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How a Victorious Bush Fumbled Plan to
Revamp Social Security
By Jackie Calmes, The Wall Street Journal
October 20, 2005
Through two campaigns, George W. Bush vowed to fix and partially privatize Social Security, the nation's most popular government program. This year, claiming a re-election mandate and enjoying a Congress controlled by his party, the president finally made his move.
Yet now even the president has acknowledged Social Security is dead for this year, his biggest domestic defeat to date. How could it have gone so wrong?
According to people on both sides of the battle over Social Security, Mr. Bush overestimated his postelection capital and underestimated his opposition. Embittered Democrats were even more vehemently opposed to any privatization than the White House imagined.
And the president's party faced deep divisions of its own. As a candidate, Mr. Bush had never spelled out his Social Security plans, except to suggest that carving out private accounts would solve the program's looming financial woes. When he acknowledged this year that they wouldn't, and that future benefits would need to be reduced, both the public and lawmakers recoiled.
The idea of letting workers divert some Social Security payroll taxes to personal retirement accounts is central to Mr. Bush's notion of an "ownership society" where Americans assume more responsibilities and risk. But Democrats, many Republicans and organizations such as the giant seniors group AARP adamantly oppose such accounts as a risk to Social Security, to the government's fiscal health and to future retirees who could become victims of market downturns.
The White House insists its Social Security strategy was correct. "Obviously we wish we were talking about the president signing legislation," says Mr. Bush's chief economic adviser and college friend, Allan Hubbard. "I can't -- we can't -- really identify where we went wrong in the approach, other than that we misjudged the Democrats, and particularly the leadership, and the AARP."
Unbowed, the president in a recent private meeting told supporters, "I intend to be the president who signs Social Security reform into law."
Yet even some of his closest allies believe the president can't prevail, given the opposition in both parties, and the swirl of other issues -- including rebuilding the Gulf Coast, Iraq, deficits and energy prices -- that now roil his administration. Asked how Mr. Bush could revive the plan, Iowa's Republican Sen. Charles Grassley replied: "Get the troops out of Iraq and get New Orleans rebuilt."
The Big Surprise
Nearly a year ago, the president surprised friends and foes by a pronouncement at his first postelection news conference. "We'll start on Social Security now," he said.
The problem was stark: As the ranks of retirees grow, proportionately fewer workers are contributing the payroll taxes that fund Social Security benefits. By 2017, the government projects, the program will begin running annual deficits.
Yet many Congressional Republicans had hoped he would push tax overhaul instead. Even Sen. Lindsey Graham of South Carolina, a key Republican advocate of private accounts, despaired. Mr. Bush "jumped out with a very big idea that he ran on, but he didn't lay the political groundwork in the Senate or the House," Mr. Graham recalls. "He ran on it. We didn't. He's not up for election again. We are."
Former Rep. Tim Penny, a conservative Democrat who had served on Mr. Bush's 2001 Social Security commission, heard the news on television in Waseca, Minn. Pro-account groups like his For Our Grandchildren would have liked "a little heads-up" to mobilize, he said. Supportive business groups scrambled to form the Coalition for the Modernization and Protection of America's Social Security, and hoped to raise about $20 million for ads and other activities. But the coalition would fall far short. Donors and activists had other priorities, like fighting for conservative judges.
Mr. Bush's words galvanized the opposition. They "set off an alarm," says Gerald McEntee, president of the American Federation of State, County and Municipal Employees. "We need to ramp up our infrastructure and find a new way of operating," he told Congress's Democratic leaders. Left unchecked, he warned them, Mr. Bush would not only "dismantle" Social Security, "he'd be invincible on other fights."
AFSCME quickly put up $1 million, added $250,000 later, and raised more from other unions. Top political strategists were hired to operate the new Americans United to Protect Social Security in downtown offices and 33 states.
Meanwhile, Sen. Harry Reid of Nevada, the new leader of the Senate Democrats, created a Capitol "war room" unlike any his party had mounted against Mr. Bush. Staffers coordinated with friends at Americans United. Whenever Mr. Bush spoke, Democrats had a response, and wherever he went, protestors were there.
A Bipartisan Solution?
In early December, the president invited both parties' congressional leaders -- 16 lawmakers, with staff -- to the White House. The real talks presumably would come later, with fewer people, in private. But this meeting didn't go well. There would be no others.
