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the social security issue


WASHINGTON -- President Bush tried and failed to fix Social Security's long-term finances with his own party in control of Congress. His determination to keep trying, even as Democrats take over, is fueling speculation that he is ready to meet their price for coming to the bargaining table: dropping his goal of letting workers create private retirement accounts.

While Democrats don't take over the House and Senate until January, already some in both parties are reading tea leaves for signs of administration flexibility, including in recent remarks by Treasury Secretary Henry Paulson and White House Chief of Staff Josh Bolten.

Were the president to drop private accounts and call their bluff, Democrats would be challenged to make good on their professed willingness to help ensure Social Security's solvency.

Both sides acknowledge that a combination of reduced future benefits and higher revenues will be necessary eventually. As more Americans reach retirement age, Social Security will soon bring in fewer revenues from workers' payroll taxes than it sends out in benefit checks to retirees, workers' survivors and the disabled.

For Mr. Bush, private accounts are a way of reducing Social Security's future obligations, and central to his concept of an "ownership society" in which Americans rely less on government.

Democrats, along with the seniors group AARP, oppose personal accounts because they would initially require heavy government borrowing, and could leave future retirees at risk of market downturns.

Except for the Iraq war, perhaps no other issue so tests whether Democrats' capture of Capitol Hill in this month's midterm elections will cause Mr. Bush to alter what has been a largely partisan and uncompromising governing style. At the same time, any compromises cut with the Democratic majority are sure to cost Mr. Bush the support of many Republicans, especially in the House.

Publicly, the White House isn't budging. "Private accounts are part of our proposal and we're interested in having others put things on the table, not taking things off," says administration spokesman Dana Perino.

For those who nonetheless see a Bush concession ahead, perhaps the biggest reason is this: If Mr. Bush doesn't drop private accounts, it is virtually certain that nothing will happen on Social Security, the issue he has called the top domestic priority of his second term. Democrats say Mr. Bush also must finally spell out exactly what future benefit reductions or revenue increases he could support.

Another factor is the arrival of Mr. Paulson, who joined the Bush cabinet last summer. The former Goldman Sachs chief executive has said a priority will be tackling government spending for health care and Social Security -- "the biggest economic issue facing our country."

Democrats and Republicans agree that Mr. Paulson wouldn't have taken the Treasury post -- especially after Mr. Bush's previous two secretaries were routinely undercut by the White House -- without assurance that he would have significant influence.

Mr. Bush, in his press conference the day after Republicans lost their House and Senate majorities, said he had "instructed Secretary Paulson to reach out to folks on the Hill to see if we can't at least get a dialogue started" about Social Security and the other costly entitlement programs, Medicare and Medicaid. Last week, Mr. Paulson met at the Treasury with Rep. Charles Rangel, the New York Democrat who will be chairman of the House Ways and Means Committee, which has jurisdiction for Social Security as well as tax and trade policies.

Mr. Rangel says the two had "a very good and very long" meeting but only discussed generalities. "I don't want to be the first one to say what's off the table, what's on the table," he adds.

Democratic Sen. Max Baucus of Montana, who will chair the Senate Finance Committee that handles Social Security, will amplify Democrats' opposition to private accounts when he has dinner with Mr. Paulson Dec. 5, an aide said.

This week, in a speech to the Economic Club of New York, Mr. Paulson dodged a question about the Democrats' demand that the administration drop the private-accounts idea. "Only by taking a bipartisan approach, not conditioning the discussion" might an agreement be reached, he said.

Some listeners wondered whether Mr. Paulson was signaling administration willingness to quit prescribing the accounts. Administration officials privately said that wasn't the case. Still, a Treasury official said Mr. Paulson wants to approach the issue with an open mind and will suggest to lawmakers, "Why don't we start talking and see where we go, as opposed to prescribing things right away?"

Chief of Staff Bolten got a similar query about private accounts when he spoke last week before more than 100 people at a dinner of the board of the Brookings Institution, a policy think-tank. According to one attendee, Mr. Bolten "came as close as he could in a quasi-public setting to saying that carve-out accounts could be dropped if that were the price of reform." A second audience member supported that interpretation.

After his 2004 re-election, Mr. Bush spent much of 2005 campaigning nationwide for Congress to pass a law allowing younger workers to divert a portion of their Social Security payroll taxes to personal accounts. He argued that workers' investment earnings could offset the regular Social Security benefits they would agree to forego at retirement. Eventually Mr. Bush acknowledged that the accounts alone wouldn't make Social Security solvent, and that additional benefit reductions and perhaps tax changes would have to be made.

Republicans never attempted to write a bill. Without some Democrats' support, they wanted no part of acting alone to cut future benefits and raise taxes on upper-income workers, for fear they would lose their congressional majorities. They lost them anyway this month, as voters rebelled against corruption and partisanship, over-spending and the war in Iraq.

Messrs. Rangel and Baucus each tried to get Mr. Bush to drop private accounts in the past. Mr. Rangel tried at a White House encounter in April 2005. He said afterwards that Mr. Bush sternly replied, "I'm the president, and private accounts will stay on the table until I leave." Mr. Rangel said the president also predicted -- incorrectly, as it happened -- that Democrats would pay politically if they obstructed him.

--Deborah Solomon contributed to this article.

Entry #768


JAP69Comment by JAP69 - November 24, 2006, 10:13 am
Social security contribution funds have been abused for decades.

Entitlements created that were not in the original scheme of social security.
Social security funds used for general revenue financing.
The funds pool has been drained from the original intent.
konaneComment by konane - November 24, 2006, 12:37 pm
I believe it was Kennedy who saw a surplus in the SS accounts so created Medicare and Medicaid to begin draining it to buy votes. Now all that exists in the account is an IOU, which renders the system to a "pyramid", current recipients fully dependent upon payments made by current payors into, plus new people beginning to pay into the system. Part of the reason Democrats want amne$$$$$$$ty.

Should have been privatized when Pres. Bush proposed it, but fought tooth and toenail by Democrats and RINOS who just couldn't relinquish control over manipulating people's money and the power inherent by doing so.

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