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Social Security: It'll Take A Helluva Sales Job


If sowing the seeds of freedom around the world was the keystone of President George W. Bush's sweeping Inaugural Address, a central focus of his Feb. 2 State of the Union message will be a subject much closer to home: an ambitious effort to "modernize" Social Security. But just as Bush's foreign policy vision met with skepticism abroad, his dream of a U.S. Ownership Society built on the bedrock of private retirement accounts is running into heavy opposition -- from dug-in Democrats, the seniors lobby, social conservatives who would rather defend marriage than define benefits, and a growing chorus of worried congressional Republicans. Plenty of voters aren't convinced, either. In a Jan. 12-16 ABC/Washington Post poll, only 38% of those polled approved of the way Bush was handling Social Security.

Bush hopes to frame the drive to revamp Social Security as both an economic necessity and a moral imperative for future generations. And he'll hear plenty of applause from the GOP side of the aisle. But the President knows that the political ground has been shifting out from under him on Social Security. As a result, the White House is scrambling to regain the initiative after a rocky kickoff to reform.

STICK TO HIS GUNS?

The Administration has yet to put a specific plan on the table, although Bush promises more details in his upcoming speech to Congress. But already, Senate Republicans, many of them terrified of voting to reduce promised benefits for future retirees, are working feverishly to find Democrats willing to back a compromise. And, uncharacteristically, a stick-to-its-guns White House already has begun floating more modest alternatives to its initial agenda.

In a Jan. 26 press conference, Bush repeatedly offered to negotiate with Hill Democrats. And, to shore up his own wavering party, he met with top GOP leaders on Jan. 25 and 26. His pre-State of the Union selling job was to culminate on Jan. 28, when Bush was expected to make a rare personal pitch for reform to rank-and-file congressional Republicans at a retreat at the Greenbrier resort. "He has to knock it out of the room, or he is in deep trouble," says one top Republican aide.

For their part, Demo-crats are shaping their own strategy. A handful of moderates are talking to middle-of-the-road Senate Republicans about possible compromises, although the talks are going slowly. Says Senator Lindsey O. Graham (R-S.C.): "The hope is that in the next month we can establish a solid bipartisan beachhead." But, Graham concedes, "in the early hours on the beach, we are being hit pretty hard."

Democrats reject the cornerstone of Bush's plan: allowing workers to shift a chunk of payroll taxes from the basic Social Security system to their own investment accounts. That would reduce the money available to pay benefits to current retirees and shrink promised basic benefits for future pensioners. Says former Congressional Budget Office Director Rudolph G. Penner, a longtime supporter of revamping Social Security: "Any notion of an individual account financed by carving out payroll taxes truly is a dead horse."

Instead, some Democrats are pushing for a plan known as an add-on account, an idea first proposed by Bill Clinton. These Democrats, such as former Clinton aides Gene B. Sperling and Peter R. Orszag, argue that Republicans have a point when they say Americans are not saving enough for retirement. But, they insist, private saving should occur outside of Social Security. So they would retool existing individual retirement accounts or 401(k) plans by making them more attractive to lower-income workers. That could be done by turning the current tax exclusion for annual contributions into a credit, a setup that benefits people in lower tax brackets. They are also talking up the ideas of a government match for the contributions of low-income workers and making workers automatically enroll in the plans, unless they take steps to opt out. Bush aides and most Republicans say such a proposal is a non-starter, but Penner and others think it could form the basis of an eventual compromise.

OPEN TO IDEAS

For its part, the White House has been hinting that it is also open to negotiating over the other piece of the Social Security puzzle: how to close the gap between the benefits government has promised and the resources it has available to pay them. Narrowing that gap would require the painful steps of benefit cuts or tax increases -- moves that most pols are unwilling to make. In early January, Bush aides hinted he might change the way a retiree's initial Social Security check is figured. Today, first-year benefits are tied to increases in average wages during a retiree's working life. In the new system, they would be linked to changes in prices -- a shift that would trim promised benefits by as much as 40% by 2075. Now, after that idea was widely criticized, Administration aides are hinting at a more modest changes that would skew reductions in future benefits to upper-income retirees.

This early maneuvering is unlikely to result in real horse-trading until Bush lays a specific plan on the table. But the unexpectedly strong resistance to his call for sweeping change has sent a signal to the White House: It must be willing to swallow changes that fall short of the President's ambitious goals or face a rare defeat on a signature initiative.

By Howard Gleckman and Richard S. Dunham in Washington


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