I used to argue that Bill Clinton's great legacy would be the overhaul of the American welfare state. By that, I did not mean reducing spending for the poor (a tiny portion of the welfare state) but scaling back benefits for retirees--the true welfare state whose relentless growth needs to be restrained before baby boomers reach 65 early in the next century. Clinton seemed well suited for the task. He understood the problem; a Democrat--more easily than a Republican--could tinker with Social Security and Medicare; and his gift for language would enable him to persuade the public to support policies that might otherwise be unpopular. This would be, for Clinton, the equivalent of Nixon's going to China.
What made this seem so inevitable was that it would ensure Clinton's "place in history." In 10 or 15 years, the sheer number of new retirees will create such immense spending pressures that today's inaction would suggest--at least with hindsight--either incompetence or a willful abdication of responsibility. Clinton surely grasped this. Nor would he be able to defend himself in the future by claiming ignorance. The problems are well understood. Obsessed with his standing in history, he would act.
I was wrong. Clinton has moved the other way. He has proposed expanding retiree benefits (drug coverage for Medicare) and made it politically impossible to suggest any cutbacks--no matter how modest or distant. The present budget debate shows the consequences. Details are baffling, and the disputed amounts--in a $1.8 trillion budget--are small. But the essential conflict is clear. No one wants to be seen touching retirement benefits, including funds flowing into the Social Security trust fund. So all the pressure to cut spending or raise taxes falls on the rest of the budget--from defense to education. The Republicans claim to spare Social Security by an across-the-board spending cut. The Democrats accuse them of using gimmicks, but Clinton would pay for nonretirement programs by raising taxes (the cigarette tax).
This foreshadows things to come. As Clinton constantly repeats, the present ratio of workers to retirees of about 3 to 1 is projected to fall to about 2 to 1 by 2030. Because tax revenues come mainly from workers, paying present retirement benefits implies that (1) taxes must be raised; (2) other spending must drop; or (3) budget deficits will re-emerge. Even if benefits are cut slightly for individual retirees--through, say, higher eligibility ages and smaller payments for wealthier recipients--the total cost of retirement programs will rise because there will be so many more retirees.
An aging America poses basic questions. What is the purpose of government? Is it mainly a vehicle for workers to subsidize retirees? How justifiable are these subsidies if some retirees are wealthier than workers (this is already the case and in the future will increasingly become so)? Will retirement programs crowd out other important needs, starting with defense?
We are not asking these questions. No one is suggesting (at least I'm not) that Social Security be abolished or savagely shrunk. These programs have become a permanent part of the social fabric. But higher eligibility ages and lower benefits for wealthier retirees would acknowledge new social realities (longer life expectancy, improved health, private retirement saving). It's hard to imagine a more favorable moment for debate and change. The economy is booming. The president can't run for reelection. There's time to make gradual changes (with fair warning) before baby boomers start hitting 65, just after 2010.
But Clinton squandered the moment. Broadly speaking, he had two choices. He could present these issues as a matter of "generational justice." It's a question of parents being fair to their children. This would have opened the question of sharing burdens between workers and retirees. Or he could package the issues as "protecting the elderly." That's what he did. His slogans--"saving Social Security" and "saving Medicare"--signify preserving all present benefits. His mechanism for achieving this is to direct as much money as possible into the Social Security and Medicare trust funds.
So instead of debating personal and government responsibilities, we are haggling over trust funds. This understandably baffles the public, because it is a completely (and, one suspects, a consciously) deceptive exercise. Any "surplus" in these trust funds consists of U.S. Treasury securities. When the trust funds redeem these securities--to get money to pay retirement benefits--the Treasury can provide the money only if government does one of three things: cuts other programs, raises taxes or borrows. The trust funds don't erase the conflicts created by rising retirement spending.
One of the powers of the presidency is to set the terms and tone of public debate. It is the power of the "bully pulpit" to inform and educate the public. But the power can be used to miseducate, and that is what Clinton has done. His rhetoric has overwhelmed Republicans; they don't want to be seen threatening Social Security or any retirement benefits. Interestingly, Clinton seems to have duped much of the public (and the press, too) into believing that he's addressing future problems when he's avoiding them. Indeed, by postponing action, he's making the problems worse.
We know that the pressures of an aging society will gradually intensify. I had thought that Clinton's concern for his reputation would prompt him to do the right thing. But only Clinton knows what Clinton thinks. Perhaps he wants to be the poster boy for a selfish baby-boom generation. Perhaps he believes that Social Security and Medicare are issues that can hurt the Republicans next year. Perhaps he's deliberately trying to increase taxes and create a bigger central government. Perhaps he thinks that, even out of office, he can fool all of the people all of the time about what he didn't do.
Who knows? All that's clear is that the questions that Clinton has so deftly dodged will someday become more contentious and corrosive. History may then judge him harshly. It should.