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Split Personality

What the Republican divide over Social Security means for the future of entitlement reform. Our November cover story, "It's GOP Gut-Check Time."

By From the November 2011 issue

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MITT ROMNEY has spent the bulk of this year leading all the declared Republican presidential candidates in most national polls. Rick Perry's announcement quickly changed that. Among many other considerations, a Texas governor is simply a better cultural fit for the GOP primary electorate than a former Massachusetts governor. But Romney didn't get to where he is today by surrendering in the face of adversity.

Like Romney, Perry has chinks in his conservative armor. But it soon became clear that Romney -- who did, after all, win an election in a state where only 13 percent of registered voters are Republicans -- wasn't going to confine himself to attacking Perry's deviations from conservative orthodoxy. (Romney is hardly the best positioned Republican candidate to do so.)

Romney's strategists combed Perry's book Fed Up! and came up with what they considered to be some fairly provocative statements about Social Security. "Look at what happened to Paul Ryan when he proposed a plan to save Medicare, they say," wrote Marc Thiessen in the Washington Post. "Romney's campaign will argue that Perry is against the very idea of Social Security and Medicare, and that he will use Perry's book to scare seniors in early-primary states with large retiree populations, such as Florida and South Carolina."

"By any measure, Social Security is a failure," Perry wrote, one that "we have been forced to accept for more than 70 years now." Perry called the massive retirement program a “Ponzi scheme" and suggested that it was unconstitutional, saying it was created “at the expense of respect for the Constitution and limited government."

True to Thiessen's reporting, Romney has launched a full-court offensive against Perry's Social Security remarks. He suggested a Republican nominee with these views cannot beat President Obama in the general election. "If we nominate someone who the Democrats could correctly characterize as being against Social Security, we would be obliterated as a party," Romney told Sean Hannity.

"The governor says look, states ought to be able to opt out of Social Security. Our nominee has to be someone who isn't committed to abolishing Social Security, but who is committed to saving Social Security," Romney said standing next to Perry at a Republican candidates’ debate. The day of another debate in senior-heavy Florida -- which turned out to be a fairly disastrous one for Perry -- Romney published an op-ed on Fox News’ website titled, elegantly, "Rick Perry Wants to Dismantle Social Security."

"Does Governor Perry believe Social Security is unconstitutional," Romney asked, "or is he advocating its elimination because he believes fifty separate programs would be better public policy?" Romney senior adviser Eric Fehrnstrom said that nominating someone who used Perry's "radical rhetoric" would be a "disaster" for the GOP. "In the book and on the media tour, [Perry] attacks Social Security as a failure from its very inception," Fehrnstrom told National Review. "He said it does violence to the founding principles of this country. He suggested we should end it as a federal entitlement and give it to the states."

Whether they support Rick Perry or not, Romney's conservative critics might be tempted to reply, "Of course Mitt Romney would hit Perry from the left on Social Security." But Romney's Social Security attacks on Perry have been joined by Tea Party favorite Michele Bachmann.

"People, I think, rightly have a genuine concern about the governor's commitment to Social Security benefits for current retirees," she told the Des Moines Register. The Minnesota congresswoman also said in an interview with CNN, "America needs to keep its promise to senior citizens, I talk to them all the time. I love senior citizens. I care about them."

Bachmann has good reasons to want to take Perry down a peg. Since he got into the race, her Iowa lead has evaporated and her national poll numbers have dropped precipitously.

It is nevertheless telling that a Republican as conservative as Bachmann would criticize Perry in this fashion. The Social Security debate goes far beyond the 2012 horse race and will have implications for the party even if neither Perry nor Romney winds up the nominee. Republicans have struggled with a contradiction: they are the party of fiscal conservatism and Social Security-receiving senior citizens. The two groups most shortchanged by the current system -- young people and minorities -- were the voting blocs most loyal to Obama.

On these issues, the Republican Party's principles and political self-interest are in conflict. This could be a defining moment for how the GOP resolves its longstanding schizophrenia on entitlements.

IN 1964, Barry Goldwater raised constitutional questions about Social Security and proposed making the program voluntary. (The former is hardly a crackpot position, incidentally. Virtually no one thought the Constitution authorized anything like Social Security prior to the 1930s.) It was one of many reasons he was buried in a landslide.

After Goldwater, few candidates were so bold again. Those who did were either unsuccessful, like Oliver North in his 1994 Virginia Senate candidacy, or were elected in safe Republican districts, like Perry's fellow Texans Dick Armey and Ron Paul.