Mr. Bush said he hoped to work with them on a bipartisan solution. But the senior Democrat on the House Ways and Means Committee, New York Rep. Charles Rangel, said Democrats wouldn't discuss a solution to Social Security's looming financial woes as long as private accounts were on the table. Mr. Bush objected and said his 2001 commission had recommended such accounts, according to several participants.
"It wasn't a real commission," replied Montana Sen. Max Baucus. Mr. Bush had named only pro-accounts people to his panel.
The opposition of Mr. Baucus, the top Democrat on the Senate Finance Committee, was a bad sign. He had been a lead ally on tax cuts and Medicare changes. Days later he called to ask White House Chief of Staff Andrew Card to arrange a private chat with the president. Mr. Card refused -- "huffily," Mr. Baucus says. Mr. Card didn't respond to requests for comment.
Soon after, Mr. Reid put his friend Mr. Baucus in charge of the Democrats' opposition. While Republicans can ignore Democrats in the House, where the rules give them tight control, they often need some Democrats' votes in the closely divided Senate. The math is simple: Majority Republicans have 55 seats; it takes 60 votes to prevent fatal filibusters.
War with AARP
Support from the 36-million-member AARP had been crucial to Mr. Bush's 2003 achievement of a Medicare law adding prescription-drug benefits. The White House thought it had the group's agreement to a similar alliance on Social Security.
In late 2003, AARP had agreed to join administration appointees from the Social Security Administration in public forums about the program's problems as the retiree population grows, according to Bill Novelli, AARP's chief executive. But when the White House tried to add a business group favoring private accounts, AARP pulled out.
Days after Mr. Bush's inauguration, the dispute exploded. At the Ritz-Carlton Hotel near the White House, Mr. Novelli and policy director John Rother unveiled plans to denounce the accounts in AARP's costliest-ever campaign of media ads and grass-roots activities.
One nationally televised ad showed a house being bulldozed to fix a broken sink, as a voice asked, "Why dismantle Social Security when it can be fixed with just a few moderate changes?" Republicans who went home a few weeks later for constituents' meetings were confronted by protestors from AARP and liberal groups such as
MoveOn.org.
On Feb. 22, Mr. Rove and Mr. Hubbard invited Mr. Novelli to lunch at the White House. They charged that AARP had broken its word to work with the White House, and now it was scaring seniors. A second meeting March 7 was also fruitless. Tensions grew. When Mr. Bush in April visited a Social Security facility in West Virginia and dismissed the system's Treasury bonds stored there as worthless IOUs, Mr. Novelli says he called Mr. Hubbard and asked: "Who's scaring seniors now?"
Missing the Moderates
The day after he officially presented his Social Security proposal in the State of the Union address Feb. 2, the president set off on a two-day trip to begin rallying public support. But his itinerary -- North Dakota, Montana, Nebraska, Arkansas and Florida -- had an underlying message aimed at another audience: Senate Democrats from "red" states that had backed Mr. Bush for president.
Today that kickoff is viewed widely as a big blunder. Instead of privately wooing centrist Democrats whose support he badly needed, Mr. Bush appealed straight to their red-state constituents. That only stoked the enmity left by his 2002 and 2004 campaigning against moderate Democrats who had backed much of his first-term agenda.
The White House did include North Dakota's Democratic Sen. Kent Conrad on Air Force One to Fargo, along with a couple of Republican lawmakers. For months, Bush aides would count Mr. Conrad as a potential backer. Yet it wasn't until April 20 -- with Mr. Bush's proposal plainly in peril, and allies clamoring for the president to get personally engaged -- that the senator was invited to meet with Mr. Bush privately. The two mostly talked baseball, says Mr. Conrad, who otherwise declines to describe the meeting. But he told others afterward, "It was almost as if someone told him to do it, and he was just going through the motions."
The president isn't known to have spoken or met privately with any other Democrat, according to many Democrats, congressional Republicans and White House allies. Mr. Hubbard says Mr. Bush did meet one-on-one with other Democratic senators, but he declined to name them.
When Mr. Bush got to Omaha, Neb., waiting was Sen. Ben Nelson, perhaps his most reliable Democratic ally in the first term; the senator had been told of the event by a Nebraska Republican. Before 11,000 people, Mr. Bush called Mr. Nelson a Democrat "who is willing to put partisanship aside to focus on what's right for America."
