Will Bush Be Able to Pull a Reagan On Addressing Social Security? - WSJ

[question everything]

June 10, 2004

CAPITAL
By DAVID WESSEL

Twenty-one years ago, Ronald Reagan and Alan Greenspan, with a little help from their friends, saved Social Security. To break a partisan stalemate, then-President Reagan appointed then-citizen Greenspan to be chairman of a commission that persuaded a Republican White House and Senate and a Democratic House of Representatives to increase payroll taxes, lift the retirement age and trim benefits. The result, Mr. Reagan said in April 1983, was "to allow Social Security to age as gracefully as all of us hope to do ourselves, without becoming an overwhelming burden on generations yet to come."

If President Bush wins a second term, he will have to decide if he wants to do something to avoid leaving federal finances in worse shape than he found them. He could wage war on defense and domestic spending, a campaign for which he has displayed little appetite. He could retool the tax code, an initiative in which aides say he shows little interest. He could fix Medicare so it doesn't consume the federal budget, an unlikely move given last year's messy Medicare legislation.

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The problem is simple: Despite myths and trust funds, Social Security "is not, nor has it ever been, a savings program," Mr. Bush's point man on Social Security, Charles Blahous, wrote in a 2000 book. "Today's payroll taxes go to support today's retirees. Tomorrow's Social Security income -- at least under current law -- will be provided by taxing tomorrow's workers." The number of retirees is going to increase faster than the number of tax-paying younger workers; there won't be enough payroll tax revenue to pay promised benefits.

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If he shuns the free-lunch crowd, expect Mr. Bush to argue that markets and votes will understand an extra $100 billion a year in government borrowing over 10 years to pay these transition costs if -- and here's another big decision -- it's part of a broader plan to fix Social Security finances. That'll be a particularly tough case if the deficit in the rest of the government is swollen for whatever reason.

Making the case with a straight face demands a lasting fix to Social Security -- either putting in more money by raising taxes or taking less money out by trimming benefits. Mr. Bush won't propose an increase in payroll taxes. His pattern is to throw Congress some "principles" and hope they'll do the heavy lifting. That didn't work very well on Medicare; he got a prescription-drug benefit without much offsetting savings.

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