By Carolyn Lochhead, Chronicle Washington Bureau
April 11, 2005
Washington -- Who killed Social Security reform?
A: Harry Reid. B: George W. Bush. C: AARP. D: Monica Lewinsky.
Answer: D.
Seven years ago, the first Baby Boomer president traveled the country to warn that his generation's impending retirement -- 76 million people, equal to the populations of California, Texas and Florida combined -- would bankrupt the generations to follow.
"It would be unconscionable if we failed to act," President Bill Clinton said at a forum in 1998, when he made fixing the nation's retirement program a top priority of his second term.
Clinton's efforts then, in light of President Bush's now, induce an extraordinary sense of déjà vu.
Clinton appointed a bipartisan commission, which delivered in 1997 three options to save the giant retirement program. They included a now-familiar list of possible benefit cuts, from changing indexing formulas to raising the retirement age.
Former US President Bill Clinton looks up as President George Bush looks on after the funeral mass for Pope John Paul II in St. Peter's Square at the Vatican, Friday, April 8, 2005. (AP Photo/Andrew Medichini)
One of the options would have allowed workers to divert 5 percentage points of their payroll taxes to personal accounts -- the first such proposal by a government commission.
Clinton started campaigning for changes, without saying what he endorsed. "I don't want to dodge any of that," he said, but "if I advocate a specific plan right now, then all the debate will be about that. The first thing we've got to do is get the American people solidly lined up behind change."
So he traveled the country in 1998, giving speeches, radio addresses, and holding town hall meetings with young workers and retirees.
He warned that it is better to "fix the roof when the sun is shining," and ran through the familiar arithmetic of the declining number of workers supporting every retiree. He urged finding ways to allow poorer workers to build wealth so they could "own a share of our nation's prosperity."
He pleaded for bipartisanship, promising that all ideas were on the table.
But he said there were really only three options: "We can raise payroll taxes again, which no one wants to do because the payroll tax is regressive ... We can cut benefits ... or we can work together to try to find some way to increase the rate of return."
On Dec. 8, Clinton convened a White House summit to reach "historic bipartisan legislation to save Social Security for the 21st century." Eleven days later, the House, with Republicans in the majority, voted to impeach him.
"We were very close, in my opinion, and would have gotten it done had it not been for a momentary lapse of judgment on the part of the president," said Charles Stenholm, a former Democratic congressman from Texas who was deeply involved in the discussions.
"It's kind of the Nixon-goes-to-China theory," Stenholm said. "It takes a Democrat to do some of the hard choices in social programs."
Although their approaches differed, what Clinton said then and Bush is saying now -- about the program's condition and what it will take to fix it -- are strikingly similar.
"Nearly everybody knows that something substantial, really substantial, has to be done to reform the Social Security system to accommodate the Baby Boom generation," Clinton said after release of the Social Security trustees report on April 28, 1998.
"We've got a real opportunity here, and a rare one, to act today to provide for our children's tomorrows," Clinton said.
But at a press conference that day, the questions focused on Ken Starr, the independent counsel whose report on Clinton's relations with Monica Lewinsky would soon lead to impeachment.
"It was hard for him to have a conversation about policy after that," said former Sen. Bob Kerrey, a Nebraska Democrat who now heads New York's New School for Social Research.
Today, Lewinsky is ancient history, the Baby Boom retirement is seven years closer, and the budget surpluses Clinton hoped to use to "save Social Security first" are gone.
Clinton insisted the appearance of federal surpluses in the late 1990s, combined with the future fiscal strain from retirement programs, provided a rare chance to save for the future.
"We have been given a gift, and we have to use it," Clinton said. "This is a wonderful moment, but it is a moment of responsibility that we dare not squander."
As a Democrat, he hoped to "renew the social contract for a new era" by saving a revered social program relied upon by millions. Like Bush, a Republican, he also stressed asset ownership among lower-income workers who have no nest egg for retirement.
Rep. Clay Shaw, a Florida Republican who chaired the Social Security subcommittee during Clinton's term, said he spoke with Clinton at a signing ceremony on a bill that eliminated the Social Security penalty for those working after retirement.
When Clinton handed Shaw a ceremonial pen, Shaw said he told Clinton, "Now, Mr. president, let's do the rest of it." Shaw said Clinton replied, " 'If you get the leadership of the Democratic Party to go along, I'm there.' "
Shaw said he is convinced that if it weren't for the impeachment, Social Security reform "would have been done during his administration. I strongly believe Bill Clinton wanted this to be his legacy."
But as budget surplus projections grew on the back of a stock market bubble, Republican leaders wanted the money for across-the-board cuts in income taxes. Clinton promised a veto.
Instead, he proposed tax cuts of a different sort -- in the form of mandatory savings, returned to workers for their own individual accounts.
Clinton called these universal savings accounts, USA for short. He proposed them as an addition to Social Security. In today's debate they are known as "add-on" accounts, favored by Democrats and a number of Republicans, including Shaw, and viewed as a potential compromise.
Clinton also proposed setting aside 62 percent of the federal budget surplus, estimated in 1999 at $1 trillion over five years, for Social Security, arguing that most of it was being generated by excess Social Security payroll taxes.
He proposed that the government directly invest a portion of that money in the financial markets to capture a higher rate of return -- just as Bush wants to do, but through individual accounts.
These were seen as starting offers to a Republican-controlled Congress. Stenholm said Clinton never ruled out private accounts inside Social Security.
"Clinton studied it, he had a tremendous knowledge of the process of Social Security, and he threw out some different ideas, but he never shot down the individual accounts that (Rep.) Jim Kolbe and I were putting on the table, " Stenholm said. "He always said that's an idea, it is workable, but he had other suggestions of how it might be done differently."
David Richardson, a Clinton Treasury Department official who worked on the USA accounts, said for tax experts in Treasury, the effort "was an all- consuming thing."
But after impeachment, said Richardson, now a professor of risk management at Georgia State University, "it got to be where you couldn't get anything through, and it all kind of died."
Clinton's choice of fixes differed from Bush's, but the overlap in their strategies is striking. Clinton chose to tackle Social Security before Medicare, even though the health care program's financial problems were far more vexing. Clinton sought to reassure seniors that nothing would change for them.
Like Bush, he warned that Social Security's finances would leave young workers with just 72 percent of their promised benefit.
Like Bush, he did not endorse specific benefit cuts, saying that to deal with Social Security's finances "we will simply have to have a bipartisan process."
Some, Clinton said, "are predicting that we are simply incapable of doing this in Washington. I am determined to prove them wrong."
He never got the chance.
Carolyn Lochhead was the Washington correspondent for the San Francisco Chronicle, where she covered national politics and policy for 27 years. She grew up in Paso Robles (San Luis Obispo County) and graduated from UC Berkeley cum laude in rhetoric and economics. She has a masters of journalism degree from Columbia University. Â Twitter: @carolynlochhead
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