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Social Security: Same old stalemate

Remember last year's efforts to fix Social Security? In this era of instant news cycles, it is easy to forget.
/ Source: BusinessWeek Online

Remember last year's efforts to fix Social Security? In this era of instant news cycles, it is easy to forget. But even though the politicians bungled efforts to restructure the program last year, the issue has not disappeared. Roughly 77 million baby boomers are still preparing to retire. They still don't have enough kids and grandkids to pay the taxes needed to support them in the style to which they'd like to become accustomed. And, in the long run, Social Security is still promising 40 percent more in benefits than it has resources to pay.

That's why it was instructive to see what happened on a steamy Washington afternoon when a gang of policy heavyweights got together for the first time in a year to mull solutions to the Social Security problem. It was an opportunity to see how the logjam could be broken-and why it won't be any time soon.

Three top-notch experts rolled out a compromise, bipartisan reform plan on June 19 at a conference sponsored by the American Enterprise Institute, a conservative Washington think-tank. They were Democrat Jeff Liebman, a former economic aide to President Clinton; independent Maya MacGuineas, who advised Senator John McCain (R-Ariz.) during his 2000 presidential run; and Republican Andrew Samwick, a top economic adviser to President George W. Bush.

The plan, dubbed LMS (for authors Liebman, MacGuineas, and Samwick), tries to do a little of everything. It would raise taxes for high-income workers, trim future benefits, set up Republican-style private investment accounts to make up some of those lost benefits, and create Democratic-type add-on accounts to cover most of the rest. It could well be the model for a future deal.

A number of businesses, such as Pfizer, Charles Schwab & Co., Fidelity Investments, and Boeing Corp. waded into the last round of the Great Social Security Debate. Many lowered their profiles in the face of strong criticism from unions and seniors groups, and so far, none has publicly weighed in on this latest plan.

For about an hour in Washington this week, the discussion raised hopes that the enmity of 2005 would give way to a serious discussion of how to actually fix Social Security. The three authors laid out their plan and a panel of experts armed with impenetrable PowerPoint presentations examined weaknesses and suggested changes. It was, for a brief shining moment, wonk heaven. One could almost believe that Washington was ready to tackle Social Security-and do it right this time.

Alas, it wasn't to be. Before a second hour passed, all of the old political bile rose in the collective throats of the panelists. Republicans accused Democrats of refusing to even recognize that Social Security has a problem. Democrats accused Republicans of playing politics with the issue. David Certner, the man from AARP (the former American Association of Retired Persons), vowed he would never accept any plan that traded a dime of Social Security's basic benefit for a private account that carried a shred of market risk.

In short, inside of a couple of hours, even the wonkiest of policy analysts reverted to partisan form. Name-calling broke out. Rhetorical blood flowed. Eyes rolled. It was 2005 all over again: Social Security restructuring remains dead in the water. These people don't need an actuary to make a deal on Social Security. They need a therapist.

Bush aides continue to drop hints that the President wants to come back to Social Security in 2007. They are whispering about creating a bipartisan commission to look at Social Security, Medicare, and Medicaid—a plan that Bush first proposed in January, 2006, but never acted upon. They even hint that the White House would not object if such a panel discussed future tax increases.

But if Bush is serious, he is going to have to undo the consequences of five years of nasty partisan warfare. These days, Republicans can't do Social Security, or much of anything else, alone. But Democrats won't play ball because they don't trust the President and they think that endless gridlock is to their advantage. They figure it could win them some seats in Congress in 2006, and perhaps even the White House in 2008.

In spite of its rather harsh welcome at AEI, the LMS plan serves a useful purpose. It reminds us that Social Security is a still a problem, and that designing a workable solution is not impossible. But the politics? That, regrettably, remains as intractable as ever.