Wednesday, January 19, 2005

New Doubts On Plan For Social Security
New Doubts On Plan For Social Security
Hill Republican Seeks Review of System

By Mike Allen and Jonathan Weisman
Washington Post Staff Writers
Wednesday, January 19, 2005; Page A01

House Ways and Means Committee Chairman Bill Thomas (R-Calif.) predicted yesterday that partisan warfare over Social Security will quickly render President Bush's plan "a dead horse" and called on Congress to undertake a broader review of the problems of an aging nation.

Thomas, one of Capitol Hill's most powerful figures on tax policy, is the highest-ranking House Republican official to cast doubt on the president's plan for creating individual investment accounts. He said that as an alternative, he will consider changes such as replacing the payroll tax as Social Security's financing mechanism and adding a savings plan for long-term or chronic care as "an augmentation to Social Security payments."

"What I'm trying to get people to do is get out of the narrow moving around of the pieces inside the Social Security box," Thomas said at a forum on Bush's second term sponsored by the National Journal. "If we miss this opportunity . . . I think we will have missed an opportunity that may not present itself for another 20 years."

Bush's plan for allowing younger Americans to divert a third or more of their payroll taxes into private investment accounts to enhance their long-term benefits has drawn fire from Democrats, who say it is a risky step toward partial privatization of Social Security. Many Republicans have expressed reservations about the political wisdom of Bush's vision for restructuring the nearly 70-year-old retirement and income security program, and Thomas's comments will fuel the controversy.

The mercurial Thomas, whose chairmanship of the tax-writing committee allows him to heavily influence the fate of Bush's domestic agenda, also said he wants to consider revisions to the tax code simultaneously with debate over Bush's private-account proposal. The White House had indicated a preference to put off revisions to the tax code until next year.

"Sometimes elevating it to a larger, universal solution makes it easier because you bring more people to the table," Thomas said. "The problem with Social Security, narrowly, is that it becomes more of a partisan issue than you would like."

Perhaps most provocatively, Thomas said lawmakers should debate whether Social Security benefits should differ for men and women, because women live longer. "We never have debated gender-adjusting Social Security," he said. A House leadership official said that not even Republicans on Thomas's committee would vote for that idea. Thomas also said the system might take into account the need of blue-collar workers to retire younger than office workers.

White House spokeswoman Claire Buchan would not comment on Thomas's "dead horse" pronouncement but said Bush understands he will have to work with Congress on any Social Security deal. "The president values Chairman Thomas's views and looks forward to working with him and other members of Congress as we press forward on very important issues facing the American people," she said.

Bush has spoken generally about his plans for Social Security, and he is expected to expand on his concept when he delivers his State of the Union address Feb. 2. But the administration has not submitted a detailed plan for creating the new investment accounts and covering the potentially huge costs associated with the transition to the new system.

Thomas's comments, which took the White House by surprise, reflected some Republicans' view that the White House has mishandled the plan's rollout and that a fresh start is needed to allow a chance for getting Democratic support.

Speaking two days before Bush's second inauguration, Thomas said Bush's plan as it has been described "cannot, given the politics of the House and the Senate," win passage in both chambers.

"Every breath that's spent on discussing that plan is an attempt to lay a political ground war for the next election," Thomas said. "Save those breaths. Talk about what we need to do now that the president's plan is on the table so that we can address, in a legislative way, a solution on a bill the president could sign. That would be, I think, a positive gesture. And I'm looking forward to those discussions and not a continual beating of what will soon be a dead horse of their proposal."

The chairman's staff said the "dead horse" comment was a reference to Thomas's expectation that Democrats would continue to harp on what they view as politically damaging elements of the plan even if they have been modified.

Gene B. Sperling, who chaired the National Economic Council in the Clinton White House and participated in the panel with Thomas, said the chairman's comments pointed the way to a possible compromise that would include many Democrats.

"Thomas was accusing the White House and many Democrats of being stuck in their ideological corners, and he wanted to broaden the debate," Sperling said.

White House officials have said they believe that Social Security legislation must pass this year if it is going to be enacted in Bush's second term, but several lawmakers said Thomas's ideas sounded like a multi-year endeavor. Thomas said he will start with the idea that the legislation can be completed in a year.

Social Security is funded by taking 12.4 percent of a worker's wage and sending that money to current beneficiaries. An additional payroll tax funds Medicare. Thomas said the payroll tax can be "a problem or a culprit in trying to create more jobs."

"There are other ways to achieve revenue increases that -- in fact, by changing the tax code -- enhance business's competitiveness, rather than retarding it," he said.

The tax is considered regressive because it is levied on the first $90,000 of income and higher earnings are untaxed, meaning that poorer people pay a higher percentage of their income to Social Security than rich people. Thomas would not say what alternative he favors, but the most obvious would be through a higher income tax.

Even some White House economists are speaking of "thinking outside the box" on Social Security financing, said a White House official, who spoke on the condition of anonymity because the president's plan has not been unveiled.

Thomas was asked several times if Bush's plan for personal accounts would be an essential part of the package. He did not directly answer, although he said the bill would have to be attractive enough so that Bush would sign it.

Staff writer Charles Babington contributed to this report.