Social Security Plan Hits Shoals

WASHINGTON —  After six months of presidential speeches, town meetings and maneuvering over White House plans to overhaul Social Security, Republicans are coming to grips with an unpleasant reality: The central pillars of President Bush’s proposal have crumbled on Capitol Hill.

It has become increasingly clear that if Congress passes Social Security legislation this year -- and that is a big “if” -- it will be a shadow of Bush’s ambitious plan to shore up the retirement program’s finances and to allow younger workers to divert payroll taxes into individual investment accounts.

Republicans are loath to write an obituary for the president’s initiative yet; some hope to salvage a Social Security bill that, however far from his original plan, Bush can embrace as a triumph.

Still, allies and analysts are puzzling over how the president and his vaunted political machine could find themselves in such a weak position on this bedrock issue, in which Bush has invested more time and political capital than in any other domestic issue of his presidency.

Bush’s struggle is a testimony, in part, to how complex and politically risky it is to propose any change in Social Security. But some analysts say it is also a product of a mismatch between the president’s leadership style and the challenge he faces. The uncompromising, provocative style that has made Bush a commanding leader in foreign policy is more problematic when he takes on a tough domestic issue that cries out for flexibility and bipartisan cooperation.

“He was reading his press clippings from foreign policy, where he could get away with just about everything, and thought he could make that leap to domestic policy,” said Michael A. Genovese, director of the Institute for Leadership Studies at Loyola Marymount University. “That was a political miscalculation that is unusual for a team that doesn’t make that many mistakes.”

Other analysts point to key White House assumptions that proved unfounded -- that a campaign-style push by the president could produce a wave of public support for personal accounts, that Democrats could be drawn into working with the White House and that Republicans would rally behind Bush despite the political risks of revamping Social Security.

Those risks are well known. Although Social Security is expected to become insolvent in 2041, after the baby boom generation has retired, politicians are wary of embracing the tax hikes or benefit cuts that will probably be necessary to solve the problem.

Bush has proposed individual accounts as a possible way to make up for the likely benefit cuts, assuming workers would get a better return by investing part of their payroll taxes in stocks and bonds. The accounts also are a cornerstone of the conservative view that government should do more to foster ownership and individual choice rather than providing guaranteed benefits.

But despite months of administration efforts to sell those ideas, the political climate remains inhospitable.

Republicans are split over policy and strategy. Democrats remain united in opposition. And polls show that the public is even less supportive of Bush’s ideas than before he launched his push.

“I had hoped there would be, after four months, a firestorm of support for accounts, especially among young people,” said Senate Finance Committee Chairman Charles E. Grassley (R-Iowa). “It’s not there. I’m very disappointed.”

Many Republicans now are effectively conceding defeat of the president’s most ambitious plans -- by looking for an exit strategy or a stripped-down alternative for which Bush could claim credit. But the fallback positions being developed underscore how much Bush may have to abandon to eke out a victory.

One alternative, by Sen. Robert F. Bennett (R-Utah), would address Bush’s goal of ensuring the program’s solvency but would not establish personal accounts.

Another, embraced by Bush allies including Sen. Jim DeMint (R-S.C.), would establish limited personal accounts financed with the surplus payroll taxes that Social Security is expected to raise each year through about 2017. It would do nothing to ensure the program’s long-term solvency.

Some who support DeMint’s bill admit that, although it may pass the House, the legislation is as unlikely to pass the narrowly divided Senate as Bush’s original proposal. But they believe the new plan at least puts Republicans in a stronger political position for the 2006 elections, because it aligns them with the popular view that Social Security surpluses should be used only for Social Security -- not used to pay for other programs, as the surpluses are now.

“It’s looking more and more likely nothing is going to happen this year,” said Steve Moore, a leading proponent of individual accounts who has worked at several public policy research organizations. “But this allows the Republicans to seize the moral high ground.”

White House spokesman Scott McClellan said that Bush had not given up on personal accounts or on fixing Social Security’s finances. But, he said, Bush welcomed the introduction of alternatives. “The president believes this is a time when we ought to be welcoming all ideas and putting ideas on the table, not taking ideas off the table,” McClellan said.

Other proponents of overhauling Social Security say they are discouraged that they have not made more headway.

“I underestimated how hard it would be,” said Sen. Lindsey Graham (R-S.C.). “What was real optimism before has become more realistic now. I’m just frustrated.”

