Privatization Implosion — Who suffers most politically?

It’s been a pretty bad week for proponents of Social Security privatization. Everything that could go wrong did — and then some.

The Senate GOP wants to put off privatization indefinitely, and the House GOP refuses to put their necks out unless the Senate moves first. The polls look bad for Bush, and are getting worse, not better. Perhaps most importantly, the White House is backpedaling furiously, announcing its openness to a payroll tax increase, coupled by Treasury Secretary John Snow’s desperate-sounding announcement that Bush might be willing to give up on creating private accounts from payroll taxes — the centerpiece of the entire White House approach — altogether.

It’s way too soon to say this fight’s over, but those of us who like Social Security have reason to be optimistic. At this point, we’re winning.

So, who’s going to suffer politically for this debacle? Noam Scheiber had some terrific thoughts on the subject yesterday that I’d like to follow up on.

First is the question of whether congressional Republicans will take a major hit as a result of this implosion. The LA Times’ Ron Brownstein said conservatives might be “less interested in striking a deal than provoking a stalemate they can use as an issue in the 2006 and 2008 elections.”

The GOP’s right-wing base is radical, but they’re not stupid. They can’t use the “stalemate” issue in the midterms if the public doesn’t like privatization in the first place. What are Republican candidates going to say, “Vote against the Dems … because they refused to go along with a plan that everyone hates”? Doesn’t seem likely. Besides, as Scheiber noted, Republicans won’t want to bring up the issue anyway.

That said, it’s hard to see how Republican candidates suffer either. The public isn’t clamoring for congressional action on privatization and most GOP lawmakers haven’t expressed any interest in seeing this on the national agenda. If this mess disappears, congressional Republicans will be relieved, not reviled. In other words, it’s hard to blame House and Senate Republicans for the White House’s debacle.

Which leads us to Bush’s political fate.

If anyone suffers politically, it’s obviously the president — he put the issue on the table, he made it the centerpiece of his domestic policy agenda, and he screwed it up miserably. Bush picked the biggest public policy fight of the decade … and suffered (or, at least, is suffering) an embarrassing defeat.

That’s great, but Bush isn’t running for anything ever again. What are the consequences? I think Scheiber gets this just right.

The real impact here, I think, is psychological. If privatization fails — particularly so early on — both congressional Democrats and congressional Republicans will realize Bush is no longer invulnerable. Republicans members of Congress will stop snapping to attention when the White House calls. Democrats will feel emboldened to oppose the administration on any number of other initiatives. Suddenly the whole dynamic of congressional debates changes. One obvious place to look for this is any tax reform push down the line. Another is judicial confirmations — though the Democrats risk over-reaching here if they get too cocky. In general, I’d expect pretty much everything you normally associate with lame-duckness, only much, much sooner.

Exactly. Bush has enjoyed the highs of invulnerability, getting virtually everything he’s ever asked for. He’ll soon be suffering from lameduck status anyway, but if Social Security implodes, as it seems to be, it’ll be his power and influence that wanes. It’ll be the kind of defeat that reverberates throughout his second term.