Magazine article The American Prospect

Bush's Bridge Too Far: The Republicans May Have Wall-to-Wall Control, but the Politics of Privatization Favors the Democrats

Magazine article The American Prospect

Bush's Bridge Too Far: The Republicans May Have Wall-to-Wall Control, but the Politics of Privatization Favors the Democrats

Article excerpt

THE EPIC SOCIAL SECURITY BATTLE OF 2005 WILL boil down to two questions: which side will do a more effective job getting its message out to voters, and which party can enforce the tighter discipline in Congress. Seemingly, the circumstances favor the Republicans, who have the bully pulpit of the White House, almost infinite financial resources from corporate and ideological allies, and majorities in both chambers. But Social Security privatization is such a fiscal stretch that any of the several ways of bringing it about must alienate one Republican faction or another. It remains to be seen whether the Bush White House can bridge these schisms.

Among Democrats, there is strong party unity in the House. The biggest risk is the defection of several wavering centrist senators. These legislators view themselves as nontraditional, post-New Deal Democrats, practical problem solvers, and good bipartisans. The short list includes Senators Tom Carper, Kent Conrad, Ben Nelson, Joe Lieberman, Blanche Lincoln, and Evan Bayh. It takes 41 votes to sustain a filibuster, and the Democrats have only 45 senators, so even a handful of defections would be fatal. So far, Max Baucus, the ranking Democrat on the Senate Finance Committee and usually the most worrisome defector on such issues, is holding fast.

Republican Senator Lindsey Graham of South Carolina has been actively courting these and other Democratic senators. He even succeeded in getting Conrad to write a joint op-ed piece in USA Today on December 22, implicitly opening the door to privatization. The two senators wrote, "To address Social Security's funding challenges, all options should be on the table for discussion."

But the problem with this premise is that privatization per se makes Social Security's finances significantly worse. And that is the rock on which the Republican privatization coalition may founder.

The Bush White House and key GOP legislators are even divided over whether the White House should send legislation to the Hill or let Congress take the lead. Key House Republicans feel they would have more cover to vote for risky, unpopular changes if it's the president's bill. On the Senate side, Chuck Grassley, chairman of the Finance Committee, like Graham, would prefer to have the White House send Congress a set of principles and let the leadership work out the actual legislation in order to attract some crucial Democratic support. No bill is expected until late February.

FOR PRIVATIZERS, THE BIG PROBLEM IS WHERE TO get the money. At bottom, there are only three possible ways.

1. Borrow it. This is the most expedient approach, but plunging the federal budget significantly deeper into debt alienates Wall Street Republicans as well as fiscally responsible ones in the heartland. The prospect of $2 trillion in additional borrowing, unlike the rest of the privatization issue, is easy to grasp and has generated lots of unfavorable editorial and news coverage. It also gives the lie to the idea that privatization is any kind of solution to Social Security's present modest shortfall. Graham, as well as several House Republican deficit hawks, opposes borrowing that much additional money. A widely circulated White House memo by Peter Wehner, an aide to Karl Rove, warned of "an economic chain-reaction: the markets go south, interest rates go up, and the economy stalls out."

2. Cut Benefits. In early January, word leaked out that the White House was very likely to include in its bill a change in the annual cost-of-living adjustment. Though seemingly an innocent technical change from "wage indexing" to "price indexing;' the result would be a drastic cut in benefits over time--not just for those who chose to put some payroll-tax receipts into individual accounts but for all retirees who stayed with traditional Social Security.

Under present law, once you retire, your benefits are adjusted every year for inflation. …

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