A New Deal to scupper a presidency
Bush is taking a huge gamble with his assault on the social contract
Thursday January 20, 2005
In his second term, President Bush is determined on regime change. The country whose order he seeks to overthrow is not ruled by mullahs or Ba'athists. But members of his administration have compared its system to communism. The battle will be "one of the most important conservative undertakings of modern times", the deputy to White House political director Karl Rove wrote in a confidential memo. Since the election, the president has spoken often of the "coming crisis" and he has mobilised the government to begin a propaganda campaign to prepare public opinion for the conflict ahead. The nation whose regime he is set on toppling is the United States.
Since the New Deal, the American social contract has been built upon acceptance of its reforms. When Dwight Eisenhower became the first Republican president after Franklin Roosevelt and Harry Truman, he never challenged the New Deal, solidifying the political consensus that had prevailed for decades. But now Bush has launched an assault on the social contract in earnest, seeking to blast away at its cornerstone, social security, which disburses pensions to the elderly and payments to the disabled.
The end of the election marked the start of Bush's new campaign, stumping relentlessly to replace this "flat bust, bankrupt" system by siphoning social security funds into private stock market accounts. His motive was best explained by his political aide, Peter Wehner, in his memo circulated through the White House. "For the first time in six decades, the social security battle is one we can win," Wehner wrote triumphantly in the afterglow of the election victory. "And in doing so, we can help transform the political and philosophical landscape of the country."
To achieve this conservative dream, the public must first be convinced that social security is "bankrupt". The administration, Wehner writes, must "establish an important premise: the current system is heading toward an iceberg. We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course". Moreover, Wehner states, the private accounts are simply a wedge for future benefit cuts, though he does not advocate that the administration stresses that point.
And so Bush and Cheney insist that social security will soon be "flat bust". A political front group run by one of Rove's proteges, which produced the television commercials that trumpeted defamations about John Kerry's military record, is spinning out new ads on social security. The social security administration itself has been dragooned into sending out millions of letters telling recipients that the system is in "crisis".
Despite Bush's furious animadversions, the social security actuaries in their most sober assessments report that the current system will issue full benefits without any changes until 2042. Only the slightest modifications then would guarantee complete solvency beyond that into the indefinite future. Thus the "iceberg" melts before the facts.
"It's a badly, badly flawed plan," Robert Rubin, the former secretary of the treasury and current Citigroup director, told me. "From a fiscal point of view it's horrendous. It adds to deficits and federal debt in very large numbers until 2060." He calculates that the transition costs of Bush's plan for the first 10 years will be at least $2 trillion, and $4.5 trillion for the second 10 years. The exploding deficit would have an "adverse effect on interest rates, an adverse effect on consumption and housing prices, reduce productivity and growth, and crowd out debt capital to the private sector. Markets could begin to lose confidence in fiscal policy. The soundness of social security will be worse".
Rubin adds that the stock market is hardly a sure bet. "You are not making social security more secure by subjecting people's retirement to equity risk. If you look at the Nikkei in Japan you get a sense of what can happen."
Behind the pomp and circumstance of the inauguration, the display of might and rhetoric of right, lie the fear and trembling of the Republican party. If the defeated, disheartened Democrats can maintain a modicum of discipline, the Republicans will alone be forced to defend Bush's social security proposal. Enough of them realise that attacking the fundament of the social contract may let loose political furies against them. Already the powerful chairman of the House ways and means committee, Bill Thomas, has called Bush's plan "a dead horse". But Bush appears intent on regime change at home. In his first term, he promised "compassionate conservatism". In his second term, he pledges casino conservatism, the restoration of boom and bust, which he calls "the ownership society". He has gambled his presidency on it.
"Behind every great fortune lies a great crime."
Honore de Balzac
"Democrats work to help people who need help.
That other party, they work for people who don't need help.
That's all there is to it."
~Harry S. Truman