Into the Gray Fray

Although they rule both ends of Pennsylvania Avenue, Republicans

are divided over whether to seize this moment and seek a dramatic

overhaul of Social Security or merely to lay the groundwork for

action in 2005. The business, libertarian, and fiscal

conservatives who lead the “just-do-it” faction believe the

midterm elections proved that Social Security is no longer a

toxic issue for Republicans and that delay only raises the cost

of reform. Their goal: Follow through on the president’s vow to

let younger workers steer some of their payroll taxes into

privately owned investment accounts. Investing through private

accounts, they contend, will help solve Social Security’s long-

term financing problems while raising national savings and

retirement incomes, as well as family wealth.

But partial privatization will likely continue to be a

tough sell on Capitol Hill. Any reform will require politically

explosive cuts in traditional benefits, and private accounts

would likely entail deeper cuts. Most Democrats are unalterably

opposed to private account “carve-outs.” Partial privatization,

they warn, would doom the promise of guaranteed lifelong

benefits, erode subsidies for the poor, women, and the disabled,

and squander money on high administrative costs, among other


If President Bush does decide to make Social Security

reform a domestic priority, the sort and level of interest-group

activity will depend on whether he aims to corral just enough

Democratic votes for passage or seeks a more broadly bipartisan

compromise with Democratic leaders.

Even if the administration decides to defer action, it

has indicated that it is counting on like-minded advocacy groups

to help advance the cause over the next two years.


The sleeping giant in the Social Security debate would rouse

quickly to fight attempts to let private accounts be “carved out”

of Social Security. The group has more than 35 million members

age 50 and over-who care about Social Security and usually vote.

“Obviously, this is the core program that sustains the middle

class in retirement,” says John Rother, AARP’s policy and

strategy director. “If you start shifting money around, out of

the program, then you will have very deep cuts in benefits,

affecting redistribution and [hurting] women and minorities

disproportionately.” Instead, Rother says, AARP favors having the

government create voluntary private retirement investment

accounts that individuals could contribute to above and beyond

what they pay into Social Security-a sort of national 401(k)

plan. A sliding-scale government match would bolster these

contributions and would supplement, rather than supplant, Social

Security’s defined benefits. “Without a match, lots of lower-

income earners are declining to participate [in existing

401(k)s],” Rother said. Although the “gray lobby” has earned a

reputation for extreme caution after suffering a couple of high-

profile advocacy disasters, this skittishness seems to be

changing with former public-relations mogul and anti-smoking

activist Bill Novelli at the helm.


Organized labor subordinated the Social Security issue to a

broader corporate-malfeasance theme in the midterm elections. But

in the event of a congressional debate over Social Security, the

AFL-CIO would be at the center of the fray. And it would be able

to draw on the substantial money and grassroots lobbying power of

its union affiliates. For labor, the government promise of a

secure income in retirement is a non-negotiable clause of the

American social contract. Protecting Social Security is also seen

as a tried-and-true campaign issue that can help promote labor-

friendly Democratic candidates-the midterm election results

notwithstanding. Look for some of the public- and service-sector

unions, such as the American Federation of State, County, and

Municipal Employees and the Service Employees International

Union, to mount an effort that goes above and beyond the others.

Alliance for Worker Retirement Security; Coalition for the

Modernization and Protection of America’s Social Security


These two overlapping and interlocking business groups

have become the conduit of choice for business support of partial

privatization. Business worries that burgeoning Social Security

costs could put pressure on the federal Treasury and spur a hike

in payroll taxes, which would raise its personnel costs. The

securities industry, also represented in these coalitions, still

hopes to profit from the channeling of billions of new investment

dollars through its firms. The alliance was launched by the

National Association of Manufacturers in 1998 and now has 40

members, including other business and trade groups, individual

corporations, and conservative groups of both seniors and

minorities. It boasts ties to the Bush administration through

former Executive Directors Leanne Abdnor-later appointed to the

President’s Commission to Strengthen Social Security-and Chuck

Blahous, who went on to become executive director of the

commission and an aide on Bush’s National Economic Council.

Current Executive Director Derrick Max, a Cato Institute alumnus,

directs COMPASS, which just poured upwards of $6 million into an

advertising campaign conducted in more than a dozen states that

had tough midterm races in which Social Security was an issue.

