Obama Steers Clear of Benefits Learning Curve

Aug. 17 (Bloomberg) -- President Barack Obama is making some costly mistakes. One example is calling his administration's Keynesian spending spree an economic recovery. An even bigger error is his refusal to climb the Social Security learning curve.

The president advertised that refusal while commemorating the 75th anniversary of the public pension program. "We have an obligation to keep that promise, to safeguard Social Security for our seniors, people with disabilities and all Americans --- today, tomorrow and forever," Obama said in his weekly address on the radio and Internet.

The Social Security learning curve is like a hill all federal politicians must learn to climb. Lawmakers who are just beginning to make their way up the curve tend to cling to political doctrine for dear life.

The Democratic doctrine requires doing everything possible to preserve Social Security in its current form. That includes using sentimental rhetoric to trumpet good news while obscuring any bad news, such as acknowledging that this year the vaunted program will pay out more than it takes in.

The Republican doctrine requires not lifting a finger to get in the way of Democrats' preservation effort.

Eventually, after studying the Social Security reforms crafted by the late Democratic Senator Daniel Patrick Moynihan and others, and making their way though demography charts, politicians in both parties recognize Social Security as the easiest entitlement program to reform.

Learning Curve

As they make their way up the curve, our leaders start working on bipartisan solutions to the program's demographic challenges. After yet more learning and cogitation, they get achingly close to seeing one of the many sensible reform ideas become law.

That moment tends to arrive at just about the same time they leave office, taking their insights with them.

That's what happened with President George W. Bush, who talked about plans for reforming Social Security, and even created a commission to review it, in his first term. The need for reform became clearer to him over time. His own actuaries warned that the program's deficits would exceed receipts while he was still young enough to mountain-bike.

In the days after his re-election, Bush was ready to spend political capital, as he put it, to reform the program. But he found himself forced to instead spend that capital on maintaining support for the war in Iraq. The legislation he roughed out never went anywhere.

Clinton's Turn

More poignant is the story of President Bill Clinton. Like Bush after him, Clinton more or less blew off Social Security during his first term. But soon after being re-elected, he phoned the lawmaker charged with overseeing any such reform, Bill Archer, then chairman of the House Ways and Means Committee.

Archer says he was decorating his Christmas tree when the phone rang. "Rush Limbaugh was on the radio, and we had to turn it down," Archer recalls.

Archer's reform plan called for allowing Americans to get a refundable tax credit that flowed into private accounts. Upon retiring, people could take either the private-plan money, or the traditional Social Security payment, whichever was higher.

The Archer plan was modeled on a successful Chilean plan. Clinton liked this idea, according to Archer, and the two men held many discussions on the topic.

Then came the Monica Lewinsky scandal. Clinton needed union support to survive impeachment efforts, and unions didn't support Archer's Social Security plan. There wasn't even sufficient support for it among conservatives. They made the good the enemy of the best and failed to support the Archer plan, preferring purer proposals for wholesale privatization.

Obama's Mindset

What about Obama? If he climbs the learning curve at the rate of his predecessors, and if he wins re-election, it'll be Christmas 2012 when he has his epiphany. Yet the president's words over the weekend signal he may be nowhere near beginning to climb. He talks like he's still campaigning. That suggests he may not even get as far as Bush or Clinton.

What's disconcerting here is that rather than start to ascend this curve, Obama acts like there's nothing more he needs to learn about Social Security. This world-is-flat executive is the price we pay for electing as president someone who hasn't thought much about either the economy or entitlement reform. This failing matters because the politician who can't engage on reforming Social Security, an elementary task, can't even begin to attack the advanced steep-grade challenges that Medicare and Medicaid represent.

Social Security reformers can't haul Moynihan back from his grave. And President Clinton has used up the allowable number of terms in office. So when it comes to presidential contenders, Americans of either party should seek out the geekiest candidate with the geekiest advisers. On this hill it is the geeks who stand the best chance of getting us all to the top.

(Amity Shlaes, senior fellow in economic history at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.)

© Copyright 2010 Bloomberg

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To contact the writer of this column: Amity Shlaes at amityshlaes@hotmail.com

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net