Social Security revamp a long-standing dream among conservatives

WASHINGTON — The argument for dramatic change in Social Security is clear:

The promise of secure retirements is a "hoax." Taxes paid by workers are "wasted" by the government rather than invested prudently. And "the so-called reserve fund ... is no reserve at all" because it contains nothing but government IOUs.

President Bush? No, Republican presidential candidate Alf Landon and his party's platform in 1936.

Bush's proposal to overhaul Social Security is the product of a conservative dream to undo the system that's as old as the program itself.

Conservatives started complaining that the system was a big-government boondoggle doomed to insolvency before the first check was sent out in January 1937. Their indictment has been part of conservative ideology from Barry Goldwater, whose doomed but defiant 1964 presidential campaign made him the father of the modern conservative movement, through Bush.

But it wasn't until relatively recently that conservatives saw a path to break the government's hold on Social Security. As envisioned in a 1983 master plan, the expansion of other private pension programs such as IRAs helped millions of Americans grow comfortable with making investments, and the bull markets of the 1980s and '90s made those investments appear more lucrative than Social Security.

Still, the conservatives' goal throughout has been as much political as economic, as much about smaller government as bigger retirement checks. The only thing Bush has ruled out is the one thing that would grow the government system: higher taxes.

"Ever since the program was first created, conservatives understood it was a major expansion of the government," said Eric Patashnik, a University of Virginia political scientist. "And they've never liked that expansion."

Landon, of course, lost the 1936 election in a landslide to Franklin D. Roosevelt, which reaffirmed the New Deal and set back the conservative cause severely. Roosevelt two years later boasted that Social Security already was a "permanent" part of the political system.

Conservative opposition to Social Security all but disappeared from public debate for decades. Not until the 1960s did conservatives such as Goldwater and economist Milton Friedman open a new barrage of criticism.

"I wanted to make Social Security solvent, to improve it," Goldwater said. "The first thing wrong with Social Security is the fact that it is compulsory. Secondly, it is not actuarially sound: It promises more benefits to more people than the incomes collected will provide."

According to historian Michael Beschloss, Goldwater also said, "perhaps Social Security should be abolished."

Speaking for Goldwater in a 1964 televised speech that helped launch his political career, Ronald Reagan endorsed the idea of turning retirement security over to the private sector.

"Can't we introduce voluntary features that would permit a citizen to do better on his own?" Reagan asked. "We are against forcing all citizens, regardless of need, into a compulsory government program."

Goldwater, like Landon, lost in a landslide.

Reagan, elected president 16 years later, refused to call for privatizing Social Security. Instead, he signed a 1983 bailout that increased taxes and raised the retirement age to shore up the program.

That was when conservatives recognized their need for a long-term strategy keyed to offering people the benefits of making more money in private accounts, while making that option feel more mainstream and less risky.

"It's really after that that conservatives, particularly libertarians, began plotting for Social Security's eventual demise," Patashnik said. "They started laying the groundwork for the effort we see today by President Bush."

Peter Ferrera in 1980 wrote a detailed paper proposing private accounts that was published by a libertarian research center, the Cato Institute.

Influenced by Ferrera, Cato published a paper in 1983 that served as a political manifesto for turning over at least some of Social Security to the private sector.

It recommended:

• Consistent criticism of Social Security to undermine confidence;

• Building a coalition of supporters for private accounts, including banks and other financial institutions that would benefit;

• Assuring "those already retired or nearing retirement that their benefits will be paid in full";

• Legislation making private savings plans such as individual retirement accounts more available and thus more familiar.

Making it easier for more Americans to set up accounts, authors Stuart Butler and Peter Germanis said, would make "it in practice a small-scale, private Social Security system that can supplement the federal system. ... We will meet the next financial crisis in Social Security with a private alternative ready in the wings, an alternative with which the public is familiar and comfortable and one that has the backing of a powerful political force."

Whether conservatives are on the verge of success is unclear. In 1936, they had no idea how long it might take. By 1983, they knew it would take time.

"We must be prepared for a long campaign," Butler and Germanis wrote. "It could be many years before the conditions are such that a radical reform of Social Security is possible.

"But then, as Lenin well knew, to be a successful revolutionary, one must be patient and consistently plan for real reform."