What was not evident then but is now is that this moment became a turning point in the Republican Party, the prod for a historic, albeit unnoticed, three-way split. Stockman represented one wing, a lonely one. He learned from this experience that the libertarian dream had been a dangerous illusion. Sure, “special interest groups do wield great power, but their influence is deeply rooted in local popular support.” Stockman concluded that trying to impose an ideologically driven “exacting blueprint” on the people of “a capitalist democracy” was a mistake of the highest order. As important was what he said next. “It shouldn’t have been tried.” The correct inference from the episode, Stockman concluded, was that voters must be told the truth. To have all the things they wanted, from clean air and water to retirement security (to say nothing of military power), Americans needed “a moderate social democracy,” and to get this, they needed to pay higher taxes. It was that simple: higher taxes could solve the problem, without permanent deficits or economic disaster.28
The Republican right’s political leadership, however, looked on Stockman as a turncoat. Its members followed the president and his advisers on a second path, one that forsook the fact-based universe. Abandoning any attempt to cut core entitlements significantly, but unwilling to give up on their promised huge tax cuts or on their desire for massive military spending, they went ahead with both, even though, as Stockman pointed out repeatedly, the outcome would be a fiscal train wreck. He was shocked: not one member of the president’s political team had studied the budget or had the slightest idea how it worked. When presented with dire news that confounded their hopes, they simply refused to believe the bothersome information. The result? By the time President Reagan left office, the deficit was three times larger than the one he inherited from Jimmy Carter. At $2.7 trillion, it was the worst in U.S. history: the national debt by 1989 accounted for 53 percent of gross domestic product.29 The path from refusal to face the outcome of their policy to denial of the human role in climate change would be a short one.
The libertarian milieu influenced by Virginia school thinking went a third way. In their view, Reagan hadn’t “failed,” in Buchanan’s summary conclusion; he had “forfeited” his chance “to change the structure of politics.” True, the economist said approvingly, Reagan had fed “widespread public skepticism about government’s capacities” and about “the purity of the motives of political agents,” a crucial contribution to the cause. But the president had proved to be too much of a pragmatist, too deferential to public opinion and those concerned about the health of his party, and so he allowed “the rent-seekers” to continue to practice “exploitation through the political process.”30
These libertarians seemed to have determined that what was needed to achieve their ends was to stop being honest with the public. Instead of advocating for them frontally, they needed to engage in a kind of crab walk, even if it required advancing misleading claims in order to take terrain bit by bit, in a manner that cumulatively, yet quietly, could begin to radically alter the power relations of American society. The program on which they tested this new strategy was Social Security.31
• • •
Social Security, as both Buchanan and Stockman had observed, was the linchpin of the American welfare state.32 The most popular New Deal reform, its very success had made it a far-right target ever since its creation, in 1935. Indeed, one of the radical right’s indictments of Dwight Eisenhower and moderate Republicans after him was that they had accepted the legitimacy of Social Security. They did so, quite simply, not only because the overwhelming majority of American voters liked the system and were terrified of facing old age without it, but also because they, too, recognized it as a good program that worked.
Now, no doubt inspired by Chile’s conversion to private pensions, Charles Koch’s Cato Institute turned to Buchanan to teach its staff how to crab walk. Having relocated from San Francisco to Washington, D.C., in late 1981 to achieve greater influence, Cato made the privatization of Social Security its top priority. Buchanan labeled the existing system a “Ponzi scheme,” a framing that, as one critic pointed out, implied that the program was “fundamentally fraudulent”—indeed, “totally and fundamentally wrong.”33
It was fundamentally wrong in the view of libertarians, but with Buchanan’s tutelage, the cause learned that opposing it candidly meant “political suicide,” because the majority of voters wanted the system to continue as it was. “There is no widespread support for basic structural reform, among any membership group” in the American polity, the professor warned, the italics his own—“among the old or the young, the black, the brown, or the white, the female or the male, the rich or the poor, the Frost Belt or the Sunbelt.”34 The near-universal popularity of Social Security meant that any attempt to fight it on philosophical grounds was doomed.
Buchanan therefore devised and taught a more circuitous and sequential—indeed, devious and deceptive—approach, but one that served the new crab-walking cause well. “Those who seek to undermine the existing structure,” he advised, must do two things. First, they must alter beneficiaries’ view of Social Security’s viability, because that would “make abandonment of the system look more attractive.”35 If you have ever seen a television ad showing older people with worried faces wondering if Social Security will be around when they need it, or heard a politician you think is opposed to the retirement program suddenly fretting about whether it will be there for you and others, listen more carefully the next time for a possible subliminal message. Is the speaker really in favor of preserving the system as we know it? Or is he or she trying to diminish the reputation of the system with the public, so that when the right time comes to make changes to it, even small ones that in fact reduce benefits or change the rules for beneficiaries, those affected will be less likely to feel that something good is being taken away from them?
