Alas, the Social Security reform debate is not going well for George Bush. House Ways and Means Committee Chairman Bill Thomas ruffled White House feathers last week by declaring the Bush Social Security proposal a “dead horse.”
Mr. Thomas shot these arrows even though he supports private accounts. The bigger problem for reformers is that a growing number of liberal-leaning Republicans, like Rob Simmons of Connecticut, are having second thoughts about the political wisdom of tackling the issue at all.
Republican lawmakers are now wandering in dozens of different directions on the issue and President Bush might as well try to herd stray cats. Democrats have also dug in their heels against Social Security reform, instead arguing the system is just fine or only requires minor tinkering.
All this is to say the support for reform is lately shrinking, not growing, and that Bill Thomas is unfortunately right: The White House needs to think anew on the strategy for winning this gargantuan political battle.
Things have gone so off course some Republican analysts now pronounce Social Security reform as a political guillotine for the GOP, much as Hillary Clinton health care politically decapitated Democratic House and Senate members in the mid-1990s.
But that analysis is wrong. Social Security reform can be an enormous vote-getter for Republicans if they will only unite behind a marketable plan, such as Ryan-Sununu, with no benefit cuts and no tax increases. Then Republicans must make the ownership case to workers in terms of their financial benefits from private accounts. Ryan-Sununu will give worker monthly benefits 30 to 40 percent higher over their retirement years.
The good news is that George Bush has not wavered in his commitment to making private investment accounts the centerpiece of any reform plan. These private investment nest eggs give workers financial security that comes with personal ownership. Mr. Bush also wants to put the Social Security system on a sounder financial footing by erasing at least a portion of the system’s long-term unfunded liability. Today, those liabilities, i.e., promises to pay benefits above and beyond the payroll tax collections, exceed $10 trillion. Medicare’s unfunded liability is even more daunting.
The private accounts proposal is not wrong; the political strategy for adopting them is. To turn this around and make a more appealing populist case for private investment accounts, Republicans must adopt six strategies to disarm the opposition.
(1) Social Security reform saves money, it doesn’t cost money. It is said creating private investment accounts will cost $2 trillion, but they will save $10 trillion in later years. Wouldn’t most Americans invest $2 now to get $10 back in 20 years? Certainly most businesses would. Mr. Bush needs to educate Americans that transition costs lead to long-term savings.
(2) Attack the attackers. Ever since Paul Krugman of the New York Times wrote that Social Security isn’t broken, the left has rallied behind this message. The Democrats in Congress have seemingly all drunk this spiked Kool-Aid. But every independent analysis finds just the opposite. The system will crater when the Baby Boomers retire fully. Even the Social Security Administration’s own actuaries see a future doom and gloom if reform steps aren’t taken now. Moreover, pollster Richard Thau has done substantial public opinion analysis which shows Americans know the truth about Social Security. They get frustrated with happy talk of stay-the-course. Republicans should attack that idea as fiscally reckless.
(3) Expose Democrats for wanting to raise taxes. If benefits are not cut, and private accounts not created, the only option is to raise taxes on workers in the future to cover gigantic funding shortfalls. The option of doing nothing now really means raising taxes a lot, later. The National Center for Policy Analysis finds we would have to raise the payroll tax to at least 18 percent to pay for benefits if there is no reform.
(4) Stop talking about benefit cuts in the future. Trimming future Social Security benefits risks an enormous political backlash against the GOP. Personal accounts for Social Security will, in truth, allow Americans to have higher, not lower, benefits. Cutting Social Security benefits to get private accounts is like “paying for tax cuts” with other tax increases.
(5) Make the accounts big and meaningful. Big accounts, like the 6 percent accounts under Ryan-Sununu will accumulate large amounts of dollars quickly. These large accounts thus help lower the long-term funding problem because workers will no longer need to draw on promised benefits.
(6) Stress private ownership and control. The issue of Social Security is not so much about financial viability as about who should control the money: the worker or the government? Private accounts empower workers with control of their own money. Especially for lower-income minorities, ownership accounts mean, if a worker dies, he or she has an estate that can be left to spouses and children.
If Republicans would adopt these six tactics, they could get the debate over personal accounts back on track so reform passes Congress before the 2006 elections.