Post-election stalemate could be the moment for Social Security reform

An almost evenly divided federal government is the main product of the Great Stalemate Election of 1996. Either the two parties now will pursue their aims through more fruitless confrontations or they will seek out at least a few areas where statesmanship might serve the best interests of both. The toughness legislative problems facing the country may be Medicare and Social Security. Each faces a funding crisis–Medicare in about five years, Social Security in about 15. But forming yet another presidential commission, as some White House aides are hinting, is not the way to create consensus for reform of either Medicare or Social Security. It would be seen–correctly–as one more device to buy time and avoid responsibility. Far better would be direct consultation between President Clinton dn congressional leaders on solutions they can announce together.

A constructive deal on Social Security seems the easier to make, in partisan terms, because both parties held back on that issue during the campaign and therefore retained their future options. But a Social Security solution may be harder to achieve in practice because conventional wisdom in Washington, D.C. still holds that the public is not ready to address the subject seriously.

There are signs that such pessimism may be wrong. Last spring, in the televised Arizona primary debate, Steve Forbes proposed a plan to use the private sector to rescue Social Security. Young workers would get the chance to put their monthly payments to work as real investments for retirement. They would own their pensions and at death could pass the unspent principal along to their heirs. Forbes’ idea got a standing ovation and possible some of the votes that helped him with the Arizona primary. It is Forbes’ contention that the public is far ahead of the politicians.

Bob Dole had the opportunity to embrace the reform proposal at the GOP convention, but passed (which may have been a big mistake). Still, his staff privately claimed that he wanted to pursue it if he was elected.

President Clinton and his new chief of staff, Erskine Bowles, are both well-briefed on various private sector approaches being proposed. It is not known publicly what the president thinks of them (amazingly, the subject was not even raised in the presidential debates), but a few days ago he put Social Security near the top of his concerns for the second term. He also expressed opposition to another increase in payroll taxes to bail out the present system. By renouncing a bailout, in fact, he eliminated the most likely alternative to some form of privatization. Rumors are circulating gin Washington that Shirley Chater, the current administrator of Social Security and a foe of any private sector role in Social Security, is about to resign.

Meantime, in Congress, a bipartisan, 40-member Pension Reform Caucus, co-chaired by Republican James Kolbe of Arizona and Democrat Charles Stenholm of Texas, has been created to work for a Social Security overhaul. In the Senate, Democrat Bob Kerrey of Nebraska and Republican Judd Greg of New Hampshire are acknowledged leaders on the issue.

In the coming session of Congress individual members will introduce reform bills that range from a plan to allow workers to designate 1 percent of their payroll tax to an IRA type of personal investment to the more comprehensive plans proposed respectively by Sam Beard, who heads Economic Security 2000 (and is a Discovery Institute fellow), and Jose Pinera of the CATO Institute, whose ideas borrow directly from his successful Social Security privatization program in Chile.

The Beard and Pinera plans offer far more than tinkering with IRAs. By plowing current surpluses into a private plan for each worker of the future (and young ones today) and guaranteeing current promises to older workers and retirees, they would solve the issue of future Social Security solvency while providing economic benefits of all generations and classes of Americans. They would broaden ownership of the economy.

There are problems with using the private sector to rescue Social Security, of course. For one, the transition to the new plan would have to be funded partially through a hard budget savings elsewhere. That is because the present surpluses generated by Social Security taxes are being used to cover losses in the general federal budget. But that is a terrible practice that ought to end anyhow.

The next difficulty is that the cost of transition to a new, private sector role in Social Security would compete with some of the initiatives that candidates advocated in the campaign–fron general tax cuts to specific education benefits. But surely both parties have a perfect treason to set campaign rhetoric aside: the campaign agendas of each are checkmated by the other. Cooperation is the only way to get something done.

Therefore, a unique moment may have arrived; a Great Stalemate Election has raised the opportunity for a Great Entitlement Agreement. On Social Security, as well as Medicare, President Clinton should skip the blue ribbon commission, and go straight to consultations with the duly elected leaders of Congress. Sit down together, in private and without the spin doctors. Work out a joint plan that will assure the elderly, give hope to the young and build a sound floor for the economy of the 21st century. Such a plan would benefit everyone, and reserve a well-deserved place in history for both his president and this Congress.