WWTOD: What Would Tip O'Neill Do?

What would legendary House Speaker Thomas “Tip” O’Neill (D-MA) do, if he were here right now? That seems like an important question to ask now that President Obama has invoked the 1983 Reagan-O’Neill deal on Social Security as a model of responsible, bipartisan “entitlement” reform. But in order to understand what O’Neill would do, we need to accurately recall exactly what he did and the circumstances in which he did it. A closer look at the history reveals that President Obama has a lot to learn if he is to live up to O’Neill’s legacy.

In calling up the ghosts of the Reagan-O’Neill deal in his press conference [1] on the budget, the President’s message was two-fold: First, both sides will have to make concessions to “reform” entitlements, just as Tip O’Neill did with Reagan in 1983. Second, by engaging Republicans I, President Obama, am merely following in the footsteps of Tip O’Neill, a venerated Democratic luminary.

Let’s begin by assessing the claim implicit in the first part of the President’s message: That the imperatives and conditions for reforming Social Security are as strong now as they were in 1983.

An honest interpretation of the facts shows this to be a false analogy. Neither the imperatives, nor the conditions for Social Security reform in 2011 are what they were in 1983.

Here’s what I mean:
• Saving Social Security may have required compromise in 1983, but that is no longer true. Back in 1983, Social Security was facing an immediate financial shortfall in which it would be unable to pay full benefits in a matter of months. Democrats had no choice but to deal with the problem right away, so the impetus to compromise was much greater. In fact, the cuts and revenue increases implemented then—including a delayed COLA, retirement age increase, and taxation of benefits—are responsible for Social Security’s current surplus of $2.6 trillion.

• Bob Ball, the brains behind the ’83 compromise, argued that benefit cuts would be unnecessary and irresponsible in the next round of reform. “It’s the essence of responsibility to insist on no benefit cuts,” Ball wrote in a 2007 op-ed [2] in the Washington Post. “What was right in 1983—a balanced package of benefit cuts and tax increases as part, roughly half, of the final agreement—would be wrong today.” Ball goes on to explain that present Social Security benefits are too modest, specifically because they are already being cut as the ’83 retirement age increase takes effect, and deductions for Medicare premiums continue to rise.

• Even the ’83 compromise was too weighted toward benefit cuts. In the Greenspan Commission’s final recommendations to Congress it offered a choice between raising the payroll tax rate and raising the retirement age as the final measure that would put Social Security in long-term actuarial balance. Congress opted to raise the retirement age, thereby shifting the make-up of the legislation to two-thirds benefit cuts and one-third revenue increases—hardly even-handed in its effects.

• The ’82 Greenspan Commission was a stronger and more balanced framework for dealing with Social Security than today’s Fiscal Commission.
o The Greenspan Commission enjoyed the confidence of both parties. This was in large part because it narrowly focused on the immediate problem of saving Social Security, it agreed on preserving the program’s fundamental structure, it included a diverse sampling of party representatives and stakeholders from the labor and business communities, and it was staffed exclusively by Social Security experts like Robert J. Myers, chief actuary of Social Security from 1947 to 1970, and Robert M. Ball (aka Bob), who served as Social Security Commissioner from 1962 to 1973 and is considered the figure most central to the development and protection of Social Security over the course of six decades.
o By contrast, President Obama’s Fiscal Commission enjoys no such confidence. The Commission’s broad mandate for deficit reduction undermined its ability to address the peculiarities of Social Security, a program that has not contributed one penny to the deficit. In addition, the Commission’s make-up was bipartisan only in the most cosmetic sense: its Democratic members were disproportionately fiscally hawkish, and many of its Republican members were avowed proponents of privatization. The Commission’s staff contained few if any experienced Social Security experts, and minorities and the labor movement were severely underrepresented among the Commission’s members.

As for the second claim, it can hardly be said that President Obama’s overtures to the GOP are consistent with O’Neill’s cautious brand of bipartisanship. Thus far, President Obama’s behavior has been more like that of Reagan, who got played, than O’Neill, who did the playing.

But it’s not too late for President Obama to change his approach. He can still throw the Bowles-Simpson recommendations in the garbage, speak passionately about Social Security and its recipients, and restart the debate with Republicans on his own terms. In short, the President can channel his inner Tip O’Neill.

If O’Neill were here today, here’s what he’d do.
• Make the GOP go first. President Reagan made the colossal blunder of being the first to propose changes to Social Security. Reagan’s Budget Director David Stockman recommended $2.5 billion in Social Security cuts as part of the omnibus budget in 1981. The most egregious cut was a provision that would reduce benefits at age 62 from 80 percent of full benefits at age 65, to just 55 percent. Democrats wasted no time attacking it and from then on, they more or less controlled the debate.

• Separate Social Security from the rest of the budget. O’Neill knew that unlike the rest of the budget, the American people feel a deep sense of personal ownership for Social Security, because they earn their benefits with lifelong contributions from their wages. The key weakness in Stockman’s initial Social Security proposal was that it lumped Social Security in with the regular budget, literally using funds designated to Social Security for other purposes. Exploiting this flaw, O’Neill immediately focused the debate on how cuts would betray the program’s promise to the American people. He called a press conference right away, telling reporters, “For the first time since 1935 people would suffer because they trusted in the Social Security system. I’m not talking about politics. I’m talking about decency.” Obama can still do this in the context of a larger deficit reduction deal if he insists that each component be dealt with individually.

• Make Social Security a moral issue. O’Neill called Social Security a matter of “decency,” and regularly denounced Republican attempts to harm the program as “rotten” and “despicable.” President Obama’s language on Social Security has been tepid up to this point, focusing generically on “strengthening” the program for future generations. Obama should at least speak passionately against those who would cut Social Security it after the devastation the recent financial crisis wrought on Americans’ retirement savings.

• Negotiate from a position of strength. Because O’Neill led a massive public relations campaign against Reagan for sticking it to seniors, he was able to bring Reagan to his knees before talks even started. As a result, O’Neill got to call the shots. Reagan abandoned Stockman’s proposal, and instead created the Greenspan Commission, over which the Democrats would have much greater sway. Even at the end, when the bipartisan legislation was signed, O’Neill turned down Reagan’s overtures for a joint press conference and did one on his own, so as to deny Reagan the credit of seeming bipartisan. Obama, by contrast, has already submitted to GOP pressure by creating the lopsided, deficit-focused Fiscal Commission, and expressing his willingness to put “everything” on the table.

• Start by demanding more than what you’d ultimately settle for. O’Neill and his surrogates on the Greenspan Commission began by adamantly opposing cuts, and repeating their opposition publicly as often as possible. In reality, they were willing to make small sacrifices, but they knew the final concessions would be greater if they agreed to cuts right away. Obama has considered offering cuts just as a way of getting Republicans to come to the table. Now he says he won’t “slash” Social Security benefits for future retirees. He needs to decide what he wants his end point to be. O’Neill might tell him that if the President does not want any cuts, he should start by demanding that Republicans increase benefits.