know what is not sound?

Merill Lynch.

Goldman Sachs.

Lehman Brothers.

Morgan Stanley.

All of these Wall Street firms are gone, bankrupted, restructured, or boned out to foreign investors.

These companies once wanted to run your life, but in the end it turned out they were all liars, cheats and thieves whose own house of cards came tumbling down around them.

Now Rick Perry is peddling the latest version of Wall Street's Koolaid. 

No problem.  Vote for who you want to. 

That said, remember this: If you are prepared to drink Wall Street's Koolaid, you must also be prepared to eat their dog food.

So if Rick Perry sounds good to you, put away the Lean Cuisine, and open up a can of Alpo and plop it down onto a plate and take a good long look.

That has been Wall Street's solution in the past. This was Wall Street's solution in 1929.  And this is what they're offering us today; the left overs bits, cut away and rendered after they take the choicest cuts for themselves.

Welcome to the Dog Food Economics of Rick Perry!  Now eat up!

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