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Social Security Overhaul Splinters GOP

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Times Staff Writer

President Bush’s proposal to overhaul Social Security is falling flat across the country, to judge from recent polls, but public opinion is not his only problem. The whole idea splits Bush’s party -- along fault lines he masterfully bridged during his first term in the White House.

A Social Security overhaul is the Holy Grail for the GOP’s free-market advocates, but it is a low priority for social conservatives who care more about banning abortion and same-sex marriage. The costly initiative gives heartburn to the party’s antideficit hawks. Even some of the Republicans’ loyal business allies are lukewarm on Bush’s effort to rewrite the program and allow workers to divert part of their Social Security payroll taxes into personal retirement accounts.

The divisions highlight potential weaknesses in the GOP coalition that Bush hopes to turn into an enduring governing majority by the time he leaves the White House.

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On Capitol Hill, the open disagreement among Republicans over the issue -- and over the political strategy for dealing with it -- is a departure from the unity and discipline they showed on most major issues during Bush’s first term.

That is in part because overhauling Social Security is a more ambitious and politically difficult issue than Bush’s priorities in his first term -- such as tax cuts and Medicare expansion -- which tended to unify rather than divide his party. All but two Republicans in Congress voted for his 2001 tax cut. Republicans of all stripes had campaigned for years for providing prescription drug coverage under Medicare.

Not so for changing Social Security.

“This does not have strong unanimity among Republicans in Congress or the rank and file,” said Eddie Mahe, a GOP political consultant and former party official. “It is not an issue that galvanizes Republicans like tax cuts, that is for sure.”

Republicans have been talking in general terms for the last few elections about revamping the popular retirement program. But few have gotten into the politically risky details of how to shore up the system to accommodate the retirement of the baby boom generation.

The problem facing Congress is that when the baby boom begins to retire, the program will have to pay out more in benefits than it collects in payroll taxes. Eventually -- around 2042 or 2052 -- it is projected to be insolvent. Many analysts argue that it will take a combination of benefit cuts and tax increases to restore fiscal balance to the program.

Bush has not said exactly how he plans to make the program solvent. But he has said that part of the solution should be to allow younger workers to divert some of their Social Security payroll taxes into personal retirement accounts, where they might be able to earn enough of a return to make up for possible cuts in regular benefits.

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But the transition to that new system could be extremely costly, because the government would have to make up for the revenue diverted into personal accounts to pay promised benefits to current retirees. Bush has indicated he is willing to add to the government deficit and borrow to pay transition costs.

However Congress decides to redesign and finance the program, the debate over crucial details -- which will determine the program’s winners and losers, who bears the risk and the cost, how big or small government will be -- go to the core question for a GOP politician, activist or voter: What kind of Republican are you? Economic conservative? Moderate? Social conservative? Balanced budget fan?

Here are the different factions of the GOP and how they are shaping the Social Security debate:

* Economic conservatives

The party’s most enthusiastic supporters of personal accounts are in a faction of conservatives whose top priority is advancing free-market concepts in the economy and reducing the role of government. The personal account idea has been nurtured for decades in conservative think tanks such as the Cato Institute and the Heritage Foundation. It has been promoted by groups such as Americans for Tax Reform and the Club for Growth.

Those in the economic conservative faction are devoted to the idea because it goes to the core of what they want to change about the government fashioned by the New Deal: Personal accounts would give individuals more responsibility and ownership of their retirement savings, they say, replacing what they believe is an unproductive dependence on government.

In Congress, many Republicans have shied away from embracing personal accounts, but a hardy band of true believers has been on the front lines of helping Bush sell the idea to the public. They include Sen. John E. Sununu (R-N.H.) and Rep. Paul Ryan (R-Wis.), sponsors of legislation that would allow even bigger accounts than Bush has proposed.

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They believe that neither benefit cuts nor tax increases are needed to shore up the system and pay for the costs of switching to personal accounts. And, unlike Bush and his senior aides, they argue that personal accounts alone can solve the program’s long-term financial woes. Opponents of this faction refer to them as the “free lunch crowd.”

