Say what you want about President Bush, you can't doubt his sincerity or his courage. In seeking to gain the support of some Democrats for personal retirement accounts, he has tentatively proposed cutting promised future Social Security benefits of middle-income workers. But watching George Allen, R-Va., and Chris Dodd, D-Conn., oppose the middle-class cut in benefits on "Meet the Press" Sunday is a signal of what's ahead for this proposal. Bush also says he would consider hiking the retirement age or raising Social Security taxes. These suggestions are bad ideas, but most of all they are unnecessary. They won't fly politically, they are an invitation to political demagoguery and, I fear, they would cause a political problem for Republicans.
Liberal economist Paul Krugman already has called Bush's "progressive price indexing" a "gut punch to the middle class," but we expect that from the Krugmans of the left. Before Republicans consider going any farther down this track, however, they should remember what happened after the mid 1980s. In 1985 the Senate froze COLAs in the name of fiscal prudence and deficit reduction. In the 1986 midterm election, Republicans lost eight Senate seats and gave control of the Senate back to the Democrats.
I learned early in my political career, representing a working-class district in Buffalo, N.Y., that the politics of pain and austerity is a loser, and what's worse it is bad economics. Liberals understand this political maxim instinctively because they are in the business of using government to spread around spending and income redistribution rather than protecting life, liberty and property. They cut their political teeth learning to extract just enough tax revenue from businesses and middle- and upper-income individuals to support government spending programs as lavishly as possible without causing taxpayers sufficient pain to revolt.
Periodically, as liberals overreach on the left, voters revolt, throw sufficient numbers of them out of office and replace them with "center right" conservative majorities. And just as invariably, it seems, conservatives misinterpret what voters are demanding and proceed to talk about slashing government spending and inflicting pain and austerity on the public in the name of fiscal prudence. In reality, voters aren't voting for government to inflict more pain on them; they are voting for government to keep the promises it has made while devising new solutions that will relieve the pain government has inflicted.
Most conservatives fail to grasp this political maxim because they believe limiting government must go hand in hand with pain and austerity. To the contrary, limiting growth of the public sphere can only come about as a byproduct of increasing the breadth and growth of the private sphere. By restoring the link between efforts and rewards, economic growth and jobs are created, thus reducing the demand for government programs and government spending.
Shrinking the relative size of government entails limiting the overall growth of government spending while the private sector forges ahead with solutions that leave everyone better off. That requires reforming programs as we did with welfare reform, which both limited future government spending growth and provided private solutions to replace failed government programs. Americans instinctively distrust government, and they invariably will choose private solutions to problems whenever one is available. It is the job of conservatives to devise those private solutions that will raise prosperity, expand private ownership, increase personal freedom and help shrink the relative size of government.
That is the genius of the Social Security reform plan put forward by Rep. Paul Ryan, R-Wis., and Sen. John Sununu, R-N.H. It illustrates that by restricting overall federal spending growth just a few percentage points, over time Social Security can be made solvent and the safety net made more secure by allowing workers to save about half the payroll tax in personal retirement accounts without raising taxes, cutting promised future benefits or hiking the retirement age.
As Ed Crane wrote in a recent Wall Street Journal op-ed piece, "In addition to more control over your life through personal accounts, all the ancillary benefits of ownership should be enthusiastically played up by the president: the pride one has in having provided for his or her own retirement, as opposed to being a supplicant of the state; the security of knowing the government can't take the money away (which they do whenever they raise the payroll tax or push back the retirement age); and perhaps most of all, the knowledge that your loved ones may benefit from your labor. Inheritability is a hugely underexploited benefit of personal accounts."
The Social Security surplus now being squandered on pork and special-interest payoffs should be saved as Congress originally intended. As Fed Chairman Alan Greenspan said, "We need, in effect, to make the phantom 'lockboxes' around the trust fund real" by allowing workers to place their share of the surpluses into personal retirement accounts. By allowing workers to save their share of the surpluses in their own personal-account "lockbox," Congress could make a dramatic down payment on solvency this year without changing Social Security one iota - without cutting anyone's promised future benefits, without raising anyone's taxes, without making anyone work longer.
It's an idea whose time has come. It is an idea sufficient Senate Democrats could embrace. Let's stop the raid and start the personal retirement accounts.