Why is the Republican Party leadership so scared of Newt Gingrich? Putting aside his generally abrasive personality, his loud streak of megalomania, and his tendency to self-destruct – OK, that’s a lot! – it’s hard to think of much in the way of substantive policy matters that sets the former House speaker apart from the rest of the Republican presidential field.
Oh yes, there’s one thing.
Early last month, when it still seemed that Mitt Romney’s anointment as GOP nominee was a matter of course, the editors of the Wall Street Journal took Gingrich for his position on, of all things, Social Security. The Journal has been pushing for Social Security privatization for decades, but strangely, it turned thumbs-down on Gingrich’s plan, which would do just that. The reasons why, and Gingrich’s subsequent surge in the primaries and the GOP establishment’s response to it, have a great deal to tell us about not only the Republicans’ post-Tea Party personality crisis, but also about the direction of the ongoing Social Security debate and where the real political danger to the program lies.
With their two frontrunners – Gingrich and Romney – significantly different scenarios for Social Security “reform,” Republican voters face the first serious disagreement on this issue in a presidential primary campaign since 1976. That;’s when Dick Cheney helped his boss, Gerald Ford, to fend off a challenge by Ronald Reagan by alleging that Reagan wanted to cut Social Security. This time, the candidates both mean to dismantle the program – the disagreement is only about the best way to do it. But the danger for them is the same – that the split may help the Democrats to win in November.
The whole thing started two months ago, when Gingrich released a paper prepared by his advisor Peter J. Ferrara, a free- market radical and author of Social Security: The Inherent Contradiction, a 1981 Cato Institute book that’s still the most thorough exposition of the thinking behind the movement against Social Security. The paper proposed a plan to phase out Social Security.
Briefly, Gingrich would allow workers to voluntarily shift their payroll tax contribution to Social Security into private investment accounts. The employer’s portion of the payroll tax would remain in place, to be used to pay benefits to those workers who chose to remain in “traditional” Social Security. Any other transition costs would be covered by trillions of dollars of prospective savings from a massive turnover of federal programs to the states via block grants. Eventually, all workers would shift into private accounts, given the overwhelmingly positive returns the accounts would generate, and the employer contribution would be used to subsidize private insurance that would replace Social Security’s disability and survivors’ benefits.
The “Gingrich vision” for “securing and strengthening Social Security would be achieved.
What does the Wall Street Journal, along with a number of conservative bloggers, other presidential candidates, and Republican establishment figures, not like about this rosy scenario? Private accounts have been party orthodoxy for years now, and the Gingrich plan is actually a variation on Ryan-Sununu, an entirely mainstream Republican proposal launched in 2005.
Some conservatives, like National Review’s Ramesh Ponnuru, object to one feature of the Gingrich plan – that retirees who take private accounts would be made whole if their account balances were insufficient to make up the benefit they would have received if they’d stayed in Social Security. Echoing arguments that progressives have been making for years, Ponnuru notes that by maintaining benefit promises while slashing the money going into the program, Gingrich risks a huge Social Security shortfall in coming years – a problem he explains away by assuming a big decrease in federal spending. It’s a good point. Yet the benefits guarantee is a feature of the private account-based Chilean pension system, the Holy Grail of the American privatizers, and has been included in earlier plans to restructure Social Security. One set of conservatives has never attacked another so publicly on this point – until now.
The real objection to Gingrich’s latest big idea boils down to one thing: politics. Since 2005, when George W. Bush disastrously peddled private accounts around the country, undermining his presidency in so doing, the movement against Social Security has undergone a major realignment. Conservatives and center-right Democrats have formed a tentative alliance around the notion of restructuring Social Security without explicitly privatizing it.
A host of think-tanks and policy pressure groups, many of them funded partially by the Peterson Foundation’s dollars, support a template for Social Security “reform” that always includes some combination of the following elements: means-testing of benefits for more affluent retirees (in reality, including much of the middle class), raising the retirement age further, adopting the stingier “chained CPI” to calculate benefits, and creating private investment accounts on the side as a way of compensating for the benefit cuts. All of the above are either proposed or at least mentioned in the deficit reduction blueprint that Erskine Bowles and Alan Simpson drew up as chairs of the president’s fiscal responsibility commission in 2010.
Bowles-Simpson’s “Big Four” Social Security proposals have become a kind of political orthodoxy in elite Washington circles, firmly embraced by the center-right. Obama himself dangled the chained CPI during last year’s debt ceiling negotiations with congressional Republicans. Outrage from progressives, unions, and rank-and-file retirees caught him up short, but the president indicated in his recent State of the Union address that he’s willing to offer the same deal again. But the right has embraced the Big Four as well, even though they don’t include private accounts carved directly out of payroll taxes.
