The Democrats have been derided for failing to offer an alternative to President Bush's Social Security reform plan, but Brendan Miniter relates House Democratic Whip Steny Hoyer's take on the Democrats' manuvering and how they hope to wrestle even more power away from the American electorate.
First what ideas do Democrats have for reforming Social Security? Mr. Hoyer wouldn't put a clear plan on the table, saying that in this fight the side that puts out a detailed plan first will likely lose. President Bush is "tanking" on this issue, he said, and Democrats aren't going to help him out by giving Americans something else to focus on and pick apart. He did say that Mr. Bush should consider as a model for compromise the deal President Reagan struck in 1983 to raise the retirement age. He also noted that there are several other options, chief among them raising the "wage cap" (so that Social Security taxes would be due on income above $90,000) and repealing Mr. Bush's tax cuts for the so-called wealthy.
Mr. Hoyer also made a concession first reported last week in our premium e-mail newsletter Political Diary (subscribe here). The No. 2 Democrat in the House said that he is in favor of private accounts as an "add-on" to Social Security. He also said that Social Security trustees--one of whom is Labor Secretary Elaine Chao--should be given the authority to invest Social Security funds in the stock market and other high-yield financial instruments. Instead of personal accounts, Mr. Hoyer is envisioning public accounts controlled by the government and used to raise funds for Social Security, much the way Calpers invests funds to pay for California state employee pensions. More on this in a minute. ...
The danger in losing the Social Security fight this year isn't that President Bush's reform agenda will die along with it, but rather that it will live on. President Clinton had to be brought to welfare reform kicking and screaming. But President Hillary or another Democrat will likely be more shrewd and embrace reform. Doing so would allow Democrats to infuse those reforms with Mr. Hoyer's ideas of using the government to invest funds in the stock market. We'll likely get a mix of higher taxes, reduced benefits for some, and "diversified risk" with publicly invested money. It will sound like a middle-of-the-road compromise. But if it comes to pass, it will give the secretary of labor and the other trustees a new tool to influence financial markets for political reasons.
Republicans didn't have to let this genie out of the bottle. But they were sent to Washington to make fundamental changes to the welfare state, and now they have a limited time to get their ownership society wish. If they miss this opportunity, it may turn out that all Republicans will have succeeded at doing is setting the stage for a massive expansion of the federal government.
Add-on accounts are a scam "fix" that wlll do nothing but increase the reach of Social Security without solving the fundamental problem of too many recipients and too few workers. The very last thing we need is goverment bureaucrats manipulating the stock market with vast Social Security money.