January 30, 2005


They Invested Years in Private Accounts: Conservatives who want to alter Social Security have long worked to nudge public opinion. Bush will likely advance the cause this week. (Janet Hook, January 30, 2005, LA Times)

Back in 1997, proponents of overhauling Social Security met with the man who would become their most powerful convert: Texas Gov. George W. Bush, whose presidential ambitions were beginning to gel.

The governor dined with Jose Piñera, architect of Chile's 1981 shift from government pensions to worker-owned retirement accounts, in a meeting that helped bring Bush a big step closer to embracing a similar plan for Social Security in his emerging presidential platform.

"I think he wanted to support the idea but needed to be convinced," said Edward H. Crane, president of the libertarian Cato Institute, who was at the dinner. "I really think Jose convinced him."

This week, President Bush's plan to allow younger workers to divert Social Security taxes into personal investment accounts will be a centerpiece of his State of the Union address and a barnstorming tour of the country. It is a tough sell to an uncertain public, but Bush has a secret weapon: A generation of free-market conservatives like Crane and Piñera has been laying the groundwork for this debate.

"It could be many years before the conditions are such that a radical reform of Social Security is possible," wrote Stuart Butler and Peter Germanis, Heritage Foundation analysts, in a 1983 article in the Cato Journal. "But then, as Lenin well knew, to be a successful revolutionary, one must also be patient and consistently plan for real reform."

Now, Bush is drawing on a deep reservoir of resources — including policy research, ready-to-hire experts and polling on how to discuss the issue — that conservatives have created over the last 20 years.

When he needed a committed ally at the highest levels of the Social Security Administration, Bush two years ago tapped Cato's staff. When Bush told African American leaders last week that blacks would especially benefit from his proposal, he drew from a controversial 1998 Heritage Foundation paper arguing that African Americans were shortchanged by the current system because of their shorter life spans.

Thanks in part to the work of think tanks like Cato, Heritage and the National Center for Policy Analysis, Bush is also benefiting from a public opinion climate that is far more receptive to changing the government retirement system than it was 20 years ago.

The reality is that none of this mattered much--it was the 401k and the dying off of the Depression generation that made reform inevitable.

Tax Fears Help Bush's Plan Win Business Backing: Manufacturers, restaurateurs and small firms are lining up in favor of restructuring Social Security -- and averting higher payroll levies. (Tom Petruno, January 30, 2005, LA Times)

Some of the nation's major business organizations are preparing to enter the fray over restructuring Social Security, spurred by concern that companies could get stuck with the bill if the system faces money shortfalls.

The groups, including manufacturers, restaurant owners and small businesses, say they will spend millions of dollars to support President Bush's efforts to create private Social Security investment accounts. Leaders say the campaign is being driven by fears that, without an overhaul, the government could resort to raising the Social Security payroll tax to bridge any funding gaps.

"It is a job killer, particularly for small businesses," Dan Danner, senior vice president of public policy at the Washington-based National Federation of Independent Business, said of raising the payroll tax.

He said his members "would come unglued at the prospect" of any tax increase as a solution to long-term funding of Social Security.

Although there is vigorous debate over the long-term fiscal health of Social Security, concerns about a payroll tax hike are not far-fetched, according to business groups.

The Social Security payroll tax has been raised 20 times since it was imposed in 1937. The levy, originally 2%, is now 12.4% — half paid by employers, half by workers.

Posted by Orrin Judd at January 30, 2005 6:33 AM

The Social Security payroll tax has been raised 20 times since it was imposed in 1937. The levy, originally 2%, is now 12.4% half paid by employers, half by workers.

Arrant nonsense. ALL of it is paid by workers.

Mr. Petruno must be taking a break from the fashion beat.

Posted by: Jeff Guinn at January 30, 2005 2:40 PM

You beat me to it, Jeff. The only reason people can get away with this lie is that the workers never see the other 6.2%, and don't realize they could be making this much more if the government didn't take it.

Posted by: jd watson at January 30, 2005 11:47 PM