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.