Social Security privatization unites Democrats, divides GOP

Northwest Congressional delegation mirrors the nation: Democrats are energized, while Republicans wish they could duck the issue

By DON McINTOSH, Associate Editor

Congressional Democrats are uniting in reaction against President Bush’s call to divert Social Security taxes into private investment accounts. At the same time, some Republicans in Congress have their own objections, while others support the president’s campaign for privatization but fear a political backlash from voters.

To plan the strategy of the president’s campaign to privatize Social Security, about 200 Republican members of Congress left Washington, D.C. Jan. 28 for a three-day retreat in West Virginia. Meeting with Bush on the first day, some told the president he’d have to sell the plan to voters before they could support it.

Bush alluded to private accounts in his Jan. 20 inaugural speech, calling for widening the ownership of retirement savings and “making every citizen an agent of his or her own destiny.” But the sales job really began in his Feb. 2 State of the Union address, when the president spent a full 10 minutes outlining his plans on Social Security on national television. Bush praised Social Security — the most significant achievement of FDR’s New Deal — as the “great moral success of the 20th century.” However, he added, “personal accounts are a better deal.”

The next day, Bush embarked on a five-state tour to promote his Social Security proposal. The choice of the five states — New Mexico, West Virginia, North Dakota, Florida and Nebraska — was political: Bush won all five in 2004, and all five have Democratic senators up for re-election in 2006. At each stop, the president’s invitation-only “town hall” meetings were dogged by protesters, including, in Nebraska, union members organized by the Nebraska AFL-CIO.

To react to the president, all but one Senate Democrat gathered Feb. 3 at the FDR memorial in Washington, D.C., to declare expanding the deficit to create private accounts “immoral, unacceptable, and unsustainable.” The lone missing senator was Senator Ben Nelson of Nebraska, who was welcoming the president back home.

Also on Feb. 3, the Senate Special Committee on Aging began hearings to determine whether reforms to the Social Security system are needed and whether or not it’s urgent.

Any bill to privatize Social Security would likely have to go through the committee, which is chaired by Oregon’s Republican Senator Gordon Smith. Oregon’s Democratic Senator Ron Wyden is also on the committee.

Smith says he’s taken no position on private accounts. But much of what he has recently said about Social Security echoes Bush Administration talking points — portraying Social Security as out-of-date, and emphasizing the financial problems the system may have in the future.

“By 2042, about the time my son will retire, he will have paid into a system that is guaranteed to go bankrupt,” Smith told a Jan. 9 town-hall-style meeting in Salem. “If Franklin Roosevelt were alive today … he wouldn’t have designed it the way he did.”

Like the president, Smith has said Social Security’s projected long-range problems should be solved sooner rather than later, and he wants to rule out tax increases and benefit cuts as solutions.

But Smith also told the Salem audience that any reform, if it is to pass Congress, will have to be something “a guy like Ron Wyden and a guy like Gordon Smith can agree to vote for.”

If that’s true, then the president’s plan is doomed, because Wyden, Oregon’s Democratic senator, has been slamming privatization in every public forum.

At the same Salem town hall, which the two senators co-hosted, Wyden said Bush’s plan would worsen the system’s problems. “For the life of me, I cannot see how we solve the concerns of Social Security with privatization.”

“If you’re having problems with the solvency of Social Security, how do you solve those problems by diverting several trillion dollars into private accounts, when you don’t have enough money for the overall program?”

Wyden said he COULD support a kind of “Social Security Plus” — keeping Social Security as it is but adding a voluntary savings program on top. That idea was one of several proposed by a Clinton Administration commission that looked at privatization.

But President Bush’s proposal was described by Wyden as a plot to sacrifice the financial security of retirees “so that more equity traders can buy summer homes in the Hamptons.”

In a Feb. 3 statement to the press, Wyden called the president’s Social Security plan “a triumph of ideology.”

“The current of far-right reasoning underlying the president’s domestic agenda will make it difficult to achieve bipartisan consensus,” Wyden said.

Washington Senators Maria Cant-well and Patty Murray, both Democrats, are also opposed to privatization, as is Southwest Washington Congressman Brian Baird, also a Democrat.

Oregon’s four Democratic members of Congress also oppose privatization, while Republican Greg Walden says he will wait to see what’s proposed in Congress.

Portland-area Congressman Earl Blumenauer told the Labor Press he invited readers of his electronic newsletter to comment on proposals to privatize Social Security — and got 8,000 responses. “People are not interested in private accounts,” Blumenauer said. “They want their guarantee protected … If the Congress at all listens to the American people, it’s not going to pass.”

Reacting to Bush’s claim that Social Security will be “bankrupt” “flat bust” in 2042, Blumenauer said “that, to be charitable, is a fraud.” He added:

“Social Security is not in a serious crisis .… The president is allegedly concerned about a deficit in Social Security, but I listened in vain for a word about the crisis we’re having NOW in Medicare.”

Furthermore, Blumenauer said, Bush’s plan to borrow the trillions of dollars “transition costs” would mean that in effect, Americans would end up paying Chinese and Japanese bond holders instead of seniors.

Oregon First District Congressman David Wu voted for Bush’s 2003 partial privatization of Medicare, but says he opposes privatization of Social Security. In a press statement, Wu called Social Security a bedrock that Americans have been able to depend upon since its inception. He added:

“The president has dubbed this a new crisis. He is developing a plan to privatize Social Security, which would ultimately dismantle it. Every privatization plan proposed thus far would reduce guaranteed benefits and expose people to Wall Street risk.”

Congresswoman Darlene Hooley of Oregon’s Fifth District had similar things to say in her criticism of the Bush Plan and, like Blumenauer, held a series of meetings on the subject with constituents in early February.

Hundreds of people turned out to meet with Fourth District Congressman Peter DeFazio about Social Security, so many at one meeting in Eugene that as many as 100 people were reportedly turned away for lack of sufficient space. The response, said a DeFazio spokesperson, is overwhelmingly against the president’s plan.

DeFazio has a masters degree in gerontology from the University of Oregon, and has been advocating his own set of Social Security reforms since 1999. Like other congressmen (and the Oregon AFL-CIO), DeFazio has called for lifting the exemption of wealthy workers from the tax (currently, income over $90,000 a year is not subject to the Social Security payroll tax.) But DeFazio also wants to add an exemption for the first $4,000 of income. In addition, he proposes that the government directly invest a portion of the trust fund in a diversified stock portfolio, to end its reliance on the trust fund as an easy source of revenue.

Salem resident Tim Roark, a Social Security employee who is active in the American Federation of Government Employees, met with Oregon’s lone House Republican, Second District Congressman Greg Walden, on Feb. 8 in Washington, D.C., as part of his union’s campaign to oppose privatization.

Walden seemed more “for” than “against” Bush’s plan, Roark said, but added that he would wait to see the specifics of what is proposed. A spokesperson for Walden said the congressman had no comment on any specific proposal, but feels that something needs to be done soon “before the system collapses under its own weight.”

Via its e-mail list, the Oregon AFL-CIO has been encouraging union members to focus on contacting Gordon Smith. Smith can be reached at his Washington, D.C., office at 202-224-3753. Patty Wentz, Oregon AFL-CIO communications director, said more people have responded to that call than to any other call the group has made.

During a Senate recess Feb. 21-25, Wyden will be hosting a series of town halls on Social Security, starting with a Feb. 22 meeting in Portland at Gill Auditorium in the Liberty Centre Building, 650 NE Holladay. That meeting begins at 11 a.m. with a panel discussion featuring Oregon AFL-CIO President Tim Nesbitt and a representative from the AARP seniors group.