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Making the case for Social Insecurity

The struggle over Social Security will be the defining political battle of Bush’s second term. His game plan: The same one he used to successfully sell the Iraq war.
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By Farhad Manjoo

Feb. 2, 2005 | When discussing possible fixes to the Social Security system, most politicians get nervous. The problems are complex, and lawmakers tend to shy away from going on the record as to how to solve them. But not George W. Bush. When he talks about Social Security, just as when he talks about tax cuts or peace in the Middle East or the war on terrorism, the president is given to simple, declarative statements. 

Here he is, for example, at a White House-sponsored conference on Social Security in early January: “By the time today’s workers who are in their mid-20s begin to retire, the system will be bankrupt. So if you’re 20 years old, in your mid-20s, and you’re beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now.”

Many economists would consider that statement very nearly an outright lie. If we do nothing at all, Social Security’s accumulated trust fund will be depleted by about the middle of this century, at which point it will need to reduce, not discontinue, benefit payouts. Still, Bush has repeated the “bankrupt” line often. He said much the same thing at his press conference last week, and he will likely make a similar argument at his State of the Union address, during which he’ll officially launch his campaign to remake the Social Security system as we know it. The centerpiece of Bush’s program is a plan to allow workers to divert their payroll taxes into private accounts invested in the stock market. Instituting such accounts promises to be both politically and fiscally difficult. Democrats have already dug in against the idea, and they’ll argue that its $2 trillion-plus price tag will break the national bank.

So how will Republicans press the issue with the public? The key to their argument, as outlined in a 104-page playbook that congressional Republicans were handed at their Allegheny Mountain retreat over the weekend, will be Bush’s trademark simplicity. “Talk in simple language—your audience doesn’t understand financial jargon,” advises the playbook, which was compiled by White House aides, pollsters and outside marketing consultants and was first reported on by the Washington Post (it later found its way online). Some other key bits of advice given to Republicans:

∑ “Keep the numbers small: Your audience doesn’t know how trillions and billions differ. They know these numbers are large, but not how large nor how many billions make a trillion. Boil numbers down to ‘your family’s share.’”

∑ “Say it the way they can hear it: Your audience will reject some turns of phrase because of the connotations and associations. The responses are not universal, but they are much less personal than you might imagine. For example, to most Americans ‘building wealth’ sounds unattainable—especially in the context of Social Security. But on the other hand, ‘putting aside a nest egg’ sounds like common sense. Another example: Calling the trust fund ‘meaningless’ will raise hackles. Taxpayers believe it is the source of the monthly checks paid out by Social Security. But, everyone agrees that it is an ‘empty promise.’”

To many Americans, it’s difficult to conceive of a denser, more mind-numbingly abstruse public policy debate than the one we’re soon about to have on Social Security. Not only is this fight fundamentally about a set of insanely huge numbers, it’s about huge numbers in the future—numbers that most of us are only making a guess at, budget and accounting and actuarial figures that various parties are only hoping, or fearing, are real. The numbers matter greatly to economists, and in an ideal world they’d matter to the rest of us, too, easily holding sway in the debate over our future. If we were going by just the numbers, the president’s plan would already be DOA, since we’ve seen, over the past few months, several elegant demonstrations of its insufficiency.

But in the campaign that the White House is about to launch, the numbers won’t count for much. What will count, as Republicans suggest in their playbook, are language and media, and public relations spinners will matter far more than economists. Key supporters of the White House plan—corporate interests, mainly—are gearing up to launch expensive ad campaigns pushing the new scheme, and after his speech, Bush himself will barnstorm the nation, invading key congressional districts to pressure Democrats and even some free-thinking Republicans to commit to private accounts. So far, Democrats have done well in pushing against the effort, but the public is still very much open to the privatization plan, experts say, and Bush’s simple hard sell could work.

“As on many other issues, the opinion on this is fairly unformed,” says John Rother, director of policy and strategy for the AARP, which opposes privatization. “In polling you see a wide range of answers to essentially the same questions. That tells you the public hasn’t worked its way through this yet.”

