How Did Social Security Become the Third Rail of American Politics?
Social Security had become a difficult political issue long before the early 1980s when Tip O’Neill designated it the third rail of American politics. When Barry Goldwater lost the presidency to Lyndon Johnson in 1964, for example, many observers believed the loss was due in part to voter perception that Goldwater wanted to dismantle Social Security.
Established in 1935, Social Security quickly became what its creators initially envisioned: a “comprehensive package of protection” against the “hazards and vicissitudes of life.” Before long, millions of Americans were depending on Social Security benefits, as they still do today, and they weren’t going to give them up without a fight.
Reagan Effort to Reform Social Security Inspired “Third Rail” Metaphor
When Ronald Reagan ran for president in 1980, he campaigned on a pledge to preserve Social Security, even though he had supported Goldwater’s position 16 years earlier and had argued in favor of making Social Security voluntary. Early in his presidency, Reagan resisted Social Security proposals that he believed would require him to go back on his campaign promise.
But many government officials—including Budget Director David Stockman and Health and Human Services Secretary Richard Schweiker—continued to struggle with the runaway costs of Social Security coupled with rising budget deficits. Several Social Security programs were facing immediate funding shortfalls at the time, and officials needed to find some way to save $75 billion over five years.
Reagan Plan for Social Security Sparked Unexpected Controversy
Stockman argued for severe and immediate cuts, Schweiker proposed more modest adjustments. At a meeting with the president in May 1981, they and other presidential advisors outlined a plan that would save $80 billion by reducing aid to students who were children of retired workers, cutting disability payments by tightening eligibility requirements, and reducing early retirement benefits that would cut the monthly check for low-income retirees by a third.
Reagan’s advisors assured him that Congress would pass the measure with few objections. They were wrong.
Some members of Congress saw the call for immediate cuts in benefits as America reneging on its promises, and O’Neill fanned those sparks into flame in an effort to claim a Democratic win for the American people.
Speaking at a news conference, O/Neill said: "For the first time since 1935 people would suffer because they trusted in the Social Security system." When a reporter asked O/Neill if Reagan had made a political mistake in trying to overhaul Social Security, O'Neill said: "I'm not talking about politics. I'm talking about decency. It is a rotten thing to do. It is a despicable thing."
Second Attempt at Social Security Reform Achieved Temporary Success
The measure was quickly voted down, but a few months later Reagan agreed to the formation of a bipartisan commission to examine Social Security and appointed economist Alan Greenspan as chairman. The commission proposed a mix of benefit reductions and tax increases that become law in 1983. Those changes included extending the retirement age to 67 and requiring people who were self-employed to pay the full Social Security tax instead of the 75 percent they had paid previously.
These changes provided some relief for the troubled system, but only temporarily. Two years later, rising budget deficits sent elected officials back to the table for another attempt to lower the cost of Social Security. In 1985, a proposal to freeze the annual cost-of-living adjustment for Social Security beneficiaries narrowly passed the GOP-controlled Senate and failed in the House. In the next election, the American voters ousted the Republicans and gave Democrats control of the Senate. Many political observers tied that shift in power to voter anger over the Republican attempt to reduce Social Security payments.
Voters Send Politicians a Strong Message
As a result of the 1986 elections, politicians got the message loud and clear that Social Security was sacred to the American people and tinkering with it—no matter how noble the intentions—was tantamount to political suicide.
That didn’t really change until George W. Bush ran for president in 2000, when the Republicans changed their strategy by embracing the idea of “privatizing” Social Security and trying to sell Americans on the vision of getting more money by combining lower guaranteed payments with self-directed investment accounts. This shift led many conservative pundits to declare that Social Security was no longer the third rail of American politics, yet over the next few years privatization failed to move forward and Social Security was still facing a bleak future.
Social Security continues to pose serious financial and political dilemmas for the American people—in part because it has become standard procedure for the federal government to “borrow” millions of dollars every year from the Social Security trust fund to help provide more money for discretionary spending. And those dilemmas are almost certain to continue for several more decades.
Social Security Remains the Third Rail of American Politics
As baby boomers start to retire in record numbers, politicians will be caught between an enormous population of voters who are relying on Social Security to help finance their retirement and another large group of voters that will not want to accept higher taxes to help pay for it.
As the political pressure builds for Social Security reform to preserve benefits without raising taxes significantly, the third rail of American politics is sure to start throwing off sparks once again.