Bush's Reluctant Business Allies

Corporate lobbyists are being told to back the Social Security crusade -- or else

Last Jan. 31, just days before George W. Bush's State of the Union address, 60 top corporate lobbyists trudged through Washington's frozen streets to the headquarters of the Business Roundtable for an Administration briefing on second-term priorities. At the head of a long conference table sat Special Assistant to the President Mike Meece, flanked by officials from the departments of State, Treasury, Labor, Health & Human Services, and Commerce, as well as from the U.S. Trade Representative's Office.

But instead of a friendly give-and-take about legislation of mutual interest, the capital's lobbying elite got a one-topic lecture on the White House's overarching priority: Social Security reform. "What about the energy bill? Is it going to pass?" one impatient oil industry rep interjected, according to a source who was there. "Depends on whether the energy bill helps get Social Security," came a wisecrack from the back of the room.

By the time the pep rally was over, participants say one point had been hammered home to Washington's business lobby: Get in step with the drive to reform Social Security. The implication was that if the overhaul fails to pass Congress, a lame-duck Bush would be too weakened to help with the passage of programs Big Business cares most about -- such as sweeping tort reform, repeal of the estate tax, and a pro-production energy bill. "A loss means his clout is diminished on anything but foreign policy and national security issues, and every domestic initiative will evaporate," warns one top Republican strategist.

Weeks later an additional must-get was added to the lobbyists' assignment: congressional passage of the Central America Free Trade Agreement (CAFTA), another in a string of tiny trade pacts that the Administration has used largely to reward friendly allies in the war on terrorism. "We've been told by the White House that we have to put up a full-court press on CAFTA or else they won't do anything for us," says the head of one large trade association. "This is one of the more coercive and controlling Administrations ever."

Like Social Security, public support for CAFTA remains tepid at best in Congress. While the White House has been vague about a deadline for a Social Security vote, the Administration insists on chalking up a CAFTA victory before Memorial Day even though, by most estimates, the deal is 40 votes short in the House and is facing skepticism in the Senate. "You can't have a conversation with anyone in the Administration without first saying that Social Security is your top priority and that you intend to work for CAFTA. Then you can talk about your own issue," says one lobbyist for a computer software and services company.

A bigger problem, business lobbyists say, is that the Social Security debate could tie up the Senate for weeks during the critical summer and fall periods when most legislation actually gets passed. Business groups point to declining public support for President Bush's proposals on Social Security, even as he wraps up a 60-stop campaign to sell his ideas.

On Feb. 24 business lobbyists were called to the White House and given their final marching orders by White House Deputy Chief of Staff Karl Rove. A business umbrella organization made up of trade associations, the Coalition for the Modernization & Protection of America's Social Security (coMPASS), would raise $20 million for a campaign on behalf of personal Social Security accounts. A second group originally founded in 2002, Alliance for Worker Retirement Security (AWRS), which counts companies such as Pfizer (PFE ), Hewlett-Packard, (HPQ ) and UBS PaineWebber (UBS ) among its 46 members, would lobby Congress directly.

Social Security reform has been a tough slog for Washington's business lobby, normally more at home discussing golf outings than actuarial tables. Two securities firms, Waddell & Reed Financial Inc. (WDR ) and Edward Jones, withdrew from AWRS and the campaign after union pension-fund trustees threatened to take their business elsewhere. To forestall further defections, AWRS pulled its membership list from its Web site.

Exactly how many businesses are behind the corporate campaign for Social Security reform isn't clear. CoMPASS, for example, lists the Camden-King Bay (Ga.) Area Chamber of Commerce as one of its 160 members, but its chairman, Hal Weathers, insists that his group didn't join the coalition. "We've never endorsed any part of Social Security reform. I have no idea how we came to be listed," he told BusinessWeek.

The two umbrella groups have close ties to the White House and the Republican National Committee, which hosts a weekly meeting of business lobbyists working on Social Security at its headquarters on Capitol Hill. Charles P. Blahous III, the White House's Social Security coordinator, is a former executive director of AWRS. His successor, Derrick A. Max, also acts as executive director of CoMPASS.

Max says most of the business donations behind the Social Security push come from manufacturers. He plays down the interest or involvement of Wall Street, saying the amount of money involved in personal accounts isn't large enough to get securities firms excited. According to Max, AWRS will spend $500,000 on ads directed at Congress this year, while CoMPASS will mount an $18 million grassroots organizing effort. He predicts an August victory for private accounts.

One lobbyist representing a high-tech company says he has studiously avoided being drawn into the Social Security battle. "At the end of the year," he says, "my boss is not going to judge my performance based on whether the Social Security bill passes." Maybe so, but as the White House has made clear, business will be judged on how well it delivers the vote. And Rove & Co. are definitely taking names.

By Paul Magnusson in Washington

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