WASHINGTON — After an election in which scores of candidates from both parties pledged to "save Social Security," everyone in Washington appears eager to tackle the issue of reforming the nation's most popular government program. The House Ways and Means Committee could not wait until the start of the new Congress, holding a hearing two weeks ago, and the White House will host a national Social Security conference Dec. 8-9. So far, this has been a polite discussion, with appeals for bipartisanship.
Don't believe it. Behind the scenes, both political parties and powerful interest groups are girding for an epic battle. At the center of the brawl will be the issue of partly "privatizing" the system: diverting a portion of payroll taxes into personal-investment accounts, invested in stocks or other securities, to provide retirement income. Republican leaders appear to be committed to the idea as an essential component of a reform plan, though few had the courage to mention this during the recent campaigns. With a few exceptions, Democrats oppose privatization on the grounds that it introduces too much risk into a system dedicated to providing a legally guaranteed core-retirement income and requires deep cuts in benefits.
If Republicans do make a strong push for Social Security privatization, it will represent an enormous political miscalculation. In fact, the emerging debate over privatization is looking a lot like the 1993-94 health-care debate, but with the party labels reversed.
Then, health-care reform was widely considered inevitable, and the only question was how far-reaching it would be, as pundits now say of privatization. Then, Democrats were sure they had an easy political winner, but they radically underestimated the difficulty of making big changes in programs important to Americans' daily lives. Now, the GOP is guilty of the same conceit. The parallel may well continue to the denouement: a crushing legislative defeat, perhaps without even the courtesy of a formal vote, that brings political ruin on its sponsors.
There are four main factors that combine to make privatization improbable, if not impossible: the program, the pain, the particulars and the politics.
The program. Conservatives fundamentally misunderstand public sentiment toward the Social Security program, mistaking anxiety for disenchantment. Working Americans are worried about the system's future, with polls showing that only four in 10 expect to receive substantial benefits at retirement. Privatizers take this to mean, almost axiomatically, support for radical change. But the public has a more straightforward reaction, saying, by two to one, that Congress should "fix Social Security by strengthening its financial condition," rather than "replace Social Security by allowing people to invest [payroll] contributions in the stock market."
Republicans seem to think this a replay of the welfare-reform debate, failing to appreciate that Social Security is a vastly more popular program. A better analogy is the debate over national defense in the late 1970s. At that time, the public was concerned about military preparedness and feared the armed forces were not up to meeting the challenges they faced. The GOP took advantage by calling for more defense funding, just what the public wanted. Now that it is Social Security that faces trouble, the Republicans offer a far different solution, the equivalent, in military terms, of saying, "We'll let the armed services decline, and give every family its own M-16." But the public's view remains the same: Give this vitally important program the resources necessary to get the job done.
If anything, poll results that consistently show strong and cross-generational support for Social Security may even understate Americans' commitment to the system. After 60 years of never missing a payday, we all take the system for granted. People often don't realize how much they value something until they face the prospect of losing it. The same will be true of Social Security and its central promise of a guaranteed, risk-free baseline retirement income.
The pain. Advocates have sold the idea of private-investment accounts as an alternative to painful benefit cuts. This notion will not stand up to even minimal scrutiny as the debate unfolds. The most credible privatization plan advanced thus far, from the National Commission on Retirement Policy, would reduce guaranteed monthly benefits by 30% or more, raise the retirement age to 70 by 2029 and cut disability payments. These are extremely unpopular ideas, and polls find overwhelming public rejection of such a plan.