The impossible reform

Posted: Mar 07, 2004 12:00 AM
From all ideological quarters, people are pushing and pulling in the matter of Social Security reform. The sheer steepness of any approach to reform is vivid in memory, the most humiliating example of which was the early attempt by Ronald Reagan, a few months after he took office. A draft proposal, embodying a few reforms, was whispered in the Senate, resulting not merely in defeat for the proposal, but in denunciation of its sponsor with a 96-0 vote.

Although Reagan showed, in his speech to the White House Conference on Aging a few months later, that he grasped the nature of the problem brilliantly, he himself simply got out of the way. If the Senate is 100 percent opposed, go fish elsewhere. Which he did, but what he then agreed to in 1983 was an increase in the payroll tax and the levels at which income became taxable. And the extra Social Security revenues thus collected have been raided for general government expenses ever since.

President Bush is palpably sincere in his call for reforms -- or rather, for thought to be given to reforms. He suffers several disadvantages. The first, of course, is the election. To talk about reforms for Social Security in the heat of an election campaign is to run over your political advisers in a Mack truck. Their responsibility is to win elections, not to save Social Security.

A second obstacle is his own record, at two levels. The first, for which he is directly responsible, is his vulnerability on the budget deficit. A president who has never once used his veto power to curb ornery congressional greed has special difficulties urging reform in Social Security payments.

The second is not traceable to him directly, except as an acquiescent president who went along with his predecessors in spending Social Security revenues as if they were conventional tax receipts. What Reagan and Congress did in 1983 was jack up the payroll taxes. That move created huge surpluses for the simple reason that there were millions of Americans who had not yet come around the corner of age 62. Between 1983 and 2001 a total of $667 billion in excess Social Security revenues was spent.

Enter into the conversation Alan Greenspan, who without giving the White House any reasonable notice about his recommendation, testified to a congressional committee that Social Security payments should be reshaped in closer accord with reality.

The proposal of Mr. Reagan in 1981 that was massively rejected by the Senate was that there should be a cut in benefits for those who put in for Social Security before reaching the age of 65. Alan Greenspan, 23 years later, has made the same point. And in between, the number of Americans age 62 or older rose by millions.

The speech Reagan gave at the White House conference in December 1981 was exemplary in logic and eloquence, and prophetic in the matter of costs. It was pure Reagan. He spoke of the difficulty of communicating with elderly people on the subject of Social Security, but acknowledged that communication between generations was always difficult.

He recalled the special difficulty he had had as governor of California, back when students were rebellious and suspicious of anyone over 30. He spoke of one delegation of students who had come to him. Their spokesman had said: "You can't understand your own sons and daughters. You didn't grow up in a world of instant electronic communications, of cybernetics, of men computing in seconds what it once took months and even years, of jet travel, nuclear power, and journeys into space to the moon."

Reagan said that the Lord was with him that day, providing an apt response: "You're absolutely right. We didn't have those things when we were growing up. We invented them."

He went on to plead, in a speech graphic with illustrations, the need to invent a Social Security system that didn't simply run out of money. He cited longevity. "Today's young people, in many instances, don't even know the names of diseases that plagued mankind when we were young and that have been eliminated."

In a saddening citation he spoke of the mortality rate. "Today's typical 65-year-old will live another 16 years, and our median national age will go up another three years in the next decade. I'm already ahead of that!" He was ahead of that then, and, 23 years later, is still alive.

There are many approaches, of course. Raising the age at which Social Security can be had is the most obvious --but remember, it was frowned upon by the Senate 96-0. Retirement funds that provide an incentive to save and a prospect of real growth are a part of the Republican view of life: Encourage independent and individualized economic activity. But the challenge is directly on the shoulders of George W. Bush.