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To: Lane3 who wrote (113465)	5/13/2005 10:23:39 AM
From: Lane3	Respond to of 793806

GOP Battles Public Displays of Division on Social Security Republicans on House Panel Debate Size of Proposed Private Accounts, Need to Cut Future Benefits By Jonathan Weisman Washington Post Staff Writer Friday, May 13, 2005; Page A09 In October 2001, with the White House divided over the steps necessary to preserve Social Security, then-economic adviser R. Glenn Hubbard presented President Bush the stark choices that he believed Bush had to make: raise revenue or cut promised benefits. Hubbard prevailed over other White House advisers who argued that large private investment accounts and trillions of dollars in government borrowing could ensure Social Security's long-term solvency with no benefit cuts whatsoever. But 3 1/2 years later, the fissures that once divided the White House continue to split the Republican Party at large. Those fissures were on display anew yesterday when the House Ways and Means Committee convened its first hearing on Social Security restructuring. "No benefit cuts are needed," testified Lawrence A. Hunter, chief economist of the conservative Free Enterprise Fund, who said the White House's proposals for creating investment accounts and reducing future benefits for 70 percent of Americans have "led the debate into a political cul-de-sac." "There are no free lunches," countered Robert C. Pozen, a Massachusetts investment executive whose plan to cut scheduled Social Security benefits has been embraced by Bush. White House aides have been trying to put the public dispute to rest for months, if not years. But their failure to do so has left the GOP looking divided, next to united Democrats, who say they will not negotiate until Bush puts aside his call for private accounts financed through Social Security taxes. "You've got a president who was honest with the American people in leveling with them about the tough choices we face," said Jeffrey R. Brown, a University of Illinois economist who served as the Social Security expert on Bush's Council of Economic Advisers. "And what's he get for it? A unified Democratic Party who's screaming about cutting benefits, and a small but vocal group in his own party who are basically yelling about the same thing." During Bush's first year in office, Hubbard, who chaired the Council of Economic Advisers, split with White House National Economic Council Director Lawrence B. Lindsey over the parameters of a Social Security plan, according to administration documents. Bush had spoken of personal accounts equal to 2 percent of workers' income subject to payroll taxes, but Lindsey maintained that accounts three times that large would garner investment returns large enough to virtually guarantee currently scheduled benefits. Hubbard ultimately convinced Bush that such a plan would require a potentially disastrous amount of government borrowing and could end up expanding the size of Social Security just when the nation could least afford it. The White House has been fighting conservative advocates of such large accounts ever since. "You may know that there is a small number of conservatives who prefer to push only for investment accounts and make no effort to adjust benefits," White House political aide Peter H. Wehner wrote conservatives in a January e-mail. "This could easily cause an economic chain reaction: The markets go south, interest rates go up, and the economy stalls out." Not all Republicans are buying the argument. Two Ways and Means Committee Republicans, Reps. Paul Ryan (Wis.) and Sam Johnson (Tex.), have written separate large-accounts proposals. Ryan's would establish accounts as large as 10 percent of wages, then guarantee that beneficiaries would receive at least the Social Security benefit level currently promised. "What we show with our bill is that with large personal accounts, you don't have to change benefits," Ryan said. In his written testimony yesterday, Hunter warned the committee that "American workers . . . will become confused and then suspicious and eventually rebellious when they hear politicians on the one hand confirm their own sense that Social Security is a bad deal but then turn around and lecture them on the need to cut promised future benefits even more." Although Democrats were united in their condemnation of the president's Social Security approach yesterday, restructuring advocates appeared unsure of where they were going. In a rare public appearance since his White House departure, Lindsey proposed a new tack: financing personal accounts out of workers' voluntary contributions and a generous government match. Pozen suggested an additional 2.9-percent payroll tax surcharge, half dedicated to Social Security's solvency problem, the other half for private accounts similar to existing individual retirement accounts. Ways and Means Chairman Bill Thomas (R-Calif.) spoke of raising the retirement age as longevity rises, while making allowances for heavy laborers and poor widows. And for the first time, Rep. E. Clay Shaw Jr. (R-Fla.) suggested that Congress be satisfied with ensuring Social Security's solvency for 40 or 50 years, rebuffing Bush's demand for a permanent fix. Such divisions may be the natural consequence of Bush's decision to embrace cuts to promised benefits, a move that was both intellectually honest and politically perilous, said Peter R. Orszag, a prominent Democratic Social Security expert. On Wednesday, White House National Economic Council Director Allan B. Hubbard told the Associated Press that Bush's benefit plan would cut promised survivor benefits for middle- and upper-income children and widows in the future, although he said those cuts may be made up in investment gains from private accounts. In large measure, Orszag said, Bush's economic honesty has played to the Democrats' favor. washingtonpost.com