What Obama Needs to Learn from the Failure of Bush’s Social Security Plan and Clinton’s Healthcare Reform

obama_bush_clintonIn recent weeks, the president has joined his allies within and outside of government in launching a campaign to overhaul and reform the American health care system. It appears as if all the stars are lining up to ensure the President’s success – healthcare reform is in high demand, the president is popular, there are large Democratic majorities in Congress, and outside groups from across the political spectrum seem interested in reform. Yet the same claims could have been made about President Clinton’s health reform efforts in 1993, or President Bush’s Social Security reform efforts in 2005. Despite seemingly favorable situations, both of these big reforms failed; and so too could President Obama’s if he is not careful.

Although the features of Clinton’s health care reform and Bush’s Social Security reform were quite different, I believe they failed for the same reason: crowded politics. In both cases, the overwhelmingly number of groups and individuals interested in the issue created a paralysis, ultimately leading to the reform’s downfall.

Gone are the days when policy design was negotiated and controlled through small Iron Triangles consisting of the relevant executive agency, the congressional committees of jurisdiction, and at most a handful of interest groups. Since the 1970s, the number of associations has more than doubled, the number of lobbyists has quadrupled, and the number of think tanks has grown sixfold. Meanwhile, academics, politicians, and private citizens have become more interested and informed in a wider array of policy areas.

Many social scientists have noted that this growing number of actors could lead to policy stagnation. As early as 1979, Theodore Lowi warned that the permeation of interest groups intensified the status-quo bias in policy making. More recently, Jonathan Raunch has pointed to hyper-pluralism as a source of “Demosclerosis” – a disease of government in which interest “groups interact to produce collective stalemate

But insightful as they were, these authors failed to see the whole picture – pointing only to entrenched interests as a source of resistance. In reality, that paralysis is caused not only by interest groups, but also think tanks, experts, politicians, journalists, and government bodies; and not just by those defending current policies, but by disinterested experts and those on the side of reform as well.

The defenders of the status quo tend to coalesce, using their collective resources to educate, advocate, and lobby against a reform. Meanwhile, non-partisan think tanks, journalists, and government agencies provide detailed analyses which serve as fuel for opponents and a source of concern for many supporters. And as reform moves closer to becoming a reality, cleavages tend to form among those in favor of reform; some members drop out of the coalition and others try to push and pull policy design decisions to fit their own narrow interests or ideas.

Clinton’s Healthcare Fight
We saw crowded politics at its worst in the 1993 debate over healthcare reform. By this time, health politics had already transformed from an area controlled by a few politicians and interest groups representing labor, business, and the medical community to an issue every person and group wanted their hands on. As an illustration of this, the number of health care groups increased from around 100 to over 800 between 1979 and 1993.

Understanding this, President Clinton and his allies put together a large potential coalition of interest groups, think tanks, and politicians including single-payer supporting liberals, market-oriented moderates, budget hawks, labor groups, business groups, and even physician’s, hospitals, and insurance groups. The policy he thought could bring these groups together was termed “managed competition within a budget,” and involved universal coverage through private competing insurers with government subsidies and a cap on overall spending. According to Theda Skocpol, in early 1993, “national interest groups were falling all over themselves to signal public and private willingness to cooperate with the President.”

As the President began hammering out the details and pushing for reform, though, opponents mobilized against him. The Health Insurance Association of America, Coalition for Health Insurance Choices, American Medical Associate (AMA), and other interest groups lobbied the Congress and public in opposition of reform, spending $15 million on the now infamous “Harry and Louise” commercials. Meanwhile ideological resistance, especially from conservative think tanks like the Heritage Foundation, attacked the plan as an effort to undermine the market in favor of bloated and inefficient government.

Some of the more apolitical groups also created problems. Reports from the Congressional Budget Office, Lewin Group, and Urban Institute all suggested flaws in the president’s plan, or calculated that it would not achieve all of its goals in terms of deficit reduction, cost control, or coverage expansion. As Andrew Rich explained, “the commentary from think tanks, interest group, and elsewhere was useful precisely as ammunition in what became a highly politicized debate over health care reform …all of it contributed … to the ultimate demise of the reform effort.”

Even potential supporters of health reform stymied President Clinton’s efforts. Budget hawks and others concerned with cost held the president to his promise that his plan would reduce rather than increase the budget deficit. Yet insurance companies and physicians opposed cost controls, unions resisted limits to the so-called employer tax exclusion, employers rejected large “play-or-pay” taxes, the AARP criticized cuts in Medicare spending, populist liberals rejected the idea of middle-class tax increases, and moderates worried about too much departure from market principles; and each change to accommodate one group would infuriate another. On both ideological and interest grounds, groups and individuals continued to fight for or against particular provisions.

Some – supporters of single-payer health care, for example – ultimately knew they would support the president, but wanted to push his plan closer to their vision. Others – especially business groups and moderates – abandoned Clinton’s plan, generally supporting an alternative such as the more market-oriented proposal put forward by Congressman Cooper and the Conservative Democratic Forum.

