Since taking office, George W. Bush has systematically worked his way through his campaign checklist, doing exactly what he promised on issues from tax cuts to school reform. Now, he's trying to budge the big boulder of American politics: Social Security. His plan: allow workers to divert a portion of payroll taxes into "personal investment accounts."
The timing couldn't seem worse. The market is in a swoon, workers' 401(k) accounts are in the red, and Democrats are crowing that the downturn illustrates why folks shouldn't risk their retirement on stock market roulette. Still, the Bushies are convinced that public confidence in Social Security privatization has not been shaken by the slump. Bush economic adviser Lawrence B. Lindsey says that "a big reason for the popularity of personal accounts is [that they allow for portfolio] diversification."
THE GOOD NEWS. Indeed, a new BusinessWeek/Harris Poll lends credence to the White House view. By 56% to 39%, Americans favor a partial privatization of Social Security. Among two key voting blocs, the news is good for Bush, with 59% of independents and 60% of workers earning $35,000 to $50,000 a year endorsing the accounts. If anything, the slump has solidified public opinion: 38% say the downturn has made them more likely to support privatization, 35% are more strongly opposed, and 20% say it has made no difference in their thinking, according to the July 20-25 poll of 1,022 adults.
Still, private accounts are not a sure bet for the GOP in 2002. While they are popular in the already Republican South, there is strong opposition from low-income elderly in the industrial Midwest and from the West Coast, where the tech collapse has spooked investors.
What's more, a huge generation gap could come back to bite the GOP. While 70% of Americans under age 25 support the concept, just 40% of seniors do. Historically, the over-65 set votes with much greater regularity than do the young. "The intensity is with the [Social Security] recipients. It's not with the young," concedes National Republican Congressional Committee Chairman Thomas M. Davis III (R-Va.). This could help Democrats in states with concentrations of elderly voters, including Florida, Arizona, Pennsylvania, and Iowa.
But Democrats, who have never shied away from a scare-the-elderly approach, could overplay their hand. If they try to convince seniors that Bush's plan will leave them bankrupt and bereft, they may alienate swing voters. Argues Will Marshall of the centrist Democrats' Progressive Policy Institute: "It's a serious mistake for Democrats to look like a reactionary party opposing a retirement policy that empowers people to...build wealth."
That's not likely to stop the Dems from trying. Al Gore's support among seniors surged in the closing weeks of the 2000 campaign amid a Democratic ad blitz about Bush's risky scheme for Social Security. "The 70-plus vote ended up with Gore after being with Bush for a year," says independent pollster John Zogby.
Undeterred, the Bushies intend to launch an all-out PR offensive in the fall after a handpicked Presidential commission led by AOL Time Warner co-COO Richard D. Parsons and former New York Senator Daniel Patrick Moynihan formally endorses Bush's approach. The stakes are huge. Both parties know that toying with Social Security is like investing in high tech: a big risk for a potentially huge payoff. U.S. Army Secretary Thomas E. White figured that the Pentagon could save up to $30 billion a year by outsourcing services such as day care and groceries on military bases. The savings could then bankroll new weapons.
A top target: privatizing utilities. Trouble is, nobody wants the business. White's former employer, Enron Corp., was the only bidder for such a contract with Fort Hamilton in New York. A spokeswoman, citing regulatory snafus, says Enron isn't looking for any similar deals. Unless the process is overhauled, White may have to look elsewhere for savings. Dick Cheney's job-approval rating has dipped to a record low of 39% positive and 52% negative, according to a July 20-25 Harris Poll. Usually, the Veep's popularity is tied to his boss's. Yet while Cheney dropped 10 points in a month, Bush's favorable rating rose by six points, to 56%. Cheney's problem: His outspoken conservatism hurts him with the center. Liberals continue to wage statistical war on the big tax cut of 2001, which they blame for the vanishing federal surplus. One think tank contends that the tax cut will hobble long-term efforts to keep Social Security solvent. A new study by the Center on Budget and Policy Priorities calculates that the tax cut will drain $7.7 trillion (in current dollars) from federal coffers through 2075. That's more than twice the projected $3.2 trillion Social Security shortfall over the same period.