February
22, 2009
President Obama is eager to seek a bipartisan solution to ensure the long-term solvency of Social Security, people who have spoken with him say, but he is running into opposition from his party’s left and from Democratic Congressional leaders who contend that his political capital would be better spent on health care and other priorities.
Mr. Obama considered announcing the formation of a Social Security task force at a White House “fiscal responsibility summit” that he will convene on Monday. But several Democrats said that idea had been shelved, partly because of objections from House and Senate leaders.
The president signaled in his campaign that he would support addressing the retirement system’s looming financing shortfall, in part by applying payroll taxes to incomes above $250,000. But that would ignite intense opposition from Republicans, especially with the economy deep in recession.
Liberal Democrats are already serving notice that they will be equally vehement in opposing any reductions in scheduled benefits for future retirees. But any solution, budget analysts said, must include a mix of both approaches, though current beneficiaries would see no change.
Despite the long-running partisan divide over benefits and taxes, the advocates for a compromise see an opportunity now given the fact that the stock markets’ slide has discredited the idea of carving private accounts from Social Security. Former President George W. Bush demanded such accounts as the centerpiece of any compromise, while Democrats and some Republicans were just as adamantly opposed, dooming his effort in 2005.
“The carve-out account is off the table,” said Senator Lindsey Graham, a South Carolina Republican who has long sought a deal.
This month, Mr. Obama unexpectedly approached Mr. Graham when he was at the White House to meet with Rahm Emanuel, Mr. Obama’s chief of staff. Mr. Graham, who was a vocal foe of Mr. Obama’s $787 billion stimulus plan, said in an interview: “I know he’s sincere about wanting to do something about entitlements generally, health care and Social Security. And I want to help him.”
Despite Mr. Obama’s interest, his political and policy advisers are divided, with most arguing that taking on Social Security would overload a legislative system already strained by the economy and war.
Within the administration, “the question is whether it helps you in moving the rest of the agenda or hurts you,” said John D. Podesta, an informal adviser to Mr. Obama and former chief of staff to President Bill Clinton who is now head of the Center for American Progress, a left-leaning research group.
Mr. Podesta is among those arguing for action sooner rather than later. “What this crisis has proven,” he said, “is that we need to have a basic benefit that keeps people out of poverty, and that we need to work at both ends — toward fiscal sustainability and toward ensuring that people, particularly at the bottom, have an adequate benefit.”
For some Democrats, another reason to act is that with their party in control of the White House and Congress, they are positioned to produce a solution more to their liking. And while neither the changes nor the fiscal benefits would take effect soon, a compromise would send a reassuring signal to markets and to foreign investors who worry about the nation’s huge looming liabilities for promised social benefits, advocates said.
Those who oppose action said Mr. Obama must focus on his bigger priority — health care legislation to expand access to insurance and reduce the costs of care. They argue that success there would help control the unsustainable growth of Medicare and Medicaid, the government’s other major benefit programs, which together pose a far greater fiscal problem.
Social Security still runs a surplus, and its reserves will not be exhausted until 2041, after which enough payroll taxes will come in to cover 78 percent of benefits, according to the 2008 annual report of the program trustees. Medicare, by contrast, requires big infusions from general revenues each year; its hospital trust fund is already running annual deficits and will be exhausted by 2019.
The problems of both programs, as well as those of Medicaid, are sharpened as the huge generation born between 1946 and 1964 reaches retirement age. While presidents have grappled with Social Security for three decades, Mr. Obama comes to office just as the first of those 77 million Americans are turning 62, making them eligible for early retirement benefits. Most Americans claim early benefits, which are slightly reduced, rather than waiting until age 66 for full benefits.
“What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further,” Mr. Obama said days before his inauguration. “We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.”
Likewise, Mr. Bush often said that he would not leave big problems like the finances of Social Security to a future president. Yet warnings of a coming crisis like the one he sounded four years ago pale against the economic crisis at hand, many Democrats said.
Social Security “was a critical issue before we got into this crisis,” Representative Ellen O. Tauscher, a California Democrat and chairwoman of the New Democrats coalition of House moderates, said in an interview. “Now it’s one of those things — the question is, is it a nice-to-have or a have-to-have?” She said she would favor having a bipartisan group take up the issue and devise a plan “that doesn’t get delivered until perhaps a year from now.”
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