Ultimately, as Skocpol explained, these groups and individuals “pushed and pulled in irreconcilable directions, as each group sought to bargain on behalf of its own constituencies. Multiple committees and ambitious politicians in Congress gave points of access for the full range of conflicting groups and positions … division only deepened over time.”

Bush’s Social Security Fight
But President Clinton wasn’t the only victim of crowded politics. In 2005, after winning reelection, President Bush declared that he had “earned capital in the campaign,” which he intended to spend on “reforming social security… [as the top domestic] priority of [his] administration” As with health care, Social Security policymaking had transformed from an area controlled almost entirely by the Social Security Administration, the Finance and Ways & Means Committees, and organized labor to one involving hundreds of interest groups, think tanks, politicians, and government agencies. In 2005, no one would have taken seriously Martha Derthick’s 1979 complaint that there was “not enough politics” in Social Security.

As President Clinton did with health care, however, supporters of Social Security reform had put together a broad coalition of groups and individuals supportive of shoring up Social Security’s finances and transforming it to include some type of private retirement account (so called “partial-privatization). Consisting mainly of libertarian and far-right think tanks in the 1980s, this coalition expanded to include business organizations, financial firms, budget hawks, supporters of asset-building, growth-oriented economists, moderate Democrats, and conservatives.

Yet when President Bush began to push for reform, he met considerable resistance. Supporters of traditional social insurance, including liberal think tanks, organized labor, and the old-age lobby, would not allow the president (according to the director of the Campaign for America’s Future) to “dismantle Social Security.” These groups presented research arguing against reform, lobbied members of Congress, sent out mailings to their members and lists, held forums around the country, and funded protests against privatization, spending tens of millions of dollars on television and print ads. They even had their own version of the “Harry and Louise” ads – a commercial accusing President Bush of using a metaphorical wrecking ball (privatization) to fix a leaky faucet (Social Security’s financial troubles).

And again, neutral groups added flame to the fire. The Social Security Administration put out analyses of specific plans proposed by Congress, providing opponents and the public hard information about the steep benefit cuts and significant borrowing being proposed to repair the system. Outside think tanks and researchers, meanwhile, shed light on a number of distributional issues often missed in the presentation of aggregate numbers. And many outside studies raised questions about some of the economic and fiscal claims made by partial-privatization and reform supporters.

As was the case with health care reform under Clinton, President Bush’s own allies also caused problems as cleavages began to form. Fundamental ideological questions began to emerge, as one of the original visionaries of the private accounts system, Peter Farrara, pulled away from the think tank which founded the privatization movement, claiming that the “Cato [Institute] wants to get rid of the entire Social Security system, and I don’t.” And many reform supporters trusted neither of the two.

Budget hawks, meanwhile, became increasingly concerned as they saw reform proposals which would vastly increase the deficits for many years, before doing anything to reduce them. Keeping their support required proposing steeper benefit cuts – which angered those who argued private accounts could present a “free lunch” (or at least a cheap one) – or tax increases – which were considered unacceptable to most conservative and anti-tax groups. Meanwhile, policy decisions to invest private accounts in index funds to minimize administrative costs took all the profit out of these accounts for financial firms, who subsequently left the coalition. And undue influence from the right caused moderates in both parties to be wary of supporting reform.

President Bush’s Social Security reform quickly joined Clinton’s health care reform as a victim of crowded politics, and the issue was dropped within a year.

Just because these two presidents failed, though, doesn’t mean President Obama will. Of course, big reforms do sometimes succeed. And we are currently in quite unusualpolitical and economic times where the combination of huge majorities, strong popular support, and a nation-wide crisis mentality may allow the president to achieve his goals.

But whether or not he succeeds, the president will have to confront the obstacles of crowded politics. We’re already seeing resistance to many of the policies proposed to finance health reform. It comes from charities, the mortgage industry, veterans groups, the sugar industry, defenders of Medicare Advantage, liberals, and of course conservatives. And debates are abounding over what to do with the tax exclusions for employer-provided health insurance, whether to mandate coverage, if there should be an optional public plan, and whether health reform must be fully paid for in the short-run. As proposals become more concrete, opposition and resistance will surely strengthen. They may not prevent the president from achieving his reform, but they could neuter it so as to undermine his goals of universal coverage and large health care cost reductions.

Ironically, Social Security reform might now be easier, as there has been some “de-crowding” in recent years. But whatever the policy, and whatever the time, this president and others will face a world of complexities – one where more information and more interest stifles or limits actions. Such is the nature of crowded politics, and the reality of our democracy.

Marc Goldwein

Mr. Goldwein is a Policy Analyst in Fiscal Policy at the New America Foundation and a graduate student at Johns Hopkins University.

Reprinted with permission from The History News Network.

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