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What does "Winning" on Social Security Mean, for Bush??

I read with great interest the leaked e-mail from White House "Office of Strategic Initiatives" director Peter Wehner (and also this profile of Wehner as the "resident thinker" of the White House -- a job that might be fun to have someday, if there is ever a more, um, congenial president, except for the part about getting to the office by 5:30 a.m.)

It's not a totally awful memo. Of course it depends on the two grand fictions they have created: the "infinite horizon" that allows them to claim "$10 trillion in unfunded liabilities" (how they stop at $10 trillion is a mystery to me -- infinity is infinity) and the idea that calculating initial benefits based on earnings history adjusted for wage growth is some kind of scam. There's some ridiculous Gingrichian pseudo-philosophical bombast, but on the whole, it's a perfectly responsible memo if you believe in its premises. It's a desperate plea to the free-lunch crowd of conservatives that if they want private accounts, they're going to have to be willing to pay for them somehow. One wishes that such a memo had gone out in advance of the first tax cut, or the second, or the third, or the Medicare bill, or the Iraq invasion...

But here's the passage that's most interesting to me:

The debate about Social Security is going to be a monumental clash of ideas -- and it's important for the conservative movement that we win both the battle of ideas and the legislation that will give those ideas life. The Democrat Party leadership, the AARP, and many others will go after Social Security reform hammer and tongs. ... But Democrats and liberals are in a precarious position; they are attempting to block reform to a system that almost every serious-minded person concedes needs it. They are in a position of arguing against modernizing a system created almost four generations ago. Increasingly the Democrat Party is the party of obstruction and opposition. It is the Party of the Past.

For the first time in six decades, the Social Security battle is one we can win -- and in doing so, we can help transform the political and philosophical landscape of the country.

I think that that passage, for all its bullshit, shows that Wehner is really arguing with a faction that believes it can win "the battle of ideas" without winning the legislation. That's a very important thing to understand. Josh Marshall, Paul Krugman and others have aggressively driven home the point that the goal of the right here is to destroy Social Security. And there is no doubt that that is what the result would be if what we assume to be the White House plan became law. But while there is a faction of the right that would like to destroy Social Security, there is obviously also a considerable faction that wants only to destroy the political advantage that Democrats and liberals still get from Social Security. That's the faction that Wehner is addressing, and he's bascially arguing -- feebly, I think -- that they can't put up a merely symbolic fight, but have to actually win the legislation.

For the free-lunch faction, "winning" on Social Security is all defined in the last two sentences of the first paragraph of Wehner's memo. It involves putting the Democrats in a position where they do nothing but defend an old and boring program for most of the year. Republicans will appear to be the party of innovation, change, economic opportunity, while Democrats are the party of security, limited choices, old programs and old people. Democrats won't control the agenda, they'll just spend the year being against something, and they won't be speaking to the actual economic anxieties of younger people or working-age adults, because Social Security is a very limited response to those anxieties.

In this scenario, losing the legislation isn't the end of the world, as long as it's mostly Democrats in opposition and mostly Republicans in support. This is the scenario Newt Gingrich is promoting when he argues that "the president should go for a very large account because it's going to take exactly the same amount of energy to get a large account as a small one, and you get a dramatically bigger reward with a large account." The free lunch promised in this scenario -- very large accounts accompanied by no changes to benefits or increases in taxes -- has only one downside: it would cause an Argentine-style economic collapse. But that's only a problem if it actually passes.

As Wehner acknowledges, this takes a very delicate dance. You can't pull it off unless you at least seem to be serious about winning "both the battle of ideas and the legislation." If the legislation can't get past the first sniff test -- and so far, thanks to the blogs, even Bush's facile sound bites aren't making it -- then you can't get to the "momentous clash of ideas" that they are looking for. Wehner ends his e-mail by invoking Senator Moynihan's words from the report of the 2001 Social Security Commission -- not a wisely chosen example, I think, since that commission did such a half-assed job that it could not even get to the starting gate for the "clash of ideas."

If you understand that at least one faction of the right -- and perhaps all of it -- is a hell of a lot more interested in playing a game that keeps Democrats on the defensive all year than in actually changing Social Security, then I think you can understand why some Democrats are still wary of this whole debate. That's why I'm not as distressed about the "fainthearted faction" as Marshall is. Those Democrats who want to find a place to stand other than total opposition to changing Social Security know that there are two games being played here, and they want to win both. Stopping the legislation will be the easy part. It's only a little premature to say that that's already been won. (When the White House is forced to turn things over to a "bipartisan group of Senators" to come up with something to salvage the plan, that's usually the desperate end game, as it was for the Clinton health plan in 1994 but at least it took a respectable six months to get there.) But the battle of ideas requires a little more creativity. There's a lot out there, from the Aspire Act to the Rahm Emanuel plan. I think the next step is for Democrats to get behind one of these things, grab the mantle of the "opportunity society," and push toward the day when the White House has to respond to their agenda. It's not as far off as it seems.

