Expand Social Security Now!: How to Ensure Americans Get the Retirement They Deserve - Steven Hill (2016)
Chapter 3. The Bipartisan Attack on Retirement Security
The debate over the US retirement system, including Social Security, is a debate over what kind of society we want to live in. Opinion polls continue to show that a large super majority of Americans—Democrats, independents, and Republicans alike—support Social Security, oppose cuts to benefits, oppose privatization, think everyone should pay their fair share, and would pay higher taxes to sustain it.1 Yet the elite in Washington, DC, including many think tanks, policy experts, influential pundits, news media, congressional staffers, Republican and Democratic politicians, inexplicably continue to call for cutbacks in the false name of fiscal responsibility.
As attempts since the Reagan era to unravel key cornerstones of the New Deal have unfolded, including the extreme deregulation of the banking and financial industry which directly led to the economic collapse in 2008, it is hardly surprising that the architects of austerity have also waged a war to undercut Social Security. What is more surprising, however, is that, given the overwhelming popularity of Social Security, this Ayn Rand brand of libertarianism has made so much progress in its backward-looking project of privatizing the retirement system.
The Republican Party today is a different species than when Social Security booster Dwight Eisenhower was president. Eisenhower left office in 1960, but within just a few years the Grand Old Party launched itself in a radically new direction. Barry Goldwater, the Republican nominee for president in 1964, led the cavalry’s charge with what was to become a frequent conservative rallying cry, later popularized by Ronald Reagan. Goldwater said, “I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size. I do not undertake to promote welfare, for I propose to extend freedom. My aim is not to pass laws, but to repeal them. It is not to inaugurate new programs, but to cancel old ones that … impose on the people an unwarranted financial burden.”2
That was the beginning of a new era for the party of Lincoln, a transmogrification that was fully realized with the election of Reagan in 1980. From that point forward, most Republican leaders have strategically attacked government programs that actually help people as part of their smackdown of government itself. This relentless, well-planned and well-funded assault has served to undermine American’s faith in our own institutions of self-rule. Conservatives’ obsession over killing Social Security is precisely driven by their recognition that the program’s popularity helps legitimize government in the eyes of the public. Stephen Moore, the chief economist at the right-wing Heritage Foundation, once proclaimed that Social Security is “the soft underbelly of the welfare state” and if activists could “jab your spear through that” they could slay the sacred cow.3
But when programs are too popular to attack directly, like Medicare or Social Security, Republicans have taken to undermining them by feigning a principled concern about debt, deficits, and our ability to pay. Yet that concern is opportunistic and largely fictitious. After all, when Mitt Romney and Wisconsin representative Paul Ryan were the GOP’s presidential and vice presidential standard-bearers in the 2012 election, they proposed a 20 percent cut in income tax rates, plus other tax cuts that would have added about $6 trillion to the deficit over ten years. They also proposed increased military spending that would have added another $2 trillion to the nation’s debt. That lack of concern over increased deficits and debt did not raise any concerns among the GOP faithful. Many Republicans only seem to be concerned about debt when they are criticizing government expenditures of which they don’t approve. But when it comes to spending for their preferred national priorities, Republicans are willing to spend tax dollars like drunken sailors on a port o’ call spree.
To be fair, the Romney-Ryan ticket claimed it could implement its tax cuts for the wealthy, as well as their other preferred expenditure increases, without adding to the national debt load. They boasted that their changes to the nation’s fiscal and tax priorities would be “revenue neutral,” allowing Republicans to dodge the charge that they were being hypocritical. But the dodge was only superficial, since the Romney-Ryan budget was full of funny math that did not hold up even to the most elementary scrutiny. We have seen thirty years of evidence that tax cuts directed at the wealthy not only do not pay for themselves, but they also do not correlate with higher economic growth. The Wall Street Journal reported on a study from the National Bureau of Economic Research, which found that tax cuts aimed at the wealthy do not spur growth in output and jobs, nor do they eventually trickle down to the masses, because it turns out that the wealthy tend to save the money rather than invest it.4 Yet people believe what they want to believe, and the millions of Americans who voted for the Romney-Ryan ticket apparently were untroubled by the prospect of even larger deficits, as long as they served their partisan interests and priorities.
Flash forward to the field of Republican presidential candidates for the 2016 election. With seventeen political and business leaders tossing their hats into the ring, candidate after candidate expressed what the US News & World Report called “unwavering fealty to a failed theory” of trickle-down economics.5 This included US senator Rand Paul’s proposal for a flat tax—elimination of the progressive income tax, another New Deal achievement—and Senator Marco Rubio’s tax cuts for the wealthy based on the total elimination of capital gains and dividends taxes, which would almost exclusively benefit the wealthy and be far larger than the massive tax cuts enacted by President George W. Bush. The always provocative former Texas governor Rick Perry, who eventually pulled out of the race, has called Social Security “a Ponzi scheme,” as has Texas Senator Ted Cruz.6
Many pundits and political analysts have wondered why, given the popularity of Social Security even among the Republican base, these GOP leaders try to row so hard in the opposite direction. According to New York Times columnist Paul Krugman, “This apparent act of political self-destructiveness probably reflects an attempt to curry favor with wealthy donors.”7 In a separate piece, Krugman hammered on this theme, saying, “The invisible primary has been reduced to a stark competition for the affections and, of course, the money of a few dozen plutocrats.”8 The only candidates who raised a dissenting voice against those bashing Social Security and entitlements were Donald Trump and Mike Huckabee, who criticized the Republican chorus for betraying America’s seniors. Vox’s Ezra Klein observed, “Both parties [are] vulnerable to a candidate like Trump who has the money, and the star power, to campaign on a platform that party elites would normally suppress.”9
Indeed, if he had been elected president, Mitt Romney’s proposals would have amounted to a continuation of a longtime conservative philosophy called “starve the beast.” Conservatives have long had a strategy of actually provoking a deficit “crisis” by way of government shutdowns and other tactics so that the crisis can be solved by raising the pressure to cut government programs that Republicans don’t like. In the words of notorious GOP operative and antitax crusader Grover Norquist—taking his cue from Barry Goldwater—“I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”10
In the Crosshairs of a Billionaire’s Obsession
So Romney and Ryan’s talk about “revenue neutral” was simply electioneering pixie dust to fool independent and swing voters who did not have the time or the inclination to subject their claims to sufficient scrutiny. Their campaign was just the latest point of the spear for conservative organizations and leaders who had long advocated cutting or privatizing entitlements. Chief among those has been conservative Wall Street billionaire Peter G. Peterson, who was briefly secretary of commerce in the Nixon administration, and then became CEO of Lehman Brothers (which later collapsed during the financial crisis of 2008), and later a cofounder of the private equity firm Blackstone Group. He is also former chairman of the Federal Reserve Bank of New York.
