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The Conservative Gambit

Noam Scheiber muses on how risky Social Security privatization is for the GOP and wonders why, exactly, Bush is so committed to getting it. I think I know why. Reading and talking around town, I've noticed something that I don't think many liberals are aware of. Many conservatives believe -- quite sincerely, as far as I can tell -- that privatizing Social Security will actually create new conservative voters and they also seem to believe (likewise sincerely) that liberals share this belief and that this explains why liberals don't like privatization. It seems to me that most liberals aren't even aware that this theory exists, much less are motivated by it. I also think the theory is wrong.

Let me start out with the quick observation that I think that while beating the Bush plan is obviously crucial for the short term fortunes of the Democratic Party, it's passage would be excellent for the Democrats over the long term. The key is price indexing. In Conservative Dream Land what happens if you pass price indexing is that benefits stay indexed to prices forever, even while their effective replacement rate enters steady decline. In the real world what happens is a return to the pre-1977 situation where congress periodically adjusts benefits upwards to compensate for their declining replacement rates. That old situation wasn't very good from the point of view of the country, but it was excellent for the Democrats, who could always put the GOP on the defensive by proposing hikes in Social Security benefits. You see something similar now with the minimum wage. Good policy would index it to inflation, but it's good politics for the Democrats to see its real value constantly falling so Democrats can always be proposing to raise it. Now, hopefully, no Democratic members of congress are reading this, because I think it's very, very, very important for you not to vote for the Bush plan even though it will probably help you down the road.

Now on to the "new conservatives" theory of Social Security privatization. The theory goes a bit like this. Under privatization, more people would own stocks. People who own stocks vote Republican. Ergo, under privatization, more people will vote Republican.

That strikes me as an extraordinarily silly misunderstanding on which to wager your party's political future. "People who own stocks" is a group that has a lot of overlap with "rich people." Take a single mom working a low wage job and depending on some considerable public assistance to get by. Now smash up a bunch of her furniture and her TV, but give her $500 worth of S&P index funds and she's not going to start voting Republican. Stocks are not, in other words, some kind of magic fairy dust that creates conservatives. It's just something that happens to correlate with being rich, which does create conservatives.

Switching around, a slightly more generous construal might be that privatization and the resultant broadening of stock ownership will make more rich people which will make for more conservative voters. See, for example, Brooke's theory that "it's almost counter-intuitive that the Democratic policy makers are against a policy that could conceivably do something about the wealth gap they're always complaining about, until you realize that without a wealth gap, the Democrats would be out of a job." (Among other things, I never hear Democrats complaining about the wealth gap, though I think they should complain and promote ideas that would address it without wreckign Social Security). I don't think that's right as an analysis of the likely effects of privatization. The distributive consequences of privatization would be complicated. Bad or neutral for all poor people qua beneficiaries, but good for the heirs of some poor people (those who die before 67 but late enough in life to have built up a private account that's worth something) who are, in turn, mostly going to be poor people. But leaving that aside, even if privatization did make people richer, this isn't how politics works.

After all, Social Security first started paying benefits in, I think, 1940. Since that time, the United States has become a much wealthier country. Demand for big government hardly tapered off in the intervening period. We got the big Social Security expansions of the 1950s (an oft-overlooked part of the history of the welfare state), the Great Society of the 1960s, the environmental and consumer protections of the 1970s, the Clinton-era expansions of small-bore public sector health care (SCHIP, etc.), and then by the 2000s prescription drug benefits for Medicare recipients and a renewed burst of federal education spending. If wealth actually led to support for rightwing policies, then the United States would have been moving toward laissez-faire throughout the 20th century when, in fact, we've been moving further and further away from it. What privatization might do is build political support for a very narrow range of conservative policy proposals aimed specifically at the economic interests of stockholders, like non-taxation of dividends. That, however, is hardly the essence of conservatism.

I think the idea, more broadly, is that if everyone owned a small stake of corporate America, you would suddenly have broad-based support for "pro-business" (i.e., management-friendly) policies. That's a bit silly, though. People who have pension funds that are invested, in part, in the stock market don't suddenly become hard-core rightwingers. Privatization would be no different.

February 26, 2005 | Permalink

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KILLING SOCIAL SECURITY....Why is George Bush so committed to privatizing Social Security? Matt Yglesias thinks he knows the answer:Many conservatives believe — quite sincerely, as far as I can tell — that privatizing Social Security will actually crea... [Read More]

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Comments

It is interesting that the GOP should have such a silly approach on Social Security privatization. Usually, they're so sober and high-minded...

Posted by: bobo brooks | Feb 26, 2005 2:30:01 PM

Yes.

