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Bush Opening Social Security Debate Without Saying Much

Times Staff Writer

Even as President Bush has started telling voters that overhauling Social Security would be a key part of his second-term agenda, he is likely to avoid offering specifics before election day, according to Bush aides, lawmakers and privatization advocates.

Instead of getting into details, which would almost certainly embroil him in controversy, Bush is campaigning on broad principles for revamping the 70-year-old retirement system in a way that fits his vision for an “ownership society,” the sources said.

Bush revised his campaign speech in recent weeks to include a push for changing the program to permit personal investment accounts, a proposal many conservative activists have been hoping for months he would spotlight.

“I’m worried about our Social Security system,” he said Wednesday at a stop in Wisconsin. “I’m not worried about it for baby boomers like me. The system is solvent. But if you’re a younger worker, I think it’s important that you be allowed to have your own personal savings account that you can carry with you throughout your life.... “

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Bush is promising to protect existing benefits for current retirees and others who will soon retire, while holding the line on the paycheck deductions that finance Social Security. But he is reiterating his desire to let younger workers begin using for private investment some of the money they pay to the government for the program.

Purposefully left unanswered are the most divisive questions -- such as what fraction of a worker’s payroll taxes could go into a private investment account instead of the Social Security trust fund, how the government would pay the estimated $1 trillion in transition costs, and how the government would protect retirees whose investments did not turn out well.

Many experts, including some conservatives, also think any meaningful privatization plan would eventually involve some combination of reduced benefits and higher worker contributions. Bush is expected to continue to skirt that issue as well.

Confronting such matters, Republican strategists fear, could make Bush and other GOP candidates vulnerable to attacks in key states such as Florida, where senior voters have a history of punishing candidates who talk of changing Social Security.

“What they’re afraid of is that they’d embrace a particular idea and the other side will demagogue the hell out of it,” said Sen. Lindsey Graham (R-S.C.), who has introduced legislation to create private accounts based largely on the recommendations of a commission appointed in 2001 by Bush. Graham is working closely with the White House on the issue.

The decision to stick to generalities also reflects the political complexities facing Bush as he tries to outline a domestic agenda for a second four years in office. Towering budget deficits resulting in part from his tax cuts have given him little room to maneuver. And what critics see as his confrontational leadership style has fostered implacable hostility among Capitol Hill Democrats, whose support would be critical for anything as substantive as changing Social Security.

Some Republicans are hesitant to act on Social Security because of poll data showing that seniors have been unhappy with Medicare’s new prescription drug benefit and have responded to Democrats’ charge that the legislation was more of a boon for pharmaceutical companies than beneficiaries.

“The [GOP] leadership gets very nervous about what happens in the marginal [House] districts” when Democrats focus their attacks on Republican stewardship of Social Security and Medicare, said Michael Tanner, director of health and welfare studies at the Cato Institute, a libertarian think tank.

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Still, advocates of partial privatization said that presented in the right way on the campaign trail, the plan could appeal to younger voters who worried they would never reap the rewards of the taxes they paid into Social Security.

The advocates said that talking about the proposal in general terms would allow Bush to claim a mandate for change if he won in November.

But Rep. Robert T. Matsui of Sacramento, the ranking Democrat on the House committee that oversees Social Security funding, said he couldn’t foresee his colleagues going along with Bush on creating private accounts, especially if the president did not address the tough questions surrounding it.

“He has an obligation to put down a plan,” Matsui said. “To talk about it conceptually is meaningless. We all want to solve the problem and maintain benefits and not increase payroll taxes and make everybody happy. But he can’t just say that and expect to get a mandate out of it.”

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White House officials say they are watching six separate proposals pending in Congress, all of which they say meet Bush’s standards for changing the Social Security system.

Still, that offers little clue to what his position in a second term might be, since the bills vary widely -- ranging from so-called “free lunch” plans that envision large personal accounts and no benefit cuts or tax increases, to what experts say are more realistic proposals that would create smaller accounts accompanied by benefit cuts and tax hikes.

White House aides will not discuss the bills in detail.

Many think Social Security is facing a crisis as the first wave of baby boomers are nearing retirement. Historically a pay-as-you-go system, with workers’ payroll taxes being used to fund retirement benefits for current seniors, the program is projected to begin paying out more than it takes in as early as 2018.

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Charles Blahous, who heads the White House’s review of Social Security, said Bush would strive to build public support by making a case for change that outlined the challenges facing the system and how “ownership” could foster a permanent fix.

Graham said he had urged Bush and chief White House political strategist Karl Rove to be bolder during the campaign, arguing that Social Security was not the politically dangerous issue it once was. He noted that Bush won in 2000 while talking openly about a shift to private accounts.

“The more specific, the better politically,” said Graham. Such an effort “is an opportunity to tell the nation that we’re interested in solving real problems, that we’re going to level with the public on how to get there, and that we’re going to lead.”

Critics and supporters alike say any serious move toward privatization would require strong bipartisan support because it would transform Social Security’s guiding principle. The program has been a social compact in which each generation of workers paid for the benefits of retirees. Under privatization, workers would have more responsibility for what their own retirement income might be.

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Many Democrats and liberal economists do not agree that a Social Security crisis exists or that such a big change is needed to save the system.

Bush’s Democratic challenger, Sen. John F. Kerry, said last week that revamping the program required only a “tweak here, tweak there.” In campaign appearances, Kerry tries to put Bush’s ideas in stark terms, telling crowds, “I will not privatize Social Security.”

Opponents of private accounts contend that using tax credits and other incentives to help middle- and lower-income people save for their retirement could reduce the strain on the system.

“Social Security faces a long-term deficit, but calling it a crisis is an exaggeration,” said Peter Orszag, an economist at the Brookings Institution, a nonpartisan think tank. “The scale of the problem is manageable. If your car has a flat tire, you don’t get rid of the car.”

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Polls show a majority of voters back the creation of personal accounts, particularly when the question is posed without mention of potentially higher taxes or shrinking benefits.

A Gallup Poll last fall showed that more than six in 10 voters backed a shift to private accounts. But it also showed a stark generational divide -- 82% of voters younger than 30 backed the privatization proposal, but support steadily declined among other age groups, to less than 30% among those at least 65.

“People who are into the system now have no interest in changing anything because they’re worried about losing benefits,” said Frank Newport, the poll’s editor in chief.

“But for young people, many of whom aren’t convinced they’re going to get any money [from Social Security], they like the idea.”

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Although Bush aides contend that Social Security can be changed without an increase in payroll taxes, Blahous, the lead White House official on the issue, wrote a book before joining the administration that, while advocating personal investment accounts, was skeptical about any plan promising a pain-free fix.

Such proposals “are so tempting that they seduce even the most well-motivated individuals,” Blahous wrote in the book, “Reforming Social Security: For Ourselves and Our Posterity.”

Graham, while pressing the private-account idea, said he thought an effective overhaul plan for Social Security without some unpleasant consequences would be impossible.

“If you can find one, sign me up,” he said.

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