By Paula Cruickshank, CCH Washington Staff Writer
President Bush pledged not to raise payroll taxes as part of any proposal addressing Social Security's long-term financial woes. We will not raise payroll taxes to solve this problem, Bush asserted in remarks at the end of a White House meeting with Social Security trustees on December 9, 2004.
Although the president spoke firmly about his opposition to any increase in payroll taxes, it was not entirely clear, based on remarks by his spokesman, whether a proposal by Sen. Lindsey Graham (R-S.C.), to increase the income threshold subject to the payroll tax, would constitute a tax increase in the eyes of the administration.
Asked specifically about Graham's proposal to raise the income ceiling on payroll tax contributions, White House Press Secretary Scott McClellan, at a daily press briefing on December 9, reiterated the president's opposition to tax increases. When questioned repeatedly if Graham's proposal to raise the income threshold subject to the payroll tax is tantamount to a tax increase, the presidential spokesman replied, If you're talking about raising payroll taxes, that is a payroll tax increase; the President would not be for that.
McClellan declined to comment on specific provisions of Social Security proposals under consideration in Congress. At the same time, the White House spokesman repeated three underlying principles that Bush expects to be followed in devising an acceptable plan: no reduction of benefits for current or near retirees, no tax increases, and the creation of voluntary individual retirement savings accounts for younger workers.
While the president wants Congress to abide by his principles, Bush also acknowledges that it will require a bipartisan effort to address the problem. The President wants to work in a bipartisan way with all members of Congress who are committed to getting this done, McClellan stressed.
During remarks at the meeting with Social Security trustees, the president noted that his views on the issue have been influenced by the commission co-chaired by the late New York Democratic Senator Daniel P. Moynihan. Among the options presented by the Moynihan panel in its final report in 2001 was a proposal to index benefits to price inflation instead of the faster-growing wage index.
A former member of the Social Security panel, Tom Saving, who attended the December 9 White House meeting, later discussed with reporters some of the key recommendations made by the commission, including the price-indexing option. Saving said the price-indexing proposal was one of the approaches recommended by the commission to address the problem without requiring higher payroll taxes.
As one of three options outlined by the commission, the proposal would allow workers to contribute 4 percent of their payroll taxes, up to $1,000 annually, to personal retirement accounts. Traditional Social Security benefits would be offset by the worker's personal account contributions, compounded at a 2 percent interest rate. Beginning in 2009, benefits would be indexed to price inflation rather than the more rapidly rising wage index, effectively slowing the growth of benefits.
Asked if the price-indexing approach met Bush's principles, McClellan declined to respond directly to the question and instead chose to describe the current process under way within the administration as a transition in terms of policy. These are issues we're talking through internally; these are issues we're talking with congressional leaders about (in terms of) how is the best way to proceed forward. And that's the spirit in which we're going to keep working, according to the White House spokesman.
Democratic Response
Democrats immediately criticized President Bush for setting up unrealistic requirements for Social Security reform, but pledged to work with the White House as long as proposals do not increase the federal debt and meet seniors' needs. House Ways and Means member Rep. Robert T. Matsui (D-Calif.) predicted that the administration would use sham accounting gimmicks to hide the true costs of its privatization schemes.
President Bush seems to have painted himself into a corner on Social Security because he says no tax increases and no benefit cuts for current or 'near' retirees, while insisting on costly private accounts with trillions in transition and administrative costs, said Representative Matsui.
House Minority Leader Nancy Pelosi (D-Calif.) said Democrats are willing to look at whatever proposal President Bush puts on the table as long as it doesn't add to the deficit, doesn't harm the middle class and has a guaranteed annuity for seniors. In order to make Social Security privatization acceptable, the administration will have to show me how you can take money out of a situation where you're concerned about having enough to make ends meet and then have those ends meet.
Pelosi said the administration and Democrats have agreed to use the same budget numbers to begin the process of reforming the system.
Added to the news on December 10, 2004.
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