George W. Bush, Philosopher-King
Why he won't debate the math of Social Security reform.
Correction, Jan. 18, 2005: When President Bush mentioned "the philosophical argument of the age" in his interview with the Wall Street Journal, he was referring to democracy in the Middle East, not Social Security reform. So Bush is a philosopher, but not on the subject of Social Security. I regret the error. The article's point about liberals focusing too much on the mathematical impact of reform still holds.
George W. Bush has waited until the eve of his second inaugural to let us know that he doesn't hate pointy-headed intellectuals after all. Instead, he now confesses, he's one of them. On the subject of Social Security reform, "It's exciting to be part of stimulating a debate of such significance," President Bush told the Wall Street Journal this past week. "It really is the philosophical argument of the age."
You may be surprised to learn that the president views Social Security reform as a philosophical question, the kind of groovy give-and-take subject that's appropriate for drug-induced dorm-room bull sessions. But understanding why he framed the subject that way is critical to understanding the impetus behind Social Security privatization. Opponents of personal Social Security accounts have been trying to knock down the president's plan—to the extent that he has one—by tackling it as a mathematical puzzle and carefully explaining that the numbers don't add up. "There's no Social Security crisis," is one version of this argument, explaining how relatively minor changes in benefits and taxation can preserve the system in its current form. The other is to poke holes in the arithmetic of privatization. Slate's founding editor, Michael Kinsley, went so far as to offer a logical proof of how privatization would fail to fix Social Security. But submitting the answers to a math test during a philosophy exam is a sure way to flunk.
Explaining how both the "Social Security crisis" and the "privatization solution" rely on faulty math misses the point of the president's plan entirely. Like supply-side tax cuts, Social Security reform is a subject on which conservatives prize philosophy—or, if you prefer, ideology—over arithmetic.
The confusion over the nature of the debate is intentional. The Bush administration has linked two reforms—private accounts and benefit cuts—that have nothing to do with each other. Benefit cuts are the administration's preferred solution to Social Security's long-term financing imbalance. (Democrats prefer a mixture of benefit cuts and tax hikes.) Private accounts have nothing to do with Social Security's actuarial problems, except to the extent that they make them worse. White House aide Peter Wehner conceded as much in his leaked memo on Social Security. Pushing investment accounts without benefit cuts would mean "making no effort to address [the system's] fundamental structural problem," Wehner wrote.
Private accounts have different virtues, Wehner explained. "Our goal is to provide a path to greater opportunity, more freedom, and more control for individuals over their own lives. That is what the personal account debate is fundamentally about." In other words, it's a philosophical debate about the role of government, not a mathematical debate about how to make Social Security's outflows match its inflows.
National Review, in its response to Kinsley's (in their words) "ingenious argument against reform," suggested that personal accounts would "increase incentives to work" and "induce people to save more." Those arguments sound a lot like the conservative arguments against welfare, which had to do with the effect of economic incentives on thrift and industriousness, rather than the mathematical effect of welfare spending on the budget. NR also argued that private Social Security accounts would "probably restrain federal spending" by preventing the government from "masking its deficits by borrowing from Social Security." Perhaps most important, the magazine argued that private accounts would create more Republicans, by increasing "both the public's financial sophistication and its receptivity to proposals to increase the returns to capital." In short, NR replied, look, our math doesn't add up, but that's not the point. We like the idea because Social Security privatization is consistent with conservative philosophy: "Providing the security of ownership, and reducing dependence on Washington, is a worthy goal in its own right." (Kinsley, in his Los Angeles Times column, wrote: "Republicans control the entire federal government. If they want to cut government spending, they should do it. They don't need to trash Social Security along the way.")
Liberals, for their part, aren't bereft of philosophy. They support Social Security because it's redistributive. In other words, it's welfare for old people. The politically correct term for this is "social insurance." Liberals are willing to keep paying rich people Social Security in the hopes that the payments will keep those rich people from figuring out that Social Security is a redistributive transfer program. Responding to Kinsley, former Federal Reserve economist Arnold Kling made the novel point that redistributive liberals should support the transition to personal accounts, because it means that Social Security payments for current retirees will be funded by the progressive income tax instead of the regressive payroll tax.
Like the Iraq war, the administration's push for private Social Security accounts is a war of opportunity and a war of choice. As with the war, the administration's arguments have some merit, but rather than arguing the honest case, Bush is trying to convince the country of a looming crisis in which the dangers of inaction are as risky as the dangers of action. Democrats have done a good job of shooting holes in Bush's "crisis is now" assertion, but winning that debate may not be sufficient if Republicans win the philosophical side of the argument. A recent Washington Post-ABC News poll (disclosure: Slate is now owned by the Washington Post Co.) showed why: Only 19 percent of Americans between the ages of 18 to 29 believe the Social Security system is in crisis, but 67 percent of those same Americans support private accounts. In every demographic group in the poll, the number of people who supported private accounts was greater than the number of people who believed the system was in crisis.
Here's what a straightforward discussion of the philosophy behind the Social Security system would look like: Democrats support welfare for old people, on the grounds that it creates a safety net for capitalism's losers, who might otherwise live in poverty. Republicans oppose welfare for old people, on the grounds that it reduces incentives to work and save, it gives the government too much money to spend, and it makes people overly dependent on the government for their retirement. That's an honest debate. Let's have it.