The fate of President Bush’s proposal to partially privatize Social Security is yet unclear. Democrats in Congress seem largely united in opposition and many Republicans have been signaling that supporting the President’s plan may be too politically costly. The social conservative wing of the party appears lukewarm and some moderates such as Sen. Olympia Snowe (R-ME) balk at drastic program changes with large price-tags (the President’s plan is said to require borrowing around $4.9 trillion over twenty years).
Treasury Secretary Snow and other officials have tried to suggest that the administration is open to some level of compromise, but suggestions that the cap on payroll taxes could be raised were criticized severely by Republican House Majority Leader Tom Delay and House Speaker Hastert on February 17. Then, Snow’s suggestion on March 2 that the Administration might be open to creating private accounts that would be “add-on” accounts (rather than accounts funded by diverting payroll taxes) was criticized by conservatives like Rep. Mike Pence (R-IN) and Senator Sununu (R-NH), who fear creating a new entitlement program on top of traditional Social Security.

While the White House tried to please both conservative Republicans and the moderates of both parties, Senate leadership seemed to cast doubt on whether the President’s proposal had any chance to succeed. Senate Majority Leader Bill Frist said it was unclear whether Congress would pass Social Security legislation in “a week, a month, six months or a year.” A few days later Frist changed his tone and said “We need to do it this year — not next year, but this year.” Not all Republican Senators seem so sure; Senator Grassley, Chairman of the Senate Finance Committee that will oversee any Social Security overhaul, said at the end of last week, “I think it’s very difficult for me to say today that we’ll present a bill to the president.”

With several polls showing that the majority of Americans do not support diverting money from Social Security to create private accounts and Congressional support faltering, the White House attempted to start reclaiming the debate with its “60 Stops in 60 Days” campaign begun at the start of March. . Efforts to regroup supporters of the President’s proposal in Congress are expected to commence in the weeks ahead. Rep. Anne Northup (R-KY) was selected by House Republican leaders to chair a new Retirement Security Public Affairs Team that will work to win support for private accounts, although she is not one of the legislators associated with various Social Security proposals in Congress.

Social Security came up at a few points during the budget debates that monopolized Congress’s time in the week before the March recess, and many symbolic amendments pertaining to Social Security came up for a vote. For example, 50 senators voted to “express the sense of the Senate that Congress should reject any Social Security plan that requires deep benefit cuts or a massive increase in debt.” The fact that five Republicans joined the Democrats to vote for this resolution seems to suggest that the President lacks the 60 senators needed to overcome a filibuster on his own proposal, which would clearly increase the national debt and reduce benefits. The one substantive move related to Social Security that was approved by the Senate was a successful amendment offered by Sen. Jim Bunning (R-KY) to take money away from Medicare to raise the Social Security benefits of well-off seniors by reducing the taxes they pay on benefits. The Bunning amendment added an eye-opening $59 billion to the deficit – deepening tax cuts in the budget resolution (see budget story).

It is unclear how this amendment will be seen in light of Congressional testimony days later by two of the trustees (one Democrat and one Republican) charged with overseeing Social Security and Medicare. They testified that the shortfall in the Medicare program is nearly six times as large as the projected shortfall in Social Security. The Medicare shortfall appears to be both very real and far more imminent, fueled in part by the prescription drug provisions approved by President Bush. Their testimony coincided with the release of a report by the Social Security and Medicare Boards of Trustees. The two trustees highlighting the financial problems of Medicare, who are also the only trustees not appointed by President Bush, wrote separately to highlight their point.

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