Jewish World Review Feb. 16, 2005 / 7 Adar I 5765
Why we are hostage to granny and her purse
Howard Dean is losing no time in the commitment department. On his election on Saturday as chairman of the Democratic National Committee, the former candidate for his party's presidential nomination swore that the Democrats were "the party for young Americans" and the "party for older Americans."
Wonderful promise. Nearly impossible to keep. The big domestic policy challenges tend to pit the two groups or their lobbies against each other. The battle between old and young slows the political process and, increasingly, the national economy.
Consider Social Security, the topic consuming Washington.
President Bush said he would devote the political capital accumulated in last year's election to reforming and privatizing the public pension program. This month he is sending out his most credible men in their most credible coats and ties, Joshua Bolten director of the Office of Management and Budget and N. Gregory Mankiw, chairman of the Council of Economic Advisers, to make the case.
Everyone knows change is not optional: As Bolten reminded bond traders in New York on Friday, postponing Social Security reform by just one year means an extra $600 billion in costs (read: tax increases) in the future. Social Security privatization, especially the Bush plan, is eminently reasonable. The plan will narrow deficits in the long-term and erase trillions of dollars in unfunded liabilities. (Indeed, anyone who natters on about fiscal imbalances and does not mention Social Security in the next breath is a hypocrite.) Such reform is the most important domestic step a president can take.
Privatization is something Democrats could in theory support. In the 1990s, Dean's own Democrats, led by President Bill Clinton, joined hands with Republicans to end welfare, another historic social program. Robert Rubin, Clinton's Treasury secretary, taught the country that Democrats also care about fiscal responsibility. The Bush men who are making the case for Social Security privatization this week are not so very different from the Clinton men who once argued, in an analogous campaign, for the retirement of the 30-year long bond. Blink, and Joshua Bolten becomes Robert Rubin.
Still, Social Security privatization, the 2005 version, is facing serious obstacles. Some are misrepresentations propagated by Dean's more disingenuous allies. Jano Cabrera, the DNC's communications director, said recently: "We welcome any opportunity to run against Republicans in 2006 after they've cut Social Security benefits and added trillions to the federal deficit." But other criticism has come from more surprising sources: Republicans Bill Thomas, chairman of the House Ways and Means Committee, and Dennis Hastert, House speaker.
How is it that Republicans could hurt their own on such an important project? Behind the battle between old and young is a larger battle between taxpayers and "tax eaters." As Steve Malanga, a public finance scholar and journalist, notes, "tax eaters" are those citizens who receive cash from Washington, via wages or benefits. The old are not the only such group, but they are the largest. As America ages, the balance tips toward the tax eaters.
The change explains why the old labels of "left" and "right" often no longer apply. Clinton could pass welfare reform because welfare, for all its fame, affected relatively few Americans. Bush is a visceral free marketeer. Yet when re-election time came, he looked into the ghastly tax-eating face of AARP, the lobbying group for those older than 50. He realized its members counted 35 million, all of them capable of voting, and he decided he must feed it something. Betraying his own principles, he provided an enormous and permanent benefit: government guaranteed drugs. This made arguing Social Security's numbers harder.
Which brings us to Howard Dean. One reason he won his new post was the success of his presidential primary campaign in reaching younger people through the Internet. These are cohorts who neither know much about the history of the Social Security program nor expect its dollars to be available when they retire. Such low expectations can work to the advantage of any reformer, including Dean. But only if he ignores groups such as AARP.
AARP's reflex is to block reform, no matter the eventual cost to members' grandchildren. Failing that, it opts for punishing the more successful of its children now, through a tax increase on higher earners. Dean did cross AARP in the 1990s, a fact that competing Democrats used against him last year. But he is not crossing AARP now. He apparently took time on Friday to announce he is a proud AARP member. Such declarations make any later move against the giant that much harder.
The point here is not that all Americans are selfish. It is that when they morph into interest groups becoming Granny the Lobby instead of the granny who lives upstairs, they can do perverse things.
These days, U.S. lobbies are becoming more like European ones, so strong they constrain the nation as a whole. If Howard Dean, an iconoclast, wants to smash more icons, let him join the Bush team in writing Social Security law that improves the future. Otherwise he will find himself trapped, just another hostage to Granny.
Every weekday JewishWorldReview.com publishes what many in Washington
and in the media consider "must reading." Sign up for the daily JWR update. It's free. Just click here.
JWR contributor Amity Shlaes is a columnist for Financial Times
. Her latest book is
The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.
