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Jewish World Review Jan. 24, 2005 / 14 Shevat, 5765

John H. Fund

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Consumer Reports

If Bush wants to reform Social Security, he'll have to soften his approach to Congress


http://www.NewsAndOpinion.com | As President Bush began his second term, Democrats consoled themselves with the belief they have won Round One in the battle over his plan to reform Social Security by channeling some payroll taxes into personal retirement accounts.

Democratic pollster Mark Penn opened his Georgetown home on Inauguration Day to an informal meeting of the party in exile, including Sen. Hillary Clinton and her husband, the former president. The consensus among partygoers was that Democrats were doing better at undermining the Bush Social Security plan than Republicans had been at this stage in tearing down the Clintons' 1993 attempt to re-engineer American health insurance. "This could be the comeback battle in which Democrats recover both their souls and their political energy," writes liberal columnist Robert Kuttner. "They could hand Bush a rare, humiliating defeat that breaks his winning streak and exposes Republican divisions."

The bashing of the Bush plan has begun before any details are known. Rep. Brian Baird, a Washington state Democrat, one-ups GOP critiques of traditional pay-as-you-go Social Security by labeling the idea of personal accounts "an enhanced Ponzi scheme."

"The Republicans said about Clinton's health care plan, 'If it ain't broke, don't fix it,' " another Democratic congressman told me. "It worked, so that's our message on Social Security." He didn't have to mention that Democrats, sensing blood in the water, hope to use any Bush defeat on retirement accounts to score big gains in Congress, as the GOP did in 1994.

Still, no one should bet against President Bush's ultimate success on Social Security. He has been "misunderestimated" many times before and come back to win through grit, missteps by his adversaries and a healthy dollop of luck. But his allies in Congress say he would be foolish to ignore the early warning signals on his plan. Chief among them:

Most members of his own party in Congress don't yet agree with his assessment of the problem. Many dispute his statement this month that Social Security would be "flat bust, bankrupt," unless Congress acts quickly. Rep. Gil Gutknecht, a conservative from Minnesota, says the president's rhetoric was "over the top," adding that he is "a little nervous" Mr. Bush will be criticized for "not being completely fair with the facts." "Why stir up a political hornet's nest?" chimes in Rep. Rob Simmons, a moderate Republican from a swing district in Connecticut, "When does the program go belly up? 2042. I will be dead by then."

It isn't just GOP moderates who are squeamish. At a reunion this month in Arizona of the House class of Republican revolutionaries who were swept into office after the Clinton health care debacle, there was precious little enthusiasm for tackling Social Security. Even Majority Leader Tom DeLay was skeptical about the need to put the issue on his legislative plate. "The appetite for bold moves was zero," former Rep. Randy Tate of Washington told me. "The White House needs to get its talking points  —  both political and policy  —  out soon."

The White House hasn't settled yet on a clear, simple message to sell its program. It will win only if it can make a case on why reform will benefit individual Americans. A new Time magazine poll finds that by a margin of 56% to 33% Americans still believe they would be better off with the current system than investing part of their payroll taxes in stocks and bonds. Advocates of personal accounts will have to point out that someone age 25 today is can expect a 0.68% rate of return on his Social Security payments and will face a 30% reduction in benefits upon retirement if nothing is done.

As governor of Texas, Mr. Bush was captivated by how local governments like Galveston County, with old waivers allowing them to plow the payroll taxes of local employees into private instruments, never lost a penny and instead saw courthouse janitors retire with $800,000 nest eggs. Creating that kind of "ownership society," in which people look to their own resources for more of their needs, could splinter the Democratic coalition and usher in a new area of Republican dominance. But building the political infrastructure to push such a bold concept takes time, and Democrats aren't waiting to begin their own blitzkrieg against reform.

Republicans have yet to be convinced that the transition costs of channeling some payroll taxes into personal accounts can be paid for by reducing future Social Security benefits. Newt Gingrich and former Club for Growth president Steve Moore caution against a plan under consideration by the White House that would bring the Social Security program into future balance by having benefits rise only as much as prices do, instead the current practice of having them rise as fast as wages do.

While economists of all stripes endorse such a move, it would provide Democrats with a club to attack the very concept of reform. "Any effort to change benefit formulas virtually guarantees stalemate," Mr. Gingrich told me. "If you allow them to create a slogan that includes 'benefit cuts' in it, they're going to prevail." He noted that a bill by Rep. Jim Kolbe (R., Ariz.) and ex-Rep. Charles Stenholm (D., Texas) that combined creating personal accounts with changes in future benefit formulas never attracted a third sponsor.

Democrats are determined to kill the Bush plan at all costs. True, a few, such as Sens. Joe Lieberman of Connecticut and Tom Carper of Delaware, have withheld criticism of Mr. Bush on Social Security till they see the details. But in the House, Minority Leader Nancy Pelosi has cowed all but a handful of Democrats from even considering the idea of personal accounts. "They have been told that massive ad campaigns by the AARP and George Soros will make it politically unpalatable for anyone to back private accounts, and they better not stand in the way of those who want Bush's political scalp," one Democratic House staffer told me.

Many Republicans are currently unwilling to vote for Social Security reform unless a respectable number of Democrats are willing to join them. The problem is that few moderate Democrats from swing areas remain in the House. Mr. Stenholm, now a consultant in Washington, jokes that only a "very simple bill" would currently get bipartisan support in Congress: "The Social Security Reform Act of 2005 That Does Nothing."

But it doesn't have to be so. Most Republicans in Congress understand the long-term political benefits of promoting an "ownership society" that enhances individual responsibility and looks less towards government for societal solutions. They agree with White House aide Pete Wehner, who says that reform would rank "as one of the most significant conservative governing achievements ever." If President Bush refuses to flinch, he has a good chance of having a GOP Congress follow his lead. When push comes to vote, more than a few Democrats will also end up voting for personal accounts if they seem a sure thing. Many privately admit the popularity of the idea among younger voters.

But that will happen only with the greatest of foot-dragging unless the White House changes the nature of its relationship with Republicans in Congress. From Speaker Dennis Hastert down to lowly sophomores, the Congress is filled with members of the "Bleeding Lip Club." For four years, they have all bit their lips as a "Lone Ranger" White House dictated the details of every major legislative item. The 2003 threats and strong-arm tactics that the White House ordered to push through the prescription drug bill (which ultimately had little political benefit for most members) was the last straw for some.

Mr. Bush's name will never again appear on a ballot, but congressmen's names will. and many are determined to now prove they belong to a coequal branch of government. Last week, House Ways and Means chairman Bill Thomas, who had many unhappy tussles with White House aides over the prescription drug bill, already signaled his independence by saying that Social Security reform would best be best handled by at the same time pairing it with a redesign of the nation's tax code.

Mr. Thomas's grand plan  —  which apparently would involve the introduction of an easily demagogued value-added tax  —  is probably too ambitious to pull off. But his attempt to take the lead on Social Security should tell the White House to rethink its go-it-alone legislative strategy of the last four years. What worked in a first term may be precisely the wrong approach to win over bruised members in a second term. Like it or not, if the White House really wants Social Security reform it is going to have to consult more and listen often to the members who will have to sell voters on their handiwork in 2006.

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JWR contributor John H. Fund is author, most recently, of "Stealing Elections: How Voter Fraud Threatens Our Democracy". (Click HERE to purchase. Sales help fund JWR.)

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©2001, John H. Fund