Ronald Reagan was on record taking Goldwater's position on Social Security in 1964. He also opposed the creation of Medicare in 1965. At least one subsequent Republican nominee, Bob Dole, voted against Medicare as a member of Congress. Both Reagan and Dole subsequently emphasized their support for an alternative proposal called Eldercare. In 1980 candidate Reagan strenuously denied he had any plans to cut either Social Security or Medicare. "There you go again," he famously said when Jimmy Carter accused him of harboring such intentions.

Once in office, Reagan did propose some cuts to Social Security and Medicare, including a freeze in cost-of-living adjustments in 1985. Many political analysts argue this helped cost Republicans control of the Senate in 1986. But he didn't try very hard to get them passed. When Social Security faced the first of its many crises in long-term solvency in the early 1980s, Reagan went along with a conventional patchwork approach that emphasized payroll tax increases over any systemic reforms. He won reelection by almost as big a margin as Lyndon Johnson beat Goldwater 20 years before (in fact, Reagan did better than LBJ in the Electoral College).

Even the Reaganized Republican Party generally exempted Social Security, along with military spending, from budget cuts. This did not stop the Democrats from perennially attacking the GOP on entitlements, butit did prevent most Republican presidents and Congresses from tackling serious reform. For good reason: Franklin D. Roosevelt crowed that "no damn politician" would ever be able to touch Social Security. It became known as the "Third Rail" of American politics.

After the 1994 Republican congressional takeover, Newt Gingrich's Republican revolutionaries went along with the promise to never cut Social Security benefits. But they did propose a reduction in the growth of Medicare spending. Democrats quickly pounced. Gingrich was said to want to let Medicare "wither on the vine" (an out of context quote of a characteristically bombastic Gingrich statement). Democrats pointed out the $270 billion the Republicans sought in Medicare savings was awfully close to the $245 billion they had proposed in tax cuts.

The narrative became that Republicans wanted to cut Medicare to pay for tax cuts -- for the wealthy, natch -- rather than to shore up the program's solvency. Bill Clinton won reelection in 1996 as a protector of Social Security, Medicare, Medicaid, education, and the environment. In his second term, a bipartisan commission entertained some sound ideas for reforming Social Securityand Medicare. But there remained a bipartisan reluctance to tackle the issue, even though the economy was booming, the baby boomers were still in their peak earning years, and the political conditions were theoretically in place for reform.

In 1999, however, the Clinton administration did come up with a Social Security plan of sorts. The proposal was to redirect two-thirds of the expected budget surplus over the next 15 years -- an estimated $2.7 trillion -- to the Social Security trust fund. To increase the rate of return, Clinton also proposed investing 20 percent of this additional money in the stock market. Stock market holdings were to be limited to less than 14.6 percent of the trust fund's holdings.

GEORGE W. BUSH, the frontrunner for the Republican presidential nomination, had a bolder free-market reform plan. He wanted to partially transform Social Security into personal investment accounts, letting individuals rather than government reap the market returns. In exchange for forgoing some traditional benefits, younger workers would be able to divert some of their payroll tax contributions into personal accounts which, unlike their Social Security taxes, they would actually own.

Bush was attacked from both the left and the right, as Democrats demagogued and Republican entitlements schizophrenia manifested itself. Gary Bauer, a pro-family activist then running against Bush for the GOP nomination, said that senior citizens "ought to fear" any "privatization plans that say that current workers can all withdraw their current payments."

"It's the current payments that's paying the checks of current retirees," Bauer continued. "I will preserve the Social Security system. It’s worked well and it's served the elderly in this country." (Bauer favored an immediate 20 percent cut in payroll taxes in exchange for a 20 percent cut in benefits.)

John McCain was more mixed. He essentially sided with Al Gore on the "lock box" and backed putting more of the projected surpluses into the Social Security trust fund. But he also endorsed the idea of letting younger workers have personal accounts. "The only way to increase the yield on Social Security dollars is by allowing workers to make investment decisions for themselves," McCain remarked in June 1999. Steve Forbes also supported personal accounts, though his plan would have allowed workers the choice of remaining in the current system.