02/02/05: Moral action should be its own reward
01/27/05: It's OK to declare that women are from Venus
01/25/05: Soros should revive the old liberalism
01/11/05: Fannie Mae's story is not one of corporate greed, or executive compensation, or the challenges of accounting regulation standards. It's a story of moral hazard
12/22/04: Focus on growth, not backbiting
12/09/04: Tide of democracy sweeps the globe: Prospects for free elections becoming a trend
11/30/04: Change the tax regime to help America save
11/11/04: Ignore the scaremongers Social Security `crisis' fixable
11/01/04: U.S. election about class, not politics
10/20/04: Reckless and extreme
10/06/04: Under construction: Threat of nuclear proliferation
09/19/04: A no-confidence vote in consumers
09/08/04: Caught in a triangulation traps
09/01/04: Competitive endgame
06/22/04: Oil as a curse
06/16/04: What de Gaulle can teach us about Iraq
05/18/04: Why trade matters in a time of war: Promising steps by U.S. and EU against protectionism
05/12/04: Let's face it, planning your life to reduce your tax bill is a time-honored and legal tradition
04/29/04: Being caught between 2 complicated syndromes: The high cost of living in big cities and the progressive structure of the U.S. tax code
04/20/04: Kerry's Misery Index is just sad
04/15/04: John Kerry's tax the rich mantra won't get the jobs done
04/02/04: Faithful following at the White House
02/25/04: It's back to the Dark Ages on trade
02/20/04: Trust the U.S. or trust Al Qaeda
02/12/04: A Political Year of Yalies: Boola Boola for Meritocracy
02/04/04: Here's what America doesn't need: Another New Deal
01/15/04: Forget Mars, U.S. economy looking like the final frontier
12/30/03: Bob Bartley put morality's place in the market economy
12/18/03: Mission accomplished: 1991's, that is
12/11/03: Shrugging off outdated data: Inside America's economic machine
11/13/03: Leaving a little something for the kids? Good luck
11/05/03: Never, Never will we Desist
09/30/03: Tax, lies and a few supply-side parables
10/09/03: Free markets are the key to rebuilding Iraq
09/25/03: Don't be sentimental, Mr. Bush
08/12/02: Howard Dean, Robin Hood
05/29/02: Berlin Diarist: To believe that by self-improvement and restraint, we can end tyranny
03/27/02: The curse of oil
11/12/02: Political Correctness at the Fed (No joke!)
10/31/02: Local enforcer who has changed national laws
10/12/02: No Mirror for Europe; US is a picture of unity
08/14/02: Keeping your financial eggs at home
07/24/02: New Democrats' unaffordable luxury
06/26/02: The evolution of eminent domain is the story of the lasting power of Supreme Court decisions to alter the American cultural fabric
06/20/02: The distinction between known risk and uncertainty: What was lost in the Martha Stewart flap
06/11/02: Europe, long waiting for a chance to assert itself as independent from the US on the world stage, is clueless to terror's threat
06/04/02: A Cold Warrior's lessons for the Middle East
05/21/02: Geography does matter when it comes to development, but aid must nonetheless be linked to good governance
05/14/02: The increasing number of new claims is hurting innocent companies and making a mockery of the Common Law system
05/09/02: Aid, development and guilt in our times of terror
04/30/02: Wine lovers may at last be able to stray across state borders. The Internet is coming to the aide of free trade
04/23/02: Taxation by way of Madison Avenue
04/17/02: Special relationships and free trade do not mix
04/08/02: Is terror the flip side of globalization?
03/20/02 Bush gives aid but seeks results
03/13/02 The Danger in policy by numbers
02/26/02: States' smokescreen for tax hypocrisy
02/20/02: Echoes of leadership against a global threat
02/13/02: Jackson Vanik May be a Useful Analogy When Thinking About the Middle East
02/07/02: Budgeting for victory: Requiem for a peace dividend
02/05/02: The detectives of 1930s pulp fiction had a nose for clients bearing gifts. Sadly, those consulted by Enron did not
01/22/02: Allow all American children a decent chance
01/15/02: Do not disturb the profit-sharing revolution
01/09/02: It is dangerous to elevate a currency as a political emblem if the need for other economic reforms is obscured
01/03/02: There is only one way for a free thinker to bring up children
12/20/01: Why America's economy always bounces back
12/18/01: When it comes to taxes, Washington lawmakers can learn a thing or two from The Honeymooners
12/13/01: Bush opens a new era
12/12/01: A flamboyant reversal for the Democratic party
12/06/01: Threat of an oil embargo on the U.S. is a bluff
11/29/01: Which is more important--the war or diplomatic comity?
11/20/01: Unbalanced by a wealth of oil and diamonds
10/17/01: Afghanistan Needs a General MacArthur
09/27/01: The US has gained an understanding of the costs of war for which its European allies have hitherto wished in vain
09/13/01: War against terrorism will rise from the ashes
08/15/01: Geography is no excuse for the state's economic stagnation. Its policymakers should take a leaf from Ireland's book
08/07/01: Teamsters may pay a heavy price for winning its batle in Congress
07/25/01: Towards a patent-free nirvana?
