The eyes of (not just) Texas were on Governor Rick Perry during Wednesday's GOP debate at the Ronald Reagan Museum and Library.
Much of the questioning was directed to or about Perry, who was on stage with his rivals for the first time. And most of the headlines Thursday morning were about the GOP front-runner, who reiterated prior comments about Social Security being a "fraud" a "Ponzi scheme" and a "monstrous lie."
Perry was pilloried in the press. Polls show most Americans have favorable views of Social Security, most notably seniors who tend to vote in bigger numbers than other demographic groups. MSNBC contributor Al Sharpton said Perry had handed the DNC it's campaign slogan for 2012: "It's not about Obama, it's about your momma."
Whether Perry's comments prove to be good politics remains to be seen. The bigger question is whether he's right.
The answer: It depends on your definition of "Ponzi scheme."
If you define Ponzi scheme as a Bernie Madoff-like scam designed to intentionally defraud investors, then Rick Perry is wrong about Social Security.
But if you define Ponzi scheme as a system built on unsustainable promises and accounting slight of hand, Perry's onto something.
"I salute Perry for raising the issue," says Christopher Whalen, co-founder of Institutional Risk Analytics and author of Inflated: How Money and Debt Built the American Dream. "This is a real fundamental financial issue we have to talk about."
No Trust in the 'Trust Fund'
Fundamentally, the big problem is "Treasury has to run a surplus of $1 for every $1 of payment that goes out," Whalen says. "That's the basic problem with Social Security; it's intertwined with the Treasury."
Social Security "is not like an insurance company or pension fund putting away money…that can pay these claims," he explains. "These claims are paid by the U.S. Treasury. That's the problem. There is no savings account."
With the number of retirees rapidly approaching the number of workers paying into the fund, the reality is today's workers aren't paying for their own retirement; they're paying for the benefits of current retirees.
"We all have parents who probably need Social Security and the kids are going to end up taking care of their parents," Whalen says.
Sounding more like Mitt Romney than Rick Perry, Whalen says the most likely outcome is some change to the Social Security system such as raising the retirement age or means testing.
"We're going to readjust eligibility, participation and look more like Europe," he says. "But if your government is destroying the value of money, it doesn't matter. Until we get the Fed and our fiscal situation under control, issues like Social Security, savings and investing aren't going to matter."
Today's workers will most likely get a Social Security check. "The question is: "What will it buy at the grocery store?," Whalen quips, paraphrasing Alan Greenspan. "The government is defaulting [on its debts] via inflation and also via the way they calculate inflation," which is constantly changing.
In the end, Whalen says Americans need to give up "this understandable illusion they could retire with large percentage of their pre-retirement income."
Whether Americans are indeed ready to give up that dream could determine the outcome of the 2012 election and, as Whalen notes in the accompanying video, the really scary thing is Social Security is "not in that bad of shape" compared with Medicare.