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He’s Back!

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In a city where survival is the supreme value, few prominent politicians who have failed have been as resilient as Newt Gingrich. Having led the Republicans to power in the House in 1994 he had to resign as Speaker, and left Congress, after the 1998 elections; his overzealousness in pursuing the impeachment of Bill Clinton was seen as having cost the Republicans five seats. By that time, the formerly much-feared Speaker of the House was widely seen as a joke.

Since his humiliating dismissal, Gingrich has, through sheer cleverness and brashness, once again thrust himself onto the Washington stage. He is more visible now than anyone would have dreamed possible when he left Congress. He serves on a Pentagon advisory board and talks with Dick Cheney and Donald Rumsfeld; and he has influential allies such as Grover Norquist, the leader of a coalition of about a hundred conservative groups advocating a reduced federal government. He has support from powerful business executives and is highly popular with the activist conservative base of the party.

It’s not that Gingrich ever went away. After he left Congress, he opened his own consulting firm, from which he dispensed expensive thoughts to businesspeople and made highly paid speeches. He was given an office at the American Enterprise Institute, and before long, he was appearing once again on talk shows. Gingrich knows that talk-show guests are often invited mostly for the attention they get for their controversial statements, and he doesn’t disappoint.

Now Gingrich has published a new book, Winning the Future: A 21st Century Contract with America, and has let it be known in interviews that he may well run for president in 2008. Preposterous as this may seem, he understands that if he says he is a candidate this will get him more attention and sell more books. In fact, some of his friends think he’s serious about running. His first “Contract with America” provided the platform on which Republicans successfully ran for the House in 1994. Among its ten items were demands for a constitutional amendment requiring a balanced budget, tougher sentences for crimes, welfare reform, tax cuts, increased defense spending, and a rollback of regulations on business. But the Contract with America was less important as an instrument of the Republican victory than as a program for the party, which had been out of power in Congress for forty years.

At least as important for the Republican victory in the 1994 election were not only the missteps of the first two years of the Clinton administration, among them Hillary Clinton’s health care bill, but Gingrich’s own canny assembling of a coalition of interest groups, including gun owners and the Christian right, as well as his attacks on House Democrats for arrogance and corruption as he made the election for the House a national one.

As a legislative program the contract was only partially successful—in the end, according to the nonpartisan National Journal, about a third of it was enacted into law, a third was passed in watered-down form, and a third failed. The three items enacted by the new Republican Congress were relatively minor, including, for example, limits on “unfunded mandates” in which Congress directs state and local governments to act in such matters as reducing pollution, but doesn’t provide the funds to accomplish them. Congress later passed welfare reform, tougher crime laws, higher defense spending, and tax cuts. Some of Gingrich’s proposals, such as term limits for members of Congress, failed, as did the balanced-budget constitutional amendment; but Gingrich and his supporters forced Clinton to submit a balanced budget. It remains unclear whether some of the measures passed because they were in the contract or whether they would have passed anyway because they reflected ideas circulating among Republicans, some of them originating with President Reagan, some with a small band of right-wing House members, including Jack Kemp, who called themselves the Conservative Opportunity Society.

Major Garrett, a Fox News reporter, in his new book about the origins and successes and failures of the Contract with America, writes of how some of its provisions, in particular those on political reform and fiscal responsibility, were designed to attract Ross Perot’s followers back to the Republican Party. Garrett traces George W. Bush’s support of the missile defense program back to Gingrich’s campaign for the contract, though it was never specified in the contract itself; and it has its own powerful constituency among defense hawks and contractors who stand to benefit from it. (The administration’s efforts to develop a missile system continue, but the missiles keep flunking their tests.)

In the mid-1990s, many conservatives wanted to abolish the Department of Education. Now a good many of them, including Garrett, are upset about Bush’s No Child Left Behind law, which required the states to set standards and test how children were meeting them, in exchange for more federal funds. When Gingrich forced the government to shut down in a struggle with Clinton over the budget, most commentators—and many Republicans—felt Clinton had come out best, but Garrett argues that Gingrich won because he succeeded in forcing Clinton to make budget cuts.

Throughout the analysis of the successes of the contract, in The Republican Revolution Ten Years Later: Smaller Government or Business as Usual?, a collection of essays published recently by the very conservative Cato Institute, runs the lament that congressional Republicans have given up their belief in limited government and are increasing federal spending and power, whether in farm subsidies, the prescription drug program enacted in 2003, increased regulation of telecommunications, new federal crime laws, or international peacekeeping. Former House Majority Leader Dick Armey reflects a current strain within the Republican Party when he writes in the Cato book of his unhappiness with the push for a more interventionist foreign policy by the neocons in the Bush administration.

