Risk Tolerance

by Noam Scheiber | March 7, 2005

If I were a congressional Republican, the thing I'd worry about most is ... well, the thing I'd worry about most is the unwritten rule requiring me to get a really bad haircut. But the second thing I'd worry about is why my party's leadership keeps lying to me about the politics of Social Security. My most recent cause for concern would have been a closed-door meeting between Republican National Committee Chairman Ken Mehlman and Republican senators last Tuesday. (No lowly House member I.) One person in attendance told the congressional newspaper Roll Call that Mehlman claimed the president's "practical experience" had taught him Social Security privatization "is good politics and policy." "The water is good. Jump in," is how the source characterized Mehlman's take on the matter.Being a faithful Republican senator, I'd want to believe Mehlman with all my heart. But I'd also worry that privatization could be a much, much worse issue for the GOP than anyone, Republican or Democrat, has suggested. Karl Rove likes to say that no Republican incumbent has lost a seat in the last six years thanks to privatization. But that claim only really applies to one person: Louisiana Senator David Vitter. He's pretty much the only Republican congressional candidate who has run on a bona fide privatization proposal--that is, diverting Social Security revenue into private accounts and cutting benefits or raising taxes to fund the transition costs. And Vitter didn't even endorse benefit cuts; he just didn't disavow them. (South Carolina Senator Jim DeMint wasn't in a competitive race until privatization and tax reform became issues.) Just about every other Republican in an even vaguely competitive race has punted. South Carolina Senator Lindsey Graham, frequently cited as evidence of Rove's point, promised not to cut benefits during his 2002 campaign. "Everybody gets guaranteed their check," he said on "Meet the Press." The most specific Bush ever got on the campaign trail was a vague sentence in the middle of a gauzy riff on ownership, as when he announced at the Republican convention, "We must strengthen Social Security by allowing younger workers to save some of their taxes in a personal account--a nest egg you can call your own." Proposing to give voters a nest egg without mentioning the attendant benefit cuts is a bit like promising voters an endless supply of beer without mentioning the attendant love handles. In neither case does it take account of the heavily back-loaded costs. But, of course, it's the prospect of lower benefits, not privatization per se, that gives Social Security its "third-rail" reputation. Just ask the 26 House Republicans looking for work in November of 1982, six months after Ronald Reagan proposed cutting Social Security benefits by $40 billion over three years--and Democrats wrapped it around their necks. (Privatization wasn't on many people's radar screens back in the early '80s.) Republicans argue that, thanks to the dramatic rise of stock ownership since 1982, the landscape for privatization has improved. There may be some truth to that. But, in other ways, the landscape has gotten worse. A recent Gallup poll found that people making $30,000 to $50,000 per year oppose privatization by 19 points; people making more than $75,000 support it, though only 49 to 47 percent. That difference in the margin is important; it suggests working-class people oppose privatization much more passionately than affluent voters support it. And that would make sense. An affluent voter knows he's going to retire in relative comfort whether or not Social Security is privatized; for a voter who sees Social Security as his main source of retirement income, the prospect of exchanging private accounts for benefit cuts is pretty alarming. Recall here the political price congressional Republicans paid when they merely flirted with "slowing the growth" of Medicare in the mid-'90s. Put it all together, and it seems possible, even likely, that the practical effect of Social Security privatization would be to reverse the now-familiar trend of working-class voters ranking social issues above economics--a trend essential for maintaining a Republican majority in Congress. But don't take my word for it. Just look at the House Republicans who have expressed reservations about privatization either this year or in the past. (The blogger Joshua Micah Marshall has placed most of them on a list he dubs the "conscience caucus.") By my count, roughly half of the more than two-dozen skeptics represent large working-class areas. Among them are Candice Miller, whose district includes Macomb County, Michigan (home of the original "Reagan Democrats"); Mark Green, Geoff Davis, and Shelley Moore Capito, who represent important blue-collar constituencies in Wisconsin, Kentucky, and West Virginia; and Mike Rogers, who hails from an economically marginal district in Alabama. Perhaps the most illuminating example is a freshman Republican from Louisiana named Charles Boustany. Boustany's district boasts a large conservative Catholic population that tilts rightward on social issues. But it has traditionally leaned populist on economic issues; his predecessor, the four- term Democrat Chris John, often voted the protectionist line on trade. On the campaign trail in 2004, Boustany played up his opposition to abortion and gay marriage and to cutting Social Security. Later he laid out four "principles" on the issue: no privatization, no raising the retirement age, no benefit cuts, and no payroll tax increases. People like Boustany may be only the tip of the iceberg. A 2001 study by the National Committee for an Effective Congress found that, of the 88 congressional districts that Republicans won from Democrats between 1994 and 2000, 59 had incomes below the national average. Among the 46 seats that Democrats won from Republicans, 29 had incomes above the national average. If Republicans move ahead with privatization, we're likely to see Democrats win back a big chunk of the voters who abandoned them in the '90s--the kinds of voters who live in Boustany's district--without losing many of the affluent voters they've picked up. (Marshall's "fainthearted faction"--Democrats sympathetic to privatization--only contains five House members.) Why Bush would want to risk this kind of realignment is beyond me. But, then, hypothetical Republican senators don't get a say in these matters.

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