I have heard the "stock ownership will make more Republicans" thory, I just thought other (conservative) people would see how silly it was. In addition to Matt's observations, I would point out that the urban professional class, which votes largely Democratic, already has 401Ks, and it's not changing their voting pattern.

Now, stock investments may make people overall more conservative, without changing parties, though I really don't see that either. But even so, more conservative Democrats would seem to be a nightmare for the GOP, which relies on a polarized left/right split to keep its side in line. A Democratic party that moved modestly rightward would, everyone seems to theorize, win, and win big.

But to sign on to Matt's point, the whole discussion seems to be a kool-aid moment on the right - Democrats aren't afraid of people getting to invest in stock (hey - 401Ks for everybody, that's fine with me), they're concerned about an important safety net for the elderly and the disabled with guaranteed benefits that can't be taken away. I think it's a moment, among several lately, when Republicans believe their own hype a little too much. And just from experience, that's a big mistake. Huge.

Posted by: weboy | Feb 26, 2005 2:33:28 PM

To go back what I said in the last thread about this, I think the major problem for the GOP, is that they're assuming that the average historical returns means that everybody will recieve that.

The real question is, for the average investor, what will THEIR return be. What will most of these people recieve back in an investment plan. I suspect that it's not going to make them very happy.

Posted by: Karmakin | Feb 26, 2005 2:45:34 PM

I don't think that's right as an analysis of the likely effects of privatization.

Well, that's because it isn't an analysis, it's spin.

Obviously the main reason why they are so committed to piratization is that they don't want to raise income taxes to pay back the trust fund treasury notes. Why do you need any other explanation? That's over 2 trillion good reasons right there.

Posted by: abb1 | Feb 26, 2005 2:51:14 PM

"Noam Scheiber muses on how risky Social Security privatization is for the GOP and wonders why, exactly, Bush is so committed to getting it. I think I know why."

Don't underestimate the fact that the magic 2018 date starts showing up on 10 year budget plans before Bush is out of office. Never discount the appeal for Bush of making his income tax cuts and estate tax repeal permanent.

Also don't underestimate the fact that Bush has been flogging privatization since he first ran for Congress 25 years ago. Never discount the appeal of a bad idea held for an entire adult lifetime.

And finally, don't underestimate the fact that privatization is a boon for wealthy Americans income taxpayers, wealthy Americans with lots of money already in the market, and financial services companies. Never discount the appeal of pleasing your donor base.

Posted by: Petey | Feb 26, 2005 2:52:56 PM

This was precisely the debate when Thatcher was "privatizing" council houses in the 1980s. It didn't work for thr Conservatives, natch.

Posted by: John Isbell | Feb 26, 2005 2:57:02 PM

Perhaps Ralph Nader's got it right. He's asserted that Bush & Co. are tilting at the social security windmill as a distraction to the Iraq war which has turned out badly. If so, it's a perfect ploy, since it's a credible conservative endeavor which Bush can pursue with sincerity and even passion. If it doesn't work out, he can shift attention to yet another high-stakes gambit and try to keep refocusing our attention. Keeping one step ahead, he keeps his critics and the public off balance until the historians reassess, and hopefully even they will be bamboozled.

Posted by: Julian | Feb 26, 2005 2:57:49 PM

"Many conservatives believe -- quite sincerely, as far as I can tell -- that privatizing Social Security will actually create new conservative voters and they also seem to believe (likewise sincerely) that liberals share this belief and that this explains why liberals don't like privatization."

Worked like a charm for the Tories didn't it? How long will it be before Michael Howard runs on a platform of restoring state pensions?

The best the right can hope for is that if they do manage to destroy social security it takes a good generation for Americans to figure out how badly they *hate* privatization, and only then elect Democrats to reinstate it.

Posted by: Robin the Hoodlum | Feb 26, 2005 2:58:25 PM

Julian's right, at least to the extent that if this SocSec campaign works out to produce those results, then it's effectively as if the GOP had intended it as a strategy to produce those results, and so we should address it as if it was intentional. The resulting distraction will hurt us no matter what was intended.

Abb1, I don't quite follow you and I'd appreciate if you could provide a little elaboration or a link to a good treatment.

Matt, how about this?

1) The conservatives might think that once accounts are privatized, people will think after a while, "Well, I might as well be investing in stocks with the rest of my savings, as well!" The private accounts will have proven, to some people who wouldn't have had any money in the stock market without having gotten a little push from the fed. gvt., that putting money in the stock-market is not so risky.

2) Then, once the market for stocks has increased by people putting their non-Soc.Sec. savings into stocks, it would create political pressure for Soc.Sec. to be done away with altogether- the common person saying, "We don't need this big, wasteful gvt. program! We can just invest in stocks!"

