"Half of workers would opt out of Social Security if they could"

by Bruce Webb

In a post at his site Andrew Biggs points us to a NewMajority.com piece by him Survey: Half of workers would opt out of Social Security if they could which in turn points to a survey sponsored by Sun Life Financial Results show that almost half (48%) would prefer to stop paying into the Social Security

The results broke down by ages as follows:
30-39: 59%
40-49: 52% (Men 57%, Women 44%)
50-59: 44%
60+: 34%
All: 48% as being willing to drop out of Social Security even if they had to forfeit benefits earned to date.

Which lead Biggs to ask in comments: What does it say when even people who benefit from Social Security have so little faith in it, particularly when the main purpose of the program is to make people feel secure? to which my reply was

Well some people really do believe “Things go better with Coke”. Because Coke paid good money to market that message.

The results of the survey tell me something I have known for a long time, the efforts outlined in Butler and Germanis (Cato J. 1983) worked brilliantly. The plan as outlined had three parts which I would summarize as follows:
1. Reassure those in or approaching retirement
2. Convince younger workers that Social Security just won’t be there for them
3. Present them with a plausible alternative based on the argument ‘something is better than nothing’

This plan was perhaps one of the best marketing campaigns in history with the results seen in the survey. Those who have been exposed to the message promulgated by what is now known as the “Cato Project (on) Social Security Choice” aided and abetted by various enterprises sponsored by Pete G. Peterson such as Concord and the movie I.O.U.S.A combined with an active outreach to younger workers via such things as the Fiscal Responsibility Wakeup Tour over the 25 years (since the publication of Butler and Germanis) have largely succumbed to the message strategy. Naturally people will want to opt out if they don’t believe they will get anything out or can get better returns on their own.

So congratulations are due to all concerned. But all that polling really shows is the success of the marketing campaign. In my experience extraordinarily few of the doubters really have any conception of the actual numbers in play. Mainly because they never seem to be part of the message being delivered. Except of course when they see numbers aggregated over the Infinite Future Horizon for both Social Security and Medicare.

“What does it say when even people who benefit from Social Security have so little faith in it?”

Well it suggests to me that Cato got its money worth in some of its past hires.

I’ll explain that last piece of snark and discuss some implications of this below the fold.

In the Summer of 1983, smarting under what they called the “fiasco of the last 18 months”, i.e. the Greenspan Commission and subsequent 1983 Reform, the Cato Institute convened a conference in Washington DC and subsequently published the papers in their Fall 1983 Cato Journal under the title Social Security: Continuing Crisis or Real Reform. One of those articles had the intriguing title of Social Security Reform: Achieving a ‘Leninist’ Strategy. In that article was laid out the long term plan alluded to in my comment quoted above, which plan focused in large part on convincing younger workers that Social Security just wouldn’t be there for them. Cato not only accepted that plan it institutionalized it in what was then known as the Project on Social Security Privatization but now known as the Project on Social Security Choice. (Note the domain name: http://www.socialsecurity.org/about/index.html – they have staked a claim to Social Security itself)
One thing to note is that ‘privatization’ has essentially been scrubbed out of the ‘About’ page and in fact it now states

On August 14, 1995, the Cato Institute launched its Project on Social Security Choice, the largest undertaking in the organization’s history. The objective of the project is to formulate a viable blueprint allowing individuals the opportunity of owning their own retirement account. The project publishes books, studies, and articles and holds conferences. The Cato Institute’s experts examine the problems facing the current system, the methods that can be used to move towards a system of personal retirement accounts, and the effects that a new system would have on workers.

Subsequently it was shown that ‘privatization’ and ‘privatizing’ didn’t poll well and so were dropped. As in “We have always been at war with Oceanea”. They were a little more open on the actual launch Project on Social Security Privatization

On August 14, 1995, the 60th anniversary of Social Security, Cato held a press conference to inaugurate its Project on Social Security Privatization. That event was televised by C-SPAN and covered by ABC’s Good Morning America. The objective of Cato’s Project on Social Security Privatization is to formulate and recommend a viable ‘blueprint’ for privatizing the U.S. Social Security system. The Project is directed by Cato’s director of health and welfare studies, Michael Tanner, and is co-chaired by José Piñera, Chile’s former labor minister and architect of that country’s private pension system, and William Shipman, principal at State Street Global Advisors.

How successful was the Project? Well in the early days pretty good. In fact by 1996 they were able to put up this result Public Opinion and Social Security Privatization (by Michael Tanner, Project Director) (bolding mine)

Although Social Security remains one of the most popular government programs, most Americans understand that the system faces serious future financial problems and would support privatization of the retirement system, according to the results of a poll conducted by Public Opinion Strategies on behalf of the Cato Project on Social Security Privatization.

