Wednesday, November 08, 2006

A Contrary Opinion

Disappointed as I am with the results of the voting last night, and contrary to what many others have said, I think the voters have set the table in just about the optimal way for entitlement reform. (A caveat: I'm not saying it will happen, I'm just saying that if it doesn't happen now, it may never).

We have seen very clearly that the Democrats would not work with the President on a plan to create private accounts in Social Security. Because of that opposition, the President's plan was seen as too radical and risky, and the GOP could not even consolidate its own caucus. And the Democrats had the best of both worlds, because they could attack the GOP without being accountable for the results.

Well, the President's plan is clearly DOA. But Social Security reform may not be. The President wants a legacy. He wants Social Security reform. The Democrats - at least in theory - do not want the program to go bankrupt. Plus, because the Democrats seem to control both the House and the Senate, they have accountability for the result, and they have a 'seat at the table.'

Well, what about Bill Clinton's Social Security reform plan as a starting point for discussion? He laid it out in his 1999 State of the Union. Some key points have changed since then (notably, there is no longer an anticipated budget surplus), but Republicans might be able to build on the idea of:

  • Investing a portion of Social Security revenues in the private sector; and,
  • Creating Universal Savings Accounts

I don't know if the Democrats can be convinced to fund Clinton's proposals with Social Security revenues (as opposed to the budget surplus which Clinton wanted to use), and I don't know if the President can move back from personal private accounts to government-directed investment. I know that conservatives used a lot of ink trashing the idea of having the government invest tens and hundreds of billions of dollars in the private market (and those criticisms remain valid). But I wonder if there is not a middle ground to be found.

After all, the President is clearly not going to get exactly what he wants. The Democrats are clearly not going to get exactly what they want. The program goes into the red in about ten years. And if reform does not happen in this Congress, the next President won't be foolish enough to touch it in his or her first term. That means that if it is not addressed in 2007, it won't be addressed until 2015 at the earliest. And that's right around the time that Social Security ceases to be a subsidy for general federal spending, and instead becomes a drain on the general budget.

As I have said before, Democrats claim to want to save the program. Well, they won't get a better chance. If they wait until after Bush, then it's almost inevitable that the solution will be more politically painful, and more damaging to the Social Security recipients that the Democrats claim to want to protect.

And by the way, do Hillary Clinton, Evan Bayh, John McCain, Sam Brownback, John Kerry, Barack Obama, Chuck Hagel, Russ Feingold, Chris Dodd, Joe Biden, and Duncan Hunter (am I missing anyone?) want to run for President in an environment where Social Security is a looming problem, or would they rather have the issue 'off the table' during the campaign?

As I say, the table is set.

Back to the top.


Bill Woessner said...

I pray every night that the government will get serious about Social Security reform. Social Security is an enormous drain on people's personal finances (not to mention the economy as a whole).

However, I must say that I don't share your optimism that anything will be done. Social Security has been elevated to such a sacred status that people are no longer able to discuss it rationally. The Social Security Administration could be burning our FICA dollars and people would still bow down to worship the Golden Calf.

I wasn't crazy about the President's plan, but I thought it was better than the current situation. I think a big part of why it failed is that there was no education. We need to get out there and educate people on why the current system is defunct. I'm reminded of an episode of "The West Wing" where Toby has to explain to a staffer that Social Security is a pay-as-you-go system, not a pension plan. I bet there are plenty of people out there who still don't know that.

The Editor at IP said...

I believe I agree with all of that. And I hope that Pelosi, Reid, and Bush seize this opportunity. The biggest threat to such cooperation is the possibility that they will decide to put politics ahead of policy.

It's not like that happens all that often...

Charlie said...

Senator Hagel put forth a plan for social security reform in 2005, but as we saw the issue died.