O'Donnell Endorses Welfare Statism

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O'Donnell Endorses Welfare Statism

by Ari Armstrong, August 9, 2006

Republican Rick O'Donnell now faces Democrat Ed Perlmutter in Colorado's Seventh Congressional District. It's the seat vacated by Republican Bob Beauprez, who is now running for governor against Bill Ritter. Because Beauprez won the congressional seat by thin margins, Democrats hope to pick up the seat as a step toward recapturing the House.

So far, the big campaign fight has been over Social Security. Today, the first day after Perlmutter's victory in the primary, Senator Ken Salazar (who beat Pete Coors to split the state's delegation) attacked O'Donnell "for writing an essay 11 years ago calling for the abolishment of social security," Christopher Osher reports for today's Denver Post.

However, unlike the leftist media and the Democrats, I'm not upset that O'Donnell once called for the "abolishment of social security." I'm annoyed that he now endorses the welfare state and calls for minor "fixes" to the system.

Unlike the Post in its attacks on O'Donnell, USA Today at least suggests the real problem. Dennis Cauchon reports in an August 2 article, "The federal government keeps two sets of books. The set the government promotes to the public has a healthier bottom line: a $318 billion deficit in 2005.The set the government doesn't talk about is the audited financial statement produced by the government's accountants following standard accounting rules. It reports a more ominous financial picture: a $760 billion deficit for 2005. If Social Security and Medicare were included -- as the board that sets accounting rules is considering -- the federal deficit would have been $3.5 trillion."

Cato reports that "Social Security is already $12.8 trillion in debt" (though that does depend on projections). By way of comparison, in 2005 the gross domestic product of the U.S. was $12.5 trillion.

The basic financial problem of the next few decades is that the number of (tax taking) retirees is rising dramatically relative to the number of (tax paying) workers. The more fundamental problem is that Social Security rests on the immoral confiscation and redistribution of wealth.

I favor phasing out Social Security by "continually raising the age at which benefits are paid." (The plan can be complicated from there, but that one step would result in the eventual phasing out of the system, notably without impacting the payments of current recipients.)

What does O'Donnell want to do? Chris Barge reports for the July 11 Rocky Mountain News: "...O'Donnell tried to take the steam out of anticipated attack ads by acknowledging Monday that he wrote an essay 11 years ago calling for the abolishment of Social Security. O'Donnell, 36, said he has since changed his position and wants voters to know, before Democrats slam him, that he now favors fixing Social Security, not abandoning it. His essay, titled 'For Freedom's Sake, Eliminate Social Security,' was published in February 1995, when he was editing American Civilization, a publication of Newt Gingrich's Progress and Freedom Foundation."

O'Donnell wrote then, "As we bury the rest of the welfare state in preparation for the 21st century, it is time to slay the largest government 'entitlement' program of all, Social Security."

The problem with this line is that the term "slay" seems to suggest an immediate end to the entire system, without any transition period. I doubt that's what O'Donnell meant. (Incredibly, when I called O'Donnell's campaign office today, his campaign manager refused to send me a copy of the article, even though she said she has it.) In the essay, O'Donnell advocated a "mandatory, private savings scheme," according to Barge. As I've written at length, the plan to partially or completely replace Social Security with mandatory, regulated savings accounts is statist in nature and dangerous to a free society.

By not mentioning O'Donnell's old plan for mandatory accounts, Osher's article for the Post misrepresents the debate. Similarly, The Denver Post's July 28 editorial fails to fully describe O'Donnell's old position. There's a huge difference between simply wanting to get rid of Social Security (on whatever schedule) and wanting to replace it with mandatory accounts.

My plan to phase out the system would take many years to complete, thus leaving current recipients unaffected and giving those nearing retirement progressively more time to plan for the change. My plan recognizes individual rights to income even as it minimizes social upheaval.

O'Donnell now wishes to "fix Social Security." If the standard is individual rights, that's a little like saying you want to "fix" a cancerous growth rather than remove it.

O'Donnell is unfortunately vague in the specifics, at least judging by his web page. He writes, "We must stop Congress from spending the Social Security surplus on other government programs. Social Security funds should be used only for Social Security -- our Social Security money must be put in a personal Social Security lockbox for each of us, where we can watch it grow and the government can't spend it."

However, as O'Donnell well knows, this is a trivial "fix." The surplus won't be there for long -- as he writes in the same web page -- and then Social Security will run a deficit year after year (according to current rules and trends). But the whole "lock box" rhetoric, while basically meaningless, seems to give some voters a vague sense of comfort.

Next, O'Donnell writes, "Everyone 55 and above must be guaranteed their promised Social Security benefits -- no benefit changes for those born before 1950." So the heart of O'Donnell's plan, then, is to reduce benefits for future retirees (though he'll never use such straightforward language). I'm all for this. Of course, I want to eventually reduce benefits to zero.

But, O'Donnell continues, "All future retirees should receive a Social Security benefit that is at least as large as today's retirees get." So apparently O'Donnell wants to limit the increases in Social Security benefits, but never reduce (real as opposed to nominal?) benefits. Thus O'Donnell expresses his fundamental support for welfare statism, or the forcible transfer of wealth from some citizens to others.

O'Donnell confirms, "We must strengthen the Social Security safety net, raising even more of our elderly out of poverty." Of course, he fails to mention that it is the Social Security tax itself that helps drive people to poverty, and the program is hardly restricted to the poor, with the wealthy receiving larger benefits.

The Post's July 28 editorial is up to the paper's usual standards of smug inanity.

The editorial points out that "Americans were paying into the Social Security system, not just drawing from it." Because, you know, there might still be somebody in elementary school who's confused about that point.

But of course it is not the case that Americans generally get out of the system what they put into it. The first recipients put in practically nothing but got payments for years. And younger workers under today's system will get financially creamed. The proper system is one of individual rights, in which people earn money on a free market and then invest it however they see fit, without any government mandates or forced transfers.

The Post does get O'Donnell on the matter of the "lockbox:" "He hasn't determined how that money in the lockbox should be invested -- avoiding one of the political pitfalls of the debate. The thought of gambling with Social Security money in the marketplace doomed whatever plan Bush tried putting forth last year."

But either the government spends the money on other programs, or it invests it. It's difficult to see why blowing the money on boondoggles is a lot better than "gambling" with it in the investment markets. Of course, I favor the third option: reduce the social security tax such that there is no surplus, then keep cutting the tax to keep up with cuts in future benefits, until both are zero.

The Post alleges, "With companies cutting pensions, Social Security has become the most reliable part of a senior's retirement plans." Nobody who has glanced at the unfunded liabilities of Social Security could make such a statement with a straight face. The most reliable part of a person's retirement plans are his or her own savings and investments.

The Post concludes, "Workers pay into the system, and in return it provides a safety net for retirement. That's as American as apple pie." But the "system" prevents workers from making real investments with their own money, it forcibly redistributes income, and it is fundamentally at odds with the American legacy of individual rights and economic liberty.

The Colorado Freedom Report--www.FreeColorado.com