December 3rd, 2006

Out of the loop

Posted in  Entitlement Reform 
Author: Peter Ferrara || Location: Washington, DC, USA

Lies?

Last week I reported that the Bush Administration will offer Social Security payroll tax increases to the Democrats to induce them to do a deal on Social Security. The deal would include as well cuts in future promised Social Security benefits. But the exciting new idea Bush originally so bravely embraced, personal accounts substituting for a portion of the current system, would be dropped. The final mix might include instead a new entitlement in the form of government subsidized personal accounts on top of the current entitlement system.

In response, acolytes of certain mid-level White House staffers have responded by accusing me of lying.

On Wednesday, November, 22, 2006, The Wall Street Journal ran a news story on p.A6 by Judith Calmes. The headline was “Will Bush Bargain to Save Social Security?”  The subhead was “Speculation Grows President May Drop Demand for Private Accounts to Win Over Democrats.”

The article reveals that Treasury Secretary Henry Paulson is in charge of the negotiations with the Democrats and he has already started meeting with new Ways and Means Chairman Charlie Rangel (D-NY) and new Senate Finance Committee Chairman Max Baucus (D-Mont.). The article reports, “Both sides acknowledge that a combination of reduced future benefits and higher revenues will be necessary eventually.”

Is Ms. Calmes also lying?  Or is she talking to more senior people in the Administration than the name callers are?

Her article also quotes attendees at a private address given by Bush Chief of Staff John Bolton as saying he “came as close as he could in a quasi public setting to saying carve out accounts could be dropped if that were the price of reform.”

Then there was The Wall Street Journal editorial “Not So Grand Bargain” on November 30. “The Bush Administration has been around long enough that by now we can smell a retreat in the making. To wit, the White House is getting ready to throw personal retirement accounts over the side in an attempt to cut a deal with the new Democratic Congress. Will a tax increase be the next concession?”

The editorial notes the President’s already public support for cutting future promised benefits through the progressive price indexing plan advanced by financier Robert Pozen. It then states,

“Odds are that Democrats will pocket Mr. Bush’s concession on private accounts and then move the goal posts. In return for even the modest Pozen reductions in benefit growth, they’ll demand that Mr. Bush agree in the name of “fairness” to raise taxes too….We wish we were confident that Mr. Bush will resist this temptation, but Presidents on a legacy hunt are hard to predict. The Beltway press corps and many of his own advisors will also be cheering him on. His former White House economic advisor, Larry Lindsey, warned on these pages recently that the White House is contemplating precisely this kind of deal.”

Besides the public record being rife with unmistakable indications that the above deal is in the works, I can report that I and several of my colleagues have heard directly from senior Republican members of Congress and their staffers that White House minions have been on the Hill all year trying to sell exactly the above deal to them, complete with the tax increase. The White House has also been talking to AARP, which is publicly supporting the same deal mentioned above, calling it the “balanced plan”, balanced as in tax increases as well as future benefit reductions.

But there is a third source for the above sellout plan. I argued in a published op-ed over a year ago that the White House was headed in precisely this direction, cuts in future promised benefits, tax increases, and no personal accounts. That was before even the White House knew it was on this course.

How did I know that? The President has already publicly proposed the price indexing benefit reduction plan. It doesn’t take the public record, inside information, or any real genius to recognize that there is no way on God’s green earth that Democrats and liberals are going to agree to such benefit cuts without a major tax increase in the mix as well, the “balanced plan” as AARP is already calling it. And it couldn’t be more brutally obvious as well that the Democrats and liberals are not going to even consider such a plan without dropping personal accounts as well. They have publicly said as much over and over and that is uniformly consistent with their past behavior.

Further supporting this conclusion is the brutally obvious fact that the White House has zero leverage over the Democrats to get them to consider anything other than this plan. The White House has utterly failed to build grassroots support for personal accounts, and the Democrat base has no interest in solving the future Social Security solvency problem now. Indeed, reformers sound silly when the say we must consider now future benefits cuts and tax increases because Social Security will run out of money to pay promised benefits 40 years from now.

We know President Bush wants to be able to tout the achievement of eliminating the long term Social Security deficit. There is absolutely no way he is going to cut a deal on that with the liberal Democrat Congressional leadership that does not include major tax increases and that does not drop the idea of real personal accounts.

The very people who are accusing me of lying for publicly pulling together what is now the obvious on this are the very ones whose intellectual weakness was responsible for the failure of the Administration’s personal account effort last year. More on that in the next blog.