Posted by Mark Schmitt on January 7, 2005 | Permalink


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One thing I don't understand, Mark. It relates to your lack of distress about Josh Marshall's "Fainthearted Faction."

In what scenerio aren't the Democrats in Congress playing defense all year, next year, and most likely until 2009?

Posted by: Mk | Jan 8, 2005 10:30:31 PM

"(how they stop at $10 trillion is a mystery to me -- infinity is infinity)"

I assume that they are saying that the current value of the social security liability is $10 trillion. That is, if I put $10 trillion into a bank account today, the interest generated would be enough to pay for social security for all time.

This is a common method of comparing cash flows (at least it was 10 years ago when I took an engineering economics class). Assuming a certain interest rate, compute the size of the bank accounts that would be necessary to pay out the cash flows. These are the current values of the cash flows and can be used to compare them. Of course, these involve lots of assumptions, etc.

Posted by: Mike | Jan 9, 2005 2:15:12 AM

Americans' Future In One Plan
I know that most of you are busy to read my book. As I explained previously that Taman Health Plan (www.trafford.com) takes care of all the health care, Medicare, Medicaid and social security. It will threw away all bureaucracies out of window. Let me explain shortly how it works:
1- there will be no more health care insurance companies, no Medicare, Medicaid or Social Security. My plan will take care of all.
2- Basically will be only one Big Health care organization (Taman Health Plan or THP).
3- The center of the plan will be in Washington while the health departments in every state will be the branches.
4- One organized body will be taking care of the Health Care and long term care of all Americans replacing 1500 insurance companies, Medicare, Medicaid and Social Security.
5- This will allow us to provide a uniform service to all Americans every where in both inpatients, outpatients and long term care.
6- When you go to any Duncan Donuts branch your expectation is to have a fresh coffee and a donut with no long wait. We will try to provide a similar predictable service everywhere as Duncan Donuts. With having only one body will be able to do that.
7- The Capital of the plan will be the funds of Medicare and Social Security (before the bankruptcy of both systems). The maintenance will be a yearly tax from each of us (will replace our yearly social security and Medicare holding taxes). A percent of each of us go to his account cards and a percent go to THP itself. The money of the plan will be invested by the investing sector of the plan very likely in Wall Street.
8- We will have 5 ATM cards with a corresponding accounts. Card A (children), Card B (working group 18-65years old), Card C (Medicare card >65 years old), Card D (Medicaid card), Card E ( expensive medicines or investigations).We will have the health cards devoted to health care and long term care. Thus we will have: health cards, banks with accounts to each card and credit card machines in outpatients care and hotelling part of hospitals and nursing homes.
9- Cards will pay for the outpatient medical care including doctors, emergency room visits, investigations, medical supplies, pharmacies and the hotelling part of hospitals and nursing homes. While the medical part of hospitals and nursing homes will be budget by the plan itself.
10- In the first year of issuing cards: Card B and C (most of people) will have a bonus it could be a percent of their Medicare and social security withholding (70 % or so). We will try to be fair to every one but every one has to now that most of us already lost a lot of money with the HMO's. For next year new comers to card B at age of 18 when first issued will have a bonus of 50,000 dollars. It will change every year by a percent a according to inflation.
11- every one of us will get a statement every one or two months of his card account. Card B account will phase in card C at the age of 65. If card C account is vanished Card D will be issued (hoteling part will be less luxurious). Only few of Card B will have card D if there account vanish most likely those with severe medical problems.
12- So basically most of us will have our own account Card B then card C. Say you are 45 and you have now in your account $ 200,000 you can take one or more years out of work, you Can retire early if you like and with your card you will control all the medical services and its prices.
13- With this card system we will end all bureaucracies of health care, Medicare and Medicaid. No one will stand between you and any medical or long term service (only your card). Shop around with you card, have early health care security and responsibility and invest in your health.
14- We will not need Social Security since after age of 65 we will be able to use our cards to stay in any nursing home each according to his account in card C or card D. So when you invest well in your health you will be able to enjoy a nicer nursing home when you get old (actually it will be also a kind of tourism).
15- The money in cards do not get inherited when we pass away but recycle in the plan to support the next generations.
16- The plan will have very positive effects not only in simplifying our care, save a lot of waste in health care, give early health care security and responsibility to Americans it will also have a positive effect on the economy, saving billions of dollars to Americans, creating jobs in health care and cutting outsourcing.
Very likely, you figure it by now I could have sold the plan to one of the presidential candidate before the 2004 election for millions of dollars (they already spent 2 billion dollars). It is my gift to the American people (it will help the healing process of the two worlds America and the Muslim/Arabs).

Maged Taman.

Posted by: maged taman | Feb 21, 2005 11:30:06 AM