Thompson’s plan spooks GOP backers

Congressional supporters of Sen. Fred Thompson (R-Tenn.) are splitting with him over his proposal to curb the cost of Social Security by cutting projected benefits by as much as 25 percent over the next 33 years, according to the estimate of one conservative think tank.

The presidential candidate broached his proposal for limiting the cost of Social Security at a GOP presidential debate in Dearborn, Mich., earlier this month. Thompson reiterated his support for pegging benefits to inflation instead of wage growth, a policy that would create substantial savings because the price of goods and services grows more slowly than wages.

{mosads}At a speech Wednesday before the anti-tax group Club for Growth, Thompson called “indexing benefits to inflation instead of wages” a “common sense” idea and a “step in the right direction.”

Michael Tanner, the director of health and welfare studies at the Cato Institute, a fiscally conservative think tank, said that pegging Social Security benefits to inflation would preserve the program’s solvency. He also said it could lead to a dramatic cut in benefits.

“It’s substantial,” he said. “It’s about a 25-percent benefit cut by 2040. That by itself would restore Social Security to solvency.”

Most lawmakers who have endorsed Thompson, however, said they would not support cutting benefits so drastically, calling the move politically dangerous.

After laughing uproariously at a question about whether it is political risky to discuss cutting Social Security benefits, Rep. Dan Burton (R-Ind.), a Thompson supporter, said: “What do you think? Take a wild guess.”

“Social Security has always been known as the third rail in politics; you don’t touch it,” he added.

 Burton said he was skeptical about any proposal that could cut benefits by as much as 25 percent but said he didn’t want to comment on Thompson’s ideas until he studied a comprehensive plan.

Larry Lindsey, an economic adviser to Thompson’s campaign, disputed the Cato Institute’s calculation.

“There are many different benefit indexing formulas,” said Lindsey, who served as director of the National Economic Council under Bush. “The formula behind the Cato calculation is not the one Thompson is using.”

Lindsey said that workers retiring in 2040 would see their benefits cut by roughly 9 percent. Lindsey emphasized  that his estimate was approximate.

He also urged supporters and critics to wait until Thompson unveils a detailed plan for reforming Social Security in the next few days.

“You should wait until you see the whole plan,” said Lindsey. “There’s a personal savings component and a minimum benefit component…. The indexing change is one component of the Thompson plan.”

Thompson’s allies on the Hill said they admire his courage and honesty in telling voters that he would cut their benefits, an outcome that government actuaries say is probably unavoidable unless taxes are raised instead. But privately they’re scratching their heads as to whether grabbing the “third rail” of American politics is the wise choice from a purely political perspective.

Many lawmakers still remember the tactical mistake that Democratic presidential nominee Walter Mondale made in 1984 when he told voters that he would raise taxes to demonstrate his honesty.

“No I don’t,” said Rep. John Duncan Jr. (R-Tenn.), who has endorsed Thompson, when asked if he supports indexing Social Security benefits to inflation instead of wage growth. “I think there are other things we can do.”

In early 2005, President Bush proposed setting benefits to inflation when he submitted a plan for Social Security reform to Congress. But Bush’s plan hit a brick wall in the House.  

“I don’t think that it got very far. It wasn’t discussed very much,” said Duncan.

Despite the political risk, Duncan said, action needs to happen.

“At some point someone is going to have to do something; it can’t survive the way it is right now,” he said. “I hope it’s something voluntary and not crammed down people’s throats.”

Rep. Zach Wamp (R-Tenn.), who is leading efforts to recruit supporters for Thompson’s campaign in Congress, said cutting Social Security benefits is a broadly unpopular idea.

“Nobody in office wants to support a cut in benefits,” he said.  

Instead, Wamp suggested “means testing,” whereby Social Security payments are adjusted according to the wealth of beneficiaries after beneficiaries have received more from the program than they paid into it. As retired workers are living longer and longer because of medical advances, their benefits are beginning to exceed their contributions to Social Security.  

Rep. Thaddeus McCotter (R-Mich.), chairman of the House Republican Policy Committee, is another Thompson supporter who said he would not support restricting projected Social Security benefits to the growth of inflation.

But McCotter said he nevertheless supported Thompson’s attempt to tackle the growth of entitlement program spending.

“I support his willingness to take on the issue of entitlements,” he said. “As you know there’s been a dearth of that here [in Congress] so far.”

McCotter rejected a comparison between Thompson’s proposal to cut benefits and Mondale’s vow to raise taxes.

McCotter said Mondale’s statement on taxes did not doom his candidacy. He said the legacy of former President Jimmy Carter and the popularity of then President Ronald Reagan made it virtually impossible for Mondale to win in ’84.

Rep. Adam Putnam (R-Fla.), chairman of the House Republican Conference, was the only Thompson backer contacted by The Hill who endorsed linking benefits to inflation.

Putnam noted that he also supported Bush’s Social Security reform plan, which would have leashed the growth in benefits to inflation.

“[Thompson] is the only guy who talked about really solving the problem of Social Security but he made clear that it would not affect retirees or near-retirees,” said Putnam. “There will have to be changes to that system to guarantee that people our age have Social Security. It goes bust the year I’m eligible.”

Putnam is 33 years old.

Even so, Putnam acknowledged that discussion about reducing benefits posed risk on the campaign trail.