Bipartisan Reagan-O'Neill Social Security Deal in 1983 Showed It Can Be Done

1983 Social Security deal showed that good politics can happen in the most unforgiving environments.

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Barack Obama vowed to bring unity and bipartisan reconciliation on a national scale to Washington politics during last year's campaign. It's fair to say that so far he has not achieved bipartisan action on the nation's biggest economic and social issues. Structural forces, in large part, explain why Obama hasn't been able to reach this goal. The country remains ideologically split on big issues, while congressional Democrats are bickering among themselves. The moderate bloc of Northeastern Republicans that once could have endorsed Obama's agenda has virtually become a relic of the mid-20th century. Meantime, the growth of sharply partisan (and increasingly "safe") congressional districts; the 24-7 Internet and cable-news cycle; and fundamental ideological disputes within the country over government's role in American society have deepened the challenge of the task that Obama has set for himself.

Ronald Reagan and House Speaker Tip O'Neill demonstrated in 1983, however, that bipartisan action can happen in swift and surprising terms on the thorniest and most insoluble of issues. Like all historical analogues, the 1983 Social Security compromise is far from a perfect fit for Obama's Washington. Nowadays, Democrats enjoy one-party rule; in 1983, Reagan confronted a large Democratic majority in the House.

Despite this and other differences, the bipartisan compromise on Social Security stands in hindsight as about as striking a breakthrough imaginable in the deeply polarized political atmosphere of Reagan's first term. Reagan had a record of scorning Social Security as an involuntary, quasi-socialistic example of government running amok. In a nationally televised 1964 speech for GOP candidate Barry Goldwater, he argued that Social Security should become a "voluntary" program.

During his 1976 White House run, he declared that Americans—as long as they showed that "provisions" had been made "for their...non-earning years"—should be able to opt out of Social Security. Reagan's opposition to the capstone of the New Deal produced bitter fruit in his first year in office. As the Social Security fiscal outlook darkened, Reagan's Health and Human Services Secretary announced that the administration wanted to reduce Social Security benefits for people who had retired before they turned 65.

Republicans and Democrats alike reacted to the White House plan with a combination of disdain and derision. Reagan's plan was overwhelmingly repudiated. The Senate voted 96 to none against while a large bipartisan majority in the House opposed it as well.

What happened next would have been hard for anybody to predict at that time. The White House agreed to establish a bipartisan commission to look into how to cope with the system's long-term challenges and extend the solvency of the trust fund. Reagan appointed future Fed Chairman Alan Greenspan, and O'Neill appointed some of his own members to the Commission.

It offered a compromise that has had lasting effects on Social Security politics and policies. Some of the proposals were less than ideal; one that was ultimately enacted into law raised the regressive payroll tax, which hit working- and middle-class Americans harder than wealthier citizens. Nonetheless, the 1983 agreement did succeed in extending the trust fund's solvency for a couple of generations by raising the retirement age to 67 from 65 (to be phased in by 2027); imposing a six-month delay in the cost-of-living adjustment; and requiring government employees to pay into Social Security for the first time. The compromise also cemented a new reigning political consensus on Social Security—Social Security, in historian Sean Wilentz's words, was "untouchable" because it had become more than ever the "'third rail' of national politics.

Reagan's Social Security Reform Act not only reversed his own ideological opposition to Social Security but also identified the nation's leading conservative as a defender of liberalism's most cherished achievement: "This bill demonstrates for all time our nation's ironclad commitment to Social Security," Reagan announced when he signed the bill. (For his part, Tip O'Neill called Reagan's action "a happy day for America.") But the law has also reverberated across the decades into our own times; in 2005, George W. Bush failed to enact his plan to privatize Social Security despite having Republican majorities in Congress. The Reagan compromise strengthened the position of Social Security's defenders, so much so that few elected officials openly endorse plans either to privatize or make Social Security voluntary anymore.  

Matthew Dallek, a visiting fellow at the Bipartisan Policy Center, is the author of The Right Moment: Ronald Reagan's First Victory and the Decisive Turning Point in American Politics.