In the limousine afterward, Mr. Nelson said he, Mr. Bush and several others mostly gabbed about University of Nebraska football, and the president agreed to quit calling him "Nellie" and to call him "Benator" instead. The president hasn't talked to Mr. Nelson since. Mr. Hubbard visited several times, Mr. Nelson says, but "if I was being negotiated with, I didn't know it."
"The president reached out individually to these Democrats and that speaks as much to his commitment to work together as any words," says White House spokesman Trent Duffy. "The senators did not respond with a similar level of commitment."
Sens. Nelson and Conrad were among several Democrats who privately met with Sen. Graham and a few Republicans, starting in January, in talks that gave the White House some hope of a bipartisan breakthrough. Finally, at an impasse, Mr. Nelson suggested a get-together with the president. Sen. Graham called Mr. Hubbard to propose an informal dinner, but the Bush adviser said it couldn't be arranged.
"It just didn't seem appropriate for the president to be talking without some firm proposal from the other side," Mr. Hubbard says.
Democrats' Rare Unity
As March approached, Senate Democrats heard that Mr. Bush was about to rev up his sputtering campaign with a "60 Stops in 60 Days" tour. Their leader, Mr. Reid, decided on a send-off.
He asked Democratic senators at their Tuesday lunch to sign a letter to Mr. Bush opposing private accounts. By Thursday, they had 42 signatures, more than enough to sustain a filibuster. The letter was made public, removing any doubts about Democrats' cohesion.
"They demagogued the issue as opposed to looking for solutions for the American people," Mr. Hubbard says. "And that was, to be perfectly honest, a shock."
Many Republicans say it shouldn't have been. Democrats' defeats had left the party in Congress more liberal, and the survivors more united. Liberals opposed any tampering with Social Security; centrist Democrats couldn't abide the massive borrowing needed to start the private accounts. Democratic leaders insisted they were willing to negotiate benefit and tax changes to keep Social Security solvent, if he'd just drop private accounts. Mr. Bush, wedded to his proposal, declined to call their bluff.
The White House never expected a lot of Democratic support. It did expect to peel off some moderates' votes, as it had in the first term. Without some Democrats for political cover, Republicans weren't going to provide the difficult votes alone.
Republicans: A House Divided
A bigger problem for the president was his own party.
Republicans were hopelessly divided. Mr. Bush led the so-called pain caucus, which favored both private accounts and, to keep Social Security solvent, future benefit reductions. "Free lunch" conservatives wanted larger private accounts, and deeper borrowing to cover the multitrillion-dollar costs for creating them, and they opposed any benefit reductions or payroll-tax increases. Some moderate Republicans opposed private accounts altogether. Then there was the do-nothing camp, which included most House leaders, worried about losing their majority.
The White House looked to the Senate Finance Committee chairman to get the issue rolling. Yet with all nine Democrats on his panel opposed to private accounts, Mr. Grassley needed all 11 Republicans' support. Instead they embodied the party's divisions.
On June 16, Finance Republicans gathered for a 12th weekly caucus but soon had to break for a Senate vote. Only two -- Olympia Snowe of Maine, who opposes private accounts, and Mike Crapo of Idaho, who supports them -- returned. Mr. Grassley says he quipped that the two of them should write the bill. No, Mr. Crapo said, "because what I'm for, Olympia can't vote for. And what she's for, I can't vote for."
In July the free-lunch faction moved into the void. Republican Sen. Jim DeMint of South Carolina honed a fallback proposal to create small accounts from surplus Social Security revenue -- until the program starts running deficits around 2017. That wouldn't make Social Security solvent over time, but at least Republicans wouldn't have to vote to cut benefits.
House leaders snatched the idea and planned a fall vote to get the issue behind them. Then Katrina hit, dealing the final blow by its distractions and cleanup bills. A month later, House Majority Leader Tom DeLay was indicted in a fund-raising scandal; the Texas Republican had to forfeit his post to Missouri Rep. Roy Blunt, who strongly opposed taking up Social Security all year.
Finally Mr. Bush conceded, for now. "Social Security, for me, is never off," he said at a news conference Oct. 4. But as for "when the appetite to address it is -- that's going to be up to the members of Congress."
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