An Emerging Reform Majority?

Washington (The Weekly Standard) Vol. 010, Issue 18 – 1/24/2005 –

IS A BIPARTISAN COALITION REQUIRED to pass legislation that would allow individuals to invest their Social Security (news – web sites) payroll taxes in stocks and bonds? Not really. Surely, the White House will endorse a Social Security reform plan that slows the growth of benefits by roughly 40 percent, right? Don’t count on it. And won’t Democrats be able to attack almost any reform proposal by President Bush (news – web sites) with political impunity? Actually, obstructing Bush carries real risks. But as for all the talk about a new paradigm, doesn’t Social Security still represent the third rail of politics–touch it and you get badly hurt? Well, we’re going to see about that.

The point is that if you believed those nuggets of the conventional wisdom in Washington, you’d assume Bush’s plan to reform Social Security is dead even before it’s been unveiled. And you’d be wrong.

The prospects for enacting a reform bill this year are not exactly bright, but they aren’t grim either. What are the exact odds of passage? Nobody knows. It depends on what the White House proposes or is willing to settle for. And that hasn’t been decided, except to the extent that individual investment accounts must be the heart of the legislation. It also depends on how effectively the Bush team carries out its strategy in Congress.

Start with the strategy. The White House does intend to pursue bipartisanship, but of a distinctly Bush variety. That means rounding up all, or nearly all, the Republicans in the House and Senate, plus a few Democratic defectors. This is the only realistic approach. Most congressional Democrats oppose investment accounts, much less any conceivable Bush financing scheme that would make accounts feasible. So do their chief allies, the AARP and organized labor. Democratic senator Teddy Kennedy insisted last week that Bush wants to destroy the Social Security system simply because it’s a great Democratic achievement. He’d oppose any measure freeing payroll taxes for investment accounts, but some Democratic senators have a different view. Which is good, because Bush will probably need 60 votes in the Senate–thus a few Democrats–because of budget rules.

In the House, Bush doesn’t need any Democrats, though it might be easier to attract a handful of Democrats in the Senate if some House Democrats break ranks first. So far, the only House Democrat to cosponsor a Republican reform bill is Allen Boyd of Florida, a moderate. One House Republican vigorously wooed a young Democratic reformer, but the Democrat backed away at the insistence of House minority leader Nancy Pelosi. “Pelosi is pulling out all the stops to intimidate Democrats” and prevent them from defecting, the Republican said. “So far, she’s succeeding.”

Republican unity in Congress may not be sufficient to win passage, but it is necessary. For the White House, the key task is to draft a Social Security proposal that will please or at least be acceptable to three Republican factions. The first faction favors dumping the “wage index” used to calculate a beneficiary’s initial monthly payment. This would slow the growth of benefits by 40 percent over the next few decades while keeping benefits at the current, inflation-adjusted level. The White House initially looked favorably on this. But it’s moved away from the idea in the face of noisy objections that a 40 percent “cut” is a nonstarter.

The second faction has vigorously opposed any such reduction in benefits. Their objections–the public ones, anyway–have been voiced by former House speaker Newt Gingrich, ex-presidential candidates Jack Kemp and Steve Forbes (news – web sites), and others who relish investment accounts but fear a bill that trims benefits in any fashion would lose. A large but unknown number of congressional Republicans agree with them. The White House was inclined to dismiss their complaints, but now recognizes it needs the Gingrich group. Enlisting them won’t be easy.

The third group consists of those Republicans who’d rather the whole matter go away. They disagree with Bush’s claim that “the crisis” in Social Security is now. Republican representative Rob Simmons of Connecticut, a moderate, made himself famous for a day last week when he was quoted on the front page of the Washington Post disputing Bush. “When does the program go belly up?” he asked. “2042. I will be dead by then.” However, unpersuaded Republicans like Simmons are likely to fall in line behind the president, given that he’s the head of their party.

All this leaves the White House in search of what Republican representative Paul Ryan (news, bio, voting record) of Wisconsin, a key player on the Social Security issue, calls a “third way” solution. The White House has a month to six weeks to develop one. The president, by being unspecific about what he will ultimately propose, has left himself negotiating room. Currently, the White House is inching toward a proposal that would slow the growth of benefits slightly (but nothing close to 40 percent), either raise the $90,000 ceiling on income subject to payroll taxes (but far, far short of the $200,000 recommended by Republican senator Lindsey Graham of South Carolina), or not raise it at all and create investment accounts funded by 2 to 4 percent of income now paid in payroll taxes.

Of course, details would be negotiable on Capitol Hill.

That basic scheme may not thrill Republicans, but they’ll have to embrace some version of it to achieve the one goal they all agree on–individual investment accounts. On this, there has indeed been a paradigm shift. Every poll I’ve seen shows strong support except among the elderly for such accounts. A Zogby poll cited by Gingrich in his new book, Winning the Future, found that 68 percent of Americans favor “changing the system” to allow for investment accounts. Also, prominent Republicans–Sen. John Sununu (news, bio, voting record) of New Hampshire is one–who’ve run on investment accounts have won. So Social Security is no longer an untouchable third rail.

Bush can’t ignore Democratic attacks entirely. By focusing on benefit “cuts” or bigger budget deficits caused by Social Security reform, Democrats could frighten queasy Republicans. But obstructionism hasn’t served Democrats well in recent elections. Opposing Bush’s plan for a Department of Homeland Security cost them the 2002 election. Blocking judicial nominees was critical in Tom Daschle’s defeat last year. Voting against $87 billion for the Iraq (news – web sites) war doomed John Kerry (news – web sites)’s presidential bid. Opposing Social Security reform may be less risky. But maybe not.