I want to believe it. I want to believe President Bush can transform Social Security, an elaborate Ponzi scheme and the proudest achievement of the Democratic party, into a wealth-generating bonanza. But he can’t.
True Social Security reform is at least a decade or two away. And while it’s often better to try and fail than not try at all, in this case a slugfest over Social Security could abort the one genuine opportunity for a second-term achievement: tax simplification.
There are five reasons why Social Security reform–including the Holy Grail of personal retirement accounts–will never see the tip of President Bush’s pen. First, too many people benefit from the current system. Nothing is “more dangerous,” Machiavelli declared, “than to take the lead in introducing a new order of things.” These beneficiaries have too much to lose and will fight with every weapon in their arsenal.
In twenty-first century America, the Old Order consists of the entire Democratic party and every man and woman over the age of 65. The Democratic party would lose its raison d’être if the president transformed American voters from welfare recipients into empowered investors. And the elderly are just flat-out opposed to Social Security reform: Understandably, they are concerned that any tinkering with the current system will reduce the benefits on which they’ve grown dependent. Joined together under the leadership of the 36-million-strong AARP, the Old Order will offer formidable opposition.
Second, the history of so-called “conservative reform” isn’t very comforting. In the post-New Deal era, Congress has passed only one major conservative reform of a federal program: welfare reform in 1996. Liberal reform, on the other hand, is a near-annual event. In the last three years alone, we’ve witnessed the creation of a $1 trillion prescription drug benefit, the resurrection of farm subsidies, and a campaign finance reform bill that hangs like the sword of Damocles sword over the right to free speech. And what free-spending liberal signed this unholy trinity of liberal legislation? The conservative icon George W. Bush. The ugly truth is that liberal reforms are easily pushed through the legislative pipeline, while passing conservative reforms (such as the transformation of Social Security) is as long and painful as birthing septuplets.
Third, an initiative as ambitious as Social Security reform can only be achieved in an “atmosphere of crisis.” The original Social Security program, for example, came to fruition amidst the Great Depression. The Bush administration toppled Saddam Hussein’s regime shortly after 9/11. This is how politics works. Problems are postponed until a crisis erupts. And in the case of Social Security, that crisis, quite frankly, doesn’t yet exist. According to the Social Security trustees’ annual report, Social Security taxes will be able to cover outlays until 2028–maybe even later. Until then, we’re okay. It’s noble for President Bush to offer a solution to a problem twenty-five years away–but politically, it’s useless.
Fourth, in political debates pitting “emotion” against “facts,” “emotion” nearly always triumphs. In the case of Social Security, the facts are on President Bush’s side. Yes, Social Security is an unsustainable Ponzi scheme. Yes, personal retirement accounts will substantially increase the wealth of most Americans. The Democrats don’t have facts. What they do have is emotion. Senior citizens are afraid that benefit cutbacks will force them onto the streets. And Baby Boomers are afraid that a tumultuous stock market could turn them into the next generation of Enron employees.
Still, the facts in favor of personal retirement accounts are so powerful that under normal circumstances they might trump the emotion oozed by their opponents. It would require, at a minimum, a substantial public information campaign led by President Bush. But there are two reasons to doubt whether that would work. First, Bush’s communications skills are shockingly poor for someone who has reached the pinnacle of political power. Second, it is quite likely that news from Iraq will continue to dominate the public’s attention–squeezing out the time and mental space needed to learn about “unfunded liabilities” and “rates of return.”
Finally, the reformers simply don’t have the votes. A comprehensive Social Security bill will require the support of 60 senators to survive a filibuster. The GOP starts with 55 votes, five short of the minimum. Finding five Democratic senators to cross party lines in the most partisan era since Reconstruction will be difficult, to put it lightly. And there’s no guarantee that Republicans will unanimously support the president. Several Republican moderates are reluctant to transform a big, popular program without bipartisan cover. Sadly, the Senate math doesn’t add up. That’s the final nail in the coffin.
While the prospects for Social Security reform are bleak in the near term, personal retirement accounts are probably inevitable in the long term. As people learn more about them over time, public support could reach critical mass, that is, become large enough to overcome an unfavorable political environment.
Until then, Republicans would do well to dedicate their time and energy to passing a “tax simplification” bill. Granted, “tax simplification” would not be as historic as Social Security reform, but its prospects for legislative success are far greater and it could have a more immediate impact on the American economy.
The political advantages of “tax simplification” are numerous. If it were revenue-neutral, it would be seen as a bipartisan initiative, thus quelling Democratic opposition. And if we limited its reach to personal income taxes, we could avoid some of the nasty Old Order special interests that congregate around corporate taxes. And while some degree of public education would be necessary, this is an issue that ordinary people get. Granted, there is no “tax crisis.” But that didn’t stop President Reagan from achieving a monumental tax reform bill in 1986.
The president should give his new tax advisory panel a radical mission: develop a tax code so simple the average American could do his tax return on a postcard. Ideally, the commission would recommend a flatter, fairer tax system that eliminates nearly all of the deductions that distort our economy. Personally, I think it’s feasible to eliminate all of the deductions except those for home mortgage payments, health care expenses, and charitable contributions. These are “untouchable” because they are just too popular. But everything else should be fair game.
The final bill may include other deductions, of course. That’s one of the beauties of prioritizing “tax simplification” over Social Security reform. Tax bills are more conducive to legislative give-and-take. Personal retirement accounts, on the other hand, are basically an “either-or” proposition. There’s little room for compromise.
President Bush wants to be bold. But that boldness needs to be accompanied by political savvy. And Social Security reform is a nonstarter. There are simply too many forces aligned against it. But tax simplification, which is almost as important, has the potential to be a legislative winner–and a solid capstone to the president’s legacy.
Todd Weiner works at Luntz Research Companies, a political communications firm in Alexandria, Virginia.
Source: AFF Doublethink Online | Emma Elliott Freire
Source: AFF Doublethink Online | Kaavya Ramesh