Social Security reform
The third rail of American politics is in the process of moving to the other side of the track

The Introduction to the report of the President's Commission to Strengthen Social Security bears the unmistakable imprint of its co-chairman, former Sen. Daniel Patrick Moynihan. "From the first, Social Security was a work in progress," it begins. "It remains so now." Moynihan and his co-chairman, AOL TimeWarner's next CEO, Richard Parsons (who co-signed the introduction though he surely did not write the prose), go on to point out that "in his original message to Congress, President Roosevelt envisioned pensioners owning annuities." We are reminded that, "as the early administrators of Social Security anticipated–and very much hoped for–the program steadily evolved." Now, the commissioners unanimously agree, it should evolve again. Because current benefits are paid by current taxpayers and the ratio of workers to retirees is diminishing, "the system is not sustainable as currently structured." It should include some form of "personal retirement accounts within Social Security"–the Commission sets forth in detail three models. But, and here one is reminded that after serving in the subcabinet or cabinet of four successive presidents of both parties, Moynihan was elected as a Democrat to four terms in the U.S. Senate, "the commission recommends that there be a period of discussion, lasting for at least one year, before legislative action is taken to strengthen and restore sustainability to Social Security."

"At least one year"–those words were received with a sigh of relief by Capitol Hill Republicans. For the sad fact is that while the policy arguments for Social Security investment accounts grow stronger every year, the political support for them is significantly weaker than it was three years ago. In December 1998 Bill Clinton made a speech on the subject which, though characteristically ambiguous, was not inconsistent with supporting investment accounts. Moynihan, then the ranking Democrat on the Senate Finance Committee, supported them. So did Senator Bob Kerrey, also on Finance. Most Republicans seemed favorable to the idea. It was one of those moments when the political planets are in alignment for a major policy initiative. A lame duck Democratic president could give cover to a mostly Republican coalition for reform. But it didn't happen. In February 1999 Clinton, indebted to left-wing Democrats for their support on impeachment and heeding the advice of his designated successor Al Gore, announced that he favored having Social Security investment funds run by the government–a proposal that would mean government would own a large percentage of the private economy, which was a deal-killer for Moynihan as well as Republicans.

The moment was lost. Moynihan and Kerrey did not run for re-election in 2000. Gore and, despite some of his previous statements, Joseph Lieberman made harsh attacks on George W. Bush's proposal for individual investment accounts in the campaign. So did Democrats in special elections in 2001. The issue has become mostly partisan; few Democrats now favor reform, and most plan on campaigning against it. That pleases organized labor, whose membership is dwindling but whose campaign contributions and on-the-ground campaigning are surging, and other Democrats who want to see workers dependent on government, not empowered to accumulate wealth on their own.

In this setting, Republicans are afraid of the issue. Unduly afraid, I believe. After all, in 2000 George W. Bush ran on the issue and won. And Republicans held the House of Representatives in 2000 with the same percentage of votes as they had in 1996 and 1998. Nonetheless, the head of the House Republicans' campaign committee, Tom Davis, very much did not want Social Security reform to come forward legislatively in 2002. To him, the Commission's invitation to discuss the issue–and not to consider legislation–for at least a year was a welcome one.

But it's important to understand that this is one of those issues on which the conventional wisdom is out of date. The conventional wisdom has it that Social Security is the third rail of American politics: Touch it and you die. Retirees and those preparing to retire in a few years are terrified of anything that sounds like it will cut Social Security benefits, and they will vote on the issue. Others don't much care.

But, as Bush's victory in 2000 shows, the third rail is in the process of moving to the other side of the track. Young voters are beginning to realize that Social Security is a bad deal for them, a Ponzi scheme into which they are required to put lots of their money and won't get much back. As Moynihan and Parsons point out, "For a single male worker born in 2000 with average earnings, the real annual return on his currently-scheduled contributions to Social Security will be only 0.86 percent. This is not what sends savers to savings banks." Individual investment accounts test well in polls, and have some oomph in elections. Democrats campaigned against them in the Virginia 4th district special election in June and the Arkansas 3rd special election in November. Republicans picked up the Virginia seat (represented by a Democrat since 1982) and held the Arkansas seat. Republicans carried elderly voters in both, just as George W. Bush carried elderly voters nationally and in the most heavily elderly state, Florida, in 2000.

Many Republicans remain skittish about the issue and want to say as little about it as they can get away with. But discussion of the issue in 2002 will help Republicans. Without discussion, Democrats' fall 2002 ads making the familiar claim that Republicans want to destroy Social Security will not be counterbalanced by the the unfamiliar positive case for change. Democrats will be able to try to make gains with the elderly without risking countervailing losses. Making the positive case for empowering all Americans to accumulate wealth, as George W. Bush has done, is necessary for the Republicans to prevail. But amid the war on terrorism, Bush cannot make that case often; voters want him to concentrate on the war. So congressional Republicans must bring forward their own arguments, promising to help those who are hurt by the current system while maintaining benefits for those who depend on them. In the meantime, Social Security reform won't come until and unless Republicans win more elections, perhaps in 2003, more likely in 2005.