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In case you havent

In case you haven't seen it, here's the full text of the Wehner Memo (all formatting and emphasis from the original email) <$NoAd$> ...

From: Wehner, Peter H.
Sent: Monday, January 03, 2005 2:57 PM
Subject: Some Thoughts on Social Security


I wanted to provide to you our latest thinking (not for attribution) on Social Security reform.

I don't need to tell you that this will be one of the most important conservative undertakings of modern times. If we succeed in reforming Social Security, it will rank as one of the most significant conservative governing achievements ever. The scope and scale of this endeavor are hard to overestimate.

Let me tell you first what our plans are in terms of sequencing and political strategy. We will focus on Social Security immediately in this new year. Our strategy will probably include speeches early this month to establish an important premise: the current system is heading for an iceberg. The notion that younger workers will receive anything like the benefits they have been promised is fiction, unless significant reforms are undertaken. We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course. That reality needs to be seared into the public consciousness; it is the pre-condition to authentic reform.

Given that, our aim is to introduce market reforms in Social Security and make the system permanently solvent and sustainable.

We intend to pursue the first goal by using our will and energy toward the creation of Personal Retirement Accounts. As you know, our advocacy for personal accounts is tied to our commitment to an Ownership Society -- one in which more people will own their health care plans and have the confidence of owning a piece of their retirement. Our goal is to provide a path to greater opportunity, more freedom, and more control for individuals over their own lives. That is what the personal account debate is fundamentally about -- and it is clearly the crucial new conservative idea in the history of the Social Security debate.

Second, we're going to take a very close look at changing the way benefits are calculated. As you probably know, under current law benefits are calculated by a "wage index" -- but because wages grow faster than inflation, so do Social Security benefits. If we don't address this aspect of the current system, we'll face serious economic risks.

It's worth noting that wage indexation was not part of the original design of Social Security. The current method of wage indexation was created in 1977, under (you guessed it) the Carter Administration. Wage indexation makes it impossible to "grow our way" out of the Social Security problem. If the economy grows faster and wages rise, this produces more tax revenue. But the faster wage growth also means that we owe more in Social Security benefits. This has produced a never-ending cycle of higher tax burdens, even during periods of robust economic growth. It is the classic case of the dog chasing his tail around the tree; he can run faster and faster, and never make any progress.

You may know that there is a small number of conservatives who prefer to push only for investment accounts and make no effort to adjust benefits -- therefore making no effort to address this fundamental structural problem. In my judgment, that's a bad idea. We simply cannot solve the Social Security problem with Personal Retirement Accounts alone. If the goal is permanent solvency and sustainability -- as we believe it should be --then Personal Retirements Accounts, for all their virtues, are insufficient to that task. And playing "kick the can" is simply not the credo of this President. He wants to do what needs to be done for genuine repair of Social Security.

If we duck our duty, it can have serious short-term economic consequences. Here's why. If we borrow $1-2 trillion to cover transition costs for personal savings accounts and make no changes to wage indexing, we will have borrowed trillions and will still confront more than $10 trillion in unfunded liabilities. This could easily cause an economic chain-reaction: the markets go south, interest rates go up, and the economy stalls out. To ignore the structural fiscal issues -- to wholly ignore the matter of the current system's benefit formula -- would be irresponsible.

Here's a startling fact: under current law, an average retiree in 2050 would be scheduled to receive close to 40 percent more (in real terms) in benefits than an average retiree today -- and yet there are no mechanisms in place to produce the revenue to pay out those benefits. No one on this planet can tell you why a 25-year-old person today is entitled to a 40 percent increase in Social Security benefits (in real terms) compared to what a person retiring today receives.

To meet those benefit levels, one option would be to raise the age at which people receive benefits. If we followed the formula used when Social Security was first created -- make the age at which you receive Social Security benefits above the average age of mortality -- we'd be looking at raising the benefit age to around 80. That ain't gonna happen.

Another way to meet those benefit levels is through the traditional Democrat/liberal way: higher taxation. According to the latest report of the Social Security Trustees, the current system's benefit formula would require some $10 trillion in tax increases over the long term. We'd therefore need to raise the payroll tax almost 20 percent simply to provide wage-indexed benefit levels to those born this year.