Even by billionaire standards, Peter G. Peterson is no ordinary plutocrat. The Los Angeles Times’s Pulitzer Prize-winning reporter Michael Hiltzik has called Peterson “the most influential billionaire in America,” more influential than George Soros or the Koch brothers, Charles and David.
Peterson “isn’t content merely to express concern about the federal deficit,” Hiltzik says. “His particular targets are Social Security, Medicare and Medicaid, which he calls ‘entitlement’ programs and which he wants to cut back in a manner that would strike deeply at the middle class.”11
Peterson’s billions have backed a large number of think tanks, including the Concord Coalition, formed to “fix the nation’s debt problem” and “unsustainable entitlement programs,” as well as the Campaign to Fix the Debt, the Committee for a Responsible Federal Budget, and, most importantly, his very own Peter G. Peterson Foundation (which he launched in 2008). These organizations and others champion his pet causes, and take his fiscal austerity message outside the Beltway. He has sprinkled his donations around to numerous organizations and candidates on both sides of the aisle, launching TV ad campaigns to push his debt politics and starting his own media outlet called the Fiscal Times to churn out articles about fiscal issues. He even funded a college and high school campaign called “Up to Us,” ostensibly aimed at “teaching kids about the national debt,” but in fact it was targeted at fomenting a generational war between young people and seniors over Social Security. In essence, Peterson, a fabulously wealthy and consummate Wall Street insider, has bankrolled his own movement over the past thirty years, and Social Security is squarely in his crosshairs.
Peterson says his concern is over a government drowning in debt, particularly in the aftermath of the government bailout of Wall Street and the economy after the 2008 collapse. But economist Dean Baker, codirector of the Center for Economic and Policy Research, disputes this. “He’s not focused on the debt so much as on cutting Social Security and Medicare,” Baker says. “Even in the late ’90s, when we had a surplus, he was saying the same thing and the debt wasn’t in any obvious way a problem then.”12
Peterson has shown a deftness at making his views and actions seem nonpartisan and even mainstream, and he has been able to influence both Beltway Republicans and Democrats to the point where “urgent reform” of Social Security and Medicare has become a foundation of a bipartisan consensus. Yet, Hiltzik explains, “Peterson’s evidence can be misleading and his contentions questionable. The avoidance of overt political partisanship enables Peterson to engage in something more insidious: economic partisanship.” In the battle over Social Security we see the familiar pattern of the rich and powerful against nearly everyone else, the 1 percent versus the 99 percent.
But Peterson does not make those sorts of class-based arguments head-on. Instead, he has argued that too much entitlement money is going to the middle class, and that cutting off payments to these recipients “would balance the budget, and would do so with a comfortable surplus to spare.” Cleverly, he even tries to overturn the class warfare card by claiming that “a substantial part” of retirement payments go to wealthy people like him, and that this is a waste of money and national resources. But in fact, Social Security payments to recipients earning annual incomes of $1 million or more typically amount to peanuts—seventeen-hundredths of 1 percent (yes, 0.17 percent)—of all benefits paid out.
“The hallmark of Peterson’s worldview,” Hiltzik says, “is to view social insurance programs such as Social Security and Medicare strictly as fiscal expense items, ignoring their roots as moral commitments to American citizens that cross generations and unite economic classes.” Portraying them, as Peterson does, as “safety net” initiatives that should only be available for the most destitute Americans reconceptualizes Social Security and Medicare as welfare for the poor, rather than as an insurance program into which workers have contributed premiums all their working lives. Peterson and his allies are quite consciously trying to undermine the universal appeal of these popular programs. Yet Peterson has managed to sell his soap to the point where his views dominate Beltway discussions over Social Security and so-called entitlements. “The shame of Washington,” Hiltzik adds, is that almost every organization allegedly trying to “fix” these programs “has accepted, somewhere and somehow, money from Pete Peterson.”13
Peterson’s ambitious efforts sometimes have resorted to exaggeration, hyperbole, and even fakery. He and his allies deployed a favorite tactic of campaigning for benefit cuts to Social Security by blending Social Security with Medicare’s future trend lines. Unquestionably, the cost of health care has exploded in the United States and threatens to undermine the nation’s finances. But when opponents like Peterson criticize the costs of “entitlements,” nearly all of those costs come from Medicare (though Medicare costs are a good bargain compared to the exorbitant, privatized US health-care system, which is twice as expensive as health-care systems in other developed nations). By lumping together Medicare and Social Security into “entitlements,” the critics are using a meat cleaver approach instead of a scalpel in their bid to call for severe cuts to both.
Peterson also spent a lot of money to organize a charade of town hall meetings to advance his agenda. The Peterson Foundation reportedly gave over $2 million to America Speaks, one of the leading innovators in the field of public deliberative democracy, to organize nineteen town hall meetings across the country.14 With the digital magic of the Internet and video capabilities, these nineteen locations were all linked together simultaneously, on the same day in June 2010. It was billed as “Internet democracy at its most sophisticated,” showing the capabilities of this live crowdsourcing technology. All told, more than 3,500 average Americans from across the country were summoned to deliberate on the “debt problem.” At the town halls, participants were provided “objective” information about the problem, as well as potential solutions.