3) Dems are then caught in the defensive on Soc. Sec., but the long-term trend, as an indirect result of Bush's Soc.Sec. policy, is that Soc.Sec, becomes a losing issues for the Dems, an anchor that drags them down.

So, it's a long-term policy to create Republicans that would work in steps. Rove is just laying the groundwork today for what he thinks would undermine Dem influence in the long-term. He may think that using a very big ax that takes a couple of decades to make its blow felt is the only way to do this.

Posted by: Swan | Feb 26, 2005 3:11:09 PM

You know, I've noticed that, generally speaking, you analyze liberal policy proposals based on the assumption that they'll work as intended, and more, that the people who oppose them expect them to work as intended, and oppose them out of a variety of evil motives.

Contrarywise, you analyze conservative policy proposals based on the assumption that they won't work, and further assume that the people who propose them share this assessment, and expect them to crash and burn. And so go searching for motives for their desiring this disaster.

This seems to be a rather foolish way to approach things. Sure, it's to be expected that liberals will expect liberal programs to work, and conservative programs to fail. But why do you expect conservatives to share these expectations?

You think you have a better understanding of human nature than Bush and company? Then why aren't you winning the elections?

Posted by: Brett Bellmore | Feb 26, 2005 3:16:48 PM

This, Matt, is wrong:

Let me start out with the quick observation that I think that while beating the Bush plan is obviously crucial for the short term fortunes of the Democratic Party, it's passage would be excellent for the Democrats over the long term.

because, for this to follow, you'd have to assume that the viability long-term success for the Dems did not depend on them winning this particular short-term battle. What I mean is that Dems may need to be perceived as having won a victory on this, regardless of any other consequences of defeating Bush's plan, in order for Dems to continue to get sustained support from the people.

But I think you realize this, and were just speaking a little imprecisely, because you also wrote this:

I think it's very, very, very important for you not to vote for the Bush plan even though it will probably help you down the road.

Just putting a little clarification on ya! :-)

Posted by: Swan | Feb 26, 2005 3:16:58 PM

Swan,
Petey posted a good explanation here just a few minutes ago.

Posted by: abb1 | Feb 26, 2005 3:20:29 PM

Brent: I don't think that's a fair characterization. Rather, I tend to embrace policy proposals that I think will work, and say bad things about policy proposals that I don't think will work. Perhaps it's fair to say that I use "liberal" and "conservative" in a slightly tendentious manner to mean "will work" and "won't work." I support various measures (a lot of the accountability/testing stuff in NCLB, the ASPIRE Act, shall-issue concealed carry permits) that enjoy some (or a lot of) support from conservatives. Obviously, I think these things will work, or else I wouldn't support them. Likewise, I'm dubious of various schemes put forward by people on the left that I regard as unworkable.

As to why Democrats lose elections, this is a subject I've written on pretty extensively. It's mostly unrelated to the popularity of their economic policy proposals, which tend to garner strong public support that's outweighed by dislike of Democratic cultural politics and massive uncertainty that Democrats can handle national security issues.

Posted by: Matthew Yglesias | Feb 26, 2005 3:24:58 PM

"Contrarywise, you analyze conservative policy proposals based on the assumption that they won't work, and further assume that the people who propose them share this assessment, and expect them to crash and burn."

On domestic policy, that seems a pretty accurate description of this administration.

Overseas, I think they're at least trying to do the right thing, even if I find much of it misguided. But domestically, they seem in the thrall of pure cynicism.

Posted by: Petey | Feb 26, 2005 3:27:34 PM

Matt, I think you misunderstand. The point isn't to make people into conservatives because they are stock owners. The point is to make people apathetic to negative about the prospect that the Federal Government can do much of anything at all to improve their social or economic condition. Social Security, as an extremely efficient and effective program, reminds people that the government is capable of SUCCESSFULLY addressing and SOLVING these kinds of problems. So when other problems come up, they might think, Gee, maybe the government can do something about that. This is the notion which conservatives wish to extinguish, and that's why they are against Social Security: not because they're worried it might stop working, but precisely because it DOES work.

Posted by: larry birnbaum | Feb 26, 2005 3:33:50 PM

Given tax-sheltered stock investments, a rational person would vote for a Democratic president. Tax-sheltered means that Republican tax breaks do me no good, and having a Democrat in office is correlated with better economic performance (both employment, and stock market). Perhaps that pattern will change in the future, but Bush has shown no signs of changing it yet.

Posted by: dr2chase | Feb 26, 2005 3:34:08 PM

"Contrarywise, you analyze conservative policy proposals based on the assumption that they won't work, and further assume that the people who propose them share this assessment, and expect them to crash and burn."

