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[Gene GeRue <genegerue AT ruralize.com>]

Bush aide argues for Social Security cuts
By Associated Press
Thursday, January 6, 2005

WASHINGTON -- A White House e-mail argues the case for cutting Social 
Security benefits promised in the future and says support must be built for 
investment accounts by convincing the public the system is "heading for an 
iceberg."
     Calling President Bush's effort "one of the most important 
conservative undertakings of modern times," Karl Rove deputy Peter Wehner 
says in the e-mail that "the Social Security battle is one we can win." 
Doing so would advance the idea of limited government and could transform 
the nation's political landscape, he said.
     White House spokesman Scott McClellan said the e-mail was sent Monday 
to "opinion leaders" to lay out "the challenges we face and the importance 
of seizing this opportunity to strengthen Social Security for our children 
and grandchildren and provide them with some ownership over their 
retirement savings."
     Democrats think the White House e-mail "shows the strategy is to 
instill panic," said Rep. Charles Rangel, D-N.Y., the top Democrat on the 
House Ways and Means Committee.
     In the e-mail, Wehner, director of White House Strategic Initiatives, 
urged cuts in future promised benefits as the best approach to overhaul the 
system to private investment accounts. Failure to make the cuts would cause 
"short-term economic consequences," he wrote.
     The e-mail outlines some of the difficult financial trade-offs 
required to carve out accounts from the system - details the administration 
has so far refused to discuss publicly.
     Bush's 2001 Social Security commission, in a plan serving as a 
blueprint for the overhaul, proposed changing the formula used to calculate 
benefits, resulting in cuts in promised benefits of 0.9 percent to nearly 
46 percent. The investment accounts, which would be similar to 401(k)s, are 
expected to make up the income loss.
     McClellan cautioned that Bush had not decided on an approach. But 
Wehner's e-mail implied that the White House was further along in its 
planning than it has claimed.
     "At the end of the day, we want to promote both an ownership society 
and advance the idea of limited government," the e-mail said. "It seems to 
me our plan will do so; the plan of some others won't."
     The administration is focusing on a proposal that would let workers 
divert two-thirds of their payroll taxes into investment accounts, up to an 
annual limit of $1,000 to $1,300, an administration official told The 
Associated Press on Tuesday. Supporters are embroiled in a fierce debate 
over the size of the accounts, with an influential segment pushing for much 
larger investments.
     But to achieve the overhaul, the administration must "establish an 
important premise: the current system is heading toward an iceberg," 
Wehner's e-mail said.
     Supporters and opponents agree the future financial shortfall must be 
addressed, but they sharply differ on the severity and the solutions.
     Social Security is projected to start paying out more in benefits 
than it collects in taxes in 2018, according to Social Security trustees. 
It can pay full promised benefits until 2042. Then, it can cover about 73 
percent of promised benefits. The nonpartisan Congressional Budget Office 
predicts solvency until 2052.
     "We need to establish in the public mind a key fiscal fact: right now 
we are on an unsustainable course," Wehner's e-mail said. "That reality 
needs to be seared into the public consciousness; it is the precondition to 
authentic reform."
     But Democrats say the White House is exaggerating the system's future 
financial picture to dismantle the New Deal program.
     "This memo shows that some in the Bush administration will resort to 
the worst kind of scare tactics to undermine Social Security," Rangel said.
     The e-mail criticized Democrats as "the party of obstruction and 
opposition. It is the Party of the Past."
     Asked if it was improper for the government to send a partisan e-mail 
discussing political strategy, McClellan said he disagreed with that 
characterization. He said the message "is simply stating the serious nature 
of the Social Security crisis we face and why we are in this situation."
     Besides cutting future promised benefits, the administration may be 
forced to borrow $1 trillion to $2 trillion to continue paying benefits to 
current retirees if tax revenue is diverted into personal accounts for 
younger workers.
     If the benefits are not reduced for those younger workers when they 
retire and the government has borrowed "trillions," an economic disaster 
could occur: "the markets go south, interest rates go up, and the economy 
stalls out," the e-mail said. "To ignore the structural fiscal issues - to 
wholly ignore the matter of the current system's benefit formula - would be 
irresponsible."
     The message said that implementing the accounts and avoiding the 
benefit cuts would require tax increases or raising the full retirement 
age, which is already up to 66 for people who are turning 62 this year and 
thus eligible to draw reduced benefits.
     Under current law, the full retirement age moves to 67 in subsequent 
years.
http://news.bostonherald.com/politics/view.bg?articleid=62191