It seemed as if the schizophrenic Republicans had finally crossed the Rubicon on entitlements. Bush won the nomination and the 2000 election against a Democratic opponent who pounded away at personal accounts as "stock market roulette," "gambling with retirement," and, that perennial Gore favorite, "a risky scheme." John Kerry also hit Bush on personal accounts to little avail in 2004. After being reelected with a majority of the popular vote, Bush was ready to start out his second term with a detailed partial privatization plan for Social Security.

Then the old Republican double-mindedness on entitlements once again reared its ugly heads. Social conservative leaders -- including some who had shared Bauer's skepticism of Bush's reform ideas five years ago -- protested that the president should instead be spending his vaunted political capital on the social issues helped him win a second term. Even Democrats from red states felt there was little political risk in opposing Bush on Social Security, while swing state Republicans were unconvinced it was time to grab the third rail.

SINCE BUSH'S Social Security reform failure, the GOP has returned to being a house divided on entitlements. Republicans aggressively attacked Obama for trying to cut Medicare in order to pay for his own health care reform law despite warnings such tactics would undermine their message on entitlement reform later. GOP leaders and strategists offered several defenses for their move.

Republicans pointed out that Obama was not addressing Medicare's unfunded liabilities, because he was double-counting the savings and actually using them to pay for a brand new entitlement. They noted that Obama's Medicare cuts would be achieved through reducing payments to doctors, thereby increasing cost-shifting, and rationing care rather than any fundamental reform. Republicans also argued that Obama wasn't sheltering current beneficiaries from his cuts.

Privately, many Republicans acknowledged that they were willing to use any means necessary to defeat Obamacare. The legislation was a permanent, unconstitutional increase in the size, cost, and power of the federal government. Republicans argued that its cost-savings assumptions were wrong and it was likely to make the existing entitlements crisis much worse. Finally, Medicare was already an established fact while there was still a chance of stopping Obamacare.

Obamacare passed. But Republicans did manage to capitalize on older voters' anti-Obamacare backlash in the midterm elections. The GOP won the 65-and-over vote by an eye-popping 21 points in 2010, after splitting this bloc evenly in 2006. That’s 13 points better than Republicans did with seniors in the 2008 presidential race with a senior citizen at the top of their ticket. Elderly voters swung important races. In New Hampshire, Republican Kelly Ayotte won them by 33 percentage points. In the race for Obama's old Illinois Senate seat, Republican Mark Kirk won older voters by 22 points. Even Christine O'Donnell, who went down to defeat in Delaware, carried this group by 11 points.

Older voters spiked from 19 percent of the electorate in 2006 to 23 percent in 2010. "Senior voters
seemed motivated by concerns about the health care law and punished incumbent Democrats accordingly," reported Politico at the time. "Senior voters seemed motivated by concerns about the health care law and punished incumbent Democrats accordingly." Indeed, the increase from 2006 can't be entirely explained by senior citizens' relative conservatism.

That this would complicate GOP efforts to reform Medicare once Paul Ryan -- whose basic ideas for Medicare were already contained in his Roadmap plan well before the election -- assumed the chairmanship of the House Budget Committee should have been obvious. Republicans had campaigned against the changes the Clinton administration proposed for Medicare as part of their controversial 1994 health care plan, simultaneously running against Medicare cuts and a federal takeover of the health sector. That debate had featured possibly apocryphal quotes from seniors who wanted “the government to get their hands off my Medicare" and similarly came back to haunt congressional Republicans when they turned their attention to Medicare reform.

Even the Tea Party, the inchoate group of activists pressing the GOP to cut spending and curb borrowing, appears to be conflicted about entitlements. A McClatchy/Marist poll found that 70 percent of self-described Tea Party supporters opposed cutting Medicare and Medicaid as a way to reduce the budget deficit. Those numbers were only slightly better than the 73 percent of Republicans who said they opposed such cuts and actually slightly worse than the 68 percent of conservatives who gave the same answer. (There is data that cuts the other way, however, and the methodology for determining who is a "Tea Party supporter" varies from poll to poll.)

A detailed New York Times/CBS News poll found that while 92 percent of Tea Party supporters say they want a smaller government that provides fewer services, 62 percent said the benefits from Social Security and Medicare are worth the costs. That is 14 points less than the overall percentage of voters who thought the costs were worth the benefits, but it's a substantial majority nonetheless. The Tea Partiers polled were more likely to be on Social Security or Medicare than the general public.