While step one would soften public support for the system by making it seem unreliable, step two would apply a classic strategy of divide and conquer. Recipients could be split apart in this way.
The first group he defined as those already receiving Social Security benefits and (although Buchanan did not include them, his ideological heirs would) those nearing the age when they could begin to collect. These current recipients and those close to retirement (some said within ten years; more recently politicians on the right have suggested five years) should be reassured that their benefits would not be cut. This tactic Buchanan referred to as “paying off” existing claims. The reasoning behind it is vintage public choice analysis: as the citizens most attentive to any change in the system, they were the ones who would fight the hardest to preserve it. Getting them out of the struggle to preserve the system would greatly enfeeble the remaining coalition (to say nothing of the resentment their departure would cause among those who found they were being denied something others had secured for themselves).36
The second group, Buchanan coached, consisted of high earners. The plan here would be to suggest that they be taxed at higher rates than others to get their benefits, thus sullying the image of Social Security as an insurance program in the minds of the wealthy by making it look more like now-unpopular means-tested income transfer programs popularly understood as “welfare.” Progressives would likely fall for a proposal to make the wealthiest pay more, not realizing the damage that could do to Social Security’s support among group two. And if the message was repeated enough, such that the wealthy began to believe that others are not paying their fair share, they in turn would also become less opposed to altering the program.37
The third group would consist of younger workers. They needed to be constantly reminded that their payroll deductions were providing “a tremendous welfare subsidy” to the aged.38
Finally, those who would just miss the cutoff for the old system should be targeted for short-term changes. As Buchanan put it, “those who seek to undermine the support of the system (over the longer term) wou
ld do well to propose increases in the retirement age and increases in payroll taxes,” so as to irritate recipients at all income levels, but particularly those who are just on the wrong side of the cutoff and now would have to pay more and work longer.39
This “patchwork pattern of ‘reforms’” (the quotation marks around “reforms” were added by Buchanan, to make sure the message was clear that reform was not really the endgame) could tear asunder groups that hitherto had been united in their support of Social Security. Better still, Buchanan noted, the member groups of the once unified coalition that protected it might be induced by such changes to fight one another. When that happened, the broad phalanx that had upheld the system for a half-century might finally fracture.40
Yet Buchanan’s projections left unanswered how to identify those who would benefit from the end of Social Security and turn them into active allies of the cause. To answer that question, two staff members at the Heritage Foundation wrote a follow-up plan. It was titled, notably, “Achieving a ‘Leninist’ Strategy.” As the Russian revolutionary had taught, the coauthors explained, a radical cause must succeed in both “isolating and weakening its opponents” and “creat[ing] a focused political coalition” to work for change.41 In other words, the revolutionaries must find the people who would gain from the end of Social Security and draw them into the battle alongside the cadre.
In the case of Social Security, the answer was clear: the financial sector. The right was not against people putting away for their retirements. To the contrary, they wanted people to save, early and actively, for their own retirements as part of their philosophy of personal responsibility. They just wanted those savings taken out of the hands of the federal government and put into the hands of capitalists, just as was done in Chile. And to end employer contributions as Chile had.
Once again, an incremental strategy was proposed. First push for legislation to make private retirement saving easier and more remunerative to the industry; then pull into the fight the financial corporations that would profit from the replacement of social insurance with private savings accounts. Individual retirement accounts (IRAs), the report argued, were “a powerful vehicle for introducing a private Social Security system,” not least because the tax deductions granted for them had become popular. By thus “strengthen[ing] the coalition for privatizing Social Security,” backers of change would be better positioned to take advantage of any crisis in the system.42
The Cato team translated Buchanan’s ideas into a battle plan. The top priority was to assure current Social Security recipients that they would not lose anything; as “a very powerful and vocal interest group,” they required “neutralizing.”43 Phase two would be “guerrilla warfare,” albeit of the legislative kind, to break up the coalition that sustained Social Security by “buying out, or winning over” its various elements. Those who could not be bought out or won over should be weakened and defeated. (For example, AFL-CIO unions had helped organize the Save Our Security fight against the Stockman cuts; breaking the spine of the labor movement would hobble any future defense.)44 Phase three would cultivate new partners in the private sector who would benefit from all that money being shifted to savings accounts and investment.45
But the overall message shared among insiders was always this: “If the political dynamics are not altered,” no “radical reform of Social Security is possible.”46
