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NOVEMBER 4, 2002

Private Club

Republican candidates talking about Social Security privatization
this year sound very much like Democratic candidates talking about
Saddam Hussein: They avoid the topic at all costs. If, despite
their best efforts, the issue does arise, they treat it as if it
were a homicidal dictator--utterly abhorrent to their most
cherished values. "I don't support privatizing Social Security,"
vowed Minnesota Republican Senate candidate Norm Coleman, who had
previously supported the idea, "and I'll fight against anybody who
would do that." And they piously insist that it is unfair to make
it a campaign issue. When it was pointed out that New Hampshire
Republican Senate nominee John Sununu had sponsored a privatization
bill two years ago, he responded by accusing his opponent of trying
to "score quick political points by scaring retirees." After
Democratic House candidate Chris Kouri criticized his opponent, GOP
Representative Robin Hayes, for endorsing private accounts, Hayes
shot back, "I oppose any plan to privatize Social Security. It's
silly for Chris to bring this up." Social Security privatization
may not be a matter of war and peace, but as domestic issues go it
is a defining one, central to our conception of what kind of nation
we want to be. And on this question, just as the Democrats did on
the war, the Republicans have dodged honest political discussion.In one crucial respect, though, the Republicans' Social Security
evasion is more dishonest than the Democrats' Iraq evasion. In
order to escape a protracted debate that might raise doubts about
their foreign policy bona fides, Democrats swallowed their private
misgivings and signed onto a use-of-force resolution. Few
Republicans, by contrast, have made any substantive concession on
privatizing Social Security. They continue to support President
Bush's proposals to privatize Social Security. They simply insist
that these proposals do not constitute "privatization."

The genesis of this strategy can be found in a memo written two
months ago by the National Republican Congressional Committee
explaining that, since voters disdain the term "privatization,"
candidates must not allow either their opponents or the media to
use the word unchallenged. "It is very important that we not allow
reporters to shill for Democratic demagoguery by inaccurately
characterizing private accounts and `privatization' as one and the
same," the memo urged. The argument for this differentiation is
that, under the Republican plan, individual accounts would remain
under government control rather than being invested through private
brokers. "Personal accounts are not privatization," a White House
official told The Washington Post. "You would be simply directing
the government to invest some of your savings."

This hastily contrived distinction depends upon heroic feats of
historical revisionism. In fact, Republicans have described turning
Social Security over to individual control as "privatization" since
the idea's very inception. As late as two years ago party loyalists
like Karl Rove used the terms "personal retirement accounts" and
"privatization" interchangeably. ("On Social Security
privatization, encouraging private personal retirement accounts,
[Dick] Cheney was for them," Rove explained to CNN on August 13,
2000.) Now the entire Republican apparatus has turned on a dime,
castigating Democrats and reporters for using the very term they
themselves consistently used not long ago. (Even the supposedly
independent Cato Institute, which designed Bush's Social Security
plan, has dutifully changed the name of its "Project on Social
Security Privatization" to the "Project on Social Security
Choice.")

There's good reason that friend and foe alike once referred to
individual accounts as "privatization": Such accounts would
transfer the risk of retirement security--that is, the essential
function of Social Security--from the public to the private
individual. Whether those individual accounts are invested through
the government or through a private broker is a relatively
unimportant detail. But even by this post-hoc, hairsplitting
definition, Bush's plan still constitutes privatization. That's
because once the personal accounts reach a certain level workers
might be given the option to move them from a government-run
account to a private broker.

But as anyone familiar with the Republican Party's Orwellian efforts
to redefine the estate tax as the "death tax" and school vouchers
as "opportunity scholarships" could have guessed, this intellectual
dishonesty hasn't kept the GOP from browbeating much of the media
into accepting its preferred terminology. Several radio stations
have actually refused to run ads criticizing Republicans for
supporting privatization. The more typical reaction has been a
studious evenhandedness. Consider how the Minnesota papers have
covered Coleman's fervent repudiation of "privatization." Voters
have been treated to headlines like "CANDIDATES POUND EACH OTHER
WITH SOCIAL SECURITY CLUB." A story in the Minneapolis Star Tribune
observes, "In fact, neither campaign has told an outright lie. They
are snarling past each other, in a way that sheds more heat than
light, because they disagree on the meaning of the word
`privatization.'" The issue has thus been drained of its ideological
content and reduced to an impenetrable, niggling dispute over
semantics--which, from the GOP's point of view, was the entire
point of the exercise.

