Social Security Up for Discussion

President Bush at a recent Rose Garden speech, with several Cabinet members, including Treasury Secretary Henry M. Paulson Jr., right. Paulson says the administration is seeking a bipartisan discussion on Social Security.
President Bush at a recent Rose Garden speech, with several Cabinet members, including Treasury Secretary Henry M. Paulson Jr., right. Paulson says the administration is seeking a bipartisan discussion on Social Security. (By Pablo Martinez Monsivais -- Associated Press)
By Lori Montgomery
Washington Post Staff Writer
Wednesday, November 22, 2006

With the elections over and Democrats poised to take control on Capitol Hill, the Bush administration is making a fresh push to persuade them to help rein in the rising costs of Social Security and government health-care programs by offering to open talks with "no preconditions."

Treasury Secretary Henry M. Paulson Jr., the president's point man on Social Security and other entitlement programs, said in an interview yesterday that he has had "a number of . . . very, very general, very preliminary conversations" with lawmakers from both parties about the issue since Election Day, Nov. 7.

So far, "it's too early in the aftermath of the election to know whether we're going to get traction," Paulson said, adding that he is "going to make a huge effort to persuade people to engage in a bipartisan discussion where we don't precondition our discussion."

"No preconditions," Paulson said, means both sides get a chance to put their ideas on the table. In regard to Social Security, administration officials said that means President Bush will continue to advocate that younger workers be allowed to divert a portion of their Social Security taxes into private retirement accounts, a proposal Congress roundly rejected last year.

It also means that the White House is willing to listen to other ideas, administration officials said, including personal savings accounts that do not involve diverting Social Security taxes, as well higher payroll taxes to help cover a projected explosion in Social Security costs after members of the baby boom generation begin to retire in 2008.

"We're in a listening mode," said Rob Portman, director of the Office of Management and Budget, who has also been spending a lot of time since the election talking to key Democrats about entitlements. "The president wants to listen. He wants to hear what the leaders on Capitol Hill think is the best way to go. He's not wed to any particular approach."

Political analysts said the outreach campaign is a sign that Bush may be willing to compromise to make progress on Social Security, an issue he has consistently identified as one of the top priorities for his second term. Weakened by low approval ratings, a chaotic and unpopular war in Iraq, and his party's loss of control of both houses of Congress for the first time in 12 years, Bush may see Social Security as an issue on which he could score points before leaving office in 2009, analysts said.

Bush's former chief economic adviser, Lawrence B. Lindsey, added to that speculation on Monday, after writing in the Wall Street Journal that Bush "may be willing to raise taxes as part of a 'deal' on entitlement reform." Specifically, Lindsey wrote, the administration might agree to lift the cap that limits Social Security payroll taxes to the first $90,000 of income, thereby raising total taxes, but not tax rates, for high-income workers.

"Bush has been on a losing streak. The question is: Is he going to attempt to save his legacy by giving the Democrats everything they want on Social Security and passing a big Social Security bill with his name on it?" said Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute. "It could be that's what we're looking at next year."

While Paulson and Portman are talking about consensus, some Democrats worry that Bush is still determined to pursue the idea of private accounts. Many of them oppose such accounts on the grounds that they would weaken Social Security overall. That fear was fanned last week when Bush appointed Andrew G. Biggs, a proponent of Social Security privatization, to the agency that runs the program.

"This nomination of Biggs is very troublesome," said Rep. Sander M. Levin (D-Mich.), who is in line to chair a House subcommittee on Social Security. "The president is sending signals that what he's really after is privatization. And that's just a non-starter."

Other Democrats want Bush to explicitly put taxes on the table, including elimination of some of his signature tax cuts, instead of focusing exclusively on restraining the escalating costs of Social Security, Medicare and Medicaid. The big three entitlement programs eat up 8 percent of the country's total economic output and are projected to double in cost over the next 50 years, creating a budget hole that must be shrunk by cutting benefits or filled by raising taxes.

Rep. Charles B. Rangel (D-N.Y.), who is to chair the tax-writing House Ways and Means Committee, had lunch last week with Paulson and said he came away impressed. The secretary, he said, is "a straight shooter" who agreed to attend a retreat that could take place as early as February where Ways and Means committee members will look for common ground with the administration on fiscal issues. But entitlement reform is unlikely to be part of those discussions, Rangel said.

"I don't know whether we're secure enough with each other to start on these very sensitive issues," he said.

Also yesterday, the White House released its final economic forecast before submitting its budget for fiscal 2008. In a conference call with reporters, Edward Lazear, chairman of the Council of Economic Advisers, said Bush's top economic advisers, like many private forecasters, expect the economy to grow a bit more slowly next year, at an annual rate of 2.9 percent. That would be a bit below the average growth rate of the past three years, when the economy grew at an annual rate of about 3.2 percent.

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