Just about the only thing the Cato authors are happy about is welfare reform. Like Garrett, they deplore the increased federal involvement in education. But they all credit Gingrich with forcing Clinton to adopt such major policy changes as ending welfare as an entitlement program as well as requiring a balanced budget—which Bush has since made obsolete. Though Clinton had pledged to “end welfare as we know it,” he originally wanted only to limit the time people could stay on welfare, not to end it as a federal entitlement program. In 1996 he agreed to accept the Republican Congress’s bill only after bitter debate within the administration. As a result of the new law, while many people went to work, millions have been thrown off the welfare rolls. Conservatives see this as a triumph. By putting forth another “contract,” Gingrich is trying to present himself again as a man of ideas. In doing so, he has revealed the hand of the Republican right on Social Security in a way that could do harm to Bush’s favorite proposal.

In the chapter “Social Security Prosperity,” Gingrich gives the game away. Though Bush talks of his desire to set up private savings accounts as “partial privatization” of Social Security—a limited program allowing workers to put part of their Social Security payments into private accounts—Gingrich makes it clear that some influential conservatives want to completely privatize Social Security. He speaks of the supposed benefits of “shifting fundamentally all Social Security retirement benefits to the personal accounts over the long run.” Among those who share this goal are Grover Norquist and some members of conservative think tanks, in particular the Cato Institute, which has long been arguing for privatization.

For now, Gingrich backs a plan for private accounts more ambitious than anything the administration has proposed. While Bush’s plan would set aside 4 percent, or about a third of the income subject to Social Security taxes, for private accounts, Gingrich supports a proposal, already introduced in Congress, which would divert 6 percent, amounting to half of Social Security taxes, into such accounts. This bill is also backed by about thirty House Republicans. Since the goal of conservatives who share Gingrich’s views is to end the present Social Security system, it’s safe to assume that even if private accounts were begun on a limited basis, conservatives would come back with proposals to expand them over the years.

Though the President originally suggested that his proposal for private accounts would alleviate the predicted shortfall in Social Security funds, which is believed by varying actuaries to be likely to occur in 2042 or 2052, legislators quickly realized that establishing personal accounts would only make the problem worse by reducing the Social Security funds available for benefits. Even the White House has now admitted that the accounts don’t solve the problem of the shortfall, although Bush continues to imply that his proposal would fix it. Moreover, Bush’s proposal would force the government to borrow an estimated additional $2 trillion over ten years and $4.5 trillion in the following decade.

The expected shortfall could be made up by a modest increase in Social Security taxes and reduction of benefits. But Bush continues to argue, against the facts, that the Social Security system will be “bankrupt” in 2042 or 2052. Such scare tactics by those who want to change the Social Security system, the most successful federal program the US has ever had, have reinforced the unjustified fears of large numbers of younger people—as indicated in various polls—that their benefits won’t be there when they retire.

Neither Bush nor Gingrich has been willing to admit that private accounts have their own risks—the markets can’t be expected to consistently produce higher returns than the Social Security system does, and financial markets have higher administrative costs than the Social Security system does, as Paul Krugman has shown.1 Moreover, Gingrich and other supporters of private accounts make exaggerated claims of the economic growth that would result from the diversion of money into private savings accounts. (Gingrich’s claims for the bill he backs are particularly wild.)

Bush and other backers of privatization are overselling the idea as enabling workers to “own and manage their own assets.” But to minimize risk, the types of investments that could be made would be strictly limited—though Norquist says that these restrictions would likely be loosened over time. And once a worker retires, he or she doesn’t “own” the private account; instead he must purchase an annuity for much of the account in order to spread out the monthly payments of funds put into the account.

Social security benefits would be reduced for those who set up private accounts, and, in addition, the money put into a private account would be treated as a loan, for which workers would have to pay 3 percent interest upon retirement, thus enabling them to keep only the difference between the 3 percent and what the account earned in the markets—hardly as desirable a deal as Bush suggests. Thinking that the money in a private account is theirs, people may want to with-draw it early to meet, say, a medical or other emergency, but they would not be permitted to do so. The account, however, could be passed on to heirs, whereas Social Security payments cannot, but the heirs’ Social Security benefits would be reduced.

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    See “America’s Senior Moment,” The New York Review, March 10, 2005.

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