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May 18, 2010

How Monica Lewinsky Saved Social Security: Clinton, Gingrich, Bowles and “The Pact”

Posted in: Barack Obama,FDL Book Salon,Federal budget,Uncategorized

Please welcome Steven Gillon, author of The Pact: Bill Clinton, Newt Gingrich, and the Rivalry that Defined a Generation

By 1997, Bill Clinton felt he had the upper hand with Congress and it was time for him to make historic moves. He had replaced Leon Panetta as Chief of Staff with investment banker Erskine Bowles late in his first term, and as author Steven Gillon tells the tale, Bowles brought a sense of order to the White House. Bowles planned to return to the private sector as Clinton’s second term began, but Bill and Hillary implored him to stay on for one final task: “fixing” Social Security.

President Obama has likewise entrusted Erskine Bowles with the task of chairing his own Deficit Commission, which is currently meeting in secret to address Social Security and other entitlement issues. Since little is known about the deliberations of that commission, I thought it would be instructive to have Dr. Gillon on to talk about Bowles’s history of shuttle diplomacy in 1997 to negotiate a deal between Newt Gingrich and Bill Clinton to cut Social Security. He based his book The Pact: Bill Clinton, Newt Gingrich, and the Rivalry that Defined a Generation on interviews he conducted with Clinton, Gingrich, Bowles and others involved in the negotiations. And according to Bowles, the deal would have gone through save for one factor: the Monica Lewinsky episode.

Bowles was uniquely suited to the task of negotiating a deal on Social Security. He had the trust of Newt Gingrich and the Republicans that Clinton would need to carry out his vision of Social Security reform:

Bowles became the liaison between Clinton and Gingrich, shuttling back and forth brokering deals between Capitol Hill and the White House. Neither man trusted the other, but both trusted Bowles, and he became the key figure in their evolving relationship. “You cannot underestimate the role that Erskine played,” recalled Joe Gaylord. “He and Gingrich liked each other. They trusted each other.” Bill Archer, the powerful head of the House Ways and Means Committee, also felt comfortable with Bowles. “He was not ideological. He was not pushing the big left agenda. He was there to make things happen between the White House and a Republican Congress.” Later, Gingrich would call his appointment “decisive,” and a turning point in his relationship with the White House. “It is the one brief period when you have a significant adult whose experience transcends Washington, who understands making deals and getting business done, and who has a center-right bias in fiscal policy,” he said. “He had the ability to bridge the White House and my party in Congress.”

Clinton had been trying to deal with Social Security for some time. In 1994, HHS Secretary Donna Shalala had appointed the 13-member Danforth Commission to advise on Social Security. She appointed three members from labor (including Richard Trumka), Republican Alan Simpson (appointed by Obama to co-chair his Deficit Commission with Bowles) and Pete Peterson (the hedge-fund billionaire funding much of the current economic work being used to justify dismantling Social Security). The Danforth Commission was always deeply divided and was never able to reach a consensus, largely due to the fact that the appointees had different perspectives, but Obama apparently learned that lesson: His 18-member commission already is packed with 14 members who support cutting benefits, and many who support some form of privatization. It takes 14 votes to pass any recommendation.

The deal between Gingrich and Clinton left many of the details to be worked out, but with the stock market doing well, there was some indication that there would be more public support for privatization than there had been in the past. Writes Gillon:

There was a growing consensus on both sides of the aisle in favor of having Social Security tap into the stock market to increase the rate of return on retirement funds. However, difficult questions remained unanswered: Who would manage the money: individuals or the government? Would private accounts replace checks guaranteed by the government, or would they simply be an add-on to the existing system? Politics, not economics, presented the biggest obstacle. Any long-term solution to solving Social Security required increasing the age of eligibility and changing the formula used to calculate the annual cost of living adjustment (COLA) — two steps guaranteed to arouse powerful opposition across the political spectrum.

A White House photographer snapped this picture of the secret meeting in the Treaty Room between Clinton and Gingrich. Photo was declassified in November 2007 in response to Gillon's FOIA request.

Clinton was willing to take the hit with liberals if Bowles could bring on board a contentious GOP, which didn’t want to give Clinton a legislative victory. That meant negotiating with Gingrich.

Gillon writes that the two men had a strange affinity, coming from differing cultural traditions rooted in the ‘60s. Bowles was adept at bridging that gap, and thus on October 28, 1997, Gingrich arrived at the White House for a secret meeting. He came in the diplomatic entrance to avoid the press.

Gillon writes:

In private conversations with Gingrich and with Texas Republican Bill Archer, powerful head of the House Ways and Means Committee, the president promised to “provide political cover” for Democrats and Republicans by announcing his support for raising the minimum age required for Social Security and for changing the COLA formula. The president was willing to oppose the leadership of his own party and support the Republican demand for private accounts.

According to Gingrich:

“I understood that I would have to fight some of my old guard,” Gingrich recalled. “He understood that he would have to fight his hard left. Together we could shape about a 60 to 65 percent majority. I was happy for him to be a successful president. He was comfortable with us being a successful Republican congress.”

It looked like they had a path to success. Clinton would take the heat from Democrats and work through “centrist” Democrats and Republicans, as he had when he passed NAFTA and welfare reform.

And then Monica Lewinsky broke into the headlines:

Politically, it forced Clinton to seek refuge in the liberal wing of his party, the same group he had agreed to abandon a few months earlier. “All opportunities for accomplishment were killed once the story came out,” reflected a senior White House official. “If we cut a deal with the Republicans on Social Security there was every possibility that the Democrats, who were the only people defending him in Congress against these charges, could easily get angry and abandon him.” With conservatives in an uproar, Gingrich lost his political wiggle room and was forced to appease his right-wing base. If Gingrich did not “feed the conservative beast,” recalled a colleague, he would have been removed from his job as Speaker.

As Erskine Bowles himself said, “Monica changed everything.”

The book certainly offers a fascinating insight into what might have been. But it also offers clues to Obama’s thinking in appointing the current Deficit Commission. His does not have the ideological fractures that the Danforth Commission had, yet seeks to replicate Clinton’s successes — most notably in appointing Bowles, Simpson and Democrat John Spratt, who were all involved in the Clinton Social Security effort.

Please welcome Steven Gillon, Resident Historian of the History Channel and Professor of History at the University of Oklahoma.


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