No Strong Conservative Mandate? The Failed Social Security Reform of 2005 and the Prospect of Future Reform
By Christian Eckert

Following his reelection in 2004, President George W. Bush interpreted the election outcome as a strong mandate for his policies. For his second term, he promoted Social Security reforms as the cornerstone of his domestic agenda, which was a surprise to many people. Social Security, officially called Old-Age, Survivors, and Disability Insurance (OASDI), was introduced in 1935 by President Franklin D. Roosevelt as part of the New Deal programs and has undergone reforms since then. Over the years Social Security has grown in size and continues to be very popular, especially among people in the middle and lower income classes, as Social Security benefits are often the main part of their retirement income. While Bush had occasionally talked about Social Security reform and even established a commission to develop reform proposals during his first term, he was not expected to focus on this issue during his second term.

The president's push for reform was met with much skepticism. The main reason for this skepticism was the same as the one for why Social Security has often been described as a "third rail" of American politics. In this view, Social Security is viewed as a program that cannot be fundamentally reformed because retrenchment efforts have a history of producing backlashes that have ended political careers. This assertion is based on the sheer size of the program, the influence of retiree interest-groups, and the power of the elderly as a voting bloc.

The president based the urgency of Social Security reform on the projections of the 2004 OASDI Trustees Report. By 2018, as projected by the report, benefits will exceed the income of the funds. By 2030 most of the baby-boomers will have retired and the ratio of workers to beneficiaries will have shrunk to 2.2. By 2042 the savings of the funds will be depleted. As a result of these trends, if no adjustments are made, unfunded obligation for the funds will reach $3.7 trillion by 2078.

George W. Bush saw an historic chance to fundamentally change the seventy year-old program, using the dire projections of the OASDI Trustees Report as a key argument for the need of reform. The opportunity for reform was based on the assumed conservative policy mandate provided by both his reelection and by the seemingly firm Republican control of both houses of Congress. While the president did not introduce a specific reform plan, he made it clear that any reform would have to be based on the introduction of personal saving accounts into the system. This can be seen as part of the president's push for an "ownership society" and as a conservative take on social policy. Economic conservatives favor small government and personal responsibility; they think that the markets can do a better job in creating prosperity than the government can, so they dismiss the idea that the government should actively provide social programs. In addition to ideological reasons, creating an "ownership society" can also be seen as a strategy to bolster the Republican voter base, as people owning more assets tend to vote Republican. The administration tried to persuade the public and Congress of the wisdom of the president's plans during the months following his reelection.

The push for a reform of Social Security was a real test of the strength of the current conservative coalition in American politics. Opposition to the reform formed quickly after the plans became public in November 2004. It consisted of congressional Democrats, the American Association of Retired Persons (AARP), unions, and liberal-leaning interest groups and think tanks. They were unified in their rejection of diverting payroll taxes into personal accounts. The reasons for the opposition were based on principle as well as self-interest:

• On principle, liberals vehemently oppose conservative social policy. They want an active government because they are convinced that Americans should be offered a basic level of protection from the risks of the private markets. In their view this is a core function of government.
• On the less ideological side, Democrats, for example, were also aware that the support of any reform that includes cutting benefits or raising taxes could cost them at the ballot boxes and that the introduction of personal accounts in Social Security could, in the long run, bolster Republican support.

The opposition was not only united, but also very successful. The AARP started a very effective multi-million dollar ad campaign to oppose personal accounts, portraying them as an unnecessary gamble with people's money. While in the minority, Democrats were able to hold on to more than the needed forty-one votes in the Senate to effectively threaten to filibuster any reform bill, including those involving personal accounts.

Facing strong opposition to its plan, the White House was looking for supporters, such as Republicans in Congress, business groups, and conservative-leaning interest groups and think tanks. The problems the administration faced in unifying those groups behind the reform were manifold and proved to be too big to overcome the opposition:

• The Republicans in Congress could not agree on the right policy. There were members who thought the creation of personal accounts alone would be the right solution to the problems, but fiscal conservatives shared some skepticism with the opponents of the reform. They were appalled by the transition costs the set up of personal accounts would create and they also noted that the accounts would do nothing to address the solvency problems of the program. Other Republicans in Congress did not want to do anything at all as they came to the conclusion that any chances of a successful reform were by far overshadowed by the political risks.
• The business community, which was assumed to profit from the reform, lacked enthusiasm. They thought the administration was ill prepared and lacked a plan to overcome the opposition, so they were reluctant to invest too much into the reform.
• Finally, social conservatives, one of the most reliable allies of the White House during the Bush administration, were not a real factor during the push for reform because it was not something their activists felt strongly about.

The CBS/New York Times national polls of June 2005 showed that 42 percent of the people interviewed liked the administration's reform proposals less the more they heard about them; only 12 percent said they liked them more. By summer 2005 it was clear that the reform had failed. Since then, the debate over reform has more or less disappeared from public awareness. Other topics, especially the Iraq War and health care policy, have been dominating the political discussions.

The reasons for failure were, first and foremost, the strong opposition to fundamentally changing a popular program and, second, the inability of the proponents of personal accounts to form a strong coalition to counter the critics. The debate over reforming Social Security showed that the current American conservatism is not a homogeneous movement. While conservatism has been a dominant force in American politics throughout much of the last two decades, its heterogeneous character and limitations have often been overlooked. The groups in the conservative coalition share common beliefs, but they also have quite different views when it comes to specific topics. In the case of the Social Security reform their different views prevented a strong unified effort to introduce personal accounts into the program.

The prospects of Social Security reform during the coming years are mixed. As long as the demographic trends in the U.S. do not fundamentally change, the problems of the program are real and, sooner or later, must be addressed. The reform debate during the 109th Congress highlighted these problems but it also showed the fundamentally different views of the political left and right on social policy. Furthermore, it demonstrated the problems and political risks faced by those who push for reform. There is a high degree of mistrust between Republicans and Democrats in Congress right now and a consensus that there will not be any reform in the remaining months of the Bush presidency. Future reforms will depend on the shape of the American political landscape after the elections in 2008, specifically the new president and new Congress.

Christian Eckert was a DAAD/AICGS Fellow in the summer of 2007. This essay is the result of his stay at AICGS.

This essay appeared in the November 14, 2007, AICGS Advisor.