But the objective information turned out to have been Peterson-ified in advance. Salon financial columnist David Dayen reported that “the entire event was absolutely designed to create a panic about the deficit among the participants. Slickly produced scare videos talking about the dire straits of the budget were prevalent. Multiple charts and graphs without precise numbers or percentages were handed out.” One video featured deficit hawk Rep. Paul Ryan, as well as Federal Reserve Chair and former Bush Council of Economic Advisors chair Ben Bernanke. President Barack Obama was also featured in the video. “The speakers, and the content,” Dayen wrote, “seemed skewed” in favor of one side of the argument.15
Through the wizardry of modern digital communications, the 3,500 participants at the America Speaks town halls all watched and listened at the same time, a virtual high-tech “national town hall meeting.” But at the Los Angeles location, things didn’t go as scripted. In the words of Thomas Frank, author of What’s the Matter with Kansas, “They deliberated, and then something funny happened on the way to the consensus.”16 Instead of participants coming to the conclusion that had been planned, that debt and deficits were evil and Social Security and other entitlements had to be cut in order to save them—a “we have to burn the village in order to save it” mentality—the Angelenos in attendance tore up the script. Instead they wound up supporting “an extra 5 percent tax” on incomes of greater than $1 million per year (by 68 percent), an increase in the corporate income tax rate (59 percent), and a “securities transactions tax” (61 percent) as alternative ways to close the deficit and fund entitlements. Specifically on Social Security, a whopping 85 percent supported raising the limit on the payroll tax so that all income levels pay the same rate of Social Security tax as a means of stabilizing the retirement system. Despite the scaremongering and factual distortions they encountered, these Americans spoke, loudly and clearly, about their opposition to rolling back Social Security and Medicare.
The Party of FDR Goes AWOL
It’s clear that the Republican Party is no longer the party of Ike Eisenhower, and it’s a foregone conclusion that the GOP and its leaders are antigovernment and against all forms of what are today referred to as “entitlements.” At this point, it is in their partisan DNA. But what about the Democrats? What explains their transmutation, from the party of Franklin Roosevelt and the New Deal that launched Social Security—one of the most popular government programs of all time—to a party that also now appears to hold a meat cleaver, ready to chop away at one of the foundations of the US middle class?
As a candidate for president, Barack Obama first raised some liberal and progressive eyebrows with his Peterson-like take on Social Security. Obama invoked the GOP talking point about the “Social Security crisis”17—which, as we saw in chapter 1, doesn’t really exist except in the minds of those who want to cut it. And then as president-elect he pledged in January 2009, just before assuming office, in a meeting with the Washington Post editorial board, to enact reforms to fix the alleged crisis.18 His solutions have included various ways to cut benefits. For example, Obama has promoted an alternative measurement of the consumer price index known as the “chained CPI,” which, if used, would amount to a less-generous annual rate of increase for Social Security payments and federal-employee retirement annuities. Under Obama’s plan, a seventy-three-year-old retiree would see a 2.5 percent reduction in Social Security payments, which by the age of ninety-three would balloon to a 7.2 percent cut in her or his Social Security payments. Obama only dropped this idea after a massive outcry from many Democrats and progressives.19
Hillary Clinton also has been slippery on Social Security, and in some ways worse than Obama. She has a long track record of waffling and fudging on the subject of what to do about entitlements. In the 2008 Democratic presidential primary debate in Philadelphia, Clinton was asked if she would agree to lift the Social Security payroll cap on individuals making more than the then upper limit of $97,000 per year so that wealthier people would pay a fairer share into the Trust Fund. In the debate, Obama correctly stated, “Right now millionaires and billionaires don’t have to pay beyond $97,000 a year.” To this, Clinton responded blandly, “I don’t want to raise taxes on anybody,” and made a feeble defense of why it was OK that the wealthy paid a lower percentage of their income toward Social Security than the rest of Americans.20 In a debate in Las Vegas, she called Barack Obama’s proposal to lift the payroll cap a trillion-dollar increase “on middle class families”—despite the fact that (at the time) only 6 percent of Americans made over $97,000 per year.21
Flash forward to October 2016, when she visited New Hampshire as part of her presidential run. Clinton again tried to stoke fear over hurting “middle class families” as she refused to endorse lifting the payroll cap.22 Yet the Center for Economic Policy and Research found that a mere 6 percent of the richest Americans (just over 9 million people) earned more than the $118,500 taxable limit.23 In New Hampshire Clinton also would not categorically rule out making cuts to Social Security benefits or raising the retirement age. Earlier in the campaign, Clinton did at least say that Republican candidates’ proposals to “privatize” or “undermine” Social Security are “just wrong.” But when her campaign was asked if she supported expanding Social Security, or if she favored some of the Republican presidential candidates’ other proposals, such as raising the retirement age or means-testing, her campaign spokesman did the Hillary dodge, saying only that “dealing with challenges facing older Americans is a top priority for her.”24
Besides Clinton presenting herself as a protector of the middle class in such an obviously disingenuous way, she has also delivered speeches, for which she has been lucratively paid, to employees of the controversial investment bank Goldman Sachs (particularly irksome since Lloyd Blankfein, CEO of Goldman Sachs, has proclaimed to CBS News that “entitlements” must be “contained”). All of this has only fostered deep suspicion about her true beliefs and values. It certainly did not endear her to the progressive and liberal wings of the Democratic Party. Clinton’s unreliability on Social Security, Medicare, and other entitlements caused many progressives to grumble that she should not simply be automatically coronated with the presidential nomination, and became one of the crucial motivators for US senator Bernie Sanders from Vermont to throw his hat into the ring.
But this lack of FDR-ness, or even JFK-ness “profiles in courage” on the part of leading Democrats, is nothing new. Many people forget that President Bill Clinton negotiated with Republican House Speaker Newt Gingrich over a plan to “save” Social Security that included partial privatization.25 That grand bargain imploded under the weight of the Monica Lewinsky scandal and Clinton’s impeachment, but Clinton’s willingness to “go there” caused lasting harm because no Democratic president had ever before agreed that there was a Social Security “crisis” that needed to be “solved.” Clinton’s decision provided political cover for politicians of both parties, as well as for special interests like the billionaire Pete Peterson, to advance schemes for restructuring the program.
