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Social Security Plan May Put Bush in Saddle

Times Staff Writer

If President Bush wants to push an overhaul of Social Security through Congress during his second term, he will probably have to do something he rarely did during his first term -- get his hands dirty.

To revamp the popular retirement program, many allies say, Bush will have to offer detailed proposals to Congress and engage in a broad public campaign to justify the changes and its cost. And he will have to ride herd on legislators to ensure they do not veer from his main goal of shoring up Social Security by allowing younger workers to invest some of their payroll taxes in private accounts.

“It’s going to take a lot of personal involvement and a lot of political capital,” said Rep. Paul Ryan (R-Wis.), a proponent of private retirement accounts.

That would be a big change in the way Bush deals with Congress. Typically, even on issues as important as last year’s Medicare overhaul, Bush has conveyed only broad goals and principles, leaving it to congressional Republican leaders to work out the details. He has become engaged only at the end of negotiations to get wayward Republicans behind him.

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The risks of that approach were amply illustrated this month when rebellious House Republicans blocked an overhaul of intelligence operations that the White House backed -- despite last-minute lobbying by Bush and Vice President Dick Cheney. The seeds for defeat were sown, lawmakers say, in Bush’s failure to engage early and to convey convincingly his commitment to the bill.

Social Security will be different, Republicans say, because Bush has made clear that it is his top domestic priority. Senior White House aides are already consulting members of Congress and conservative activists, weighing options and preparing for early action.

House Republicans may be the toughest to sell on tackling Social Security. Many fear the issue could be used against them in the midterm elections.

“No more than a double handful of Republicans would be truly excited about walking into this particular fight,” said a senior House Republican. “As a political issue, it’s been used against Republicans for a quarter century now.”

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Rep. Jim Kolbe (R-Ariz.), another advocate of Social Security overhaul, conceded that the political anxiety was so high that, even with a giant push from the White House, the idea might not fly. “This is going to be really, really heavy lifting,” said Kolbe. “It’s technical. It’s difficult to understand. And it is so prone to demagoguery.”

At issue is the long-term financial stability of Social Security. The retirement program, funded through payroll taxes, will become strained after baby boomers begin to retire. By 2019, the program will be paying out more in benefits than it collects in taxes. By 2052, the program’s trust fund is projected to have exhausted its surplus.

Bush has argued that the best way to shore up the program is to give younger workers the option of using part of their payroll taxes to invest in private accounts. That could -- with wise investing -- produce greater retirement benefits at less cost to the government. But critics have said it would also expose retirees to greater risks by privatizing one of the government’s most successful programs.

To get such changes through Congress, Bush will first have to convince lawmakers and the public that the need to change the program is urgent -- even though its problems may not come to a head for decades. His allies argue that the longer Congress waits to fix the program, the more painful the solutions.

Administration officials want to move quickly to capitalize on Bush’s postelection momentum. But they acknowledged that they needed to persuade the public and members of Congress.

“We’ll need some bully-pulpit time,” said an administration official close to the issue. “It’s not a snap-your-fingers kind of thing.”

The president is facing divisions in his own ranks, even among Republicans who support the private accounts. Their views are being heard by top White House aides, including Charles P. Blahous, an economic advisor, and political advisor Karl Rove. They have been consulting with members of Congress who have been leaders on the issue, including Ryan and Sen. Lindsey O. Graham (R-S.C.), as well as experts from conservative research groups.

Supporters of private accounts disagree over crucial questions such as how large the accounts should be and how to handle the cost of the transition to the new system.

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Ryan and Sen. John E. Sununu (R-N.H.) are pushing for robust accounts that could divert an average 6.4 percentage points of the 12.4% payroll tax to personal accounts. Graham backs a more limited plan that would divert less than half as much to personal accounts.

One Republican who has discussed the issue with White House aides said they seemed inclined to go for the more limited approach, although “the exact size is up in the air.”

Private-account advocates are also divided over how to handle the transition costs arising from Bush’s promise that benefits would remain unchanged for current retirees and those near retirement. Every dollar diverted to younger workers’ private accounts would not be available to pay benefits to retirees and older workers. The gap is estimated at $1 trillion to $2 trillion over 10 years.

The White House and its Republicans allies are trying to reframe the debate over costs so that it does not run so squarely afoul of many lawmakers’ concerns about the growing federal deficit. Some argue that initial costs are more like an investment than an expenditure, and will be more than outweighed by the long-term savings that will accrue from shoring up the system.

“We’ve got to think of this the way you think about maintaining your car: You schedule the maintenance to avoid a massively more expensive engine repair later,” said White House spokesman Trent Duffy.

That is why some Republicans are considering keeping the transition costs out of the five- and 10-year deficit projections that Congress looks at when it writes the annual budget.

“I don’t believe you can use a five-year budget window to address the Social Security issue,” said incoming Senate Budget Committee Chairman Judd Gregg (R-N.H.). “This isn’t about five years. It’s about 50 years.”

But some advocates of private accounts are fighting the idea that creative accounting can make the transition costs go away. Graham has proposed covering part of the cost by raising the annual cap -- from $87,900 to $200,000 -- on the amount of income that is subject to Social Security taxation.

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Bush has not embraced that idea and may never do so because he has promised not to raise taxes. But Graham said the White House was sensitive to deficit concerns and to his view that it would be nearly impossible to get Democratic support on a plan that adds trillions to the national debt. The administration is “in the camp that understands the transition costs are real, can’t be ignored and require some sacrifice,” said Graham.

The president has not said how or by whom the costs of changing social security will be borne. Some of his allies say he soon will have to say more to prepare the public.

“There is no such thing as fixing Social Security with no pain,” said David John, an expert on Social Security at the conservative Heritage Foundation.

Sununu is urging Bush to establish a timetable for congressional action and offer detailed proposals on crucial issues.

“It has to be substantive and specific,” he said.

John urged the White House to monitor the Social Security debate “almost minute by minute.... There’s genuine concern that if Congress isn’t given some fairly close guidance, they are going to go off in a direction that probably isn’t going to solve the problem.”


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