Wednesday, April 27, 2005

GOP May Be Splintering on Social Security

GOP May Be Splintering on Social Security

By Jonathan Weisman and Michael A. Fletcher
Washington Post Staff Writers
Wednesday, April 27, 2005; A04

A badly divided Senate Finance Committee yesterday held the first hearing examining President Bush's efforts to restructure Social Security. While the Democrats remained united in their opposition, there were signs of cracks in the Republicans' support for the president.

After months of political positioning, the stakes were high as the committee took up Bush's signature domestic issue for his second term. The White House has framed the Social Security debate as a matter of political courage, challenging both parties to secure the program's long-term solvency while giving all Americans an ownership stake in their economy. But over the course of the president's Social Security tour, public support for Bush's proposal has fallen, and Democrats see the issue as their best chance to make political gains in Washington.

With that highly charged backdrop, Republican divisions at the hearing had added significance.

One GOP witness repeatedly disparaged the White House's approach to Social Security changes, bolstering Democratic contentions that it would lead to politically untenable benefit cuts. Sen. Craig Thomas (R-Wyo.) questioned the wisdom of adding trillions of dollars in federal debt in the coming decades to finance the president's plan. And Sen. Olympia J. Snowe (R-Maine) seemed to signal intractable opposition to converting part of the defined Social Security benefit to variable returns from stock and bond investments.

"Social Security became the bedrock of support for seniors in my state precisely because it's defined and guaranteed," she said. "What cost and what risk is it worth to erode the guaranteed benefit?"

Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) told reporters after the hearing that he is determined to press forward with Social Security legislation, even if it passes out of his traditionally bipartisan committee with only GOP votes. Republicans on the panel will meet in two weeks to begin hashing out legislation that Grassley hopes could eventually bring some Democrats on board.

But he did not express much hope. Senate Majority Leader Bill Frist (R-Tenn.) is not likely to bring a partisan bill to a vote in the full Senate because any Social Security change will need 60 votes to pass, he said. To get Democratic votes, Grassley said, he could drop the centerpiece of the president's plan, the creation of private investment accounts through the diversion of Social Security taxes. But doing that would cost him critical Republican support, he said.

"I could fail," he conceded. "If we can't get some Democrat support, I do fail."

Bush was in Galveston, Tex., yesterday, marking the 23rd state he has visited on his nearly completed "60 stops in 60 days" Social Security tour since outlining the details of his private account plan in February during his State of the Union address.

Bush's appearance was intended to highlight the retirement programs that cover workers in Galveston and two nearby counties, Brazoria and Matagorda. Workers in those counties opted out of Social Security in the early 1980s, switching to private plans that proponents say offer workers better benefits than the federal retirement system -- something Bush said could be duplicated if Congress enacts his plan to allow workers to divert nearly a third of their Social Security taxes into personal accounts.

The accounts offer "a better deal for younger Americans," Bush said, adding, "I like the idea of people owning something."

Five months after Bush launched his drive to restructure Social Security, all of the pitfalls of his efforts were on display yesterday before the Finance Committee. Democrats -- even those identified as potential swing voters -- were united in their opposition, appearing en masse at a Capitol Hill rally after the hearing to underscore the point.

"I've always been one who thought that there was a kernel of a good idea in individual accounts, but I never thought it was a good idea to finance personal accounts with massive debt," said Sen. Kent Conrad (N.D.), a committee member who has been wooed by Bush.

On the other side, Republicans appear to be splintering in the face of falling public support for the president's private accounts plan. Peter Ferrara, a Republican witness and director of the Social Security project at the Free Enterprise Fund, took repeated swipes at the White House for overemphasizing the need for benefit cuts; refusing to draft a detailed, comprehensive plan; and failing to anticipate the criticism that has weakened the restructuring movement.

Some committee Republicans made favorable comments about the plan of another witness, Massachusetts investment executive Robert Pozen, who would slow the growth of Social Security benefits for middle- and upper-income beneficiaries by using the growth of prices over their careers to help determine initial benefit levels. Currently, initial benefits are determined by the growth of wages.

But Ferrara warned Republicans that under such a plan, Social Security benefits would replace less and less of a senior's pre-retirement income. Returns on Social Security taxes would worsen each year. Ferrara warned Grassley after the hearing that Pozen's approach could be politically disastrous for the GOP.

His alternative would allow workers to contribute their entire 6.2 percent share of Social Security taxes to private accounts, a huge hit on the Treasury that would be made up over 75 years by $7 trillion in unspecified federal spending cuts and assumed economic growth because of a surge of private investments from those accounts. Absent such spending cuts, the government would incur trillions of dollars in additional debt, a prospect that did not sit well with some Republicans.

"Our debt is very high now, and to say we need to add more, that troubles me greatly," Thomas said after the hearing.

Fletcher reported from Galveston.