I know what you mean Brett. Matt's proposal to nationalize Microsoft and Intel and build a 30 foot high concrete wall around the country to prevent all foreign goods from entering probably wouldn't work out all that well in the end.

But seriously, Democrats - even liberal Democrats - for the most part embrace deregulation, freeish trade, are opposed to excess bureaucracy, and don't wish to see the American people (which includes themselves) soaked in taxes.

Liberals have become the pragmatists - the proverbial adults in the room - who look at ideas, weigh the evidence, the pros and cons, and judge each initiative on its merits. Liberals reject social security privatization not because we spend our nights jerking off to pictures of Frank and Eleanor, or dream of socialist utopia, but because it *has* been a successful program, and dismantling it will likely mean millions of poor and middle class people worse off in their retirement years. That is an immoral thing, but it is also an un-pragmatic thing.

Its the right who have become purists and zealots, supporting every conservative initiative because its ideologically correct to do so, and not because they have properly gauged the consequences of their favored policies. Nixon, Carter, Reagan, Bush, and Clinton enacted much of what was sensible about the conservative agenda, cutting taxes, regulation, bureaucracy, and increasing trade, but what's left now is largely the lunatic stuff.

Petey is right. On domestic policy, its all pandering and cynicism for Bush co.

Posted by: Robin the Hoodlum | Feb 26, 2005 3:48:10 PM

And on foreign policy they are idealists liberating the oppressed proletariat around the world. How can you be so silly, folks?

Posted by: abb1 | Feb 26, 2005 3:52:05 PM

I share Matt's doubts about whether an increase in the number of people that own stocks will lead to an increase in GOP voters. First of all, as one commenter stated above, liberal professionals with 401Ks aren't swarming to the GOP because of stock ownership. Also, it seems to me that increased stock ownership also increases the amount of people with a genuine interest in supporting a strong role for the SEC and other government agencies whose job is to police the markets. The Democrats would be wise to be seen as the party that supports small investors by making sure the markets are well-monitored and policed. Elliot Spitzer's work in NY state may provide an example for such an approach.

Posted by: mistermark | Feb 26, 2005 4:07:30 PM

You think you have a better understanding of human nature than Bush and company? Then why aren't you winning the elections?

People buy inferior products sometimes based just on advertising. People also vote against their own best interests all the time. Shocking, simply shocking.

Posted by: ScrewyRabbit | Feb 26, 2005 4:18:30 PM

I'm of two minds here. Maybe the war in Iraq isn't so bad on the theory that the botching will eventually lead to more liberals.

Then again, maybe privatizing Social Security will create more liberals in the long run when conservatives mismanage the economy into an eventual stock market crash that wipes out investments and pisses off a lot of people.

Posted by: Anthony | Feb 26, 2005 4:42:26 PM

"People buy inferior products sometimes based just on advertising. People also vote against their own best interests all the time. Shocking, simply shocking."

If an advertiser managed to sell crap, when an equally priced good product was on the market, I'd probably be very careful before I assumed that their long range plans for manupulating public opinion were going to fail miserably. Because they'd already shown some expertese at it.

That is to say, all else being equal, I'd bet on Karl Rove being just a bit better at predicting the electoral effects of SS privatization than Matt is.

Posted by: Brett Bellmore | Feb 26, 2005 4:53:11 PM

Very encouraging if true, and seems to be true.
The war and values issues drove the lower-middle-class vote for Kerry down to nearly parity with Bush's. Bush's social security and tax schemes, one may hope, will drive it back up for 2008's Democratic candidate.
It would help too to get health-care coverage up and running as an issue. Too bad the leading candidate can't do that because she botched it in 1993.

Posted by: Heartened | Feb 26, 2005 4:58:25 PM

"That is to say, all else being equal, I'd bet on Karl Rove being just a bit better at predicting the electoral effects of SS privatization than Matt is."

One problem is that sometimes Bush thinks he's grown a brain, and Rove then gets stuck trying to shill a defective political product.

Another problem is that even the great Rove may fall victim to hubris from time to time - see the pre-election trip to California in 2000 for one example.

Posted by: Petey | Feb 26, 2005 5:06:49 PM

That is to say, all else being equal, I'd bet on Karl Rove being just a bit better at predicting the electoral effects of SS privatization than Matt is.

That may be true, Brett, but I wouldn't assume that boosting the electorate is the most important factor for Rove on the issue of SS privatization. In other words, Rove is not advocating SS privatization in order to win votes (after all, they've demonstrated they have plenty of those), he's doing it in the interest of paying back GOP supporters (fund managers, wealthy corporatists, what have you). The electorate is just the means to the end, not the goal itself.

Posted by: ScrewyRabbit | Feb 26, 2005 5:09:38 PM

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