In the evening of Oct. 28, 1997, House Speaker Newt Gingrich headed to the White House to meet with President Bill Clinton, ostensibly to hammer out final details of the 1998 budget. In reality, Gingrich and Clinton were putting finishing touches on a deal to create a centrist political coalition to fix long-term problems facing Social Security and Medicare. In his new book, The Pact: Bill Clinton, Newt Gingrich, and the Rivalry That Defined a Generation, Steven Gillon, resident historian of the History Channel and a professor of history at the University of Oklahoma, reveals the behind-the-scenes machinations that led to the meeting and how the potentially historic effort was derailed in an instant by the Monica Lewinsky scandal.
While there were dozens of reform plans circulating around Washington, ranging from minor tinkering to radical overhaul, there was a growing consensus around "middle ground'' proposals that combined some structural changes in the retirement age with some form of private accounts. There were also hopeful signs that the public was ready for a serious discussion about Social Security reform. An August 1997 survey by Clinton pollster Mark Penn found that 73 percent of Democratic voters favored some form of privatization, and support was especially strong among younger workers. Independent polls also showed that many young people believed that without significant change the programs would not be able to provide for them in their old age.
Given the high risk involved, Clinton realized that he could not undertake this without bipartisan support, and, Chief of Staff Erskine Bowles reflected, "He knew to do this he needed to work with Gingrich.'' He was confident that he could hold moderate and conservative Democrats and bring enough Republicans to the table to make significant reform. The danger, however, was that Republicans would seize the surplus and use it for tax cuts. Some of Clinton's advisers suggested that he make a surprise announcement of a total overhaul of Social Security in the 1998 State of the Union speech. Mindful of the healthcare debacle, Clinton rejected this option, believing it was important to bring Gingrich and other Republican leaders into the discussions. He also wanted to engage in a public education campaign that would make people aware of the sacrifices that would be necessary. Instead of coming out with a detailed plan, he would establish guidelines for the discussion. "Save Social Security First'' was the slogan he developed to describe his strategy, making clear that he would reserve all of the budget surplus until Congress produced a viable reform package.
The president reached out early on to two of the most powerful Republicans in the House: Gingrich and Bill Archer. As chair of the House Ways and Means Committee, Archer would have control over any plan to reform Social Security. While Clinton talked privately with Archer, Bowles reached out to Gingrich. Initially, Gingrich, who had been burned before on Social Security, was reluctant to get out in front on the issue.
It did not take long, however, for Gingrich to recognize the potential of a possible Social Security reform package. Bowles provided Gingrich with the same assurances that the president offered to Archer. The president would take the political heat for controversial proposals. Politically, the president and the speaker were closer than anyone realized. They recognized that their parties needed to change in response to new circumstances. They both believed that any effort to update Social Security would require government to incorporate some measure of choice, and that meant some form of privately managed account.
The exact details would have been worked out later, but the broad outlines were clear. Gingrich was willing to give up the tax cut for a proposal that included private investment in Social Security. "The balanced budget bill was Act I,'' Gingrich reflected. "This was Act II.'' Instinctively, both men still wondered whether the other was setting a trap in preparation for the upcoming elections. Would Clinton leak word that Gingrich was once again trying to tamper with Social Security and Medicare, reinforcing his image as hostile to the old and poor? Would Gingrich tell reporters that the president was ready to accept the centerpiece of Republican proposals for Social Security: privately funded accounts?