* Tax iconoclasts

Other Republican proponents of personal accounts are more willing to challenge their party’s anti-tax orthodoxy or to consider benefit cuts to shore up the program. Sen. Lindsey Graham (R-S.C.) has proposed raising from $90,000 to $200,000 the cap on income that is subject to the Social Security payroll tax. Bush has left open the door for that option. Sen. Rick Santorum (R-Pa.) has also said Congress could consider raising the tax rate.

But the party’s most ardent tax cutters -- a large and vocal faction that dominates the House GOP and outside conservative groups -- have tried to slam the door on any such tax increases.

“If this talk continues, the president’s political base could suffer a sizable morale loss,” Lawrence Kudlow, an economist who served in the Reagan administration, said in an article for the conservative Human Events online magazine. “It might not surface until the 2006 elections.”

House Majority Leader Tom DeLay (R-Texas) put it bluntly: “The Republican House didn’t come here to raise taxes.”

* Antideficit hawks

Although Republicans are no longer as dedicated to balancing the budget as they once were, there is a vestigial faction that is concerned about the large and growing budget deficit. These Republicans -- mostly self-described moderates -- are among the most stubborn skeptics of Bush’s personal account plan. Winning them over may require Bush to find some way to finance the transition costs other than piling up more debt.

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That is the main reservation voiced by Sen. Olympia J. Snowe (R-Maine), co-chair of the Senate’s Centrist Coalition, an informal bipartisan group exploring alternatives to Bush’s plan. No members of the Republican Main Street Partnership, a group of House and Senate GOP moderates, have embraced the personal account plan.

“They are on hold,” said Sarah Chamberlain Resnick, executive director of the group, mostly because of their concerns about the potential cost.

* Social conservatives

Conservative religious activists and voters whose top priorities are social values were key to Bush’s reelection in 2004, many analysts say. But changing Social Security is not as important as banning abortions and same-sex marriage to the organizations that represent those interests, such as the Family Research Council and Concerned Women for America.

“I don’t think we have come to a consensus,” said Amber Hildebrand, spokeswoman for the Family Research Council.

Some activists are worried that Bush, by spending so much time and energy on Social Security, will give short shrift to the social issues that matter most to conservative religious groups. A coalition of those groups raised those concerns this year in a letter to Karl Rove, Bush’s political advisor. “Is [Bush] prepared to spend significant political capital on privatization but reluctant to devote the same energy to preserving marriage?” the groups asked Rove. “If so, it would create outrage with countless voters who stood with him just a few weeks ago, including an unprecedented number of African Americans, Latinos and Catholics who broke with tradition and supported the president solely because of this issue.”

The letter was sent after Bush, in an interview, suggested he would not push for a vote in Congress on a constitutional amendment banning same-sex marriage this year because there were not enough votes to pass it. After the letter was sent, conservative groups welcomed a strong statement by Bush, in his State of the Union address, endorsing the traditional view of marriage.

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* Business community

Trade associations and business lobbyists have been rallying to help Bush sell his Social Security policy, even though they probably would not have made this a top priority absent a push from the White House. They have required more coaxing than when they were tapped to promote Bush’s tax-cut initiatives, administration allies say.

“Social Security is an issue we believe the president is right on, but it’s not a no-brainer the way tax relief was a no-brainer for our people,” said Jade West, senior vice president of government relations at the National Assn. of Wholesaler-Distributors.

Many business leaders believe much is at stake for them in revamping a program they pay so much for in taxes, but West said it had been harder to mobilize small businesses around such a long-term problem, because such enterprises have an average lifespan of three years.

The White House has stepped up its effort to get business involved in selling its message that Social Security needs to be overhauled. Rove and Allan Hubbard, Bush’s chief economic advisor, in late February summoned more than 100 trade association and business lobbyists to the White House and urged them to join the umbrella lobbying group that was coordinating business efforts.

“There is a growing awareness by the business community that Social Security is the president’s No. 1 issue, and it is everybody’s interest to work with the president to achieve his No. 1 issue,” said Johanna Schneider, spokeswoman for the Business Roundtable. “It’s a public policy issue and it’s a political issue.”

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