A Politician Steps Up - Why Bush decided to do it - private retirement accounts

National Review, June 5, 2000 by Kate O'Beirne

IN 1980, the Cato Institute produced its first hardcover book, in which Peter Ferrara argued that workers should be permitted to invest their payroll taxes in private retirement accounts. For two subsequent decades, wary politicians kept their distance while conservative think tankers produced shelves of studies promoting private accounts, in the hope that at the right time, the right candidate might be persuaded to adopt their reform.

Probably none of them would have expected this candidate to be George W. Bush, a man with a suspect last name. But Bush apparently took naturally to the idea. There were no epiphanies, no agonizing late- night meetings, just the firm conviction that the time had come for a transformation of one of the oldest programs of the New Deal. Even now- after Bush has danced on "the third rail of American politics" in a race with an opponent who defines himself by his attacks-there is almost a blithe confidence about the issue in the Bush camp. Some of his top economic aides claim, convincingly, that they aren't aware of the polling on the issue.

As long as three years ago, Ed Crane, president of Cato, and Jose Pinera, the architect of Chile's pension privatization, were invited to Austin by the governor to discuss social-security accounts over dinner. Crane recalls that Bush favored the reform even then, but recognized that Republicans would have to be ready for Democratic attacks. "This is one area where he needed no prodding," says Bush adviser John Cogan, who remembers first talking with Bush about Social Security reform over a year ago. Back in November, Bush told Tim Russert on Meet the Press that personal savings accounts should be part of any Social Security fix, and he hasn't wavered since.

Why the confidence-what Gore might call "smugness"? Cogan, a senior official in President Reagan's Office of Management and Budget and a Hoover Institution economist, notes the confluence of three developments. First, the fact that baby boomers will begin retiring in eight years has brought the "fiscal calamity" facing Social Security much closer. Second, the current Social Security surpluses have permitted politicians to talk about reform without threatening current beneficiaries. And third, the large number of new investors, owing to the widespread use of 401(k) accounts and IRAs, has made the idea of personal savings accounts in the payroll-tax system more palatable to a national audience. As Ed Crane puts it, "Democrats are lazy on this issue, because they've had it so easy for so long. But now, half the public owns stock, and the other half wants to, so you can't just scare them anymore."

But there are other factors particular to Bush that make this idea a natural for him. First, in Texas he was an "agenda" politician-clearly running on the ideas he wanted to implement in office. This is just a repeat. "He does not want to be the kind of president who sits in the Oval Office wondering 'How do I react to the in box?'" says top Bush strategist Karl Rove. "If you don't lay out the big things you want to do, you'll be driven by the nightly news-and this is one of the big things he wants to do." Rove also maintains that Bush is not paralyzed by fear of losing-his dad lost and came through just fine-and thus averse to proposing bold ideas. This might sound like spin, but Bush is, in fact, taking on a hot-button issue when he certainly doesn't have to.

Then, there is Bush's taste-despite his reputation in the press-for conservative ideas. Larry Lindsey, Bush's chief economic adviser, calls the governor a "natural conservative reformer" who recognizes that the Democrats' defense of government dependency represents a fundamental difference between the parties. Lindsey compares his candidate to a "board member of AEI," the conservative Washington-based think tank. The board is full of businessmen who aren't wonks by any means, but are deeply interested in policy. They aren't ideologues either; rather, they bring a healthy respect for free markets from their experience in business. Personal Social Security accounts are an excellent fit for this side of Bush.

Bush also sees himself as a responsible baby boomer. Lindsey explains Bush's willingness to take on Social Security in generational terms. His father's generation of GOP politicians was primarily worried about winning the Cold War, so they left the domestic field to the Democrats. Now, with the Cold War over, it's up to Bush's generation to repair the damage of the welfare state. Doing so would be one of Bush's foremost contributions to the "new responsibility era." Bush says all the time, with his fellow baby boomers in mind, that "it's our turn" to make the tough choices.

Finally, there is Bush's "compassionate conservatism." Cogan is convinced that Bush would favor personal accounts, even in the absence of a crisis in Social Security funding, because he wants to provide an opportunity for low- and moderate-income workers to build wealth. Many of Bush's proposals are pitched to these people on "the outskirts of poverty," from his tax plan to his education reform. Bush speaks with real passion about helping recent immigrants succeed in America, and Social Security reform is just another way to do it. It, too, would serve to pull down what Bush has called the "tollbooth" blocking entry to the middle class.