As Overhaul Prospects Dim, Lawmakers Consider Alternatives to Salvage a Partial Victory

In coming weeks, the separate efforts of Senate Finance Committee Chairman Charles Grassley and House Ways and Means Committee Chairman Bill Thomas will determine whether even that is possible, numerous Republicans say. What has become clear after months of meetings with Republicans on their respective panels, however, is that their packages won't include Mr. Bush's proposal for personal accounts carved from Social Security payroll taxes and may not meet his demand to keep the program solvent.

The two plans are still emerging but have several common concepts. Both would reduce future benefits for all but the poorest workers, much as Mr. Bush proposes. Both would raise the retirement age for full benefits, contingent on increases in Americans' lifespans. Both want to avoid raising payroll taxes.

But both chairmen have given up on finding enough Republican votes, in the face of Democratic opposition, to pass Mr. Bush's proposal to let workers born in 1950 and after divert a third of the 12.4% Social Security payroll tax to private accounts, in return for reduced regular benefits. With Republicans including House Speaker Dennis Hastert of Illinois balking at having to vote for unpopular benefit trims, Mr. Bush's demand for "permanent solvency" for Social Security also is increasingly unlikely to be met.

Republicans say Mr. Bush's best hope is that Mr. Thomas can pass a solvency package with some modest accounts proposal in the House, which could yield a compromise with the Senate that sows the seed for the Bush-type accounts.
In view of the president's problems, conservatives who favor private accounts are about to step in with their own alternative. Next week, Republican Sen. Jim DeMint of South Carolina will introduce legislation, with support from third-ranking Senate leader Rick Santorum of Pennsylvania and House Majority Leader Tom DeLay of Texas, that shuns the solvency goal in favor of creating small private accounts from Social Security's current surpluses.

Trustees project the program will start running annual deficits in 2017.

Because those surpluses currently help fund annual government spending, the bill would force deep, continuing cuts in domestic and defense programs. It also ignores the argument Mr. Bush has campaigned for months to make: that Social Security must be fixed for all time, and that requires reductions in future benefits. An analysis from the Social Security Administration's chief actuary shows the DeMint proposal would worsen the system's projected shortfall by 2079.

The president insists he won't give up. At a stop in Pennsylvania this week, his 36th trip of the year to stump for Social Security change, he reiterated that younger workers should be able to invest and try to earn more than they would receive from Social Security. Trustees project the system, with increasingly fewer workers paying taxes for ever-more retirees, won't be able to pay full benefits by 2041. "We're asking younger workers to pay payroll tax, to pay hard-earned money into a system that's going broke," Mr. Bush said.

But goaded by Republicans, the White House also has begun preparing for failure -- by blaming Democrats. While Mr. Bush spoke in Pennsylvania, aides alerted Republicans at the Capitol that the president would launch his attack at that night's Republican fund-raising gala. Democrats, he asserted, follow "the philosophy of the stop sign, the agenda of the roadblock, and our country and our children deserve better."

Yet Mr. Bush has had trouble getting his own party to go along, especially in the Senate. Facing resistance on a range of issues besides Social Security, the White House issued a rare invitation to all 55 Senate Republicans to hold their weekly policy luncheon there Tuesday. As for the president's other second-term domestic priority, tax overhaul, Mr. Bush yesterday extended the deadline for recommendations from a task force of outside experts to Sept. 30 from July 31.

At the Finance panel, Mr. Grassley hasn't given up completely on private accounts. Late yesterday, at committee Republicans' 12th weekly caucus on Social Security, he laid out options that could be part of a solvency bill. But the Iowan still says he can't get approval for accounts carved from Social Security as Mr. Bush proposes, since all nine committee Democrats and at least one of the 11 Republicans -- Maine's Olympia Snowe -- oppose diverting payroll taxes that fund today's benefits.

A bill limited to solvency, without private accounts, also is problematic: Ms. Snowe came out in recent days against the "progressive indexing" idea for reducing future benefits for all but the lowest-income workers that Mr. Grassley and the president have embraced. Conservative Sens. Santorum and Jon Kyl of Arizona say accounts must be included. Given the stalemate, Republicans also are weighing a Senate rule to bypass a committee and take a bill to the full Senate.

At the same time, Republican Sen. Lindsey Graham of South Carolina has grown pessimistic that a bipartisan group of centrists he organized in January can craft a compromise, much as they recently did on judicial nominations.

White House aides recently rebuffed his request for the group to meet privately with Mr. Bush.

The biggest question is what the savvy but secretive Chairman Thomas will do in the House. The Californian has aimed to broaden debate to retirement-security policies generally, including pension and long-term care. But he is under pressure from Speaker Hastert and House Majority Whip Roy Blunt of Missouri, who have indicated privately to numerous Republicans that they don't want to deal with Social Security before the 2006 elections.
Outside the Capitol, signs of trouble for Mr. Bush abound. Business allies aren't lobbying; they have other priorities and, without a Social Security bill, worry they could be saddled with higher payroll taxes. Polls register the public's disfavor with the president's priorities, stoking Republicans' resistance. Few Republican lawmakers hold town-hall meetings at home anymore, after drawing protesters last winter.

Social conservatives have focused on fights for Mr. Bush's court nominees and against human-stem-cell research. Economic conservatives, for whom privatization is a top priority, say they are demoralized by Mr. Bush's emphasis on making Social Security solvent through benefit cuts and new revenue.
 Should Supreme Court Chief Justice William Rehnquist announce his retirement soon, as expected, the ensuing political fight over a successor could sideline nearly everything else in Congress, Republicans say.

All of this has energized Democrats, who feel no public pressure to support private accounts. "You go outside Washington, and it just doesn't come up," said Sen. Max Baucus of Montana, Finance's top Democrat and a past Bush ally on tax cuts and Medicare. "And the more people understand his proposal...the more they dislike it."