Probably. Today's NY Times editorializes thusly:
Rather than accept defeat and consider alternatives, Mr. Bush is becoming even more feckless as public and political opposition mounts. On Tuesday, in a lame ploy to draw the Democrats to the table, he gave tepid approval to a proposal by Robert Bennett, the stalwart conservative senator from Utah, to restore the system's solvency in a way that would not include private accounts - all the while saying that he was not prepared to give up private accounts.
Let me interject to say that I too thought that the "tepid approval" of Bennett's plan together with the continued push for private accounts was weird to say the least. I wonder what Mr. Bennett makes of it.
Mr. Bennett's plan includes drastic and unnecessarily large cuts in Social Security benefits, but at least he is being straightforward in offering a plan that addresses the real problem Americans want solved. A group of four Republican representatives have meanwhile offered a proposal that would, in effect, abandon efforts to restore solvency in order to resuscitate those doomed, unwanted, unwise private accounts.
Enough is enough. Mr. Bush must either put forth a complete plan - including details of the risks, benefit cuts and borrowing costs that privatization would entail - or abandon his quest. Anything other than that is wasting his own and, by extension, the American people's time.
It's getting harder and harder for me to imagine a world in which private accounts become part of Social Security before the end of this presidential term of office. If you've been following the blog for a while, you know that I've been supportive of the general idea of private accounts (see here, for example) but not at all bashful about criticizing various proposals that have been floated (see here and here, for example). As the discussion evolved, I came to see Social Security as a very good income insurance program and a lousy retirement investment. The real questions are how much income insurance is optimal and how progressive it should be. I became frustrated with the notion of "rate of return" as applied to Social Security (see the comments to this post). To the extent that Social Security is insurance, the term "rate of return" is awkward to say the least. Because Social Security is partly (mostly?) insurance, any calculated rate of return to the average participant is sure to be dominated by the return to TIPS--probably even dominated by the return on passbook savings accounts. So many people would be better off with private accounts, but if that comes at the expense of the social insurance, it's not an unambigously good thing.
All the while, President Bush kept talking about IOUs and file cabinets. In fact, he did it again on Wednesday. Ugh. It's like the movie Groundhog Day. Same thing over and over again. Even for a supporter of private accounts it's getting old.
And it's not working. Republicans are distancing themselves from private accounts (e.g. Bennett). The polls don't look good for private accounts. Midterm elections will be coming up quickly before anything can get passed. Even Andrew Samwick is losing hope. After testifying before Congress, he notes,
It is not clear that we accomplished much through this hearing. I got no indication from the Representatives that they would be looking to get a bipartisan bill through their Committee. I hope that I'm wrong.
I'm afraid he's probably right.
A few years ago (2001 to be exact), I put the number 2008 on the whiteboard in my office. When people asked about it, I said that's the next time that Social Security reform will be seriously debated. At the start of this year, I feared that I would turn out to be wrong. Well, I was wrong if you're talking about the blogosphere, but if we're talking about any serious chance of anything really happening in the halls of congress I still have a chance. It will only happen if a Democratic candidate engages by endorsing something like Brad DeLong's idea, (not Al Gore's "lockbox").
Not that I would mind having either or both candidates in 2008 touting some version of a plan to increase national (and personal) savings. I think private accounts, if done right, would work. But it is nearly impossible to imagine a world in which politicians could come together to do it right. The last 6 months have been very discouraging in that regard. Doing it right means phasing in private accounts (and the carve-outs) very slowly with younger workers. Since younger workers don't vote in large numbers, what appears to me to be the sensible way to do it economically ends up being political suicide.
It is with much disappointment that I say this. I have lost hope that a Social Security reform plan that is anything close to optimal will be politically acceptable, and I won't throw my support behind plans that are flawed. If that means no private accounts because the demographic who would benefit from them doesn't vote, then so be it. It's a miserable conclusion if there ever was one, but I fear it is so. Time to look for a second best solution for 2008. Enterprising Republicans and Democrats seeking the White House should get to work on it now.
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