That frustration is a far cry from the hope Republicans felt after Bush was reelected in 2004 with a bigger Republican majority in Congress. Bush pledged to use his “political capital” to overhaul Social Security.

He made the issue the centerpiece of his State of the Union address in February. Over the next few months, he brought dozens of Republican lawmakers to the White House to urge action. He traveled the country for a long series of “conversations on Social Security.”

Yet the public seems unmoved. In a New York Times/CBS poll this month, two-thirds of those surveyed were uneasy about the president’s ability to make sound decisions on Social Security. And 45% said that the more they heard about Bush’s plan, the less they liked it.

“I am disappointed with the public,” Graham said. “They recognize it’s a problem, but there’s no pressure on any of us to solve it.”

Graham suggested that the debate got off on the wrong foot when Bush, in the 2004 campaign and initially after his reelection, emphasized the benefits of personal accounts as a way to increase workers’ ownership of their retirement savings. That line of argument, Graham said, may have unnerved the many people who want Social Security to be their safety net, not a vehicle for expanding their investments.

“I thought the first thing you do is tell people it’s a safety net program and will continue to be,” Graham said. “That message would have been a better approach, rather than talking about transforming Social Security into an investment plan.”

Grassley said that Bush had failed to galvanize the public because his two aims -- restoring solvency and establishing accounts -- were unconnected.

“Originally, he led people to believe [the personal account plan] would solve the solvency problem, and it doesn’t,” Grassley said.

A key part of Bush’s strategy was to defuse opposition among the elderly by promising people 55 and older that any changes would not affect them.

But Sen. Ben Nelson of Nebraska, one of the few Democrats who has been open to personal accounts, said many retirees remained unconvinced.

The biggest surprise for everyone involved has been how unified Democrats have remained in opposing Bush, and how organized their allies have been. When Republicans went home for a February recess and held town hall meetings on Social Security, many were swarmed with angry opponents of Bush’s plan.

“They were surprised by how fast and furious the opposition was,” said Michael Tanner, a Cato Institute analyst who is a proponent of personal accounts. “By the time the business groups got organized [to support Bush], the opposition had already been beating up on personal accounts for two months.”

Many Republicans expected the Democrats to be chastened by their 2004 election losses and fearful of being labeled obstructionists. But Democrats have seen little political risk in blocking an idea that has seemed so unpopular with voters.

“It’s the right thing to say ‘no,’ because Social Security is the one government program that people understand works,” said Dan Maffei, spokesman for Democrats on the House Ways and Means Committee.

In recent days, Republicans have tried to turn up the heat on Democrats, chiding them for offering no alternative proposals.

“Their voters didn’t send them down here and pay them a big salary and let them retire on a nice congressional pension and at the same time refuse to address the obvious flaws and problems that are in Social Security today,” Vice President Dick Cheney said in a CNN interview Thursday.

One Bush ally who never expected Democrats to cooperate is Grover Norquist, president of Americans for Tax Reform. He believes the Senate will not pass an overhaul until Republicans win more seats, which he expects to happen in 2006. Norquist argues that the White House should not have tried to woo Democrats with such concessions as entertaining the possibility of tax increases and benefit cuts, which angered Bush’s Republican base.

“They entered into a conversation with fictional Democrats,” Norquist said. “ ‘Imagine a Democrat who’d be willing to vote with us. What might we offer him?’ The problem is, they didn’t have a real person in mind.”

One political advantage of DeMint’s stripped-down alternative is that it includes none of the tax hikes and benefit cuts that dismayed conservatives.

But for now, Bush has not agreed to that fallback plan and still is calling for bigger accounts and a permanent fix for the program’s financing.

“You know, some in Washington wish I hadn’t brought it up,” Bush said last week in Maryland at his 37th “conversation” on Social Security. “I see a problem and believe my job is to address problems and not pass those problems onto future presidents, future Congresses or future generations.”

Bush’s persistence -- which foes call stubbornness and friends call strong leadership -- is one of his political trademarks. It is the quality that has kept him from making major policy changes in Iraq even as public support for the military operation has declined.

“He really believes in this,” said Rep. Sherwood L. Boehlert (R-N.Y.), who has remained skeptical of Bush’s plan. “But he hasn’t convinced a lot of other people it’s the right way to go.”

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Times staff writer Warren Vieth contributed to this report.