Some defend Social Security and Medicare as earned entitlements, pointing out that they paid a large number of taxes into the system. These are not pure welfare programs. The New York Times, as is its wont, found a Tea Partier who recanted her support of limited government when confronted with this apparent contradiction. "That's a conundrum, isn't it?" she was quoted as saying. "I don’t know what to say. Maybe I don't want smaller government. I guess I want smaller government and my Social Security."

THE REPUBLICAN PARTY has frequently pledged to give its voters both smaller government and Social Security. But the number of Republicans openly campaigning for entitlement reform -- my old colleague Phil Klein has called them the "Republican honesty caucus" -- has grown. Pat Toomey has been an outspoken supporter of personal accounts for Social Security. In his 2010 Senate race, he won the senior vote by 18 points. Toomey had previously been elected to the House in a swing district -- carried by both Clinton and Gore -- with a large number of seniors. Likewise, Marco Rubio won a 50 percent plurality of seniors in a three-way race in Florida. His closest opponent, Charlie Crist, took just 33 percent. In Kentucky, Rand Paul, who has since introduced a bill that would means-test Social Security, was hit on entitlement reform but nevertheless won seniors by 16 points.

In Wisconsin, Ron Johnson even made Perry-like comments about Social Security being a Ponzi scheme. Instead of backing down when Democratic incumbent Russ Feingold attacked him, Johnson defended himself in an ad. Johnson beat Feingold 54 percent to 46 percent among senior citizens, though it should be noted the Republican’s biggest margin of victory was among voters aged 40 to 49. He also did well among voters whose ages stretched from 30 to 44.

An overwhelming majority of House Republicans voted for a budget that included Paul Ryan's Medicare reforms. Most of the dissenters actually wanted a budget that cut spending even more drastically. A majority of Senate Republicans also voted with Ryan. When Newt Gingrich -- perhaps seeing flashbacks from his own failed bid to rein in Medicare as House speaker -- dubbed Ryan’s proposal "social engineering," the reaction from the base was swift and harsh. An angry Iowan confronted Gingrich and told him to his face, "You're an embarrassment to our party."

"Why don't you get out now before you make a bigger fool of yourself?" the man demanded in an encounter widely replayed on YouTube. "What you just did to Paul Ryan is unforgivable." Radio talk show callers and Wall Street Journal editorialists echoed these complaints. So did longtime allies. "I'm not going to justify this," said Rush Limbaugh. Bill Bennett argued Gingrich had "taken himself out of serious consideration for the race." Gingrich ended up apologizing to Ryan. His current poll numbers are only marginally healthier than Medicare's finances.

Even individual Republicans can't keep straight which side of this debate they are on. The same Michele Bachmann who expressed concerns about Rick Perry's Social Security comments once called the program a "fraud." Romney -- who has in the past been less genteel when talking about Social Security himself -- has suggested he would sign the Ryan Medicare reforms into law if elected president, but he has been unwilling to embrace them as his own.

Conservatives and libertarians hungry for straight talk about entitlements have praised Perry's candor. The syndicated columnist and free-market economist Walter Williams wrote, "Three cheers to Perry for having the guts to tell us that Social Security is a monstrous lie and a Ponzi scheme." Williams pointed out that Milton Friedman, Paul Samuelson, and even Paul Krugman have all described Social Security's finances similarly. "We should be grateful that a major candidate has finally spoken truth to fiction,” concurred the Cato Institute's Roger Pilon.

SOCIAL SECURITY IS a large and growing problem. Those who find comfort in the fact that it isn't the main driver of our annual budget deficits today miss the point. The program's unfunded liabilities of more than $16 trillion far exceed the deficit. Benefits are growing faster than revenues. The ratio of workers paying into the system to retirees drawing benefits has declined from 16 to 1 to 3 to 1. It is becoming a progressively lousier deal for workers. Many proposed reforms fix some of these problems but fail to address them all.

The stock market's collapse has sapped public confidence in private alternatives, however. People have seen the value of their 401ks decline. The percentage of non-retirees who tell pollsters they expect to rely on Social Security benefits has started rising. The program may be a Ponzi scheme and the long-term returns of private investment may still be significantly better, but right now Americans are nervous about both.

From the perspective of partisan politics, the Perry-Romney fight may be the equivalent of mutually assured destruction. By attacking a Republican who makes limited-government and constitutionalist arguments against a major federal program, Romney is accentuating his own liabilities. He is also practically writing copy for commercials Obama will run against Perry should the Texas governor be the GOP nominee.