That in turn led directly to President George W. Bush’s Commission to Strengthen Social Security, which in fact was a commission trying to privatize Social Security by way of individual accounts—an odd way to strengthen it by in effect wiping it out. So when President Barack Obama took office, the public discourse was already a punishing one. The Bush privatization plan was defeated, but nevertheless President Obama, who was elected twice by voters who overwhelmingly support Social Security, appointed his National Commission on Fiscal Responsibility and Reform in February 2010, with a charge of drafting a plan to “balance the budget … and address the growth of entitlement spending.” It sounded like a fiscally responsible thing to do, but a big red flag warned of trouble ahead when he appointed his cochairs: the conservative North Carolina Democrat Erskine Bowles and the conservative Republican Alan Simpson.
The two were charged with the task of forging a “bipartisan” plan, yet both were known to be no friends of Social Security or Medicare. Like Pete Peterson, Bowles also had deep ties to Wall Street and the financial industry, including being on the board of directors of investment bank Morgan Stanley (which received a $107 billion bailout from the Federal Reserve when it was on the brink of collapse in 2008, according to Bloomberg Business).26 And the colorfully blunt Simpson had helped popularize the term “greedy geezers” to describe retired elderly who were allegedly stealing from young people; previously he had described Social Security as “a milk cow with 310 million tits.”27 Both Bowles and Simpson became leaders in Peterson’s group Campaign to Fix the Debt, which targeted Social Security for “reforms.”
The Simpson-Bowles Commission, as it came to be called, was marred by controversy and headlines from the get-go, and the commission never released an official report because too many of its members disagreed with the strongly held opinions of Simpson and Bowles. But the cochairs went rogue and issued their own report in December 2010, calling for federal budget cuts and reductions to Social Security benefits by raising the retirement age, by means testing (which would undermine the universality of the program), and reducing the cost-of-living adjustments by adopting the chained CPI (and on Medicare, they called for making seniors pay higher premiums). Despite the lack of agreement among the members of the Simpson-Bowles Commission, and widespread opposition within his own party, President Obama inexplicably proposed in his second term a reduction of benefits by moving to incorporate into his 2014 budget the chained CPI cost-of-living formula. This move was fiercely opposed by Social Security advocates, both inside and outside the Democratic Party.
The Democrats have become dominated by Obama and Clinton strategists who, although they still believe in government involvement in the economy (more than Republicans), also advocate for so-called free market “solutions” to a range of problems. But increasingly their arguments stretch the boundaries of common sense, and do nothing to address the unfairness of the status quo. As we have seen, billions of dollars in federal taxes are spent subsidizing the private savings and retirement plans, as well as the homeownership, of the top 10 percent of income earners. Meanwhile, everyone else is left scrambling in this increasingly “ownership”—that is, “on your own”—society. And Democratic administrations and majorities in Congress have done little to stop it.
The Four Musketeers—Er, Social Security Commissions—to the Rescue
We can track what has happened to the Democratic Party on this issue by looking at the four Social Security commissions that were established over the last five decades, practically one every decade. It seems like just about every president has felt compelled to set up a commission to “save” Social Security. It has become a crucial wedge issue that the politicians toss in the air when they need to, like a political football that adds the right amount of misdirection to their overall agenda.
The first and most important of these four commissions was the National Commission on Social Security Reform, also known as the Greenspan Commission because its chairman was Alan Greenspan, who later was appointed chairman of the US Federal Reserve. It was established by the US Congress and President Ronald Reagan in 1981 to study and make recommendations regarding a short-term financing crisis that Social Security faced at that time. Reagan had never been a strong supporter of Social Security; indeed, he wanted to privatize it, and in 1975 had suggested making Social Security voluntary and letting workers make their own investments in the stock market.28 But by the early 1980s Social Security had become what was known as the “third rail of politics,” a reference to the high-voltage subway rail that powers the trains—“anyone who tries to touch it gets electrocuted.”29
Estimates at the time found that the Social Security Trust Fund would run out of money as early as August 1983. President Reagan’s executive order outlined the Greenspan Commission’s mission as one of devising policy interventions “that will both assure the financial integrity of the Social Security System and the provision of appropriate benefits.” In a letter to congressional leaders dated July 18, 1981, the president wrote, “The highest priority of my Administration is restoring the integrity of the Social Security System. Those 35 million Americans who depend on Social Security expect and are entitled to prompt bipartisan action to resolve the current financial problem.”30As Social Security experts Nancy Altman and Eric Kingson have observed, unlike in today’s debates, President Reagan didn’t include anything in his executive order about balanced budgets or government debt and deficits, and certainly no mention of the dreaded word “entitlements.”
Instead, the Greenspan Commission focused like a laser on Social Security solely, making sure that its dedicated funding from the payroll tax would be sufficient to provide the desired level of benefits for decades to come. Commission members wisely excluded Medicare from their mission because they understood that Medicare was substantially different from Social Security, requiring different expertise and solutions. Including Medicare along with Social Security undoubtedly would have made the politics of figuring out a remedy for both of them a lot more complex.31 If the commission was serious about finding a bipartisan patch to a short-term funding shortfall for Social Security, it made a lot of sense to take this narrow approach.
Indeed, the Greenspan Commission’s very first recommendation to Congress was that it “should not alter the fundamental structure of the Social Security program or undermine its fundamental principles.”32 The commissioners displayed a serious commitment to this very popular, pragmatic, and useful federal program, and its final report led to the Social Security Reform Act of 1983. That legislation fixed the short-term problem by increasing the payroll tax a bit, and it addressed long-term funding issues by gradually raising the retirement age from sixty-five to sixty-seven. It wasn’t a perfect solution, as it required a tax increase that was going to disproportionately impact the middle and working classes, and an increase in the retirement age did amount to a benefit cut. But bipartisan consensus was achieved in a way that preserved the best features of this crucial retirement and antipoverty program for decades to come. In the annals of government policymaking, the Greenspan Commission enjoys a reputation as a successful model of bipartisanship and effectiveness.
But just a decade later, President Bill Clinton appointed another commission—the Bipartisan Commission on Entitlement and Tax Reform, chaired by Senators Bob Kerrey (Democrat) and John Danforth (Republican). For the first time, in the very title of the commission itself, the dreaded word “entitlement” now had entered the nation’s lexicon. Altman and Kingson (who had been staffers for the Reagan commission, and Kingson for the Clinton commission) point out that never before had a commission lumped together Social Security, Medicare, and Medicaid as part of a “unified entitlement crisis.” It made no sense, from the point of view of sincerely grappling with any emerging challenges, but it was a smart political move on the part of Social Security’s opponents to stuff them all into the same bag in their attempt to drown them all.