This will all sound familiar. In the past, the way Congress usually addressed the built-in funding problem was by raising payroll taxes (from 2 percent in 1937 to 12.4 percent today). In fact, Congress has raised Social Security taxes more than 30 times -- but it has never addressed the underlying problem. Avoiding the core issue by raising taxes is not the modus operandi of this President.

The other key point, as you know, is that personal accounts, through the miracle of compound interest, will provide workers with higher retirement benefits than they are currently receiving from Social Security.

At the end of the day, we want to promote both an ownership society and advance the idea of limited government. It seems to me our plan will do so; the plan of some others won't.

Let me add one other important point: we consider our Social Security reform not simply an economic challenge, but a moral goal and a moral good. We have a responsibility to fulfill the promise of Social Security, not undermine it. And we have a duty to ensure that we do not create an inter-generational conflict -- which is precisely what will happen if the Social Security system is not reformed. We need to retain strong ties between the generations, which is of course a deeply conservative belief.

The debate about Social Security is going to be a monumental clash of ideas -- and it's important for the conservative movement that we win both the battle of ideas and the legislation that will give those ideas life. The Democrat Party leadership, the AARP, and many others will go after Social Security reform hammer and tongs. See today's silly New York Times editorial (its only one for the day) as one example. But Democrats and liberals are in a precarious position; they are attempting to block reform to a system that almost every serious-minded person concedes needs it. They are in a position of arguing against modernizing a system created almost four generations ago. Increasingly the Democrat Party is the party of obstruction and opposition. It is the Party of the Past.

For the first time in six decades, the Social Security battle is one we can win -- and in doing so, we can help transform the political and philosophical landscape of the country. We have it within our grasp to move away from dependency on government and toward giving greater power and responsibility to individuals.

There are of course other important issues dealing with Social Security; for now, though, I've covered quite enough ground. I wanted to let you know where things stand. If you have any questions, or if we can send you anything to clarify our plans and respond to critics, just let me know. The President remains flexible on tactics -- and rock-solid on the principles. But there's nothing new there.

In one of his last public acts of an extraordinary public life, the late Democratic Senator from New York, Daniel Patrick Moynihan, co-chaired the President's Commission to Strengthen Social Security. In the introduction of its report, Senator Moynihan (along with Richard Parsons, his co-chair) wrote, "the time to include personal accounts in such action [reforming Social Security] has, indeed, arrived. The details of such accounts are negotiable, but their need is clear.... Carpe diem!"

And so we shall.


Get out your red pens.

The stakes from Thursdays

The stakes (from Thursday's Journal ...)

Senate Republicans signaled their wariness yesterday in a private retreat on the year's legislative agenda with White House adviser Karl Rove. An attendee said the senators gave Mr. Rove "a subtle but clearly identifiable message that the GOP [Grand Old Party] would go along...but they were scared to death." The senators indicated that the president "had to step up his activity" to sell his initiative to Americans, which Mr. Rove said Mr. Bush would do. But the attendee said senators also warned the Social Security proposal "needed to be bipartisan or else no go."

Still, some Republicans are resigned to uniting behind the president, given his determination. "The president is going to go ahead," said Rep. Tom Cole of Oklahoma, a Republican leadership lieutenant. "He cannot afford to fail. It would have repercussions for the rest of his program, including foreign policy. We can't hand the president a defeat on his major domestic initiative at a time of war."


Let's just <$Ad$>agree to pass over that last comment, the implication of which is if Social Security is preserved it would be a win for the terrorists, and just note the following ...

The prerequisite for defending and preserving Social Security is Democratic unity. As the senators apparently told Mr. Rove, down-the-line opposition from the Democrats raises the stakes on them dramatically. Then the demise of Social Security becomes a Republican deed through and through. And all the political coverage of the Social Security debate will center on divisions among Republicans, their internal discussions of strategy, who has cold feet about the phase-out and who's pushing full steam ahead.

But for the prerequisite for all of this is Democratic unity. Muddy the waters and the whole picture changes.

You might mention it to these folks ...

The Fainthearted Faction

House

Rep. Allen Boyd (D-FL) (L&P!)

Rep. Robert "Bud" Cramer (D-AL)

Rep. Harold Ford (D-Tenn) (*)

Rep. Ron Kind (D-Wisc) (OFO?)

