The White House is looking for ways to sell jittery members of Congress and the public on a controversial strategy that would revamp Social Security by reducing future retiree benefits, analysts and Republican sources say.
President Bush is expected to push a restructuring of Social Security that will likely include creation of private bond and stock accounts for workers and some form of price indexation for benefits. Benefits are currently indexed to wages, which rise faster than prices.
With some conservatives concerned the White House has adopted a politically indefensible strategy, officials are considering alterations to straight price indexation that could mollify critics, sources involved in discussion say.
At the same time, they say, the administration is seeking a compromise agreement on the size of private accounts between Republicans who want big accounts and others concerned about the effect big accounts would have on transition costs.
Figures from the Social Security Administration show that by 2075, price-indexing could mean retirees would receive benefits up to 46 percent lower than under the current system.
“The idea of doing something in terms of price-indexing is 99 percent there,” said Mike Tanner of the Cato Institute, a libertarian think tank. “But there is now a modified price-indexing plan under discussion.”
White House officials have revived an approach put forward by Bush’s presidential commission on Social Security that would protect low-income retirees and widows from poverty.
The administration could decide to exempt economically vulnerable groups from price-indexing but still subject middle- and higher-income retirees to the policy, sources said.
Other possibilities include a benefit formula based on a mix of price- and wage-indexing, or the concentration of benefit controls on specific age groups.
“They’re dealing with what’s most politically salable,” said a source involved in talks. “The issue is that they need some slowing of benefit growth over time.”
And on private accounts, which looks set for a rocky ride on Capitol Hill, the White House is trying to forge a compromise with conservatives who favor letting workers invest as much as their entire 6.2 percent payroll tax contribution.
Initial proposals had centered on accounts of up to 4 percent. But conservatives have balked at a $1,000 per year ceiling that effectively rules out 4 percent accounts for workers with taxable income above $25,000.
Officials now are looking at the possibility of raising the ceiling to $2,000, sources said.
As he embarks on an ambitious agenda set for his second term in office, Bush faces an uphill battle with lawmakers and the public on his plan to restructure Social Security.
A New York Times/CBS News poll on Thursday suggested half of Americans see private accounts as a bad idea.
In addition, many economists and investors are concerned about transition costs that could run to $2 trillion.
“It was clear upfront that the objective in the early part of the process was to get Republicans on the same page. So far, they’re not,” said Eric Engen, a Social Security expert at the American Enterprise Institute, a conservative think tank.
Bush has made revamping Social Security a top domestic priority, citing projections that the system will run into the red in 2018 and will exhaust its trust fund by 2042 as the huge postwar “baby boom” generation retires.
His opponents, including Democrats and senior citizen advocates, accuse the administration of wanting to penalize retirees to pay for a privatization plan that would provide Wall Street with a huge government-subsidized windfall.
The White House, which had no immediate comment, has refused to speak about its internal discussions about Social Security but says benefits are unsustainable under the current structure.