That’s because Medicare and Medicaid, the health-care programs for seniors and the disabled, really do suffer from potential bankruptcy challenges going forward due to the outlandishly high costs of health care in the United States, whether in the private or public sectors (the United States pays approximately twice as much money per capita for health care, for less coverage of our overall population, compared to other developed nations). In less than a year, as Altman and Kingson explain in their book, Social Security Works!, the eleven-letter word “entitlements” went from being “perfectly respectable budget jargon into the proverbial four-letter word, used to suggest that the benefits Americans had and were earning were less than deserved.”33
The commission deadlocked on its recommendations, with not a single policy remedy receiving a majority of commission member votes, and little of its ambitious agenda was ever implemented. Nevertheless, this commission, which had been established by a Democratic president, did more than any other previous body to stigmatize the term “entitlement,” and determined the terms and context of the debate for years to come. Many news media outlets aided and abetted this wayward process, blaring front-page headlines about the alleged problems caused by allegedly out-of-control entitlement spending. Clinton’s Entitlement Commission was also noteworthy due to the participation of one of its members: billionaire Peter G. Peterson, who was to continue pushing his opposition agenda and play a prominent role in the entitlement debate for the next twenty years.
With the mischievous genie let out of the bottle by Clinton’s Entitlement Commission, the stage was set for a serious assault on the people’s fortress of Social Security. All the effort needed was a sympathetic president willing to use his office as a bully pulpit for the cause. Enter, President George W. Bush.
President Bush upped the ante—not only did he support cutting back Social Security, but he made the privatization of Social Security a centerpiece of his domestic agenda in his second term. In his 2005 State of the Union address, and in subsequent speeches he made touring the country to promote his plan, President Bush preached the familiar mantra that Social Security was “created decades ago, for a very different era.” Now the system was outdated and in need of modernization, he said, and going broke besides. President Bush spread deceptive untruths, stating that Social Security’s reserves were only IOUs, practically worthless paper backed by no real assets, and that future benefits might not be honored. He tried to sow generational discord by pitting younger workers against the elderly, saying that overly generous senior benefits were pickpocketing from younger Americans.
As his “solution,” President Bush pushed a plan for privatization of this jewel of the New Deal. His plan included allowing young workers to keep some of their Social Security contributions and stash them into individual private accounts that could be invested in the stock market. He smiled out of both sides of his face, calling Social Security “one of the greatest achievements of the American government, and one of the deepest commitments to the American people,”34 even as he pushed his privatization plans that would have destroyed it. Indeed, George W. Bush called his commission the 2001 President’s Commission to Strengthen Social Security, yet he and his strategists plotted to weaken it. This was the moment for which many of Social Security’s opponents had waited decades.
Keep in mind, privatization would have meant steering the $2.8 trillion Social Security Trust Fund into private accounts for individual Americans, who then would have had little choice but to invest their private security account into the stocks and bonds markets if they wanted to earn enough return for boosting their retirement savings. And who would have benefited from this financialization of Social Security? Wall Street fat cats, of course, many of them old friends of Pete Peterson. Millions of Americans suddenly would need to pay consultant fees to figure out how to invest their money, not to mention transaction fees for the purchasing of stocks and mutual funds. The same Wall Street where Peter Peterson had made his billions and Erskine Bowles his multimillions was salivating over that $2.8 trillion stash, anticipating the gold rush that would come their way from the privatization of Social Security.
Fortunately, the American people were buying none of it. To their credit, many Democrats rallied to defend America’s retirement pension system against privatization—even many of the Social Security critics within their party were not willing to go that far. Key Democratic leaders mobilized the public against Bush’s attack. Bush’s “ownership on your own society” was defeated. But that was not the end of the rhetorical attack, and many political leaders today on both sides of the aisle continue to propose different types of Social Security “reforms” in order to “save” it.35
Among those politicians, unfortunately, has been President Barack Obama. His National Commission on Fiscal Responsibility and Reform has adopted the anti-entitlement language and the Peterson-led posture of lumping together Social Security with Medicare and Medicaid. As Altman and Kingson point out, we can see how attitudes among the political elite have changed between the Greenspan Commission in 1981 and the Simpson-Bowles Commission in 2010.36 President Reagan’s executive order establishing his commission kept its mission narrowly focused on assuring the financial integrity of Social Security, with no attention on deficits or debt. But President Obama’s executive order outlined the goal as that of coming up with recommendations to “balance the budget” and “meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.”37 Obama’s order was expansive, covering all of the federal government’s expenditures and lumping together Social Security, Medicare, and Medicaid into what was made to sound like a gigantic federal slush fund for undeserving people. Obama cast aside the narrowly constrained approach deployed so successfully by President Reagan’s Greenspan Commission, much to the alarm of the Democratic rank and file, as well as millions of supporters who had voted for him.
Consequently, Obama’s Simpson-Bowles Commission accomplished nothing. Yet when compared to the Greenspan Commission, the language and posturing of Obama’s cochairs showed how much Pete Peterson and the Goldwater Republicans’ ideological battle against Social Security, which had been decades in the making, had gained significant ground. Without the party of FDR to defend it—and unfortunately, the Democrats are no longer that—the New Deal had been severely weakened. Bipartisan consensus over entitlements had been achieved by rolling back the most progressive legislative achievements of the twentieth century. With leaders in both parties devising plans to cut back and in some cases even chop off the only remaining solid leg of the three-legged stool of retirement security, the only obstacle preventing them from this folly has been the American people.
The Architecture of Deform
How did the party of FDR reach this state of abasement? Mike Lofgren, a former high-powered Republican congressional staffer who served for nearly three decades as a chief analyst for both the House and Senate budget committees, provides an eyewitness account of watching the Democrats cede the battlefield to Republicans. In his book The Party Is Over: How Republicans Went Crazy, Democrats Became Useless, and the Middle Class Got Shafted, Lofgren provides an insider’s view to the Democratic Party’s capitulation.
