Which Party Poses the Real Risk to Social Security's Future? (Hint: It's Not Republicans)
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Social Security remains one of the greatest achievements of the Democratic Party since its creation 75 years ago. Although Republicans have historically fulminated against the program (Ronald Reagan once likened it as something akin to “socialism”), they have actually made little headway in touching this sacred “third rail” in American politics. President Bush pushed for partial privatization of the program in 2005, but the proposal gained no policy traction (even within his own party) because Social Security continues to be hugely popular with American voters. It’s a universal program that benefits all Americans, not a government handout to a few privileged corporations.
Which is why it’s odd that Democrats seem almost embarrassed to continue to champion the legacy of FDR. The party frets about long-term deficits and the corresponding need to “save” Social Security from imminent bankruptcy and, in doing so, opens the gate to radical cuts in entitlements that will do nothing but further destroy incomes and perpetuate our current economic malaise. It is true that some Republicans have signed on to the idea of privatization, notably a proposal championed by Rep. Paul D. Ryan (Wis.), the senior Republican on the House Budget Committee. But only a handful of GOP lawmakers have actively embraced the measure and, in the aftermath of the worst shock to the financial system since the Great Depression, many Republican lawmakers would just as soon see the idea forgotten.
So why don’t the Democrats leave well enough alone? Why bother even setting up “bipartisan commissions” to discuss the issue of Social Security? At the risk of sounding like one of those ungrateful members of the “Professional Left”, whom Robert Gibbs recently decried, I note that it was President Obama who most recently re-opened this issue by setting up a commission on reducing long term budget deficits and dealing with the long term issue of entitlements, including Social Security. In the Commission’s remit, nothing is off the table, including Social Security and Medicare. (Of course, given that one of the members is a director of Honeywell, it’s hard to envisage any suggestions of defense cuts). I also note that according to the Washington Post, “Democrats said Simpson and Bowles are uniquely equipped to blaze a path out of the fiscal wilderness — and to forge bipartisan consensus on a plan likely to require painful tax increases as well as program cuts.” No mention of Republicans getting on board. This is self-immolation, plain and simple. And Obama wonders why voters remain unhappy?
Now that the President has opened this Pandora’s Box, it is hard for him credibly to make the case, as he attempted to do in last Saturday’s weekly radio address, that “some Republican leaders in Congress want to privatize Social Security.” In fact, it is an idea enthusiastically embraced by a number of Wall Street Democrats who are funded with huge campaign contributions from Wall Street itself. (Candidate Obama received more money from Wall Street in 2008 than Hillary Clinton.) These contributors would be the Rubinites who for decades have played a huge role in allowing for greater financial leverage ratios, riskier banking practices, greater opacity, less oversight and regulation, consolidation of power in ‘too big to fail’ financial institutions that operated across the financial services spectrum (combining commercial banking, investment banking and insurance) and greater risk. Privatization of Social Security represents the last of the low hanging fruits for Wall Street. Who better to provide this to our captains of the financial services industry than their major political benefactors in the Democratic Party?
The issue of privatization is germane when one considers the members of the Commission approved by the President. There are questions of possible conflicts of interest. As James Galbraith has noted, the Commission has accepted support from Peter G. Peterson, a man who has been one of the leading campaigners to cut Social Security and Medicare. It is co-chaired by Erskine Bowles, a current Director at North Carolina Life Insurance Co (annuity products are a competitor to Social Security and would almost certainly be beneficiaries of the partial privatization). Mr. Bowles’ wife, Crandall Close Bowles, is on the Board of JP Morgan, and she is also on the “ Business Council,” a 27 member group whose members include Dick Fuld, Jeff Immelt, Jamie Dimon and a plethora of other Wall Streeters.