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Heeding the Voters' Call

By George Hager
Washington Post Staff Writer
Thursday, November 5, 1998; Page D01

Get ready to hear a lot more about an overhaul of Social Security.

House Republicans went into Tuesday's election promising to make deep tax cuts next year but emerged stressing the need to first ensure the financial future of the Social Security system.

"I am prepared to lead a bipartisan effort in the Congress and I'm counting on you to do your part," Bill Archer (R-Tex.), chairman of the House Ways and Means Committee, said yesterday in a letter to President Clinton, asking him to submit a "legislative initiative that is second to none."

Neither party has committed itself to support specific changes in the popular retirement program, and Republicans clearly want Clinton to go first.

Still, Archer's statements represented an important shift for House Republicans who had pushed unsuccessfully for big tax cuts this year only to be burned by Democrats' apparent success using Clinton's call to "save Social Security first" in several fall races. For demographic reasons, the program will face serious funding problems over the next three decades.

By losing five seats in the House and failing to pick up any seats in the Senate, Republicans find themselves still in the majority but stuck with the same math that blocked them from agreeing among themselves to tax cuts this year.

House Republicans passed an $80 billion, five-year tax-cut plan in September, but it died in the Senate after President Clinton and Democrats attacked it for spending a federal budget surplus they said was built largely with Social Security funds.

"You've got to look at Social Security like a cork in a bottle," said Ari Fleischer, a spokesman for Archer. "If you can't get the cork out of the bottle, nothing else is going to come out."

Meanwhile, Wall Street, which prefers stability over uncertainty, appeared heartened by the election results, interpreting them as a signal that plans to impeach the president will probably simmer down. The Dow Jones industrial average jumped 76.99 points, or 0.9 percent, to 8783.14 yesterday in what some analysts took as a modest sign of relief that Congress will likely turn to other issues next year.

Whether Archer's plan will govern GOP strategy next year remains to be seen. The chairman of the tax-writing committee could find himself competing with other GOP heavyweights to set the agenda. House Budget Committee Chairman John R. Kasich (R-Ohio) has proposed a 10 percent across-the-board tax cut for next year, and House Speaker Newt Gingrich seemed to give both priorities equal weight in a post-election news conference yesterday.

"We should have been more aggressive where John Kasich and Bill Archer were trying to lead us, and that was to have a very aggressive tax-cut program and to be very aggressive about saving Social Security using the [federal budget] surplus," Gingrich told reporters.

There are powerful reasons for Clinton and congressional Republicans to seek a bipartisan Social Security fix: both sides' desire for an accomplishment to take to voters in 2000, Clinton's hunger for a political legacy other than the Monica Lewinsky scandal, and the prospect that solving the Social Security problem could free up some of the budget surplus for tax cuts and more spending on defense and domestic programs.

But serious obstacles loom. Republicans would almost certainly reject any proposal to raise the payroll taxes that fund the program, while Democrats are wary of plans to cut benefits. The two sides also disagree over whether and how to allow Social Security fund assets to be invested in the stock market.

There also is almost none of the urgency that drove both sides to compromise over the last major overhaul in 1983. When Congress approved a package of tax increases and benefit cuts that March, the Social Security trust fund was four months from bankruptcy. Although the program is expected to undergo serious strain when baby boomers retire in the next century and the population of tax-paying workers declines, bankruptcy is technically 34 years off, not just months away.

"I don't want this to be the outcome, but . . . we might be looking at a stalemate," said G. William Hoagland, chief of staff of the Senate Budget Committee.

Archer plans to hold a hearing Nov. 19 on how to overhaul Social Security. The White House will hold the last in its series of conferences on the topic Dec. 8-9 in Washington, after which Archer and others will be watching for Clinton to propose fixes the administration could live with. Those proposals might not emerge until the president's State of the Union address or his budget proposal early next year, if then.

"We have not made any decision as to the question of a specific proposal," said White House spokesman Barry Toiv. "The president will take whatever steps he thinks are necessary to achieve a comprehensive, bipartisan approach."

In the meantime, though, both parties may be driven to accommodation on Social Security by a shared desire to spend the federal budget surplus, which could provide funding for tax cuts plus spending for defense readiness efforts and administration priorities in education and other social programs.

Economists are beginning to warn, however, that the surplus may not be big enough to accommodate all the plans that policymakers have. While the Congressional Budget Office is projecting a surplus of about $80 billion next year, private forecasters are already knocking down that number. James Glassman, senior U.S. economist for Chase Securities Inc., said the surplus could fall to somewhere between $25 billion and $50 billion next year, after accounting for slower economic growth and last-minute spending in the "omnibus" bill Congress approved just before it left town last month.

"It's quickly getting eaten up, and it will be eaten up by the slowdown if they're not careful," Glassman warned.

© Copyright 1998 The Washington Post Company

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