07/17/01: History proves the lasting value of tax cuts
07/10/01: Stem cell research has awakened a bitter debate in Washington but voters care more about other electoral issues
07/03/01: America foots the bill for Europe's largesse
06/26/01: America the litigious, land of the lawyer's fee
06/20/01: Five reasons for gloom about global growth
06/18/01: Show pity for Alice in Tax Wonderland
06/13/01: America must take a French lesson in trade
06/11/01: Time to dream the impossible dream for Iraq
06/07/01: Whatever happened to simple?
06/04/01: When the relationship between companies becomes as close as a marriage, the eventual break-up is often very painful
06/01/01: Loving and hating the Bush tax bill
05/30/01: Will Grisham soon be unemployed? In America's courts these days, there's no room left over for legal fiction
05/22/01: Republicans sample the rhetoric of confidence
05/16/01: Boeing has been promised $60m to site its headquarters in Illinois. The deal looks a poor one for taxpayers
05/14/01: Adam Smith in love
05/09/01: Those rotten Russian capitalists
05/07/01: Why tax havens provide shelter for everyone
05/04/01: Middle classes pay for get-the-rich folly
05/01/01: Money can't buy happiness? Think again.
04/26/01: Calling America's rogues and entrepreneurs
04/19/01: High earners right to feel lonely at the top
04/11/01: The right must learn the comfort of strangers
04/04/01: When domestic law arrives by the back door
03/30/01: A Lexus tax cut suits the jalopy driver
03/27/01: The unchallenged dominance of King Dollar
03/20/01: Natural selection of an intellectual aristocracy
03/16/01: The hidden danger of a regulatory recession
03/14/01: Is the American condition that boring? Why so many Oscar nominated movies aren't set in America
03/07/01: Trampling on the theory of path dependence
03/05/01: Fighting the good fight
03/01/01: It is time for Fannie and Freddie to grow up
02/27/01: IT's important
02/22/01: The guilty conscience of America's millionaires
02/14/01: The benefits of helping the 'rich'
02/09/01: The Danger and Promise of the Bush Schools Plan
02/05/01: Crack and Compassion
01/31/01: Debt is good
01/24/01: A gloomy end for a half-hearted undertaking
01/17/01: The challenge of an ally with its own mind
01/15/01: An unexpected American family portrait
01/10/01: A fitting legacy for America's beloved dictator
01/08/01: The trick of tax 'convenience'
01/03/01: Time to stop blaming Greenspan over taxes
12/11/00: So smart they're dumb
12/06/00: How economic bad news came good for Bush
12/04/00: The Boies factor
11/30/00: "The inevitable demands for recounts erupted like acne…"
11/28/00: Fair play and the rules of the electoral game
11/23/00: The shining prospect beyond a cloudy election
11/21/00: Try the Cleveland model
11/16/00: A surprising winner emerges in the US election
11/09/00: Those powerful expats
What's right for America versus what works
11/02/00: Time to turn off big government's autopilot
10/30/00: Canada beating America in financial sensibility
10/26/00: When progressiveness leads to backwardness
10/24/00: The most accurate poll
10/19/00: The Middle East tells us the hawks were right
10/17/00: The split personalities of America's super rich
10/10/00: 'Equity Rights' or Wake up and Smell the Starbucks
10/04/00: Trapped in the basement of global capitalism
09/21/00: The final act of a grand presidential tragedy
09/21/00: Europeans strike back at the fuel tax monster. Should Americans follow?
09/18/00: First steps to success
09/13/00: America rejects the human rights transplant
09/07/00: Minimum wage, maximum cost
09/05/00: Prudent Al Gore plans some serious spending
08/31/00: A revolution fails to bring power to the people
08/28/00: A reali$tic poll
08/21/00: "I Goofed"
08/16/00: Part of the union, but not part of the party
08/09/00: Silicon Alley Secrets
08/02/00: Radical Republicans warm up for Philadelphia
07/31/00: I'll Cry if I Want To
07/27/00: Cold warrior of the new world
07/25/00: The Estate Tax will drop dead
07/18/00: Shooting down the anti-missile defence myths
07/14/00: A convenient punchbag for America's leaders
07/07/00: How to destroy the pharmaceutical industry
07/05/00: Patriots and bleeding hearts
06/30/00: Candidates beware: New Washington consensus on robust growth stands the old wisdom on its head
06/28/00: White America's flight to educational quality
06/26/00: How Hillary inspired the feminist infobabes
© 2005, Financial Times