Perry, however, is departing from the script that has best served Republicans pushing for Social Security reform. Winning Republicans have tended to emphasize that they want to save the major entitlement programs. Democrats always insist the GOP wants to destroy them. Perry is letting himself sound like he would destroy the entitlements village in order to save it.

Romney's Social Security pitch is a better fit for the general election, though Perry's might help convince the Republican base to stop making exceptions for the retirement program when contemplating spending cuts. A Quinnipiac poll of Florida Republicans -- many of them seniors -- showed Perry leading Romney and siding with the Texas governor in this debate.

Only 14 percent of Florida Republicans believe Perry wants to dismantle Social Security, while 60 percent believe he wants to save it. Fully 52 percent believe his description of the program as a Ponzi scheme is fair compared to 39 percent who don't. But the numbers reverse when looking at Florida voters as a whole. Fifty-eight percent of all Floridians find the Ponzi scheme comment unfair and only 33 percent agree with it. Similarly, 37 percent of all Sunshine State voters think Perry wants to end Social Security, 35 percent believe he wants to fix it, and 28 percent aren't sure.

THE IMPLICATIONS FOR entitlement reform are more important than the political wrangling for the Republican nomination. While no generally friend of limited government, Bush advanced the argument for sweeping changes to Social Security farther than any other Republican leader. Though his initiative failed, Republicans who supported it paid little price at the ballot box. It is striking that Bush never said anything remotely critical of Social Security itself, preferring to emphasize reforms that will keep it solvent for the next generation.

It took decades of detailed Republican arguments to prepare the country for welfare reform. Rhetoric about "welfare queens" played well with the base. Arguments that welfare harmed the poor and undermined middle-class values did a better job reaching swing voters. Winning over the uncommitted was essential to prevailing in that debate and getting to the point where even Democrats like Bill Clinton talked about "ending welfare as we know it."

Many Americans don't understand what the problems with Social Security are or think they are very far off. Those who do comprehend the program's financial shortfall either don’t know the alternatives or are put off by anything that will cut their future benefits or bring home their present mother-in-law. This is an argument Republicans are going to have to make openly rather than run from, but they need more than welfare queen -- or Ponzi scheme -- rhetoric.

Democrats are far from wanting to end Social Security as we know it. To them, any reform other than lifting the payroll tax cap constitutes ending Social Security, period. But there are ways to put the issue on less favorable ground for the president's party. Warren Buffett is eager to see people in his income cohort pay more taxes. Let them give up their Social Security checks first.

Middle-class voters need to understand that current benefits can't be paid by forcing only the wealthy, however inaptly defined, to pay more. Everyone, including middle-class voters, will have to pay higher taxes to prop up the post-Great Society welfare state as the baby boomers retire. Surely, some of those voters would rather save for their own retirements even in a time of financial uncertainty. For the one financial certainty is that the federal government's present fiscal course is unsustainable.

Why should Republicans take this risk? They have been better served by vague generalities about smaller government accompanied with fierce attacks on Democratic tinkering with middle-class entitlements. Attacking government spending for the middle class -- even in an effort to bring benefits into line with what historic tax rates can pay -- is much more dangerous than going after plainly redistributive programs for people who don't work.

Ultimately, Republicans have no choice. To lose the entitlements argument is to lose that battle over the size of government. More pressingly for the party, it is also to surrender the tax issue, perhaps permanently. Without being able to feasibly keep a commitment to low taxes, the GOP really has nothing to say about the economy to millions of Americans.

Paul Ryan's proposed entitlement reforms are controversial because they simultaneously envision lower taxes, including for the wealthy, and long-term spending cuts for everyone. The electorate needs to understand, and after decades of dealing with Democrats is predisposed to understand, that the competing vision means higher taxes for everyone.

In the end, the 2012 presidential election will turn on two questions: Do the voters judge Obama's presidency a failure? Can the Republican nominee present himself -- or herself -- as a plausible alternative? We already know the answer to the first question. Similarly, the debate over entitlements also hinges on two questions. Do the voters understand that the system is broken? And is there a plausible alternative?

Right now, both questions are unresolved. Republicans must change this, for how these questions are answered may have a bigger impact on the party's long-term fortunes than even the race against Obama.

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About the Author

W. James Antle III, author of the new book Devouring Freedom: Can Big Government Ever Be Stopped?, is editor of the Daily Caller News Foundation and a senior editor of The American Spectator. You can follow him on Twitter @jimantle.