Rep. James Moran (D-VA) (*)

Rep. Collin Peterson (D-MN)

Rep. Ike Skelton (D-MO) (*)

Rep. Adam Smith (D-WA)

Rep. John Tanner (D-Tenn)

Rep. Gene Taylor (D-Miss)



Senate (note: senate list is roughly in order of relative Faction-hood ...)

Ben Nelson (D-NE)

Dianne Feinstein (D-CA)

Tom Carper of (D-DE)

Evan Bayh (D-IN)

(Say It Ain't So) Joe Lieberman (D-CT)

Associate Members

Gov. Ed Rendell (D-PA) (*)


(ed.note: 'L&P!' designates members who are "Loud and Proud!" in their support of the president's phase-out bill. "OFO?" designates members who may already have "One Foot Out" of the Fainthearted Faction. Linked asterisks (*) note events, statements or stories that have affected a member's position within the Fainthearted Faction.)

The key passage in

The key passage in the Wehner Memo (the leaked memo written by Karl Rove's deputy, Peter H. Wehner and reported this evening in various news outlets).

Let me tell you first what our plans are in terms of sequencing and political strategy. We will focus on Social Security immediately in this new year. Our strategy will probably include speeches early this month to establish an important premise: the current system is heading for an iceberg. The notion that younger workers will receive anything like the benefits they have been promised is fiction, unless significant reforms are undertaken. We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course. That reality needs to be seared into the public consciousness; it is the pre-condition to authentic reform.


Remind you of anything?

Also included is a nice encapsulated history lesson: "For the first time in six decades, the Social Security <$Ad$> battle is one we can win -- and in doing so, we can help transform the political and philosophical landscape of the country."

In other words, this isn't about the fiscal soundness of Social Security or the babyboomers moving toward retirement or anything else. As Wehner himself says, this is the best chance the opponents of Social Security have had in six decades of trying to phase-out the program.

And this allows us to see the whole matter clearly. Social Security has been around for seventy years. How many people do you know who really don't like Social Security? Back when I was younger I'd go spend part of my summer at the subsidized retirement community where my grandparents lived. And I don't remember many people who lived there bad-mouthing Social Security. And those folks had lived under the program for pretty much all of their adults lives.

Or, the more relevant question, how about people today? How many people think Social Security is a bad thing? A program that never should have existed? I'm not saying how many worry that the program may not be there when they retire. How many people don't even like the whole concept?

I think they're in a distinct minority.

So now you can see from memos emerging from the White House itself that this isn't about 'saving' Social Security. If it were, what would that sentence mean -- ("For the first time in six decades, the Social Security battle is one we can win")? The first time in six decades they can save it?

Clearly, this isn't about 'saving' Social Security. It is a battle to end Social Security and replace with something that Wehner clearly understands is very different, indeed the antithesis of Social Security.

This entire debate is about ideology -- between people who believe in the benefits Social Security has brought America in the last three-quarters of a century and those who think it was a bad idea from the start. There is an honest debate to have on this point, a values debate. Only, the White House understands that the belief that Social Security was always a bad program isn't widely shared by Americans. So they have to wrap their effort in a package of lies, harnessing Americans' desire to save Social Security in their own effort to destroy it.

John Snow the magician

John Snow, the magician (from the Times ...)

In addition, he is dispatching his Treasury secretary, John W. Snow, to New York to reassure Wall Street that his approach, which could involve trillions of dollars in new government borrowing, is consistent with efforts to reduce the budget deficit and improve the nation's financial condition.
Trillions in new borrowing "is consistent with efforts to reduce the budget deficit." Lucky they've got a silver tongue like John Snow.

Senator Blanche Lincoln on

Senator Blanche Lincoln on Social Security ...

Dear Constituent:

Thank you for contacting me regarding social security. I am glad to hear from you on this important topic.

Preserving Social Security for future generations is one of my most important priorities this Congress. Demographic changes in our country are looming and require us to act now to ensure the solvency of the Social Security system.

I believe in the promise our government made to working Americans ­ that if we work hard, Social Security will be there to help us in our golden years. Social Security has made a secure retirement possible for tens of millions of Americans. However, it is important that everyone, especially Baby Boomers, plan for their retirement by supplementing Social Security with personal savings, pensions, and other financial investments.