Here’s what the Journal said about Gingrich’s stubborn insistence on the full enchilada:
The irony of Social Security is that its slow-motion solvency crisis is relatively easy to resolve—and the political system is moving toward consensus, if haltingly…. Personal Social Security accounts are desirable, but that doesn’t mean it makes sense to reject compromises that reduce future liabilities. Yet Mr. Gingrich proposes no such changes in his plan, perhaps because they are politically unpopular. But such an abdication opens him up to charges that he’s not serious about reform and that he has no plan to pay for the transition costs of going to personal accounts (that is, when younger workers put their money in their own accounts, rather than funding current retirees).
Most elected Republicans have distanced themselves from private-account carveouts as well. Rather than embracing them, Florida Sen. Marco Rubio, whose election was one of the Tea Party’s biggest victories in 2010, said during his campaign,
Privatization of the accounts has come and gone. There are other alternatives, such as [raising] the retirement age, how you adjust payments in the future, ‘need’ measures, et cetera.
Gingrich’s presidential rival Rick Santorum has called “doing these accounts” without first balancing the federal budget “fiscal insanity.” Last night, in the Republicans’ response to Obama’s State of the Union address – which included no mention of Social Security – Indiana Gov. Mitch Daniels didn’t bring up private accounts either. (Significantly, he referred to Social Security as part of a social “safety net,” rather than an earned benefit that workers have paid for all their careers.)
Dyed-in-the-wool privatizers, who include just about all the self-appointed leaders of the Tea Party movement – if not the rank and file – have noticed this shift, and are getting annoyed. In the name of making a deal with the center-right, Ferrara complains in his Forbes online column, conservatives are giving up on the goal of “empowering younger workers” and turning Social Security into “a personal, family wealth engine.”
Ferrara has long argued that a Social Security phase-out that consists of only pain and no sweetener – like private accounts – would be a bust with the public. But in poll after poll, voters have consistently rejected private accounts if they entail any reduction in benefits. Romney and Santorum, who have both proposed variations on the Big Four formula for restructuring Social Security, probably understand the dynamic better than Gingrich or his advisor. If they succeed in whittling down the program, ultimately the outcome will be the same as if it had been privatized. Workers saving for retirement will have to turn to some form of private investment – just not in as regimented a way as the ex-Speaker proposes. By continuing to channel Bush’s 2005 misadventure, Gingrich threatens the very real possibility of such an outcome.
Social Security “reform” can’t be taken out on tour and sold to the voting public. Like so many things in Washington, it can only be accomplished under the table, out of view. Rightly or wrongly, the Republican elders have settled on a link-up with Democratic centrists, in which they hammer out some combination of the Big Four, as their best chance to put Social Security on the road to oblivion.
Last weekend, Gingrich may have succeeded in shaking their faith a bit. Monday morning, the Journal editors suggested that they were happy to see the Republican establishment unsettled: “They don’t believe he is electable. Our advice would be to relax and let the voters decide. If Mr. Romney can’t marshal the wit and nerve to defeat the speaker, then he isn’t likely to defeat Mr. Obama.”
Although Gingrich may well be reading the, er, tea leaves differently, few experienced observers think he won the South Carolina primary by riding a wave of enthusiasm for Social Security privatization. Most likely it was something more familiar – his oblique evocations of white voters’ racial resentments, not to mention his ability as a campaigner to channel their anger at familiar targets like the “liberal media.”
Despite the infusion of cash he received, and the Journal’s calmer tone toward him, the Republican leadership won’t stop being alarmed at Gingrich, won’t stop pushing for Romney to beat him, and will remain intent on smothering the ex-Speaker’s out-of-step message on Social Security.
Progressives, on the other hand, have to be pleased. The Republican Party elite have failed to understand what they got when they embraced the Tea Party. Whatever the grassroots of that movement really wants, it created an opening for a group self-appointed leaders like Dick Armey, Gingrich’s old second-in-command in the House, to form a rival power base within the Republican ambit.
That’s fine as long as the two groups’ understanding of the issues is congruent. When it’s not, it threatens a split. With Gingrich is rapidly cementing himself as this year’s Tea Party champion, his very different understanding of the politics of Social Security dismantlement could provoke a major rift – and an opening for Democrats. Just like in 1976.