Reform with Results

He’s obsessed with advancing Social Security reform by negotiating a deal with Democrats. At the same time, he seems indifferent to promoting the one health care reform already positioned to make a big difference: health savings accounts. Thus Bush talked up a bipartisan compromise on Social Security last week in an interview with the Washington Post and in a year-end White House press conference. He broached the subject of HSAs only at the tail end of a signing ceremony for the Tax Relief and Health Care Act of 2006.

Social Security reform, a favorite issue of Bush’s since he ran for the House in the late 1970s, is a trap, in terms of both policy and politics. Bush cannot get what he wants–and what the country needs–in any deal with congressional Democrats. The inevitable “compromise” would be two-pronged: a whopping tax increase and substantial benefit cuts for the middle class and the wealthy. Such compromise is a political loser for Republicans. Worse, it would not include any reforms, such as the creation of personal investment accounts. And like the similar Social Security “solution” in 1983, which was supposed to assure solvency for 75 years, it would promise vastly more than it would deliver.

On the other hand, HSAs, even in their embryonic stage (3.6 million people are now using them), represent real reform. They consist of tax-deductible funds, to pay for doctor’s visits and everyday health needs like prescription drugs, and insurance to cover catastrophic illness. They provide the key elements of serious health care reform. With consumers in control of how, when, and where they spend their health care dollars, HSAs inject market forces into the medical system that are bound to restrain costs. And they provide families with security against having their savings wiped out by the costs of addressing prolonged or devastating health problems.

For the president’s purposes, HSAs have another advantage. To extend their use, Bush doesn’t need the approval of Democrats, most of whom oppose HSAs. Legislation passed in the lame duck session of Congress made it easier for companies and individuals to sign up. All that’s required of the president is to mount the bully pulpit to spread the good word about HSAs and promote their use. Bush sees himself as a reformer. This is where he could be one.

If further health care reform–in Medicare, say–were possible in 2007, Bush might be excused for not making HSAs a top priority. But Democrats not only oppose reform–period!–they now have the clout to block any and all reform measures. They are reactionaries. And this applies to Social Security as well. Their interest is in preserving the system in amber, as if life expectancy, the ratio of retirees to workers, and the tax bite on American families haven’t changed since the 1930s. So any deal that meets the guidelines for reform that Bush boldly laid out in 2005 is a nonstarter for Democrats.

Bush has already made one mistake. He declared that all issues are on the table, without insisting that Democrats do the same. And word has trickled out of the White House that Bush is reluctant but willing to accept a deal without personal investment accounts, the sine qua non of reforms. The result: A tax hike is on the table, but personal investment accounts, in effect, are off. The press and indeed most of the political community in Washington now expect a Social Security agreement to be a mixture of a tax increase, which Democrats crave, and a benefit cut, which Bush and Republicans are supposed to favor.

By accepting such a deal, the president may imagine he’ll at long last be proclaimed a uniter, not a divider. But it won’t happen. He’ll divide his own party. Most Republicans don’t want a tax hike (or, for that matter, a benefit cut). They want reform. This is particularly true of conservatives. Were Bush to approve a substantial tax increase without any compensating reform, he would sever his last solid link with conservatives. And who could blame them?

–Fred Barnes, for the Editors