I will not support any Social Security reform proposal that does not protect the benefits currently provided to women and low-income workers. Unfortunately, 25% of older women in Arkansas live in poverty. Along with my female Senate colleagues, I have developed a fairness checklist for women to serve as a guideline for members of Congress as we consider legislation to reform Social Security. It is critical that any Social Security proposal pass this fairness checklist before gaining support from Congress:



Preserve Social Security's guaranteed, lifetime, inflation-protected benefit; Protect disabled workers and their families;

Maintain the system's progressive benefit structure;

Strengthen the Social Security system, while ensuring that women and other economically-disadvantaged groups are protected as much as possible;

Aim to further reduce poverty among older women;

If it includes other retirement savings options, these options would not reduce or replace guaranteed Social Security benefits.


Through my positions on the Senate Finance Committee and the Senate Special Committee on Aging, I will continue to work with the President and my colleagues on a plan to make our Social Security system fiscally sound for its future beneficiaries.

I appreciate knowing your views on this important issue. Please feel free to contact me again if I may be of any assistance to you.


What does it say? Get out your red pens. <$NoAd$> Who can identify the key phrases?

Do you live in

Do you live in Florida's second congressional district? Let us know.

Berry expelled from the

Berry expelled from the Fainthearted Faction!!!

We noted yesterday that Rep. Marion Berry of Arkansas might be fixin' to leave the Fainthearted Faction. And this afternoon, in response to a request for comment from a reporter, he released the following statement to a local TV station in Jonesboro ...

"Social Security is a sacred bond between the US Government and the citizens of this country. I will not support any Social Security changes that encroach on that promise...ever. Beyond that, I will not support any changes to Social Security -- including privatization schemes -- that require us to borrow any additional funds. President Bush's initial proposals would require borrowing trillions of dollars to pay for his plans; I cannot support any plans that put this country any deeper in debt."


To our minds, it <$Ad$>would be even better if the congressman had addressed the issue of privatization and phase-out in itself rather than primarily as an issue of fiscal discipline. However, the point of the Faction is not to get people to sign on to orthodoxies or catechisms. The point is get some clear and definitive word on where they stand on the president's phase-out plan.

Many Reps. and Senators have made general comments that any reform has to be fiscally responsible and that they'll never harm Social Security. But that can mean anything. Berry, on the other hand, is being far more specific. He says he cannot support "any changes to Social Security -- including privatization schemes -- that require us to borrow any additional funds." (emphasis added)

One can imagine various permutations of an eventual Bush plan. But as far as I can tell there's no conceivable permutation that would involve no borrowing whatsoever. Even Lindsey Graham's bill requires substantial borrowing.

Transition costs are just unavoidable and huge -- and we're already in deficits. So I think Berry has made his position clear.

So, as Donald Trump might say, Marion Berry (requisite hand gesture), you're fired from the Fainthearted Faction.

[ed.note: And in case you're counting, that brings the House Faction down to an even ten.]

Heres a question --

Here's a question -- one I don't know the answer to, but one which I suspect may have an uncomfortable answer. We know that Al Gonzales has been White House Counsel for the last four years and that he's played an instrumental role in several legal findings and memos which have given legal sanction to torture (or what I guess we might call 'the act formerly known as torture'). What if Gonzales had had some roughly equivalent position in Argentina or Chile in the late 1970s? Would he have faced subsequent legal vulnerability and/or consequences?

Strip the question of drama and theatrics and assumptions. I'm curious to hear a purely factual answer.

Well be saying more

We'll be saying more about this in the coming days. But I wanted to note something about former Congressman Tim Roemer, who's currently a candidate to be Chairman of the DNC -- and has the improbable support, I'm told, of Minority Leaders Reid and Pelosi.

We've already noted that he voted against the Filner Amendment, which would have put him in the Fainthearted Faction had he still been in Congress today -- though he campaigned against privatization in the 2002 election. Others meanwhile are understandably concerned about his opposition to abortion rights.

But here's something I didn't know.

Roemer was one of the Democrats that voted against the Clinton budget of 1993 -- the one that in the end won by a single vote and cost Marjorie Margolies-Mezvinsky and so many others their seats. (Not just the big vote, but a number that led up to it.) Then he was one of an even smaller number of Democrats who voted for President Bush's 2001 Budget bill. If I'm not mistaken, he was one of only 9 Dems in the House to vote to make the Bush cuts permanent the following year.