Republicans justify their prevarication, at least implicitly, with
the claim that at least they have the guts to tackle the issue. "I
am sick and tired," scolded North Carolina Republican Senate
candidate Elizabeth Dole, of "those who put no ideas, on the table,
putting their heads in the sand." Democrats, echoed Sununu, "offer
no plan, no ideas, and no leadership." It's certainly true that the
Democrats don't have a plan to save Social Security. And if the
Republicans did have such a plan, then perhaps accepting the moral
burden of shoring up Social Security would entitle them to a bit of
protective misrepresentation. But in fact they don't have a plan
that in any way addresses Social Security's looming fiscal crisis.

The Republican position is best embodied by a set of proposals put
forward by George W. Bush's handpicked "Commission to Strengthen
Social Security." The commission drew up three plans that establish
individual accounts. One of them did not even purport to close
Social Security's long-term financing gap. The other two plans did
so only by assuming that more than $2 trillion will be transferred
into the program from other revenues. Unfortunately, as even casual
observers have noticed, the non-Social Security budget is in deficit
and will likely remain that way for years to come. So good luck
finding that $2 trillion. And, in any case, claiming that you have
solved the problem of Social Security's eventual insolvency when
your solution requires coming up with $2 trillion from somewhere
else is more than a little disingenuous. It's a bit like saying you
plan to pay off your credit-card debt by inheriting a fortune from
an as-yet-undiscovered, long-lost millionaire relative.

How to save Social Security and whether to privatize it are
completely different questions. The first is a matter of simple
accounting--raise taxes, cut benefits, change the age at which
people become eligible, change the way benefits are taxed, etc.
Whatever solution is ultimately adopted, it will involve allocating
pain-- somebody will wind up paying more or getting less. The
sooner we allocate that pain, the less concentrated it will be.
Still, we have a good 40 years until the trust fund runs dry. It's
easy to get worked up about the prospect of Social Security
insolvency, but Herb Stein's Law--named after the former Nixon
economist--held that "any trend that can't go on, won't. "
Eventually, pressure will build to trim benefits or raise taxes
enough to balance the books. Historically, this happens when
Republicans and Democrats hold a political cease-fire and agree to
some sort of nonpartisan plan.

A nonpartisan solution to Social Security's fiscal woes will be all
but impossible, however, as long as Republicans remain fixated on
privatization (or "personal accounts" or whatever euphemism they
come up with next). There is always a certain earnest school of
thought, which holds that Democrats ought to rise above petty
caviling and propose a plan of their own to save Social Security.
But given the GOP attachment to privatization, that would probably
be the worst thing they could do. In fact, petty caviling on Social
Security is exactly what the country needs from the Democratic
Party right now.

The central rationale for privatizing Social Security is to
transform the program from one in which the government bears
responsibility for insuring against old-age poverty into one in
which individuals bear that responsibility. Its advocates, though,
have instead presented it as a way to keep the program solvent. The
fallacy here is pretty simple. Right now Social Security taxes go
to pay benefits for current retirees or to help pay for other
government programs. If you allow people to keep some of their tax
dollars in private accounts, then either the government has to run
a bigger debt or else people's benefits have to be cut. In the long
run, of course, they'll have to be cut anyway. But establishing
private accounts means they'll have to be cut more and sooner.

Republicans, though, present the establishment of these accounts as
an alternative to cutting benefits. Economist and Republican
adviser Martin Feldstein touted Bush's proposal in an op-ed titled,
"BUSH'S ALL-GAIN, NO-PAIN RETIREMENT PLAN." This is a calculated
ploy: Rather than having to defend privatization on philosophical
grounds, it allows Republicans to present it as a pain-free
technical fix to Social Security's deficit. What privatizers want
more than anything else is to conflate saving Social Security and
privatizing it into the same discussion. For Democrats to answer a
privatization plan with a plan to save the program would be to walk
into a trap. On the one hand you'd have Democrats offering nasty
benefit cuts or tax hikes. On the other you'd have Republicans
offering yummy new savings accounts and no painful choices at all.
Who do you think would win that debate?

The debate that needs to take place now, then, is between Social
Security privatization--the actual idea itself, not merely the
word--and leaving the program in something resembling its current
form, a communal obligation that pools individual risk. It's only
after that debate is resolved that Democrats and Republicans will
be able to get to the unpleasant task of fixing Social Security's
fiscal problems. The current partisan sniping over privatization
may be crude, shrill, and tiresome. But right now it's exactly the
debate we need to have.

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