Bush has every incentive to fight hard to win the public. Players on each side agree that the debate over Social Security will constitute the defining political battle of the age. If Bush prevails, you’ll hear calls for carving his mug into Mount Rushmore. If he loses, the Democrats will have proved they’re still in the game. Stephen Moore, the president of the Free Enterprise Fund and a key proponent of the plan, estimates that supporters of the White House will spend between $50 million and $100 million to get it passed. “This is the big enchilada,” he says by way of explaining such huge sums. “This is the biggest fight we’ve had in years and years about our future.”

If you’re looking for good, objective information indicating that the president’s plan is unnecessary and useless, there’s been much of it in the past few months. You can start by reading Roger Lowenstein’s fine New York Times magazine piece of mid-January, which concluded that “the actuarial view is that the system is probably in need of a small adjustment of the sort that Congress has approved in the past,” but that “there is a strong argument, which the [Social Security Administration] acknowledges as a possibility, that the system is solvent as is.” A few months before that, Michael Kinsley, the Slate founder and current editor of the Los Angeles Times editorial page, presented a mathematical proof that privatization won’t return Social Security to solvency. That view that was echoed, strangely enough, by Peter Wehner, a Bush political aide, who declared, in a leaked internal White House memo, “We simply cannot solve the Social Security problem with Personal Retirement Accounts alone. If the goal is permanent solvency and sustainability—as we believe it should be—then Personal Retirements Accounts, for all their virtues, are insufficient to that task.”

There you have it, then: Even some people in White House think that privatization won’t work. Whatever long-term problems Social Security faces, the system won’t be made solvent by private accounts. The prevailing view among economists is that most of Social Security’s difficulties can be solved by a mix of modest tax increases, benefit cuts, or some other painful but not exceedingly difficult adjustment in the program (for instance, raising the retirement age, or lifting the cap on which payroll taxes are collected.) Bush has already ruled out one of these steps—he has repeatedly declined to consider raising payroll taxes. But the White House has looked favorably on cutting benefits; earlier this month, it signaled the it would consider changing the formula by which Social Security calculates its benefits to rise according to prices rather than wages. The change could cut promised benefits by about a third.

That move, says Stephen Moore, was a public relations disaster. Despite being a supporter of its goals, Moore is critical of much of what the White House has done to promote its Social Security plan in the past few months, especially the idea, suggested by Wehner in the White House memo, that private accounts won’t solve the Social Security problem. Moore is of the school of conservatives who believe that private accounts will work. Specifically, he says, if the White House pushes to create a plan with large private accounts—that is, a plan in which a great deal of a worker’s payroll tax is diverted from Social Security into the stock market—investors will realize so much money from the stock market that they’ll offset Social Security’s funding problems.

If he calls for large private accounts, Bush won’t need to push for benefit cuts, Moore believes. And from a public-relations point of view, Republicans need to stay away from any suggestion that they want to cut Social Security benefits, he says. “It makes me nervous. I’ve seen Republicans lose seats over this. Americans don’t have a big appetite for cuts in Social Security. It gives the other side an opening: ‘There go the Republicans again.’ This is American politics by sound bite, and its hard to respond to that sound bite.”

But instituting the kind of large private accounts that Moore calls for creates its own political difficulties. The more money that workers divert into private accounts, the more money the government will need to borrow to pay for the benefits of current retirees. In other words, the larger the private accounts that Bush’s plan outlines, the larger the transition price on the plan. But Moore believes that Bush will have an easier time explaining a high price tag than he will explaining future benefit cuts; with a high price tag, all he’d have to say is that paying for Social Security solvency now is a prudent thing to do. In fact, Republicans have already started making that argument by using words like “prepay” rather than “transition costs.”

By “prepaying,” you’re being a wise steward of your money. As Moore puts it, “We’ll argue that essentially we want to go from an unfunded system to a funded system, and you’re going to have to find a way to finance the transition.”

