Bush's Big Bet: Risking His Capital

Bush's Big Bet: Risking His Capital
He got the ball rolling at the State of the Union. But it's no ordinary fight. On trial: America's core belief in the social contract, and its faith in the private sector
By Howard Fineman
Newsweek

Feb. 14 issue - In the abbreviated genealogy of wristband empathy, "Live Strong" yellow was first, followed by pink for breast cancer, blue for tsunami relief and olive green for the troops in Iraq. Now Rock the Vote, a youth-oriented grass-roots group, hopes to make a new jewelry statement. The color is unchosen but the message is settled: "I [Heart] Social Security." In tandem with AARP, the seniors' lobby, Rock the Vote wants to rally youth to defend Social Security as it is—and block President George W. Bush's sweeping plan to change it. Known for using pop stars to glitterize voter registration, Rock the Vote has forged an intergenerational bond with AARP to sponsor town halls, missions to Capitol Hill, an ad campaign—and, perhaps, a concert or two by retirement-age rockers. Think, say, the Eagles, not taking it easy. "We have great brand compatibility with the AARP," says Rock the Vote's Hans Riemer. Both groups, he says, see the president's plan as too risky, and the wristband slogan—like Social Security itself—as "retro chic."

Which, of course, is the question. Is Social Security a retro but still cool program that needs only minor tinkering? Or is it an outmoded and actuarially unsound one that can be rescued only by an infusion of 21st-century market-based thinking? Searching for a higher yield, how much risk are Americans willing to tolerate in a program whose very name invokes the security of shared obligation? How much political risk is the president, or the Congress, willing to take in dealing with the grand-daddy of all entitlements?

In a forceful State of the Union address last week, the president won applause from the whole chamber when he called the 70-year-old program "a great moral success of the 20th century." But he divided the House into Republican applause and Democratic boos when he declared the "system, on its current path, is headed toward bankruptcy." If it is—a controversial assumption—how does Bush plan to "save" it? Well, if pain is required, he did not mention it. He ruled out an increase in payroll taxes. He tiptoed around the fact that benefit cuts would inevitably be needed. Instead, in a radical departure from Social Security orthodoxy, he suggested that retirees could earn bigger pension payouts by investing a portion of their payroll taxes in individual, private savings accounts, similar to familiar 401(k)s. There was risk in such stock and bond accounts, he admitted, but a greater one—given the looming retirement of the baby boomers—in relying solely on the transfer of tax revenue from one generation to the next.

Bush and Karl Rove love to push on the Democrats' unlocked doors, and this one might be slightly ajar. The new NEWSWEEK Poll contains evidence of the generational divide AARP and Rock the Vote are hoping to bridge. A whopping 75 percent of voters under 35 think that Social Security is "facing a funding crisis"—while only 52 percent of voters 55 and older agree. A majority of the older voters believe that they will get all their scheduled benefits; only 32 percent of young voters do. These younger people—three generations away from the Depression and with a greater tolerance for risk—think that retirement accounts would strengthen the Social Security system; older voters do not. Yet even younger voters, so far, are ambivalent about Bush's proposal, and are evenly divided on the question of whether "investing Social Security money in the stock market is too big a risk." And, as is the case with all Americans, young voters want their free lunch: 73 percent say the government should protect them if their accounts go bust—the highest percentage of any age group.

If Bush wanted to unite his opposition at the start of the new Congress, he's succeeded. The watchmen are racing to the towers of Castle Roosevelt, invoking the memory of FDR and the hard-times compact he made in 1935 between the citizens and the state: if you worked, you'd get a pension. Harry Reid of Nevada, the Democratic leader in the Senate, claimed to have won a pledge from all 43 of his party colleagues to oppose the president's plan. In fact, there were a couple of holdouts, but Reid needs only 41 votes to block a Bush bill—and the senator will likely find at least one or two moderate Republican allies. The rejectionist front may get an infusion of energy next week, if, as expected, the fire-breathing Howard Dean becomes party chairman.

Shrewdly, Reid is tapping into the blogosphere, hiring a "director of Internet communication" to stay in touch with influential blogs, such as Talking Points Memo and Daily Kos. The talking points are clear: that Bush is manufacturing a "crisis"; that his real aim is to attack the New Deal concept of government; and that, to the extent there is a problem, it can be repaired by raising the ceiling on taxable income, and, perhaps, by adjustments in cost-of-living indices. Bush's goal, Democrats say, is to do what much of corporate America has done: convert a "defined benefit" (a.k.a. a pension) into a "defined contribution."

While the Dems work the blogosphere, Bush works the stratosphere—in Air Force One. Last week he was busily schmoozing midcabin with members of Congress and promising the over-55 locals on the ground that they will be untouched by any changes he's proposing. The president and Rove are betting that history is on their side. Indeed, their proposal is the domestic capstone of the modern conservative movement, which surfaced in 1963 with what was then regarded (rightly) as a suicidal attack on Social Security by Sen. Barry Goldwater, and continued through the Reagan Revolution in 1980 and the Newt Gingrich victory of 1994.

But the tides of history won't necessarily sweep along wary Republicans who face reelection next year—let alone deeply suspicious Democrats. On a flight to Fargo, N.D., last week, Bush fenced jovially with Democratic Sen. Kent Conrad, a fiscal watchdog with an accounting degree from Stanford. "It was polite persuasion, a lot of friendly arm-twisting," the senator told NEWSWEEK later. But it was "no sale." There would have to be "major adjustments," Conrad told the president. In fact, Bush's GOP allies are moving cautiously. They won't even try, Hill sources tell NEWSWEEK, to unify behind a particular bill until the fall—hoping to lure Democrats to make a counterproposal first. That will leave plenty of time for more talk, more campaigning, more blogging—and rock concerts.