As he surges to the head of the Republican presidential pack, Newt Gingrich is enjoying remarkable support from older voters who like his conservative edginess and professorial command of issues. But seniors should be careful what they wish for.
At a time when seniors groups are hollering “Don’t touch my Social Security and Medicare,” the former House speaker wants to touch both, in profound ways. Gingrich believes that Americans should be allowed to choose a private retirement account, in which all the money deposited belongs to them instead of a government-controlled program like Social Security. And he has advocated a private alternative to the Medicare health care system for seniors that he says would enhance competition and bring down overall health care costs.
voluntary option for
younger Americans
to put a portion of their
Social Security contributions
into personal Social Security
savings accounts.”
Social Security is the “third rail of politics,” making it hazardous for lawmakers and presidents to tamper with it except under the most extreme conditions, as when President Reagan and then House Speaker Tip O’Neill of Massachusetts brokered a deal in 1983 to prevent the trust fund from going broke.
Gingrich has sought to minimize his political risks by saying that anyone can remain in the existing Social Security and Medicare systems. And for younger Americans who choose to gamble on investing their retirement savings, Gingrich would offer an insurance policy of sorts: a pledge that the Treasury would make up for any differences between the return on the investments and their promised benefits under the old system.
“We must consider a voluntary option for younger Americans to put a portion of their Social Security contributions into personal Social Security savings accounts,” Gingrich said in first unveiling his proposals last month. “Other countries, such as Chile, have found that this model creates vast savings while giving beneficiaries more control over when and how they plan to retire.”
“If you are for destroying Social Security – if you like that idea – then you should support Speaker Gingrich.” But some scholars say Gingrich’s ideas for creating a private parallel universe of retirement and health insurance programs for seniors carries serious risks for the long term health of the Social Security and Medicare trust funds, which already are confronting financial challenges. Members of some senior citizen groups have signaled they would strongly oppose any tampering with Social Security and Medicare, as House Budget Committee Paul Ryan, R-Wis., tried with disastrous results.
“If you are for destroying Social Security – if you like that idea – then you should support Speaker Gingrich,” Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, told The Fiscal Times Wednesday. “Because his proposal of diverting I think about a half . . . of the payroll tax into private accounts would create such a shortfall [in the trust fund] that the solvency would be dramatically reduced.”
A recent survey by AARP, the premier senior citizen advocacy group, surveyed seniors in Florida and other early nominating states and found that self-identified primary voters and caucus goers – by a 3 to 1 margin – oppose benefit cuts to either Social Security or Medicare. Without directly addressing the Gingrich proposal, AARP officials signaled that they would challenge fundamental changes in the program to reflect the concerns of seniors.
“AARP will continue to evaluate proposals put forward by candidates and lawmakers, raise the critical questions, and inform our members and other older Americans of the issues,” said John Hishta, Senior Vice President of AARP. “More importantly, we’ll make sure that leaders in Washington and on the campaign trail hear the voices of our members and other Americans on these important issues.”
With only a month to go before the Iowa caucuses, Gingrich has made a miraculous comeback from last summer’s disastrous campaign meltdown, and has firmly solidified his support at the top of the Republican presidential field. No fewer than four new polls this week showed Gingrich with nearly a double-digit edge over former Massachusetts governor Mitt Romney, the one-time presumptive frontrunner. And a major factor in this remarkable turnabout, according to analysts, is widespread support for the white-haired Gingrich among older Americans.
According to a Public Policy Polling (PPP) analysis of Iowa’s Republican caucus-goers, “Gingrich’s rise to the top is being fueled by strong support from seniors.” Among voters over 65, Gingrich polls at 37 percent support, leading Romney’s 18 percent and Texas Rep. Ron Paul’s 11 percent.
Iowa, the first-in-nation voting state, is one of the top-five oldest states in the union, and seniors make up a significant share of the state’s Republican caucus voters. In Florida, another early voting state stacked with old people, Gingrich leads Romney 47-17, according to a recent PPP survey. According to that poll, 54 percent of voters over 65 said they would vote for Gingrich.
The Gingrich Appeal
Analysts have offered a range of theories on why Gingrich, 68, does so well among the older set: Many recall Gingrich’s days as House speaker during the Clinton administration when he helped balance the budget and reform welfare. Others are impressed with his command of the facts and wide ranging knowledge about politics and history. And most perceive Gingrich as a more authentic and reliable conservative than Romney, who has flip-flopped on health care reform, immigration and other key issues.
focused on the details of his
entitlement plans. No way.”
Even before his campaign began to take off, Gingrich’s views on reforming major entitlements raised a lot of eyebrows. His proposals are a mixture of ideas he has already broached and that Republicans have supported in the past — including creating private savings accounts in lieu of the current Social Security program and empowering states to administer Medi¬caid with federal block grants. Beyond that, he has said that that food stamps and public housing should be abolished. And that kids should take jobs in their schools — both to acquire a work ethic and to replace janitors whose union contracts pay them too much.
In unveiling his proposals for Social Security and Medicare, Gingrich declared:
“We can offer a better deal for all Americans at a lower cost. This is the critical point to understand about entitlement reform. Through fundamental structural reforms, and changing the way these safety net programs work and operate, we can actually achieve vastly greater reductions in spending than we could ever hope to achieve simply by trying to cut benefits. That works because of the positive incentives and powerful competition arising from these reforms and their reliance on modern markets.
As the campaign heats up and Gingrich’s record undergoes tougher scrutiny by the media and his opponents, many older voters may grow disenchanted with his views on Social Security, Medicare, Medicaid and other vital strands of the social safety net.
“Older voters haven't focused on the details of his entitlement plans. No way,” said Larry Sabato, a University of Virginia political analyst. “ But they will with time, and this could become controversial. Democrats -- and maybe even some GOP rivals -- will go after Newt on it.”
Richtman, the head of the Social Security and Medicare advocacy group, added, “ I think the more people understand what he’s talking about, the less support that he will have -- certainly among seniors -- and the less support he should have among younger people as well, because eventually, if they live long enough, they will be beneficiaries of Social Security.”
are putting into the system
now goes to pay off benefits
earned by previous generations
who are now retired, so
you have to find some
money to replace that.”
Under Gingrich’s plan, first outlined on his website 21st Century Contract with America, Social Security would be converted from a pay-as-you-go, guaranteed-benefit system to a system of individual retirement accounts in which workers invest in stocks, bonds and mutual funds during their working lives and use the proceeds of those investments during retirement. Chile has a similar system, but that country did not have to convert from a pay-as-you-go system.
According to some projections, the Social Security trust fund eventually could be denied a third to a half of the tax revenue necessary to keep it afloat. Critics say the plan would impose an immediate cut in benefits paid to those already on Social Security -- a cut that would gradually grow over the coming decades.
Most experts agree that Social Security needs to be reformed. Expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year -- excluding interest income -- and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years.
“The great bulk of what people are putting into the system now goes to pay off benefits earned by previous generations who are now retired, so you have to find some money to replace that,” said Henry Aaron, an expert on Social Security and health care at the Brookings Institution. “There’s no free lunch on this. It isn’t as if you can pull the cloth one way without baring something somewhere else. And what you remove is the protection that exists for benefits that are paid to older workers.”
Gingrich would also allow private options to the current Medicare system, to increase competition. But Aaron said that Medicare “is operating reasonably well today,” and that efforts to create a parallel private health insurance program for the elderly would only complicate efforts to implement the new health care reform law.
“The question is, why do it in the first place?” he said.
