Senate GOP Starts Work on Social Security

The drive to overhaul Social Security shifted Tuesday from town halls to Capitol Hill as Senate Republicans launched an effort to write legislation that would revamp the retirement program.

But their first step -- holding a hearing to consider ways to shore up Social Security -- underscored the fact that President Bush had failed to persuade any Senate Democrats to back his approach, despite a major effort to pressure those lawmakers that had taken him to 23 states.

It has fallen to Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, to try to write that chamber’s version of legislation to restructure Social Security.

Grassley said Tuesday that his first effort would include a provision allowing younger workers to divert a portion of their Social Security payroll taxes into private investment accounts, likely in return for giving up a portion of their traditional benefits. That proposal has been championed by Bush but is almost universally opposed by Democratic lawmakers.

The difficulty Grassley faces in uniting the two parties was illustrated Tuesday by events outside the hearing room, where lawmakers and interest groups held dueling rallies and news conferences, and inside the hearing room, where the first Democrat to speak criticized the idea of personal accounts.

“We do not need to privatize Social Security to save it,” said Sen. Max Baucus (D-Mont.) “Common sense teaches us that when you want to get out of a hole, first you stop digging. But the president’s plan would dig Social Security into a deeper hole.”

Baucus said that he and other Senate Democrats would shun Grassley’s efforts to write a bipartisan bill until Bush publicly dropped the idea of private accounts.

Grassley said later in the hearing: “Those of you that are bad-mouthing every other suggestion out there, suggest your own plan.... Doing nothing is not an option, because doing nothing is a cut in benefits.”

Both parties say they want to shore up the shaky finances of Social Security, which are expected to come under increasing strain as the baby boom generation moves into its retirement years. Bush and many Republicans say that benefit cuts are all but certain, and that private accounts would allow workers to make up that lost money through stock market gains.

Opponents say private accounts would drain more money from Social Security and would force the government to borrow to increase the federal deficit, which is at record levels.

To increase pressure on lawmakers to back personal accounts, Bush has undertaken a cross-country campaign to promote the idea, which his administration is calling “60 Stops in 60 Days.”

The 60 days end on Sunday, but the White House has signaled that the president will continue to travel and campaign for a Social Security overhaul.

As lawmakers took up the Social Security issue in earnest, opponents of private accounts staged a rally outside the Capitol featuring the grandson of President Franklin D. Roosevelt, who shepherded Social Security into law 70 years ago.

“I would advise him [Bush] as a friend and an American that there are three things you don’t do,” said Rep. Charles B. Rangel (D-N.Y.), one of dozens of members of Congress who spoke at the rally. “One, you don’t spit against the wind. Two, you don’t look under the mask of the Lone Ranger. Three, you don’t mess with our Social Security.”

On the other side of the Capitol, a smaller crowd of supporters of private accounts held a demonstration assailing Democrats as the “party of no,” and featuring a mock construction zone with orange cones and a sign reading: “Democrat obstruction zone.”

In addition to opposition from Democrats, private accounts have drawn skepticism from one Republican on Grassley’s committee, Sen. Olympia J. Snowe of Maine.

“We’ve hit a wall,” Sen. Lindsey Graham (R-S.C.) said.

“Unless Grassley has miracle powers that he can bring the dead back from the grave, it’s a mission impossible,” said Marshall Wittmann, a former GOP Senate staffer who is now with the Democratic Leadership Council.

But Eric Ueland, chief of staff to Senate Majority Leader Bill Frist (R-Tenn.), said, “Usually at the end of ‘Mission: Impossible,’ the team succeeds.”

The Senate Finance Committee hearing featured four witnesses who had written Social Security overhaul plans. Peter Ferrara, a senior fellow at the Institute for Policy Innovation, and Michael Tanner, director of the Cato Institute’s Project on Social Security Choice, have two of the most expansive proposals for private accounts.

Robert C. Pozen, chairman of MFS Investment Management in Boston, has offered a plan for somewhat smaller personal accounts. Peter R. Orszag, a Brookings Institution economist, is co-author of a plan to raise taxes and trim future benefit increases enough to ensure Social Security’s financial stability without private accounts.

Baucus and the other Democrats took turns criticizing the proposals for private accounts, while Republicans criticized Orszag for proposing a tax increase.

Sen. John F. Kerry (D-Mass.) said Social Security benefits could be guaranteed through the rest of the century with one-fifth of the revenue that would be lost if President Bush’s temporary tax cuts were, as expected, made permanent.

Snowe, the Maine Republican, said workers could use 401(k) accounts and individual retirement accounts to take risks with their retirement savings. “But,” she asked, “why incorporate that risk” into what for many Americans is their bedrock retirement program?

“The question is: Do you want to maintain that foundation for our seniors?” Snowe said.

Some lawmakers not on the Senate panel said they held out hope for a bipartisan measure. Republicans have said they must have a bipartisan bill, not only to overcome a potential Democratic filibuster, but to shield GOP lawmakers up for reelection next year from possible political fallout from any changes to the popular retirement program.

In comments outside the hearing, Sen. Jim DeMint (R-S.C.), a leader in efforts to establish the accounts, said, “The only way to know how we’re going to move a bill is to start the process.”

Sen. John E. Sununu (R-N.H.), a leading supporter of private accounts, called the Democrats’ refusal to negotiate on a bill until the idea of private accounts was taken off the table “absolutely outrageous.”

Still, a glimmer of bipartisan cooperation emerged from the hearing.

Sen. Ron Wyden (D-Ore.), a committee member, told Grassley, “I’d like to work with you” in the same manner that Republican President Reagan and Democratic House Speaker Thomas P. “Tip” O’Neill (D-Mass.) collaborated in 1983 to save Social Security from imminent disaster.

Sen. Rick Santorum (R-Pa.), in the same spirit, said, “It would be great to see some bipartisanship.”

The Senate has taken the lead on producing controversial Social Security legislation because the House members, all 435 of whom are up for reelection next year, do not want to vote for benefit cuts or tax increases if the bill is destined to die in the Senate.

Times staff writer Elise Castelli contributed to this report.