At the moment, it’s unclear whether the White House will push for small private accounts that carry a smaller price tag but include future benefit cuts, or whether it will ask for large private accounts with a high price tag and no benefit cuts. Grover Norquist, the influential head of Americans for Tax Reform, says that there’s a debate in the White House over this very issue. The President is not expected to outline the size of the accounts in his speech Wednesday evening, but Norquist says that his group is pushing for the largest possible private accounts, and he plans to pressure members of Congress in a similar way.

Such pressure in Congress will be crucial to Bush’s effort. Supporters of the White House plan acknowledge that in the past two months, Bush has lost ground in his Social Security effort. Democrats strengthened their opposition to the scheme, while some Republicans expressed either wavering support or opposition to the plan. On Jan. 19, Bill Thomas, the California Republican who heads the House Ways and Means Committee, called Bush’s plan a “dead horse” and advocated a broader look at the tax system to fix some of the problems with Social Security. “But in politics you can regain momentum,” says Moore. “It’s not fatal. Bush could easily turn this thing around.”

Moore, who recently stepped down as president of the Club for Growth, is a veteran of the kind of take-it-to-the-streets fight that Bush now looks to be mounting against individual members of Congress. Despite even the objections of Karl Rove, Moore has frequently engaged with moderate Republicans who’ve opposed Bush’s economic policies. In 2003, in the debate over Bush’s tax cut bill, the Club for Growth targeted two Republican senators—George Voinovich, of Ohio, and Maine’s Olympia Snowe—and Moore takes credit for winning Voinovich’s vote on that bill. The coming battle over Social Security, he says, will be conducted the same way. Democrats are united in opposition to the Bush plan, “and that’s all the more reason we have to bully these Republicans by increasing the pain factor,” he says. “You run ads explaining why it’s a good plan, that Olympia Snowe is opposed to this good plan. Tell Olympia Snowe to support the president’s plan.”

Other Republican groups are, it should be said, planning less confrontational approaches. Derrick Max, who heads the Alliance for Worker Retirement Security, a lobbying group funded by a few dozen large corporations and Wall Street groups, says that he’s spoken to half a dozen Democratic senators and members of the House who’ve expressed support for private accounts and would be open to voting for a plan put forward by the president. “It’s going to take a few brave leaders to lead this,” he says, and that will come with negotiations and cajoling. Then, more centrist Democrats will follow.

It’s hard to know what to make of Max’s prediction. A handful of Democrats have certainly expressed support for some form of private accounts (Josh Marshall is the most diligent keeper of the list), but the numbers are too small for this to be called bipartisan, and Democratic-friendly groups such as the AFL-CIO and AARP are mounting huge efforts to make sure the landscape remains that way. To date, AARP members have delivered over 200,000 phone calls or e-mail messages to their representatives, Rother says. A spokeswoman for the AFL-CIO says that the group considers the fight among its highest priorities, and it is considering countering Bush’s efforts in local areas with demonstrations of their own. And Hillary Shelton, of the NAACP, says that despite Republican attempts to spin privatization as a positive move for African-Americans, blacks are unlikely to be swayed by the Bush plan. Social Security is the only source of income for one in three African-Americans over the age of 65, he points out. “We’re concerned that investments in the private stock market could end up looking just as bad or worse than my 401K, which just came back all negatives.”

Still, despite the lefty efforts, don’t be surprised if Bush pulls this off. What he has going for him is the simple sell, an alluringly uncomplicated view of how things are in the world. Not so long ago, he launched a war on the strength of just this sort of rhetoric. Now he plans to do it again. As Wehner, the White House aide, wrote in that memo: “Democrats and liberals are in a precarious position; they are attempting to block reform to a system that almost every serious-minded person concedes needs it. They are in a position of arguing against modernizing a system created almost four generations ago. Increasingly the Democrat Party is the party of obstruction and opposition. It is the Party of the Past. For the first time in six decades, the Social Security battle is one we can win—and in doing so, we can help transform the political and philosophical landscape of the country. We have it within our grasp to move away from dependency on government and toward giving greater power and responsibility to individuals.”


Posted by Nuttshell on 02/09 at 02:10 PM in Politics

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