GOP Weighs Social Security

Posted August 27, 2004 at 5:43pm

Shortly after the midterm elections of 2002, business leaders and lobbyists gathered in a downtown hotel ballroom in Washington to hear a presentation by Karl Rove, President Bush’s chief political adviser.

Many in the predominantly Republican audience had contributed mightily to the GOP’s victory in the midterms, which returned control of the Senate to the GOP. But Rove wanted to introduce them to another factor that he said made the successful outcome possible: Social Security reform.

Although politicians, fearing voter backlash, have long been skittish about plans to change the popular entitlement, Rove told the group that, far from alienating voters, proposals to reform the retirement program had been part of the winning message for such GOP Senators-elect as Elizabeth Dole (N.C.) and Jim Talent (Mo.).

Rove also told them something else: Social Security reform would figure prominently in Bush’s winning message for 2004.

“It was going to be the central issue of the campaign,” said one participant in the meeting, characterizing Rove’s message that day. “But I haven’t seen anything about it since.”

Indeed, the dialogue on reform has been confined largely to the hearing rooms of the Finance and Ways and Means committees, as well as the regular litany of “ownership” proposals the president lays out at campaign events.

But Republicans congregating in New York City this week for the national convention suggest that the issue is about to take a higher profile.

Grover Norquist, a leading conservative strategist, predicted that Social Security reform will emerge from the convention as the cornerstone of Bush’s second-term agenda. Norquist said the president has simply been waiting for the opportune moment to move on the issue.

Had Bush pressed the case earlier, Norquist said, “it would have gotten no traction — and worse, it would have been seen as a ploy.” Norquist was alluding to possible charges from political opponents that the president was trying to “distract attention” from putative failures elsewhere.

But Norquist insisted that Bush remains determined to move on Social Security reform, and added that action will be impossible unless the president lays out his agenda now. “The president can’t do it [after the election] unless he talks about it [before the election],” Norquist said.

On Capitol Hill, meanwhile, lawmakers have begun to press the debate in earnest, with Reps. Sam Johnson (R-Texas) and Paul Ryan (R-Wis.) introducing plans before the August recess.

“I think the fact that they wanted to get their plans out there [in the current Congress] is a sign that there is real interest,” one senior Ways and Means aide said.

The aide indicated that there has been “some dialogue” between the committee and the White House in recent weeks. But the aide added, “We’re all obviously waiting to hear what’s said next week at the convention.”

In fact, Social Security reform has loomed near the top of Bush’s agenda since 2000, when he first made it an issue in his bid for the White House. In the broadest terms, the president proposed giving taxpayers the option of controlling a portion — perhaps one-sixth — of the money that their payroll taxes kick in to the retirement program.

This plan would enable people to shift that money to one investment vehicle or another, with the hope that it would provide a better long-term return than they would otherwise receive from leaving it in the Social Security “trust fund.”

After the 2000 election, however, reform plans failed to get traction on Capitol Hill. In large part, this was due to the success of Congressional Democrats in casting the idea as a backdoor effort to “privatize” Social Security and thereby threaten the federal government’s lock-solid guarantee to retirees.

While refusing to “get ahead” of the president’s message this week, White House spokeswoman Claire Buchan said the president has continued to talk about Social Security reform on the campaign trail and continues to consider it a priority. She cited the legislation recently offered on Capitol Hill as evidence that interest is building on the issue.

“That’s very constructive to the dialogue,” Buchan said.

Nevertheless, veterans of the Social Security debate on Capitol Hill are not quite as sanguine, having long seen lawmakers fearful of touching the “third rail of politics.”

“Moving forward on this issue will take presidential leadership,” said Ken Trepeta of the Financial Services Forum, which has for years tried to focus Congress on what its member companies see as a looming crisis. “None of this is going anywhere without leadership from the president.”

Trepeta said his wariness comes from discussing the issue with Members on Capitol Hill who are already committed to the idea of reform. They tell him that other Members don’t want to “unduly stick their neck out.” In other words, they will need political cover from the White House first.

But, as far as the White House’s commitment to reform, Trepeta added, “Every signal we were getting is that this was going to be a second-term issue.”

Norquist and other Republican insiders say the president will offer “principles” for reform, rather than any meticulous plan. Among these is that the plan would require no tax increases, no budget cuts and would need to move the program toward long-term sustainability.

According to actuarial estimates, Social Security is approaching a period in which only two workers will be kicking in savings for each retiree in the system. At the program’s inception, that ratio was 16-to-1. The Congressional Budget Office has calculated that outlays could begin to exceed inflows in 2019.

In an effort to change that equation, the president has indicated that he believes it is necessary for workers to have individual retirement accounts that they can use to control at least a portion of the money they pay into the program. Treasury Department spokesman Robert Nichols said the administration considers this specific element to be “critical” if any reform is to be achieved.

Jennifer Crider, a spokeswoman for Minority Leader Nancy Pelosi (D-Calif.), said Democrats have always wanted to enact reforms that would ensure Social Security’s solvency — just not the reforms Bush and other Republicans have in mind.

“The problem always has been that the Republicans have wanted to change the entire program, to make it a private system,” Crider said.