He Pitched; No One Swung

By Joel Havemann and Maura Reynolds

April 30, 2005 12 AM PT

Times Staff Writers

WASHINGTON —

President Bush road-tested his new proposal for shoring up Social Security with a speech at a Northern Virginia community college Friday, but back home in Washington his plan received little but raspberries from Democrats and a lukewarm response from Republicans.

Bush criticized the Democrats as offering no alternative to his plan to change Social Security, a still-emerging proposal to which he had added details during a nationally televised news conference Thursday night.

“Those who block meaningful reform are going to be held to account at the polls,” Bush said Friday.

But the president’s newest ideas showed no sign of attracting Democratic support. Democrats have been nearly uniform in opposing part of Bush’s plan, under which younger workers could divert some of their payroll taxes into individual retirement accounts, in return, in most cases, for a cut in their traditional Social Security benefits.

On Friday, many Democrats also found fault with the newest element of Bush’s plan, under which the retirement system would save money by adjusting the formula by which initial benefits are set, with an exemption for low-wage earners.

Democrats said that would mean a benefit cut for most workers.

“I’m opposed to cutting benefits for as many as 70% of retirees,” said Sen. Bill Nelson (D-Fla.), one of the Democrats whom the White House has been courting. “Instead, let’s say to all Americans: Social Security will be there when you need it.”

The White House said that Bush’s proposal needed to be seen in the light of benefit cuts that it said would be inevitable if no action were taken. Social Security is now accumulating surplus payroll taxes, but the surplus is projected to run out in 2041 amid the wave of baby boom retirements. At that point, annual payroll taxes will then be sufficient to pay only about 74% of promised benefits.

“The current system, if we do nothing, will lead to significant benefit cuts for all Americans -- all Americans,” said White House spokesman Scott McClellan. “That’s why we need to fix the system. ... And the clock is now starting to tick on Democratic leaders. They need to come forward with ideas and quit simply standing in the way of solutions.”

Republican leaders in Congress praised Bush for taking the risky step of proposing to trim the growth of Social Security benefits. Although many Republicans did not endorse Bush’s idea, they vowed to press ahead in crafting a plan for change.

Rep. Bill Thomas (R-Bakersfield), chairman of the House Ways and Means Committee, which has jurisdiction for Social Security, announced that he planned to conduct hearings in May, prepare legislation in June and enact a bill by the end of the year.

“The House of Representatives will respond to the president’s challenge of addressing a fundamental safety net that is in trouble,” Thomas told reporters. “The American people don’t want us to wait until it becomes a crisis.” Thomas laid out an ambitious plan to legislate changes not only in Social Security but also in pension law, long-term care programs and tax incentives for savings. In particular, he said he wanted to look at the aspect of the Social Security benefits formula that allowed workers to retire at 62.

“It won’t just be a Social Security bill,” the panel chairman said. “It will be a retirement bill.”

In the Senate, Finance Committee Chairman Charles E. Grassley (R-Iowa) has said he hopes to move a bill through his committee by July.

Many congressional Republicans echoed Sen. Rick Santorum (R-Pa.), who praised Bush for his “leadership and vision to reform Social Security.” But it was unclear whether Bush had earned new support from Republicans who had been skeptical of his proposed changes. Many were either unavailable for comment or still uncertain.

Sen. Craig Thomas (R-Wyo.), who, like Santorum, is a member of the Finance Committee, said he remained worried about the government borrowing that private Social Security accounts would require.

One thing united the Republicans: the complaint that the Democrats had not put forward a plan to address Social Security’s long-term financial problems.

Sen. John E. Sununu (R-N.H.), who has introduced legislation establishing large personal Social Security accounts, praised Bush for his plan -- “an approach sorely lacking from the Democratic leadership.”

Democratic strategists said they found no down side to the strategy of criticizing Bush’s proposal without offering an alternative of their own.

“I have yet to see any evidence in my polls that Democrats are hurting themselves,” said Guy Molyneaux, a senior vice president with Hart Research, a Democratic polling firm. “Telling people that the president’s plan is worse than making no changes is a legitimate strategy.”

Roger Hickey, codirector of the campaign for America’s Future, said: “The public is not demanding action. The Democrats’ job is to say no to the president’s plan for private accounts and draconian benefit cuts.”

Molyneaux added that polling showed only one means of shoring up Social Security’s finances was popular with the public: raising the cap on annual income subject to the payroll tax, now set at $90,000. But most Republicans oppose any such tax increase, and when Bush indicated a willingness to consider raising the wage cap, he brought howls of protest from congressional conservatives.

Political analysts said the Finance Committee lacked majority support for a bill containing private accounts. Grassley has vowed to move some kind of bill to the floor, and Democrats fear that approving even a bill without private accounts could pave the way for that provision to be added later in negotiations with the House.

That scenario assumes the House can pass a bill with private accounts, which Molyneaux said was not a certainty, especially now that Bush had attached to his plan a reduction in promised benefits for many workers.

“I really don’t think he helped his prospects,” Molyneaux said. “People will realize that he’s proposing to cut benefits for everybody with an income barely above the poverty level.”

Times staff writer Edwin Chen contributed to this report.

(BEGIN TEXT OF INFOBOX)

Retirement recount

A plan by Robert Pozen, a Democrat and member of President Bush’s Social Security Commission, to fix the program’s shortfall would keep unchanged the benefit levels of the 30% of Americans who earn about $20,000 a year. But it would reduce benefits for the other 70%. How benefits would change based on 2005 inflation-adjusted dollars:

Benefit/percentage reduction

Retirement year: 2025

Low wage earner (45% of average wage, or $16,428): $0/0%

Medium earner ($36,507): $1,025/6%

High earner (160% of average, or $58,411): $2,038/10%

Maximum earner (taxable maximum, or $90,000): $2,930/11%

Retirement year: 2045

Low wage earner (45% of average wage, or $16,428)$0/0%

Medium earner ($36,507): $3,253/16%

High earner (160% of average, or $58,411): $6,444/25%

Maximum earner (taxable maximum, or $90,000): $9,324/29%

Retirement year: 2075