I used to argue that Bill Clinton’s great legacy would be the overhaul of the American welfare state. By that, I meant the scaling back of benefits for retirees–the true welfare state whose relentless growth needs to be restrained before Baby Boomers reach 65 early in the next century. Clinton seemed well suited for the task. He understood the problem; a Democrat–more easily than a Republican–could tinker with Social Security and Medicare; and his gift for language would enable him to persuade the public to support policies that might otherwise be unpopular. This would be, for Clinton, the equivalent of Nixon’s going to China.
What made this seem so inevitable was that it would ensure Clinton’s “place in history.” In 10 or 15 years, the number of new retirees will create such immense spending pressures that today’s inaction would suggest–at least with hindsight–incompetence or an abdication of responsibility. Clinton surely grasped this. Obsessed with his standing in history, he would act.
I was wrong. Clinton has moved the other way. He has proposed expanding retiree benefits (drug coverage for Medicare) and made it politically impossible to suggest any cutbacks. The present budget debate shows the consequences. Details are baffling, and the disputed amounts–in a $1.8 trillion budget–are small. But the essential conflict is clear. No one wants to be seen touching retirement benefits, including funds flowing into the Social Security trust fund. So all the pressure to cut spending or raise taxes falls on the rest of the budget–from defense to education.
This foreshadows things to come. As Clinton constantly repeats, the present ratio of workers to retirees of about 3-1 is projected to fall to about 2-1 by 2030. Because tax revenues come mainly from workers, paying present retirement benefits implies that 1) taxes must be raised; 2) other spending must drop; or 3) budget deficits will re-emerge. Even if benefits are cut slightly for individual retirees–through, say, higher eligibility ages and smaller payments for wealthier recipients–the total cost of retirement programs will rise because there will be so many more retirees.
Basic questions arise. What is the purpose of government? Is it mainly a vehicle for workers to subsidize retirees? How justifiable are these subsidies if some retirees are wealthier than workers? Will retirement programs crowd out other important needs, starting with defense?
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We are not asking these questions. No one is suggesting that Social Security be abolished or savagely shrunk. But higher eligibility ages and lower benefits for wealthier retirees would acknowledge new social realities (longer life expectancy, private retirement saving). It’s hard to imagine a more favorable moment for debate and change. The economy is booming. The president can’t run for re-election. There’s time to make gradual changes.
But Clinton squandered the moment. He had two choices. He could present these issues as a matter of “generational justice.” It’s a question of parents being fair to their children. This would have opened the question of sharing burdens between workers and retirees. Or he could package the issues as “protecting the elderly.” That’s what he did. His slogans–“saving Social Security” and “saving Medicare”–signify preserving all present benefits. His mechanism for achieving this is to direct as much money as possible into the Social Security and Medicare trust funds.
So we are now haggling over trust funds. This baffles the public, because it is a completely deceptive exercise. Any “surplus” in these trust funds consists of U.S. Treasury securities. When the trust funds redeem these securities–to get money to pay retirement benefits–the Treasury can provide the money only if government does one of three things: cuts other programs, raises taxes or borrows. The trust funds don’t erase the conflicts created by rising retirement spending.
One of the powers of the presidency is the use of the “bully pulpit” to educate the public. But the power can be used to miseducate, and that is what Clinton has done. His rhetoric has overwhelmed Republicans; they don’t want to be seen threatening retirement benefits. Interestingly, Clinton seems to have duped much of the public and the press into believing that he’s addressing future problems when he’s avoiding them.
I had thought that Clinton’s concern for his reputation would prompt him to do the right thing. But perhaps he wants to be the poster boy for a selfish Baby Boom generation. Perhaps he believes that Social Security and Medicare are issues that can hurt the Republicans next year. Perhaps he thinks that, even out of office, he can fool all of the people all of the time about what he didn’t do.
Who knows? All that’s clear is that the questions that Clinton has dodged will someday become more contentious. History may then judge him harshly. It should.