Perry Floats Private Social Security Option
When Texas Governor Rick Perry rolled out his plan to cut taxes and shrink the federal budget, he also listed 5 new principles on how to fix Social Security. One of those was to allow states and local governments the ability to opt out of the program and come up with a local private system.
In his Tuesday speech in South Carolina, Gov. Perry said it was time to return to the early 80’s: A time when Ronald Regan was in the White House, Michael Jackson was the King of Pop, and local governments were given the chance to opt out of the Social Security system.
“And instead allow their employees to pay solely into state or locally run programs. And this has been done around the country, and I might add with very good results. We ought to allow it again,” Perry said.
One of those places that Perry has in the passed used as an example of a good result is Galveston County. The county left the Social Security system in 1981 and formed what’s called the Alternate Plan. It takes similar payroll deductions, but the money is put into a private investment account. Rick Gornto is President of First Financial Benefits in Houston, the company designed and runs the Alternate Plan. He says it guaranteed at least a four percent return. And it’s given returns as high as 12 percent in boom years.
“In addition, these employees also own their assets in their accounts, and they can leave it to their estates and whatever, and their families, whereas Social Security is a promise to pay, but those benefits can change. They can be lowered and in fact have been lowered,” Gornto told KUT News.
Critics say the plan has worked well, but doesn’t have the same end goal that Social Security does. The Alternate Plan works better for those making more money. Social Security was created to make sure poorer Americans would have a safety net in their golden years, although, Gornto says, the payouts for the poor and disabled compare with Social Security.
“For the most part it provides survivorship benefits for the widows and children. Itprovides disability income benefits for people who are disabled. It also provides retirement income at greater levels than people on Social Security,” he said.
This local example could also play a role in another part of Governor Perry’s plan to change Social Security: Allow younger workers to pay into a privately run account. Former Galveston County Judge Ray Holbrook led the effort to opt out of Social Security. He says there are some things from the county system that should be changed before it’s used in a nation-wide program, including eliminating the option to take your money and run.
“I took my alternate plan money in 10 years. And of course I’ve been retired for 16 years so it’s all gone. And I think it would be far better if we did the same things Social Security does which is set everybody up on a lifetime program,” Holbrook told KUT News.
The governor will continue to answers questions on his Social Security overhaul. And he’ll probably continue to use Galveston County as an example of how a change can work and work well.