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Online Extra: A Senator's Radical Turnabout


Freshman Senator Lindsey Graham (R-S.C.) first made his reputation on Capitol Hill as a partisan, take-no-prisoners congressman who helped manage the impeachment of President Bill Clinton. He even helped lead a coup to overthrow then-House Speaker Newt Gingrich, who Graham and others believed was too willing to compromise with Clinton on the budget and other issues.

Today, Graham is grabbing headlines for his controversial effort to reach a bipartisan compromise on Social Security. Graham's plan would help pay for Social Security private accounts by increasing the payroll tax for workers making more than $90,000. He's also quietly meeting with a small, bipartisan group of senators to try to find common ground.

On Feb. 9, the 49-year-old Graham sat down with BusinessWeek Washington Correspondents Howard Gleckman and Lorraine Woellert to talk about Social Security and the dangers of congressional partisanship. Edited excerpts follow:

On working with Democrats to find bipartisan compromise:

I feel the pressure of the moment. We have domestic budgetary problems that are going to overwhelm the next generation of Americans. We're in a global war on terror that's going to require all of our creativity and all of our pulling together. I feel a real personal need to not let the political moment get in the way of problem solving.

The older I get, the more pressure I feel to have made my time here mean something. It would be very nice if Lindsey Graham, impeachment boy, could also be thought of as a problem solver.

On how President Bush can get a deal with congressional Democrats on Social Security:

The President is key here. He's got a lot of guts, and he's going to have to swallow hard if he wants a bill. I do not believe he's going to get a Democrat to break ranks [to support] personal accounts and borrow trillions of dollars all at the same time. That's more than they can bear.

The solution model is Ronald Reagan and [former Democratic House Speaker] Tip O'Neill. Ronald Reagan in 1983 raised tax rates. Then he agreed to put new money into Social Security to help save it for a while. That was very courageous and very nontraditional Republican politics. Tip O'Neill agreed to increase the retirement age limit to 67. You know he must have gotten a lot of heat from his colleagues. But they understood that Social Security was in a bad situation, and they rejected rigid ideology and bought us about 40 years of solvency.

On a possible compromise:

Here's the Achilles heel for Republicans: Most Americans have a belief that the government has an obligation to help people when it comes to their retirement. What I've tried to create is an environment where a Democrat can come onboard with personal accounts and tell their base that they've done it in a way that preserves the traditional government role in Social Security.

The way you do that is you write the accounts so that moderate and low-income workers -- the people who need it the most -- have a guaranteed rate of return better than the current system. In other words, as to their investment, there will be no risk. They will get more than they are going to get in the current system.

I am willing to raise the payroll tax cap to pay for the transition cost because we can't borrow our way out of every problem. If you make the tax cuts permanent to help the economy, which I'm willing to do in some measure, and you borrow all the money for the transition costs, you have unsustainable deficits.

On why business and upper-income workers should be willing to pay taxes on wages of more than $90,000 to help fund the transition to private accounts:

We're going to have to borrow money to pay for Medicare. We're going to have to borrow money to fight this war. But here is one area where maybe we could not borrow. You know what I'm asking people to do? Make a larger contribution to Social Security for the common good. You'll get most of your money back. We're asking people 20-, 21-year-olds to risk getting killed [in Iraq]. Let's put this in perspective. We're asking those of us who are making over $90,000 to put more money in the pot to start to solve the Social Security problem.

We're underestimating the will of the American people to make sacrifices to this country. Maybe if we asked the public to do something hard, they might. When's the last time anybody up here asked the public to sacrifice for the common good?

On the need for benefit cuts, such as changing the way benefits are indexed for inflation:

Nothing works without index changes. There is no way the accounts can save Social Security. They will never generate enough money to make Social Security solvent. We're having this great philosophical debate about a small part of the solution. The accounts have only one utility. The chance of getting a better rate of return from bonds and stocks is huge. Every dollar you get in additional growth over the current growth rate of 1.5% becomes a dollar to pay people without having to raise taxes or cut benefits [so much]. It would be crazy to take that option out of the mix.

But here's what you have to do to help get Social Security on sound footing: You have to recalculate future benefits. The promise we are making is a lie. You either raise taxes or you cut benefits. Make a promise you can keep. The defined benefit is going to be reduced one way or another. Let's institutionalize a growth rate we can afford.

On partisanship in Congress:

The fact that you are writing stories about me and a small group of senators talking about Social Security is a sad commentary on the country. I guess I've been to blame -- some of my past actions polarized the nation -- but we've got to start focusing on where can we find common ground and pick issues that would bring America together. Just park your political differences for the time being. See if you can solve a problem or two. That shouldn't be news, but it is.

If it's political heresy for Democrats to talk to me or other Republicans about private accounts, then we have really taken the great traditions of the Senate and thrown them in a ditch. If it's political heresy for a guy who is a Republican to talk about finally paying for something instead of borrowing for everything, then I think our party has gotten so entrenched that we can't serve the public.

On the reaction from his fellow Republicans:

We're breaking into camps now. Everybody is playing political team ball right now. Our Democratic friends are signing letters saying what they won't do. You've got a bunch of Republicans who are saying, "I'll never cross this line in the sand." If we continue that kind of politics, Social Security will enter a death spiral.

Sometimes you get pushback. That's not a deterrent to me -- it's just part of politics. I think I'm a pretty good Republican. I'm a darn good Republican. I want to be a good American, too. The Republican party can't solve this problem by itself.

On his reputation as a maverick:

I am on some issues. What's sad is that the idea of doing business across party lines is being replaced by constant campaigning. Once the campaign is over, somebody has got to govern.

The labels that people put on me, I have no control over. In the same week, I'm a right-wing nut on one issue, a maverick on the next. That just comes with the territory. What I'd like to be thought of when all is said and done is he represented South Carolina very well and he tried hard to solve problems.

On running for President:

You get a car and house and a plane, it's a pretty good deal. Trust me, that isn't on the radar screen.


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