Among the poll’s findings:
More than 88 percent of Americans believe that Social Security either is in trouble today or will be in trouble within the next 20 years. Fully 60 percent of all Americans under age 65 believe Social Security will not be there for them when they retire.
As a result, more than two-thirds (69 percent) believe that Social Security will require “major” or “radical” change within the next 20 years. Among younger voters, approximately half believe that major or radical change is needed today. The support for change cuts across ideological and party lines.
Voters reject most traditional Social Security reforms such as raising the retirement age, raising payroll taxes, or reducing benefits.
Approximately two-thirds of voters would support privatization of Social Security, transforming the program into a privatized mandatory savings program. More than three-quarters of younger voters support privatization.

Which explains my snark about Cato’s “past hires”. Starting with Butler and Germanis in 1983 and institutionalizing with the Project in 1995 the Cato Institute set out on a long range plan to undermine traditional Social Security by convincing younger workers that it just wouldn’t exist AT ALL. This was and is fundamentally dishonest, as long as FICA exists Social Security can pay out some level of benefits. An honest discussion would focus on the exact amount of the shortfall and the full range of possible solutions in that context. That discussion didn’t happen because the paid professionals at Cato deliberately set out to prevent it. A hint as to the next step comes in the sidebar of the Project’s ‘About’ page. (bolding mine)

“The largely Cato Institute-staffed presidential commission owes its existence to the Cato Institute itself. For the last quarter of a century, the Washington, D.C.-based libertarian think tank has been campaigning for the privatization of Social Security.”
– William O’Rourke, Chicago Sun Times, August 28, 2001

Per O’Rourke it would seem that the original Butler and Germanis plan was first institutionalized under Cato with the Project and then elevated to official status with the 2001 Commission, itself staffed by those hired professionals from Cato. And who beside Director Tanner would those people be. Well those who follow this series will be familiar with at least one name. From the Cato people page.

Andrew Biggs is a former Social Security analyst and Assistant Director of the Cato Institute’s Project on Social Security Choice. Prior to joining Cato he was Director of Research at the Congressional Institute in Washington, D.C. (where he remains a Fellow), and a staff member for the House Banking and Financial Services Committee. He holds a Bachelor’s degree from the Queen’s University of Belfast, Master’s from Cambridge University and Ph.D. from the London School of Economics and Political Science.
In 2001 Biggs served as a staff member for the President’s Commission to Strengthen Social Security, and in 2002 he was appointed by the Bush administration as a delegate to the National Summit on Retirement Savings and addressed the United Nations International Conference on Financing for Development.

So when Biggs asked “”What does it say when even people who benefit from Social Security have so little faith in it?”

and I replied: “Well it suggests to me that Cato got its money worth in some of its past hires.” I really meant “Heckuva job, Andy!”

People who make the argument that Social Security should be privatized because so many people under 50 are skeptical that it will even be there have the cart ahead of the horse. The real question is why those people are so skeptical to begin with? And to me the answer is pretty clear, Cato set out in 1983 to sell privatization via what I can only describe as a systematic propaganda plan aptly described by Butler and Germanis as a ” ‘Leninist’ Strategy”. It worked. Because I have a 1996 poll and a 2009 survey to prove it. A final note from Butler and Germanis

There are two main elements to this strategy.
The first element consists of a campaign to achieve small legislative changes that embellish the present IRA system, making it in practice a small-scale private Social Security system that can supplement the federal system. As part of this campaign, the natural constituency for an enlarged IRA system must be identified and welded into a coalition for political change. If these objectives are achieved, we will meet the next financial crisis in Social Security with a private alternative ready in the wings—an alternative with which the public is familiar and comfortable, and one that has the backing of a powerful political force.

The second main element in our reform strategy involves what one might crudely call guerrilla warthre against both the current Social Security system and the coalition that supports it. An economic education campaign, assisted by modest changes in the law, must be undertaken to demonstrate the weaknesses of the existing system and to allow it to be compared accurately (and therefore unfavorably) with the private alternative. In addition, methods of neutralizing, buying out, or winning over key segments of the Social Security coalition must be explored and formulated into legislative initiatives,
The objective of this element of the strategy complements the first. The aim is to weaken political support for the present system when the next financial crisis appears. This two-pronged strategy will now be considered in more detail.

Hmm, “an economic education campaign”. Gosh there is another word for what is being proposed here, one on the tip of my tongue, I think it starts with a ‘p’ and is associated with a certain Herr G. Even paranoids have real enemies. Mine are at the Cato Institute and strolling around the offices of the PGP Foundation.