As I've said many times before, with a very few exceptions, we shouldn't view a politician's entire career through the prism of a single vote. But those two votes are awfully significant. They frame the mammoth fiscal challenges the country faces today. And they are at the root of the Democratic party's current claim to be the party of growth, equity, fiscal responsibility and economic stewardship. To me at least, that's a very important part of what the Democratic party stands for today.

When Democrats claim credit, as they rightly do again and again, for bringing the country from perpetual deficits to surpluses in the 1990s, a major part of what they're talking about has to be the 1993 budget bill. When they denounce the Republicans as the party of deficits, fiscal recklessness and enemies of Social Security, in an equal measure, they're talking about President Bush's 2001 bill.

Yet both of those arguments, by definition, are one's Roemer simply cannot make because he was on the other side of the issue both times. At best he would be a mockery whenever he debated Republicans on anything to do with fiscal policy since he consistently voted with them and not his own party. And no doubt they'd point that out.

I've said before that I've always thought Roemer seemed like he had a lot of attractive qualities as a politician. He was great on the 9/11 Commission. And the Democratic party certainly needs to be open to people who dissent from the party's majority position on even such a central issue as this. But I just cannot understand how someone with those votes and that over-arching position can be the titular head of the Democratic party. It just doesn't make sense. And I can't see how the party's leadership in the House and Senate could be supporting him either.

Lots of news today

Lots of news today in the Senate's Fainthearted Faction.

First, the good news.

According to Ron Brownstein's piece in the LAT, both the DLC and Third Way "expect to issue statements soon opposing Bush's push to divert part of the Social Security payroll tax into accounts that individuals could invest in the stock market."

As I've hinted previously, I expected the DLC to come out against the president's plan. But I had real concerns that Third Way would play ball on the phase-out. And in this case I couldn't be happier to be proven wrong.

I'll be curious to see the fine print on their statement. But that's certainly a very welcome development since now it seems clear that every major Democratic policy group from the most leftish labor-liberals to the newest New Dems are united in believing that the Bush Social Security phase-out plan is bad policy for America.

Before proceeding, a side note: Democrats have plenty of things more important to do right now than to fight amongst themselves. And I know a lot of readers of this site have strong suspicions or negative feelings about the DLC -- in some cases because of very real policy differences. But members of a coalition party have to strive to celebrate moments of agreement at least a bit more than they rush to clamor over the inevitable disagreements. So maybe take a moment to give these guys (DLC and Third Way) some encouragement for doing the right thing.

On the other hand, notwithstanding what the policy wonks are saying, we've got some definite additions to the Senate's Fainthearted Faction.

First off, what strikes me at least as a surprise. California's Dianne Feinstein. Say it ain't so? Tell me about it.

Feinstein sent out a letter today to a number of constituents who asked her whether she supported privatization and/or the president's Social Security phase-out bill. In that letter she says pretty much everything you can imagine except for anything remotely like answering the question.

The closest she seems to come is toward the end where she writes ...

Most policy makers agree that the rate of growth of this program, as well as the oversight of its expenditures, must be addressed to ensure its integrity and preservation. I am confident that if Congress works together, it is possible that Social Security can meet its long term commitments.


Who knows what that means?

But reading the tea-leaves I think it shows an openness to the president's plan. More to the point, though, she's clearly not willing to say she opposes replacing part of Social Security with private accounts. And that really means you're in the Faction by definition since the outlines and many of the details of the president's plan are already clear.

I should also note that I see a lot of these constituent letters and they're often ambiguous. So they have to be read in the context of a member's previous legislative record. In this case, we should note that Feinstein voted for the president's awful Medicare bill as well as his 2001 tax cut bill, which has played such a wonderful role in throwing the country back into major structural budget deficits.

So for all those reasons combined, Feinstein's in the Faction big time -- though why she feels the need to be when even the major centrist groups seem opposed to the president's approach and she comes from an ocean-blue state like California is beyond me.

Next up is Tom Carper of Delaware. He's refusing to rule out private-accounts-based Social Security phase-out plan. And he told the LAT: "For now, we should leave things on the table and have a debate about them."

