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Home Publications Blogs Beat the Press President Obama Gets Leading Proponent of Social Security Privatization and Bubble Economy to Tout Budget Deal

President Obama Gets Leading Proponent of Social Security Privatization and Bubble Economy to Tout Budget Deal

Saturday, 11 December 2010 09:18

That could have been the lead of a front page Washington Post news story reporting on a press conference in which former President Bill Clinton touted the budget deal that President Obama negotiated with the Republicans. Remarkably, President Clinton's record on these issues was never mentioned in the article.

As many former aides have acknowledged, President Clinton had been considering a variety of options for partially privatizing Social Security in the beginning of 1998 when the Lewinsky scandal exploded. With his presidency in jeopardy, Clinton had to rely on his core constituencies -- labor, the African American community, women's organizations -- all groups that would have been infuriated by an effort to privatize Social Security. As a result, Clinton was forced to abandon this effort.

President Clinton also set the economy on a path of bubble-led growth, touting the stock market bubble that drove growth in the late 90s. He also pushed for the financial de-regulation that helped clear the way for the abuses of the housing bubble era. In addition, he also actively promoted the high dollar policy that led to the enormous trade deficit, which was another major imbalance distorting the economy's growth path.

During his campaign, President Obama openly criticized this bubble-led growth path. Competent news reporters would have pointed out the irony that at this moment Obama now appears to be embracing the economic legacy he criticized. They also would have pointed out that Obama is relying on a Democratic president who was actively planning to privatize Social Security, ostensibly to curb fears that his deal could lead to the privatization of Social Security.

Comments (12)Add Comment
Clinton Awards Obama Lewinksy Medal of Compromise
written by izzatzo, December 11, 2010 10:29
In praising Obama's tax deal, Clinton also reminded the audience that the Lewinsky Medal of Compromise, originally awarded to Clinton for allowing Lewinksy to prevent SS privatization, was awarded this year to Obama for allowing Alan Simpson to save SS by slurring it as a milk cow with 310 million tits.

When asked if this was true, Obama wagged his finger at the camera and defiantly claimed that Simpson did not have oral relations with that cow's milk. Clinton agreed, pointing out that Obama had honed the art of compromise so well, like compromised interns, it's now acceptable for the President to cave completely on every major issue, so only accidents like Lewinsky and Simpson can save SS.
Would be helpful to include all the facts
written by eriposte, December 11, 2010 11:25

I am perfectly fine with criticism of President Clinton for what he did and for supporting President Obama’s horribly weak cave-in on the tax cuts, but I think we can do that without rewriting history.

First, Clinton argued that $2.7 trillion of the general fund surplus be used to shore up social security – in an era of Republican dominance. Second, the proposal was that 20% of this excess contribution from the general fund could be invested in the stock market – not all of it, and certainly not the funds from the baseline Social Security trust fund that is funded through payroll taxes. Your post makes it seem like Bill Clinton’s position back then was like George Bush’s and sorta like where Obama might be heading.

Here's EPI’s 1999 paper discussing Clinton’s proposal:

Or, read Clinton’s SOTU address from 1999:

Anyone who reads that speech could not possibly claim that Clinton was reckless and wanted to undermine America’s social safety programs – for all of his mistakes/faults in relying on Rubin and Summers, I would argue that the exact opposite was true.
written by diesel, December 11, 2010 11:54
The hyenas are fighting over the carcass.
Hitler parody video - Hitler as a CEO
written by tsouftsaf, December 11, 2010 12:27
Hi Dean,

My name is John and i am from Greece. I have been following your site for some time now - it's a great site!

I recently made a "Hitler Parody" video regarding the economic crisis, with Hitler as the CEO of a multinational corporation, and since thousands of people watched it in Greece, i decided to create another version of it with English subtitles, instead of Greek.

Maybe you will find it interesting:

written by skeptonomist, December 11, 2010 1:53
The influence of the economy on Presidential politics is pretty simple - if things are improving the President is popular and if they are getting worse he is unpopular. Beyond that, people don't want taxes on themselves to increase and they don't want programs they benefit from, or expect to benefit from, to be cut. The popularity criterion seems to apply to supposedly sophisticated media pundits as well as voters; positions on issue don't count for much. Things improved greatly while Clinton was President, so he was and remains popular. I suspect Obama understands this (while most liberal political bloggers apparently do not), and his use of Clinton probably means little with respect to Obama's real position on issues (if he has any).
written by Ron Alley, December 11, 2010 2:48

A good theorem.

Consider this corollary. If you are President job number one is to tend to the economy -- keep it humming and keep voters employed. And, if the circumstances are such that you can't do that, then make mountains out of molehills. Take more credit than is due for even the smallest of improvements and label your opponents job killers for defeating even the smallest initiatives.

OBTW here's the latest on Clinton's return to the White House:
written by urban legend, December 11, 2010 4:06
We should thank eriposte for his history correction above. In any case, we have a much better understanding today of the Social Security privatization issue, so even if many Democrats toyed with the idea then -- in the relatively early days of the "crisis," I'm inclined to give them a pass. But there's no excuse for Obama's agreement that threatens the system.
written by Scott ffolliott, December 11, 2010 11:00
Alternative to the Payroll Holiday
written by Patrick Tchou, December 12, 2010 6:14
An altenative to the payroll holiday that is suggested by President Obama that would not put risk to Social Security is to reduce the Income Tax rate for those under 106K income by 2% but increase the rate for income between 106k and 212K such that the tax cut would phase out with increasing income to the 212 level. This would put the burden on the income tax side and not SS, but would nevertheless stimulate the economy. That would also phase out this tax benefit for those with higher incomes. The current proposed payroll tax holiday would actually benefit those with high incomes just as much as those with low incomes! That does not make sense as a stimulus.
written by fuller schmidt, December 12, 2010 10:43
It's not quite that easy to make money in stocks, eriposte.
you must be kidding
written by bsmi021, December 14, 2010 1:22
I find it quite amusing that any politician at this time could even think about cutting or privatizing SS with the last and still living issue with the banking industry. It should be quite evident that if the SS system was totally private in 2008/2009 most people would be flat broke (with regards to retirement) as it would all be gone, look at the 401 conditions even now, my family is still over 20% less now then before the banking collapse. As bad as the politicians are at least there is some kind of guarantee of something at the end. Also i will put all of the feds money on this bet, that once the system would get privatized how ever runs it would STOP all disability in the system which will put alot more people on the streets with no housing.
written by Tom Dehen, December 23, 2010 9:39
Why not simply " pop the cap"? Afterall it is Social Security Insurance It is more fitting to compare SSI to insurance on a house not a trust fund or savings account. Also means testing, which Ross Perot suggested and was crucified for, is not a bad idea at all.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.