Social Security 2.0: Coming in 2007?
In a television interview last weekend, President Bush said Social Security reform was "still alive" and again declared that it would be one of his top goals when the next Congress convenes. Of course, that's what Bush said right after the 2004 election. And despite pushing the issue hard and personally campaigning for it around the country–60 cities in 60 days in early 2005–the idea's beta version never really took off with the American people, and no legislation was ever submitted. So, what are the chances of reform happening in a Congress that will almost certainly be less hospitable to Bush than the current one?
Ask any veteran Washington hand, and you'll certainly get a skeptical response. "Bush has fought the good fight on this issue," says Charles Gabriel, political analyst for Prudential Securities, "but he wasn't able to get it done when he had enhanced political capital after the 2004 election." Gabriel thinks that the White House will have a tough enough time just getting Congress to reauthorize fast-track trade authority next year, much less starting a revamp of perhaps the most politically sensitive federal program in existence.
Maybe the president's chatter about this issue is merely part of a pre-election, Karl Rove scheme to fire up the base, particularly its more libertarian members. But if so, the conspiracy is a deep one. In Treasury Secretary Henry Paulson's first speech after being confirmed in the post, he spent a good chunk of his time advocating entitlement reform. "I have always tried to live by the philosophy that when there is a big problem that needs fixing, you should run toward it, rather than away from it," Paulson said in an August 1 address at Columbia University. "That is one of the reasons I decided to come to Washington, and that is the reason I admire the president's political courage and willingness to address entitlement reform."
And during a recent interview with U.S. News, Rob Portman, director of the Office of Management and Budget, quickly skimmed through the end-of-year budget numbers–good news from the administration's perspective–and then quickly shifted into a hard-hitting and dour assessment of the nation's entitlement problems, calling them "unsustainable." So perhaps the White House isn't so much trying to help congressional Republicans this year as it is laying the groundwork for a new Social Security reform effort next year.
Promises, promises
Indeed, both sides of the issue seem to be gearing up for a fight, beginning with an autumn battle of pledges. House Democrats are pushing their candidates to sign a "Golden Promise" to oppose any efforts to privatize Social Security. On the other side, reform advocates have launched For Our Grandchildren, a campaign that encourages congressional candidates to "urge Congress to work in the coming year toward a bipartisan solution to strengthen Social Security for the long term by putting aside partisan politics and seeking common ground."
It all sounds bipartisan and innocuous enough, but Democrats are urging candidates to have nothing to do with the group. In a September 27 letter, Democratic House leaders Charles Rangel and Sander Levin wrote that the "appearance of this pledge, and its carefully veiled language, shows that the privatizers haven't given up. They've just gone underground. With this pledge, they are laying the groundwork to support the president and congressional Republicans' oft-stated goal of resuming their fight for privatization in the next Congress."
Yet the FOG group is hardly veiling its preference for some degree of privatization as part of a future reform package. Two of the group's leaders are former Democratic congressmen Timothy Penny and Charles Stenholm, both longtime and well-known advocates of personal accounts. Penny admits that the strong reaction against his group is a sign that many in his party aren't ready to abandon their long-successful strategy of using Social Security as a cudgel to clobber Republicans. "It is going to be a tough nugget for them to give up," he says.
Still, Penny is hopeful that progress on reform can be made in the next Congress. "There is a hopeful scenario for the coming legislative session," he contends. Penny's "hopeful scenario" goes something like this: If Democrats take over one or both houses of Congress, they will have more ability to shape reform legislation than when the GOP held complete sway over the House and Senate. Now both parties would share more equitably in any of the credit or blame that altering the current system would bring.
Let's make a deal
Striking a deal isn't an absolute impossibility. To prove that a bipartisan agreement is possible if the will is there, Maya MacGuineas, president of the Committee for a Responsible Federal Budget at the New American Foundation think tank, decided to run a little experiment last winter. MacGuineas, a former Social Security adviser to Sen. John McCain's 2000 presidential campaign, brought together Jeffrey Liebman, a former aide to President Clinton, and Andrew Samwick, a former aide to President Bush, to see if they could hash out a reform plan. Some 50 hours later, spread over several months, they had one. The proposal includes beginning to raise the retirement age to 68 starting in 2011, raising the maximum taxable earnings limit to $172,000 by 2017 vs. $94,000 currently, diverting 3 percent of payroll taxes into personal retirement accounts, and reducing spousal benefits for those married to high earners. The plan, already vetted by the Social Security Administration, would return the program to long-term fiscal solvency and create a personal account sweetener to boot. "It's doable," MacGuineas says. "We know what tough choices have to be made. And I think the country is more aware now that something has to happen."
But before anything like that happens in the real knife-fighting world of inside-the-beltway politics, "there is going to have to be an admission among Democrats that highlighting differences on the issue won't play well going into 2008," says Kim Wallace, political analyst at Lehman Brothers, "and a desire not to leave Social Security as an issue for the next president to solve."
Yet if Democrats believe that the next occupant in the White House will most likely be Hillary Clinton, Al Gore, or Barak Obama rather than John McCain, Rudy Giuliani, or Mitt Romney, they have every incentive to stall until 2009. Wallace also thinks that Democrats will be unwilling to work with the White House on the issue as long it continues to push for permanent extension of the 2001 and 2003 tax cuts, currently set to expire at the end of 2010. "Most Democrats think that is not a rational approach," Wallace says. At the same time, he predicts that the next Congress will be the last one able to avoid working on substantial Social Security reform because of the program's obvious and impending fiscal difficulties. Indeed, Social Security surpluses will begin shrinking in 2008 when the first baby boomers become eligible to start drawing checks, just in time for the Iowa caucuses.