“You know that Social Security and Medicare are in jeopardy when even Democrats refer to them as entitlements,” Lofgren writes. “‘Entitlement’ has a negative sound in colloquial English: somebody who is ‘entitled’ selfishly claims something he doesn’t really deserve.” Why not call them “earned benefits,” Lofgren asks, which is what they are because we all contribute payroll taxes to fund them?38 Or, I wonder, why not call them social insurance as other countries do, emphasizing the “insurance” aspect, which Social Security and Medicare benefits clearly are (since virtually all recipients have had to pay premiums over the course of their lifetimes in order to receive the benefits). All workers pay 6.2 percent of their wages into Social Security and 1.45 percent for Medicare, while the employer matches those amounts. Indeed, employer contributions are ultimately taken out of the workers’ wages as well, since that money goes into paying these premiums instead of higher salaries. So this is hardly a welfare handout, as the opponents of Social Security tried to brand it. This is insurance, and every one of us pays the premiums; we have earned it. It’s so simple, yet that explanation never occurs to many politicians.
According to Lofgren, “Republicans don’t make that mistake; they are relentlessly on message: it is never the ‘estate tax,’ it is the ‘death tax.’”39 Democrats have failed to deploy the power of language, symbols, and memes to protect FDR’s New Deal legacy, and they are losing the war of words. The Republicans had their language ready, and the Democrats were caught flat-footed when the economic collapse of 2008 struck. Keynesian stimulus was called “socialism,” even as the big banks and Wall Street unloaded their debts onto the taxpayer via an emergency government bailout. And then, right on cue, the fiscal hawks began screaming about how the nation was drowning in debt, and how Social Security and Medicare were responsible.
It was a gigantic scam, because any cuts in Americans’ earned benefits would only go to pay for the rescue of the banks and their bad loans. In effect, we had socialized the losses and privatized the gains. Which only caused government to look even more inept and corrupt, alienating more people and causing them to turn even more toward a party that wants to further reduce the size and role of government. It’s a classic case of a catch-22: damned if you do, damned if you don’t. The up and down roller coaster of winner-take-all policymaking has left many Americans scratching their heads, feeling alienated from their political leadership, and casting around for a new messiah to lead them to the promised land. Often they anoint a “gazillionaire,” from Ross Perot to Donald Trump, with deep enough pockets to allegedly not be corrupted by the partisanship, cronyism, and bumper-sticker politics in the drive to win elections. How nutty, when our only hope seems to be a wealthy person who has so much money that he or she can’t be corrupted by … money?
Into this noisy, polarized confusion entered the Tea Party and Trump, the latest populist outpourings of “We the People versus Washington, DC.” What does the Democratic Party of today offer these people?
“Essentially nothing,” Lofgren says. Despite the fact that Lofgren hails from a conservative party, one can’t help but conclude that he is correct. “During the past ten years, I have observed that Democrats are actually growing afraid of Republicans,” Lofgren says.40 They are afraid to contest the battlefield and gun shy about engaging over principles and values. The Democrats’ surrender has been so complete that incompetence doesn’t seem like a plausible explanation; it seems like willful and deliberate opportunism. This is not the party of FDR, JFK, or LBJ anymore. The center has shifted to the right.
Progressive organizations, leaders, and activists have become deeply unsettled about the Democrats’ drift. Roger Hickey, director of the progressive-leaning Campaign for America’s Future, characterizes the coming battle over reforming the nation’s safety-net programs as a seminal moment for Democrats. “It’s a real point of conflict and battle within the Democratic Party. It endangers the Democrats’ ability to win elections,” he explains. You don’t want to go into any election, he adds, with a message of “I’m going to cut Social Security and Medicare benefits.” According to Adam Green, cofounder of the Progressive Change Campaign Committee, which is leading a charge for expansion of Social Security, “Social Security in 2016 could be the Iraq of 2008, meaning a definitive issue that primary voters make decisions based on.” And Justin Ruben, a leader of the influential eight-million-member progressive organization MoveOn.org is even more adamant. “Any Democrat who is voting to cut Social Security benefits,” he says, “is probably kissing his or her presidential aspirations goodbye.”41
Progressive Democrats saw some relief during the 2016 Democratic primary race for president when two non-Hillary candidates called for expansion of Social Security. Former Maryland governor Martin O’Malley released a plan to increase Social Security benefits, and US senator Bernie Sanders from Vermont called for an expansion of the program and introduced legislation to make Social Security benefits more generous.42 Sanders proposed to pay for it by eliminating the cap on the payroll tax on all income above $250,000. This way, he said, “millionaires and billionaires pay the same share as everyone else.” It was mostly a courageous step, but Sanders’s strategy begged the question: Why should those who make $118,500 to $250,000 pay a lower overall rate of Social Security tax than those making less than $118,500? What makes them so special? Is this the “moderately affluent voter” donut-hole exemption for a candidate’s political expediency?
Yet Hillary Clinton was the front-runner, head and shoulders above everyone in the small Democratic pack of candidates, and her views remained disturbingly opportunistic. Other key Democratic leaders have continued to bail water for Peter G. Peterson and his agenda. The presidential election in 2016 might be the point in the war where the cannon fire crosses.
Winner Takes Nothing
Clearly Lofgren has a point about the Democrats losing a partisan battle of words and ceding too much political ground. But I find his explanation about why the party of the New Deal has three flat tires to be too simplistic. He tells the “how” and the “when” of the Democratic capitulation, and sheds light on what that has looked like. But he never really helps us understand “why”—why would Democrats cede this ground? Political parties are nothing if not vote-maximizing machines, so it must have something to do with the drive to win elections. Do Democratic leaders really feel that Social Security is a losing issue? But with Social Security polling spectacularly well across the political spectrum, how could supporting cuts to Social Security be in the Democrats’ interest? Or flipping that, how could defending Social Security by calling for its expansion not be a winning issue?
To answer that question, we have to understand the peculiar defects of our eighteenth-century-based political system and its gaming dynamics that have reduced politics to a winner-take-all tug-of-war in which the real losers are the American people.
In a very real sense, elections are a game. I don’t mean that in a pejorative sense, I mean “game” as in a board game, like Monopoly or Risk. There are rules about how the game is played and how to win. The antiquated rules of the winner-take-all game, which are the foundation of the US political system, perversely affect an issue like Social Security.
