Let's see Bush get himself out of the privatization mess

With the president’s Social Security privatization plan now hitting so many reverses on so many fronts, conversation has now inevitably turned to whether the Democrats’ as-yet-successful policy of flat opposition may open them up to some unseen danger.

With the president’s Social Security privatization plan now hitting so many reverses on so many fronts, conversation has now inevitably turned to whether the Democrats’ as-yet-successful policy of flat opposition may open them up to some unseen danger.

One big question is whether the president might simply shift course, embrace a non-privatization solvency plan and declare victory, much as he did in the debate over a separate Department of Homeland Security in 2002.

So are the Democrats really in danger of being outflanked by the president on Social Security? I’d say almost certainly not.

Democrats are still haunted by Bush’s turnaround on homeland security in the spring of 2002, when he suddenly embraced the creation of an independent department after having issued threats to veto such legislation not long before. But the analogy between homeland security in 2002 and Social Security in 2005 is weak at best.

The first point to consider is that neither conservatives as an ideological movement nor Republicans as a party had any real investment in having Tom Ridge’s homeland security shop housed in an office at the White House rather than set up as a separate Cabinet department.

Republicans opposed creating a Cabinet department because the White House told them to. And the White House opposed it out of a mix of pride of authorship, on the one hand, and a desire to avoid the congressional scrutiny a new Cabinet department would bring, on the other. No charged political principle was implicated in the question. And no Republican constituency cared about it a whit.

Once the White House changed its tune, Republicans followed suit. And that pulled the rug right out from under the Democrats, who had never figured that the president would have the sense and audacity to change positions overnight.

The politics of Social Security privatization could scarcely be more different. Support for privatization has been gaining ground among Republicans for more than two decades.

And private accounts have become a veritable article of faith for most conservatives. Though the ideological lure is the greatest factor, Republican Party operatives have also spent years cultivating a money constituency for privatization within the financial-services industry — especially among companies specializing in managing relatively small sums of money for private individuals.

Privatizers have waited years for their political moment. And this is it. They have a newly reelected president willing to take big risks to push the policy and expanded congressional majorities over which the president exerted an almost unprecedented degree of party discipline during his first term.

If Bush bails out on private accounts now, it won’t just be a temporary setback. It will mean that even when all the political stars were in alignment and there was a Republican president willing to give it his all, privatization just wasn’t possible. Social Security will re-earn its reputation as the third rail of American politics, and privatization will be as dead as national healthcare was in the spring of 1995.

If all that weren’t enough, any non-private-accounts-based solvency plan would almost certainly include raising or abolishing the payroll-tax cap — a move that would amount to a big effective tax increase on high-income earners. And that’s a move congressional Republicans have already made clear they won’t stand for.

Nor is it just congressional Republicans. What will Pat Toomey over at the Club for Growth have to say? And how about his predecessor as chief lobbyist for the money lobby, Stephen Moore? Raise taxes in a Social Security plan that doesn’t include private accounts and the president would immediately raise the ire of all manner of GOP operators with reputations for not playing nice. Take tax increases off the table and all that’s left is benefit cuts. And why would Republicans want to head into 2006 with that hanging around their necks?

Put that all together and you quickly see that the president’s room for maneuvering on Social Security is severely limited.

None of this means, of course, that the White House couldn’t yet pull a fast one on the Democrats. If the past four years have proved anything, it is that Karl Rove and the president are canny and resourceful. But so long as the Democrats remain united and don’t let the president push through a privatization bill under a false flag of bipartisanship, any move to drop private accounts should immediately expose big fissures within his own governing coalition — ones that would quickly make the minority Democrats seem like the least of his problems.

Marshall is editor of talkingpointsmemo.com. His column appears in The Hill each week. E-mail: jmarshall@thehill.com

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