So he's in the Faction.

Next up, is Evan Bayh of Indiana. He's refusing to say no to a phase-out. But here's what the LAT says about him ...

Still, many of the Democratic centrists are signaling that they might support private accounts only with conditions Republicans likely would find difficult to accept. Bayh said he would consider a private account plan only if it could "maintain the safety net, maintain progressivity (in benefits) and protect the taxpayers (from more debt)."


We should note that there are going to be Democrats who for reasons of temperament as much as ideology are not going to state opposition from the outset, but will set conditions -- such as these -- that seem to all but commit them to opposition. I think that's what Bayh's doing here. So he's in the Faction, but only just. Like Carper, he's one of the three senate principals in Third Way. So maybe their alleged statement of opposition will or already has swayed him.

(Keep in mind that Bayh thinks he can run for president one day. So I would think that the best way to encourage him is to make sure he understands that he will never get the Democratic nomination for president or vice president if he votes in the affirmative for a bill that dismantles Social Security.)

Next up, Joe Lieberman. The LAT also has Lieberman down as one of the group of senators who will not commit themselves to opposition to the president's plan. It also says that "Lieberman, with Sen. Olympia J. Snowe, R-Maine, is leading a group of moderates from both parties that have begun efforts to determine if they can reach a consensus position on Social Security reform."

Now, I've been given to believe that Lieberman is not going to stray on this issue. And a bit after the election he told the New Haven Register that the Bush plan "may well worsen the financial condition of the existing program ... Social Security is now on the verge of going into deficit. Our first responsibility should be to work together to ensure that we keep our promises to seniors and that Social Security's future is realistic and fiscally sound."

Still, at the end of the day, he's not willing to state clear opposition to the private accounts idea that he said he'd left behind back in 2000. So Joe, personal feelings aside, is in the Faction. And in any case, it's not like there's not someone to run against him in the primary in 2006. Widely-praised Connecticut Attorney General Richard Blumenthal would probably like to get into the big leagues at some point. And in that state, he'd probably win if he knocked Joe out in the primary.

At the end of the day, I figure Lieberman does the right thing on this one. Unlike Feinstein, who voted for the 2001 Deficit-Creation Act (aka Tax Cut), he voted against it. But we'll see.

On the House side, we heard signs from a few different sources today that Rep. Marion Berry of Arkansas may be getting ready to break out of the Faction. Yesterday he told Bloomberg: "The bottom line is the debt and the deficit and the current account deficit are so overpowering that it stands the chance of destroying this country economically ... 'The idea of compounding this by adding 1, 2, 3, 4 trillion dollars to the debt to do this doesn't seem to make sense.''

That sounds like he's saying that the president's new debt-spending spree is a no-go for him. But we'll see. For the moment we haven't seen anything specific on Social Security per se. So he remains in.

As we noted last week, Ron Kind of Wisconsin looks like he's only hanging on in the Faction by a thread.

And, finally, a constituent letter from Rep. Bud Cramer of Alabama seems to put him right at the top of the Faction.

So that leaves us with the current Faction membership list

House

Rep. Marion Berry (D-Ark) (OFO?)

Rep. Allen Boyd (D-FL) (L&P!)

Rep. Robert "Bud" Cramer (D-AL)

Rep. Harold Ford (D-Tenn) (*)

Rep. Ron Kind (D-Wisc) (OFO?)

Rep. James Moran (D-VA) (*)

Rep. Collin Peterson (D-MN)

Rep. Ike Skelton (D-MO) (*)

Rep. Adam Smith (D-WA)

Rep. John Tanner (D-Tenn)

Rep. Gene Taylor (D-Miss)



Senate (note: senate list is roughly in order of relative Faction-hood ...)

Ben Nelson (D-NB)

Dianne Feinstein (D-CA)

Tom Carper of (D-DE)

Evan Bayh (D-IN)

(Say It Ain't So) Joe Lieberman (D-CT)

Associate Members

Gov. Ed Rendell (D-PA) (*)


(ed.note: 'L&P!' designates members who are "Loud and Proud!" in their support of the president's phase-out bill. "OFO?" designates members who may already have "One Foot Out" of the Fainthearted Faction. Linked asterisks (*) note events, statements or stories that have affected a member's position within the Fainthearted Faction.)

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