Why the 2005 Social Security Initiative Failed, and What it Means for the Future (2024)

Following his successful 2004 reelection campaign, President George W. Bush designated fundamental Social Security reform as his top domestic priority. This was anything but an impulsive decision. As early as his 1978 congressional race, he had suggested that the Social Security System could not be sustained unless individuals were allowed to invest the payroll tax themselves. Overriding the doubts of some political advisors, he raised the issue while announcing his first presidential race, declaring that “We should trust Americans by giving them the option of investing part of their Social Security contributions in private accounts.”

Toward the end of a first term dominated by international terrorism, President Bush renewed this call in his 2004 State of the Union address: “Younger workers should have the opportunity to build a nest egg by saving part of their Social Security taxes in a personal retirement account. We should make the Social Security system a source of ownership for the American people.” He mentioned the issue repeatedly during the 2004 campaign and was able to argue that his reelection represented a mandate to move forward on what he called personal accounts (and his adversaries called partial privatization).

Within days after the election, President Bush made it clear that he did not intend to play it safe on Social Security reform and other controversial issues. In a post-election press conference, he asserted, “I earned capital in this campaign, political capital, and now I intend to spend it.” He was as good as his word. By mid-January of 2005, the White House had launched a huge initiative, directed by Karl Rove and Ken Mehlman, to mobilize public opinion and build public support for Social Security reform and other key presidential proposals.

The President followed up two weeks later, placing a lengthy discussion of Social Security at the heart of his 2005 State of the Union address. After citing the fiscal and demographic pressures moving the system toward eventual bankruptcy, he listed some basic principles and then reached the nub of the matter: “As we fix Social Security, we also have the responsibility to make the system a better deal for younger workers. And the best way to reach that goal is through voluntary personal retirement accounts.” This approach, the President argued, would offer younger workers a “better deal”: The rate of return would be higher than in the traditional system; the accumulation could be passed on to children and grandchildren; and “best of all, the money in this account is yours, and the government can never take it away.”

Having invested so much political capital in this issue, President Bush embarked on the first of what proved to be a long series of tours crammed with events at which he pitched his plan to the people. It soon became apparent that it would be a tough sell. Within weeks, observers noticed that the more the President talked about Social Security, the more support for his plan declined. According to the Gallup organization, public disapproval of President Bush’s handling of Social Security rose by 16 points from 48 to 64 percent–between his State of the Union address and June.

By early summer the initiative was on life support, with congressional Democrats uniformly opposed and Republicans in disarray.After Hurricane Katrina inundated what remained of the President’s support, congressional leaders quietly pulled the plug. By October, even the President had to acknowledge that his effort had failed.