For the libertarian right, Social Security privatization meant a savvy triple win, in which ideological triumph over the most successful and popular federal program was the least of the gains. First, it would break down citizens’ lived connection to government, their habit of believing it offered them something of value in navigating their lives. Second, it would weaken the appeal of collective organization by inducing fracture among groups that had looked to government for solutions to their common problems. But third and just as important, by putting a vast pool of money into the hands of capitalists, enriching them, it would both make them eager to lobby for further change and willing to shell out dollars to the advocacy groups leading the charge for change. The stronger these already well-heeled right-wing advocacy groups became, the more powerful partners shared their interests, the quicker they would be able to alter power relations in America in a manner that advanced the libertarian revolution. Charles Koch later used an apt metaphor that captures this process, too. “I often think of what we do,” Koch says of his firm, as “stonemasonry. Once a stone has been carefully selected and set, it shapes a new space in which the mason can set yet another well-chosen stone. Each stone is different, but they all fit together to create a framework that is mutually reinforcing.”47
His dreamed-of revolution no longer seemed so pie in the sky as it had when he set to work. By the second half of the 1980s, the political scientist Jeffrey Henig has noted, privatization “moved from an intellectual fringe to become a centerpiece in contemporary public policy debates.” The Virginia school of political economy in particular helped effect “the intellectual de-legitimation of the welfare state,” which prepared the way for privatization and, with it, in the words of one enthusiast, “the goal of fundamentally and irreversibly changing” the nature of politics.48
Many liberals then and since have tended to miss this strategic use of privatization to enchain democracy, at worst seeing the proposals as coming simply from dogma that preferred the private sector to the public.49 Those driving the train knew otherwise. Privatization was a key element of the crab walk to the final, albeit gradual, revolution—the ends-justify-the-means approach that allowed for using disingenuous claims to take terrain that would make the ultimate project possible.
• • •
The disappointments of Reagan’s presidency notwithstanding, the libertarian cause emerged much stronger at the era’s end than it had been at the outset. Its cadre had learned invaluable lessons that some veterans would go on to apply in the years to come. Chief among them was Reagan’s closest and most trusted adviser, Edwin Meese III, who to this day plays a pivotal role in the Heritage Foundation, above all, but also in a string of less prominent organizations funded by the Koch network and other wealthy donors. Advising influential political players such as Meese would be strategists such as Stuart Butler, a British-born economist who applied Buchanan’s thinking in fine-tuning the Leninist strategy to permanently alter the political dynamics of budget growth. Butler became so deft at turning Buchanan’s ideas into measures that could be pushed by allies in Congress that the Heritage Foundation promoted him to director of its Center for Policy Innovation.50
Because they became so interconnected by the late 1980s, it is nearly impossible to identify a sharp boundary between the insider cadre of strategists and the right-wing Republican officials such as Ed Meese and Congressman Jack Kemp and lower-level staff to whom they brought their proposals.51 More research than is feasible for this book will be needed to determine who among the latter knew the actual objectives of the plans at any given point. But the cadre’s numbers were growing, as evidenced by the expansion of the Heritage Foundation and the Cato Institute and lesser operations, and so was their influence, as evidenced by media attention to the products of these institutions and the representation of their members on bodies such as the President’s Commission on Privatization.
The move to George Mason had been a godsend. It was easy to cross the Potomac to speak with political leaders and their staff members or to bring them into Northern Virginia to attend programs. With supportive donors, Buchanan’s center made use of its new site to attract and train many more foot soldiers for the cause. Among the most lastingly important of the many trainees was Stephen Moore, an early M.A. alumnus hired by the Heritage Foundation’s program on budgetary affairs, where he worked throughout the eighties, in the first of many such movement positions. In 1987, Moore was named research director of President Reagan’s Commission on Privatization. In time he would move on to the Wall Street Journal editorial board,
where he gained a platform from which to promote the cause to its most important audience: power brokers and potential donors who could benefit from its success.52
Moore was but one highly visible product of the pipeline being constructed at George Mason. The most promising would be hired upon completion of their training in Koch-funded operations. As they began to hear their own ideas echoed in the statements of politicians, agency political appointees, and such respected publications as the Wall Street Journal, confidence grew among the cadre that the very terrain of public life could be altered without their ever having to argue openly for their real goals.
• • •
While others focused on advancing the new stealth strategy, Buchanan never lost sight of the fact that such rearguard assaults on the welfare state would take the movement only so far. What was needed was a way to amend the Constitution so that public officials would be legally constrained from offering new social programs to the public or engaging in regulation on their behalf even when vast constituencies were demanding them. Again and again, at every opportunity he had, he told his allies that no “mere changing of the political guard will suffice,” that “the problems of our times require attention to the rules rather than the rulers.” And that meant that real change would come “only by Constitutional law.” The project must aim toward the practical “removal of the sacrosanct status assigned to majority rule.”53
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