Can Clinton Do A Nixon?

IT MAY BE THAT SOCIAL SECURITY AND MEDICARE ARE TO Bill Clinton what China was to Richard Nixon: a chance to make a policy reversal that will be blessed by history. The analogy with Nixon is apt, because the political taboos that once applied to China now apply to Social Security and Medicare. Before Nixon visited Beijing in 1972, no one (least of all Democrats) could suggest talking to the Chinese without being branded a commie stooge. The old taboos vanished when Nixon, a rabid anti-communist, dined with Mao Zedong. People might still disagree on China, but at least there could be open debate. Disputes could be acknowledged and discussed.

The question about Clinton--one that will shadow his second term--is whether he can similarly alter the debate on "middle-class entitlements." The subject is now essentially off-limits for working politicians. Anyone who suggests curbs on Medicare or Social Security is cast as an ogre who would starve the elderly and strip them of health care. Until the threat of political annihilation lifts, no sane debate is possible. Even our political labels discourage informed discussion. The bland term "middle-class entitlements" obscures the central issue: how much should society, through government, support older Americans?

Almost everyone knows the pressures--the aging of the baby boomers, increasing life expectancy, high health costs--that will ultimately make that question unavoidable. In 1990, there were nearly five working-age Americans between 20 and 64 for everyone 65 or older; by 2030, that ratio is projected to drop to 3 to 1. Life expectancy has risen from 71 years in 1970 to 76 in 1994 and is expected to reach 78 in 2010. The Congressional Budget Office estimates that spending on today's Medicare and Social Security programs could require a 50 percent tax increase ($700 billion in today's dollars) by 2030--or budget deficits would mushroom. Different economic and population assumptions affect the estimates, but they are huge by any measure.

Politically, this is the irresistible force (demographics) meet- ing the immovable object (entitlements). Sooner or later, the immovable object will give; Social Security and Medicare will be modified to avoid crushing tax increases. But the longer changes are delayed, the harsher they will be. Some steps that would soften the collision are clear. Raise retirement and eligibility ages. "Means test" benefits by cutting subsidies for wealthier recipients. Shift Medicare toward "managed care"--which has, so far, curbed health costs.

Clinton may now be the only person capable of ending the present paralysis. As with Nixon on China, he heads the party that has exploited Social Security and Medicare for political advantage. As president, Clinton has twice disdained the chance to forge a bipartisan approach. He created a blue-ribbon commission on entitlement reform at the insistence of Democratic Sen. Bob Kerrey of Nebraska--and then ignored it. He then refused to bargain in good faith with congressional Republicans on Medicare. Instead, Clinton distorted their position and, during the campaign, condoned ads on Medicare that amounted to a smear campaign.

Not surprisingly, political trust has vaporized. Clinton will set the agenda, for better or worse, because cowed Republicans now recoil from tackling these issues on their own. Trust can be restored only if Clinton takes some irreversible step to shatter the old taboos. He hasn't yet. In fact, Clinton's previous proposals were clearly inadequate. One example: Medicare's Hospital Insurance Trust Fund (HI). It's headed for bankruptcy in 2001. Well, Clinton proposed delaying bankruptcy until 2006. His plan would have transferred $55 billion out of the HI trust fund into another Medicare account. It was simply a bookkeeping shift. Other proposals would have cut hospital reimbursement fees. There would have been modest, immediate savings, but Medicare's long-term costs would have been barely affected.

By resubmitting a package like this, Clinton would indicate that he's unwilling to engage the larger issues. All his proposals are highly technical. They aim to sustain the fiction that Medicare and Social Security can be adjusted without ever affecting a single beneficiary. Similarly, Clinton's idea for another bipartisan commission is meaningless unless he first candidly outlines the types of changes (higher eligibility ages, more "means testing," more managed care, etc.) that should be considered. We know how to change these programs; what's missing is the political will.

The prevailing paralysis magnifies popular anxiety; changes are made to seem more frightening than they need be. Large changes (such as higher eligibility ages) aren't unfair if they're announced years before they take effect: that gives people time to plan their futures. Immediate changes aren't unfair if they're small enough so that most people can absorb them. A few dollars more a month in Medicare Part B premiums (a subject repeatedly demagogued by Clinton) wouldn't be crushing for most recipients. These premiums now average about 3 percent of their incomes.

The problems of an aging society cannot be excluded indefinitely from politics, precisely because they are so large and affect so many people. No single president or Congress is going to solve them "once and for all." We will learn as we go along, and the issues will extend beyond Social Security and Medicare. If people work longer, should there be special rules for older workers? Should government pay for more or less nursing-home care? (Medicaid now covers some costs.) Questions abound.

We need to start answering them, and history matters. Democrats created Social Security and Medicare. It will be easier for a Democrat to endorse needed changes than for Republicans. And the admission that change is unavoidable will improve debate. That is the crux of the matter: can we talk about these issues? Clinton's opportunity is clear. As yet, he hasn't grasped it; then again, Nixon's China trip was a secret until it happened. What's less uncertain is that, if Clinton misses his opportunity, history will judge him harshly. And rightly so.