Campaign for America’s Future

The labor- and foundation-backed campaign, founded by a Who’s Who

of labor and the Left, has been running a low-budget (roughly

$500,000) but high-intensity campaign against privatization. For

the Left, as for labor, this opposition is a matter of both

principle and political calculation. The Social Security

Information Project, under the direction of Hans Riemer, has made

a mark by setting up a Web page and sending out e-mail bulletins

with new developments and research; coordinating local events and

demonstrations by like-minded groups; pushing candidates to sign

a pledge to oppose any privatization; and even coming up with an

additional $320,000 to run television ads against partial

privatization in South Carolina and New Hampshire during the

midterms. Although the Senate candidates supporting private

accounts won in both those states, the Campaign for America’s

Future still believes that “privatization” is generally a losing

issue for candidates.

Cato Institute

Blurring the line between academe and activism, Cato has been an

early and tireless advocate for private ownership and investment

of payroll taxes. The group, which promotes free markets, limited

government, and individual liberty, keeps attention focused on

its privatization goal through its $500,000 Project on Social

Security Choice. Run by Mike Tanner and Andrew Biggs, the project

offers countless congressional briefings, conferences, and

reports. It also produces a weekly e-mail compendium of news and

analysis. Cato’s well-known libertarian orthodoxy could actually

make it less influential in a congressional debate than, say, the

conservative Heritage Foundation might be. Still, the group has

shown some pragmatism in scaling back its demands from full

privatization to partial privatization. And the fact that a

number of former and current Cato aides and associates are

involved with the President’s Commission to Strengthen Social

Security (Biggs, for one, was a commission aide) suggests it has

some clout within the Bush administration.

Center on Budget and Policy Priorities; Brookings Institution

Working together, these two liberal-leaning think tanks

constitute the cerebellum of the opposition to partial-

privatization proposals. The center, which is principally

concerned with the effect of public policy on low-income groups,

relies on such in-house talent as its founder and Executive

Director Bob Greenstein, budget expert Richard Kogan, and Social

Security analyst Kilolo Kijakazi to conduct instant, in-depth

analyses of the fiscal and budgetary impacts of various Social

Security reform proposals. To provide policy and economic

analysis of Social Security reform proposals, the center has

teamed up with Brookings senior fellows Peter Orszag and Henry

Aaron. The center’s quick and substantive analysis invariably

gets a lot of play in the press and in congressional debates.

For Our Grandchildren

Conservative groups have great expectations for this heretofore

obscure organization. The brainchild of former cellular-tower

mogul Denison Smith, the group hopes to stir up local enthusiasm

and political pressure around the country for creating private

investment accounts with payroll taxes. Until now, conservatives

have relied on more-broadly focused organizations, such as the

anti-tax Citizens for a Sound Economy, to line up local activists

for the cause. But now that FOG has gotten a seed grant-rumored

to be $1.5 million-from a group bankrolled by Oregon door and

window manufacturing magnate Dick Wendt, the group has ambitious

fundraising and geographic goals. It is already hiring organizers

in the Midwest, in addition to well-known national activists on

the issue: former Heritage Foundation staffer James Hamilton as

national director, and Leanne Abdnor, a former member of the

President’s Commission to Strengthen Social Security, as its

spokeswoman. It is also lining up other commission members and

heads of conservative organizations to serve on the group’s

advisory board.

National Committee to Preserve Social Security and Medicare

The arrival of former Rep. Barbara Kennelly, D-Conn., at the top

is likely to give new political savvy and sophistication to a

group fiercely opposed to partial privatization. With a

membership of 1.7 million among the over-65 set (and nearly as

many nonmembers signed up to work with the group), a $29 million

budget, and Washington lobbyists, the committee can make its

views known and its opinions felt on Capitol Hill. The group also

has a political action committee that spent upwards of $400,000

on nearly 200 congressional races this year.

Social Security

This new nonprofit made a splash during the midterm elections by

running a $500,000 advertising campaign to promote payroll-tax-

funded private investment accounts, and by pressing candidates to

sign a pledge to support such accounts. Among the several dozen

congressional candidates who did sign were five successful

Republican Senate candidates. The group is chaired by Wade

Dokken, president of the Connecticut-based financial services

company American Skandia, and it counts among its members several

former term-limits activists, including President Bob Costello-a

former banker based in Evanston, Ill.-and Washington-based

Executive Director Bill Wilson. Costello says that the group gets

its money from roughly 40 individuals he declined to name, and he

hopes to soon use direct mail to raise money and recruit members.