Unfortunately, these winner-take-all rules oftentimes prevent the “will of the majority” from prevailing. The fact is, our electoral process of electing our representatives from one electoral district at a time is carving our nation into red and blue one-party fiefdoms. The Democrats control the cities, most of the coasts, and sizable chunks of the Midwest, while the GOP dominates rural areas and most of the flyover zones between the coasts. Note that this landscape is not simply the result of partisan gerrymandering during the redistricting process, which is the typical explanation for many observers about the lack of political competition. No, this is something different, in which partisan residential patterns—where people live—are outstripping the ability of the mapmakers to greatly affect the outcome of most elections. Each legislative district, whether at federal or state levels, has been branded either Republican red or Democratic blue long before the partisan line drawers sit down at their computers, purely because of where people live. For example, Republican candidates can’t normally win a House seat in San Francisco, Los Angeles, or New York City because there are simply too many Democrats living there; similarly, Democrats can’t usually win a House seat in solidly red conservative districts in states like Mississippi, Oklahoma, or Alabama. Given the regional partisan demographics, in 90 percent of legislative districts at federal and state levels, it’s only possible for one side to win; there are too many of one type of partisan voter packed into that district.43 Certainly, in a handful of states, partisan gerrymandering has had some well-publicized effects, but in most states it has been a minimal factor.
And in presidential and US Senate elections, such lopsided partisan demographics have made it so that there are fewer than a dozen battleground states. GOP candidates have a hard time winning at the state level in California, New York, and other blue states, and Democratic candidates rarely win a statewide office in Alaska, Tennessee, Mississippi, and many other red states. The nation has balkanized along regional lines, with heavy partisan overtones. This demographic destiny has huge consequences for our politics.
In the handful of competitive House districts or presidential states, the parties circle each other as they try to attract support from key swing voters and simultaneously try to mobilize their electoral base. In the era of the “permanent campaign,” each side uses relentless polling and focus groups to figure out the campaign messages used to target these swing voters who decide close elections. Politics collapses into a silly game of sound bites and bumper sticker slogans in what I call the “swing voter serenade.” Many of the swing voters live in suburban, ex-urban and rural districts that tend to lean a bit conservative, particularly fiscally, on issues like taxes, big government, spending—and entitlements and Social Security. Entitlements are a two-headed Hydra for these swing voters—one head regards entitlements as “big government programs” for “those people,” meaning people not like them, which, for the dominant demographic of white voters, often translates into racial minorities. The other head sees not “entitlements” but programs that help grandmas and grandpas. Many undecided voters in the swing districts and states suffered during the economic crisis that began in 2008, and they are very susceptible to demagoguery and populism (enter the Tea Party).
The task of attracting these undecided, swing voters is of paramount importance if you want to win, whether key legislative districts or statewide races, or the electoral college vote for president in a handful of swing states. As the Democrats have become a more urban-based political party, they are increasingly seen by many swing voters as a party beholden to racial minorities and liberal “big government” spenders. That makes it harder for Democrats to win in these sorts of battleground races, so they contort themselves into all sorts of policy backflips in order to move the party to the center so they can compete.
Unfortunately, the soundness of national policy gets caught in this crossfire. The “swing voter serenade” ensures that even the best politicians pitch their electoral prospects toward a handful of these undecided voters in a handful of battleground districts and states. That distorted atmosphere severely undercuts attempts to pursue sound national policy when it comes to Social Security and entitlements, as well as a host of other issues. These swing voters are what all the polls, focus groups, and fuss are all about. Successful politicians and their clever consultants and strategists are obsessed with discovering the right sound bites and carefully crafted campaign themes to target these key demographics of swing voters. They come up with loaded terms like “entitlements” and “debt” and charge them full of hidden, explosive meaning. They call themselves things like “compassionate conservative” and “New Democrat,” when most of their targeted policies are anything but compassionate or new.
Indeed, when George W. Bush was campaigning for president in 2000 against Al Gore, Bush sometimes sounded like a liberal Democrat. He pledged to “save Social Security and Medicare,” programs that most Republicans had previously condemned as creeping socialism. At one Michigan rally, “compassionate conservative” Bush took a half step away from Ronald Reagan—who had boldly declared that “government is the problem”—when he declared, “We’re a nation that says that when somebody can’t help themselves, we will as a government.”44 James Dao, writing for the New York Times, suggested that “over the course of his campaign, Mr. Bush created a new Republican synthesis; he ran against [retiring president] Bill Clinton and sounded like him at the same time.”45
And yet once Candidate Bush became President Bush, his effort to save Social Security turned into an ideological sandbagging as he tried to privatize the national pension system. Bush and his advisors like Karl Rove had wagered that during the presidential campaign he could hide his hard-right conservative agenda behind a Reaganesque sunny smile and sound bites like “compassionate conservative.” His strategy worked, and he was elected president in an extremely close and controversial election.
Since that time, other politicians and their political consultants have followed a similar playbook. The Washington Post reported that during the 2014 congressional elections, when Republicans were in striking distance of winning control of the US Senate, many of their candidates suddenly reversed course and spoke out against the idea of trimming Social Security benefits.46 They pulled a George W. Bush, led by none other than Bush’s old chief strategist Rove, who ran ads in several key Senate races that accused the Democratic candidates of supporting a “controversial plan” that “raises the retirement age.” The Republican candidates were releasing ads promising to protect Social Security, and—almost comical in their perfidy—citing Democrats’ support for the recommendations from Simpson and Bowles, the cochairs of Obama’s entitlement commission, as the basis of their charges on Social Security. Simpson was asked to condemn his party’s tactic of harshly criticizing Democrats who had supported his own recommendations, but he refused. When it comes to elections, he said, “it’s savagery out there.” Former Republican senator Judd Gregg of New Hampshire, an original member of the Simpson-Bowles commission and chair of the Pete Peterson-funded group Fix the Debt, concurred, saying, “In elections, you do whatever you think will work.”47
But certainly President Obama and many Democrats also have shown themselves to be extremely adept at saying different things to different audiences. How many of Obama’s nearly 70 million voters in 2008, who heard him defend Social Security during the campaign, would have guessed that, once elected, he would appoint a commission cochaired by committed entitlement slashers? So in our winner-take-all political system, a sizable schism has opened between what candidates say they will do to attract swing voters, and what they actually do once in office. The Democratic and Republican parties today, their leaders, candidates, and their mad-scientist consultants, use modern campaign techniques like polling and focus groups to figure out the sound bites and the contrived images of the permanent campaign. The dazzling effect results in what has been called “crafted talk” and “simulated responsiveness” used to dupe voters.48
Yet in a binary, two-choice system, as a result of the incentives of our winner-take-all elections, voters have very few options when it comes to “tossing the bums out.” As we have seen, most districts and states are one-party strongholds, with no competition at all during elections at federal or state levels. Consequently, a deformed, alienating brand of politics has emerged, further confusing an already disengaged and disgusted voting public that has nowhere else to go but to the sidelines. But as more and more voters abandon the field, the game is increasingly left to the partisans who wage their battles using the politics of polarization and division, which then fuels a new round of voter alienation and withdrawal, which in turn cedes even more influence to the partisans. It’s a vicious downward cycle, and American politics is mired in its quicksand.
