For Labor Unions, Social Security Is A Matter of Clout

Several companies this year have refused to be shamed by labor into dropping their support for Bush's private-account proposal because they back the larger goal of undermining the unions' pension-fund strategy. If they hang tough now against union pressure on Social Security, they figure that labor's sway in the future might be diminished on almost any issue.

Partisanship also plays a role. Corporate representatives say that part of their enthusiasm for the president's Social Security plan is their belief that support for him and the Republican Party on this top priority will be repaid with many pro-business measures down the road. For parallel reasons, labor is equally eager to help Democrats resist the president.

Companies have another, often-unstated motivation for liking Bush's approach: It offers their best chance to repair Social Security without resorting to a tax increase. Few things repulse an executive more than the prospect of having to pay the government an extra dime. So far at least, Bush has ducked any talk of increasing revenue to close the financial gap.

In addition, converting part of Washington's second-largest program into a system of private investments is a step toward dismantling the federal government as we know it. Many regulation-averse business people would heartily endorse that development and, in effect, are doing so by pushing so hard for the president's plan.

All of which is far afield from the debate that the public has been hearing so far. Then again, what matters in the capital isn't always what's said aloud.

Speaking of Staying Quiet . . .

This will seem hard to believe but some of the most basic pension reforms that were devised after the Enron Corp. bankruptcy four years ago still haven't become law. Now, one of the Senate's most powerful Republicans -- who is usually solidly pro-business -- is speaking out in protest and laying the delay at the doorstep of big-money lobbyists.

In 2001, thousands of Enron employees lost their nest eggs because they couldn't sell the Enron stock they owned (often to the exclusion of other stocks) in their company pension plans. Virtually everyone agreed at the time that the law needed to be revised to allow more ownership of other stocks in the plans.

Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, has championed a popular list of measures that would do just that. He would permit pension participants to diversify their retirement assets beyond company stock after three years, toughen advance-notice requirements about so-called blackout periods when company stock can't be traded by employees, and increase the portability of retirement assets from one job to the next.

But Grassley says his proposals have languished because of the prowess -- and daunting campaign contributions -- of the financial services industry. Wall Street's allies in Congress, he says, have blocked the proposals until the Senate also adopts a plan that would allow financial firms to give investment advice to people who invest in the funds that they manage. In other words, a financial company would be allowed to recommend which mutual funds, including its own, a person should invest in his 401(k) or IRA.

Grassley and many other senators have balked, asserting that the legislation would promote exactly the kind of conflict of interest that the Enron scandal made clear should be snuffed out.

"This small group of firms and their army of well-paid lobbyists seem more concerned with making money than preserving workers' nest eggs," Grassley said. "I agree we need to do more to get investment advice to [pension] plan participants, but changing the conflict-of-interest rules isn't the place to start."

I guess the dispute isn't quiet anymore.

Jeffrey Birnbaum writes about the intersection of government and business every other Monday. E-mail him atkstreetconfidential@washpost.com.