Social Security Reform:
Bush's signature second-term project appears increasingly unlikely to succeed given strong Democratic hostility toward reforming Social Security. A Senate filibuster could block any meaningful reform plan, unless Bush can coax five Democratic senators to cooperate.
1) Democrats consider Social Security to be not only their party's most enduring political accomplishment, but also their political lifeline-a gift that keeps on giving in each election. The program consistently helps deliver the votes of senior citizens fearful of losing their entitlements.
2) With the new Congress solidly in Republican hands, Democrats fear that Republican-inspired reforms could destroy both their legacy and their political future. Like President Bush and his strategist, Karl Rove, the party establishment understands that private Social Security accounts will create more "owners" and "investors" who are more likely to vote Republican.
3) This political explanation, while cynical, makes far more sense than the Democrats' own explanation, exemplified by 2000 presidential candidate Al Gore's (D.) declaration that private accounts are "a risky scheme." This notion fails the test of history, as there is no 20-year period in America when investments have not gained. Another objection, even less valid, is that there is no problem with Social Security. Democrats have signaled that they will take this line in resisting Bush's reforms, without proposing their own alternative plan.
4) Sen. Max Baucus (D.-Mont.), the ranking member of the Finance Committee and the hand-picked Democratic negotiator on the issue, says he would be at a loss to name five Democrats who are likely to cooperate with Bush. The President would need that many to overcome a filibuster, provided all 55 GOP senators vote to limit debate.
5) The administration will also face problems with its reform plan's details. Among the contentious points will be how to pay the immediate costs of creating private accounts, the allowable size of the accounts, and the other possible means of keeping the system solvent. In the latter category, Sen. Lindsey Graham (R.-S.C.) and others advocate an effective hike in the payroll tax for higher earners. Others are calling for reduced benefits. Bush has already ruled out either of these scenarios, but he has left himself a loophole by which he could increase the taxable base.
6) The White House insists that it has not yet adopted any specific reform plan. But early leaks from within the White House indicate-as we anticipated weeks ago-that Bush may propose to reduce the growth in benefits by connecting them to inflation (price-indexing) rather than wage growth (wage-indexing). This would be politically difficult because the news media and the Democrats would instantly pounce on this change as a "cut" in Social Security benefits-something Bush has promised not to do.
7) The administration is expected to roll out its official plan in late February. So far, leaks suggest that it will allow a modest $1,300 annual contribution to the retirement accounts. This may mean that Bush is considering a progressive system under which higher earners will be able to invest a lower percentage of their payroll taxes in private accounts.
Tort Reform:
President Bush's recent visit to Madison County, Ill., demonstrates that tort reform remains a priority for the administration.
1) Bush chose Madison County because its courts are famous for huge damage awards in liability lawsuits and is a favorite venue for trial lawyers with class-action suits, whether the suits have any relation to the county or not. Medical malpractice cases there have also driven away area doctors.
2) Congress will take up asbestos liability reform first, because it is more likely to pass than medical malpractice reform. A draft of that bill is already in circulation. Class action reform is next on the agenda.
3) The medical liability reform bill will face more difficulties in the Senate, even with the new 55-seat GOP majority. In their three attempts to pass medical malpractice liability reforms in the 108th Congress, Senate GOP leaders fell 11, 12 and 11 votes short of cloture, respectively. Republicans were united around the bill, except for Senators Graham (R.-S.C.) and Richard Shelby (R.-Ala.).
4) In addition to Graham and Shelby, Sen. Mel Martinez (R.-Fla.) may be the big question mark in the Senate this year. As President Bush's former Secretary of Housing and Urban Development, he is expected to cooperate with the Bush agenda. But as a former president of the Florida Trial Lawyers' Association, he may seek to compromise on the bill's details.
