The Democrats' Maginot Line
For several decades, the Democrats have viewed their opposition to any significant changes in the Social Security system as an impregnable defensive position--sort of like France's Maginot Line. I wonder, though, whether times have changed sufficiently that President Bush might be able to outflank the Dems and drive them out of their bunkers with surprising ease.
Here's why I say that: So far, the Democratic leadership in Congress has taken the position that they need not come up with a proposal for Social Security reform. Patrick O'Connor reported yesterday in the Hill:
House and Senate Democrats have decided against introducing an alternative Social Security reform plan yet, preferring instead to focus attention and criticism on President Bush’s proposals, according to a number of senior Democratic aides.
Today's Washington Times notes that, while the leadership is still holding the line, a number of individual Democratic Congressmen and Senators have floated various proposals for reform.
There are two basic reasons, I think, why the Dems' preferred strategy of stonewalling and scare-mongering might not work. The first is that they, as much as Republicans, have been issuing warnings about Social Security for years. Americans under 40, especially, have grown up with predictions of Social Security insolvency, and are not hard to persuade that something must be done. In this regard, the effort by many in the mainstream media to help the Democrats by emphasizing the distinction between "crisis"--President Bush's word--and "serious problems"--the Democrats' words--has been misguided. The belief that Social Security has "serious problems" is hardly a ground for inaction, and in his State of the Union speech, President Bush happily abandoned "crisis" and used milder formulas.
So the Democrats might find that there is less patience with a "do nothing" approach than they expect.
The second problem for the Democrats, I believe, is that the only proposal for real change in the system is the President's. Allowing employees to save their own money, own their own accounts, and pass their accumulated wealth on to their heirs has powerful appeal. Everything else--tinkering with the retirement age, extending the income level on which the Social Security tax applies, etc.--is merely accounting. And distasteful accounting at that, since at bottom, all such proposals translate into higher taxes or lower benefits.
The Democrats will try to argue that there is a disconnect between the program's fiscal problems and the President's proposed solution, individual accounts, which will worsen, not improve, the fiscal picture. In the short term, they're right. But in the (only slightly) longer term, we are moving rapidly toward a demographic environment in which there will be only two workers for each retiree. At that point, a "pay as you go" system that relies on current income to support retirees will be untenable. Either the two workers will pay exorbitant taxes, or the one retiree will get a very meagre pension. There is no way out of this dilemma, except replacing "pay as you go"--a euphemism for income transfer payments--with a savings program. If each worker saves for his or her own retirement, the ratio between workers and retirees becomes immaterial.
And nearly everyone recognizes that a savings program is inherently superior to an income transfer program. Virtually anyone would rather live off his own savings than a dole from the goverment. Indeed, Franklin Roosevelt never intended the income transfer system to continue indefinitely; he recognized that it was necessary in the early stages of the program to help those who had not accumulated savings, but always intended that it would be replaced or supplemented in due course with a savings program. Probably no one other than a few hard-core leftists, who like to see people dependent on the government, and Democratic politicians actually prefers an income transfer approach to savings.
So, once again, President Bush may have put the Democrats in a position where the only proposal on the table with any power to fire the voters' imaginations is his, while the Democrats are reduced to carping from the sidelines. If that's the way the voters see it, the Democrats might find themselves abandoning their Maginot Line much sooner and in much greater disarray than they had intended.
