Will Social Security Privatization Return? It Depends on the Outcome of the 2006 Elections.

In 2005, President Bush promoted the privatization of Social Security as his top domestic
priority. However, once the American people understood what he was proposing, they
overwhelmingly rejected the idea. While open to modest reforms that would strengthen its
finances, most Americans opposed his proposal to divert Social Security taxes to create private
retirement accounts invested in the stock market – effectively slowly phasing out a program that
has been hugely successful in helping Americans retire with dignity for over 70 years. They
realized that such a scheme would reduce benefits for retirees, increase our national debt, and put
Americans’ retirement at risk by placing it at the mercy of a market that goes down as well as up.
The Democrats united in opposition and many Republicans also ended up opposing the
President’s privatization plan.

But the administration has not given up. The president and the Republican leadership have
vowed to push privatization again in 2007. Therefore, the 2006 elections will be pivotal – either
by driving a stake through the heart of privatization or by creating the conditions for its revival
from the dead. In the Senate, where 46 members already voted for privatization, only a handful
of seats would need to switch to privatizers – or a small number of current officeholders could
change their position – for a majority of senators to pass privatization legislation and begin the
phase-out of Social Security. If most of the pro-privatization ideologues are able to maintain
their seats in the Senate, they will claim to have demonstrated that there is little political penalty
for promoting what are now widely regarded as unpopular privatization proposals. And if a
handful of pro-privatization challengers are successful – or if the handful of Republican Senators
who in 2005 voted to protect Social Security begin to flip-flop their positions because they no
longer have the pressure of facing an election for another six years – the Senate could become a
political organizing point for the phase-out of Social Security and its partial replacement by
private accounts.

The situation in the House is more complicated. On the one hand, House Democrats, with the
exception of Rep. Allen Boyd of Florida, have overwhelmingly opposed diverting Social
Security payroll taxes to private accounts and some Republican members, under strong pressure
from their constituents, suggested they had concerns as well. At the end of 2004, Rep. Tom
Davis (R-VA), former chair of the House Republican Campaign Committee, told the Wall Street
Journal that “roughly 30 House Republicans, including himself, are already inclined to oppose
Mr. Bush” on Social Security. That might appear to give Social Security protectors a small
majority in a House vote. But on the other hand, the current House Republican leadership is
strongly committed to privatization, and House procedures give the leadership of the majority
party substantial power to force through unpopular proposals by limiting debate and
amendments, threatening retaliation against members on other priorities, and combining
unpopular proposals with popular priorities. House Republican leaders have shown a
willingness to use all these techniques, and an ability to persuade members like those described
by Rep. Davis to change their votes under pressure. Faced with some nervous members, House
Republicans also attempted to disguise their privatization plan so that those members could vote
for it, rather than abandoning it, and they may try that tactic again. The narrower the margin is,
the more likely it is that they’ll be successful. During the 109th Congress, the House Republican
leadership has only lost one floor vote in which the leadership recommended a yes vote.

Just as in the Senate, the numbers in the House for and against privatization are very closely
balanced. Most Republicans embraced privatization, but, freed from having to take an actual
vote on the issue, a large group of House members sought to take no public stance at all – or flip flopped
back and forth on their positions. Another large group of members maintain that they
are still for private accounts, even though they may have opposed the specifics of the President’s
proposal. If the 2006 election were to see the victory of the large number of pro-privatization
Republican challengers defeating their incumbent Democrats opponents, we could see a
Republican House with a majority favoring privatization – and a vote to dismantle our traditional
Social Security system could succeed. This report examines the contested House and Senate
seats in the context of Social Security to show how crucial the 2006 elections will be in
determining the upcoming battle to protect our popular and successful Social Security system.

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