So there is a reason why Democrats have ceded the Social Security battleground to the Republicans, and it’s a lot more complicated than Mike Lofgren’s explanation that Democrats simply choose the wrong words, or because of inequities in privately financed political campaigns. The Democrats have been whipsawed by the defective architecture of our political system. Privately financed elections are bad enough, but the Republicans are better at playing this winner-take-all game: better at slicing and dicing the electorate into bite-size groupings that can be targeted for manipulative sound bites, better at appealing to demographics of swing voters in key swing districts and states, and better at knowing how to position its candidates in the mayhem of political campaigns. Once in government, the more inept the GOP can make government look, the more voters want a party in power that promises them less government. It’s a sinister game, what I call the “mad science” of politics, and the Republicans are masters at playing it.
This zero-sum “if I win, you lose” contest is played out on many political fronts, but nowhere has it been more impactful—and potentially more tragic—than in the battle over entitlements and Social Security. Why would older and mostly white Americans who are so dependent on Social Security and Medicare pull the lever for candidates who want to “reform entitlements” (i.e., privatize Social Security and voucherize Medicare) and pass other policies that seem directly counter to their economic self-interest? Thomas Frank puzzled over this phenomenon in his book What’s the Matter with Kansas?, locating the source of the tension in the culture wars that trumped politics. Certainly that plays a role, but Frank and many other commentators have overlooked the role that the architecture of our winner-take-all political system itself plays in this dynamic. Polls tell us that most of these voters support Social Security and Medicare, but their vote isn’t decided by that issue, particularly since not even the Democrats will lead with it and make it a front-burner campaign theme. Instead, Democrats cede the “entitlement battlefield,” allowing GOP strategists to expertly target the swing voters in swing races with wedge issues like guns, gays, babies, immigration, crime, and race. Tragically, on the key issue of Social Security and other safety net supports, there is little obvious difference during high-profile campaigns between the major parties. Given the coziness of a two-choice system in which 90 percent of legislative races and battleground states are lopsidedly safe for one party or the other, both parties throw themselves at the swing voters, who usually have other things on their minds than Social Security or Medicare.
Consequently, although three-quarters of Americans depend heavily on Social Security in their elderly years, the popular program has become a political football. Our nation’s politics, cemented into our winner-take-all political system, is taking us in the exact opposite direction that we need to go.
Cracks of Dissent Within the Establishment
Fortunately there are a few leaders trying to yank back hard and pull this tug-of-war in another direction. These include Senators Elizabeth Warren, Tom Harkin, Marck Begich, Jeff Merkley, Sherrod Brown, and Bernie Sanders, and Representatives Keith Ellison, Peter DeFazio, John Larson, Ted Deutch, and John Conyers, all Democrats. Some conservative leaders like Donald Trump, and organizations like the Tea Party, don’t always follow the GOP establishment’s line on cutting or privatizing Social Security. Despite holding many other traditional conservative views, Trump has been a strong defender of Social Security and Medicare, an Eisenhower Republican in that way. Many Republicans, he says, believe “Social Security and Medicare are wasteful ‘entitlement programs.’ But people who think this way need to rethink their position. It’s not unreasonable for people who paid into a system for decades to expect to get their money’s worth—that’s not an ‘entitlement’; that’s honoring a deal.” Similarly on Medicare, Trump argues, “People have lived up to their end of the bargain and paid into the program in good faith. Of course they believe they’re ‘entitled’ to receive the benefits they paid for—they are!”49
It is the height of irony—and a reflection of the strange odyssey of the Democratic Party—that the bombastic Trump has been a more staunch supporter of safeguarding entitlement programs for retirees than either President Obama or Bill or Hillary Clinton. And he has taken on the conservative establishment, including the other GOP presidential candidates in the 2016 election, giving voice to the nearly 7 out of 10 rank-and-file Republicans who support Social Security. He hasn’t gone so far, however, as to call for an expansion of Social Security. But with Democratic senators Warren and Sanders leading the way, 43 out of 100 US senators and 116 out of 435 US House members have gone on record in favor of expansion, as have leading progressive economists like Paul Krugman and Dean Baker.50
Both the Democratic and Republican establishments have reneged on their commitment to everyday Americans. Both political parties are selling out on many important bread-and-butter fronts, including the highly popular Social Security. With US elections bedeviled by winner-take-all games and private campaign donations, both parties have become the parties of narrow special interests, marinated in money, and run by what Mike Lofgren and others have called a “deep state” of shadowy hybrid alliances of government with top finance, national security, and private industry honchos. These elite and powerful interests have been able to undermine government itself, and to pursue their agenda with only a genuflection toward democratic accountability.51
All of this may be building to a boil. Social Security remains one of the key issues of our times, both in terms of its symbolic importance as well as its policy impact. It could yet become a crucial wedge issue that the politicians dance around in their swing-voter serenade to attract voters and win elections. With polls consistently showing that a wide political swathe of everyday Americans strongly supports Social Security, how long can this corruption of politics continue to hold back the popular will?