Column: Has President Obama appointed a fox to guard the Social Security henhouse?
Charles P. Blahous III has been a prominent figure in policy debates about Social Security for about 15 years. He was executive director of President George W. Bush’s 2001-2002 Commission to Strengthen Social Security, which aimed to privatize the program. He has argued that future benefits should be reduced from their currently legislated levels, and suggested that the program is more generous to retirees than is “commonly understood” (which implies that proposals to expand benefits are unnecessarily generous). He opposed last year’s congressional reprieve for Social Security’s disability program, which saved millions of families from looming benefit cuts.
In the view of many Social Security advocates, these positions make Blahous’ influence almost entirely negative. Of course, all’s fair in Washington policy debates. But the problem critics have with Blahous is that he took many of those positions while serving as one of Social Security’s two unpaid public trustees, which gave him the aura of authority as an insider.
Now he may become the lightning rod for discontent among Social Security supporters with what they see as President Obama’s relative indifference to the program. That’s because Obama has taken the unusual step of renominating Blahous, a Republican, and his Democratic counterpart, Robert D. Reischauer, to second four-year terms as trustees. The Senate Finance Committee is scheduled to hold a confirmation hearing on the nominations Wednesday.
There is no way I’m going to allow the Senate to put someone in a position of public trust who ... collects a paycheck promoting plans to cut seniors’ benefits.
— Sen. Sherrod Brown (D-Ohio) on Charles Blahous
Reappointing Blahous places “a fox in the hen house,” said Nancy Altman, chairwoman of the Strengthen Social Security Coalition. “To me, this is emblematic of the last eight years, when the administration hasn’t paid much attention to Social Security.”
Obama at one point put a cut in cost-of-living allowances for retirees on the budget bargaining table, which was anathema to program supporters. He has allowed the program to muddle on without a commissioner after Senate Republicans blocked the confirmation of Carolyn W. Colvin in 2014; Colvin has since served as acting commissioner, which diminishes her ability to represent the program forcefully on Capitol Hill and to the public. And he let the public trustee seats go vacant: technically, the terms of Blahous and Reischauer expired with the issuance of the last Social Security trustees report, in July 2015.
Because the public trustees are expected to bring fresh outsiders’ viewpoints to Social Security, the tradition, such as it is, has been to give them one term only. The only previous time public trustees got second terms was in 2006, when Bush overcame Senate opposition to reappointing existing jobholders by pushing them through as recess appointments. The conflict over the Blahous and Reischauer renominations has been percolating for months, largely out of public view, but it’s heating up. Opposition has been voiced by advocates for the aging, a coalition of Social Security advocacy groups and the AFL-CIO.
For many Social Security advocates, the renomination of existing trustees would be bad enough, regardless of who they are. (Reischauer, an economist, is a former director of the Congressional Budget Office.) “The public trustees are supposed to be outsiders,” one Capitol Hill staffer told me. “By definition, securing a second term makes you an insider.”
Still, there’s no question that opposition to the reappointments focuses on Blahous, who critics assert has brought an excessively and uniquely ideological approach to the trustee job. Although Blahous typically has issued his commentaries on Social Security and other social programs under the imprimatur of the conservative Mercatus Center at George Mason University, where he’s a senior research fellow, critics are concerned that the average person won’t understand that a public trustee isn’t necessarily speaking on behalf of the Social Security Administration. Some may even have the misimpression that public trustees are nonpartisan -- “above the fray, with no ax to grind,” as Altman puts it. I asked Blahous to respond to these and other issues, but received no reply.
Among Blahous’ leading critics on Capitol Hill is Sen. Sherrod Brown (D-Ohio), who intends to place a senatorial hold on both reappointments if they get moved out of the Finance Committee. Under Senate protocol, that step would doom them.
“We should be working to expand and strengthen Social Security,” Brown told me in an emailed statement, “so there is no way I’m going to allow the Senate to put someone in a position of public trust who helped write the blueprint for privatizing Social Security and collects a paycheck promoting plans to cut seniors’ benefits.”
The emerging fight over the renominations places a spotlight on the role of the public trustees, a job that was created in 1983.
The public trustees, who serve on the program’s board alongside the Social Security commissioner and the Labor, Treasury and Health and Human Services secretaries, serve four-year terms without pay and must by law represent different parties. Their duties are nebulous, apart from expectations that they’ll work to increase public “confidence in the integrity of the trust funds” in which Social Security’s reserve is banked. Among those who have served as public trustees have been a Wall Street investment manager, former public officials, academics and business and finance experts.
Blahous surely would challenge his critics’ depiction of him as someone aiming to erode Social Security from the inside. Rather, he has represented himself as a supporter of “reforms to strengthen the disability program and Social Security as a whole.”
I’ve raised questions about Blahous’ role as a public trustee before, including last year when he spoke out against the congressional fix to the disability program’s crisis and implicitly endorsed a Republican attack on the program. The disability trust fund was on the verge of running out of money, which would have necessitated a 20% cut in disability benefits; Congress averted the crisis by reallocating resources from Social Security’s old-age program to cover the shortfall.
I observed at the time that Blahous backed up his position with incomplete and misleading data about disability, implying that hidden, unexpected forces had driven up claims “even though there is no evidence suggesting that actual disability is much more common than it was 30 years ago.” This was disingenuous at best, because the legal definition of disability had widened since 1980 to encompass more conditions that were understood to be genuinely disabling.
Ive also questioned his assertion that Social Security contributes to the federal deficit. (I tangled with Blahous in 2014 over his position on this issue, as Altman did in 2011. The background can be found here.)
Critics say pressure from Blahous resulted in a footnote in the 2014 Social Security trustees report that gave credence to the notion that the program contributes to the deficit. Because I’m not privy to the deliberations that go into the wording of the annual reports, I can’t verify that. But the footnote closely aligns with Blahous’ position, which involves treating Social Security as a part of the “unified” federal budget.
Referring to the footnote, Stephen C. Goss, Social Security’s chief actuary, appended a rare statement of “important caveats” to the 2014 report, making it crystal clear that he regarded the assertion that Social Security adds to the federal deficit to be factually incorrect.
That position, Goss wrote, assumes that full scheduled benefits would continue to be paid after Social Security’s trust fund runs out, by drawing on the Treasury. That’s not allowed under the law, he wrote, and “no precedent exists” to change it. He observed that the principles of unified federal budget accounting don’t apply to Social Security, which has its own revenue streams and by law can’t be financed from general government revenues.
The idea that the deficit also is increased by redemptions of the trust fund reserves -- that is, the sale of the $2.8 trillion in Treasury bonds held by the trust fund to cover future benefits -- also is fictitious, Goss wrote. The redemptions amount simply to the use of revenues that had been “collected in prior years and saved for later use.”
There’s nothing wrong with public debates about Social Security’s current or future fiscal condition. The question raised by Blahous’ activities is different: Is it appropriate to pursue a manifestly political and ideological campaign that undermines public confidence in the program while holding down a job aimed at increasing confidence?
“What we need as a public trustee,” one congressional staffer told me, “is someone with a background as an actuary or economist or social scientist who doesn’t make his living pushing a policy agenda on Social Security.”
That’s correct. Blahous should be free to pursue his agenda, wherever it leads. But he should do so from the outside, not as a member of the Social Security board of trustees, which carries special responsibilities. The White House should withdraw his nomination and Reischauer’s, and start over with a new pair of nominees.