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By WES ALLISON, Times Staff WriterA Senate committee heard ideas from witnesses Tuesday. Two support larger private accounts than President Bush has proposed.
WASHINGTON - As activists in a breezy, leafy park outside the U.S. Capitol handed out stickers saying, "No to Privatization," members of the Senate Finance Committee were ensconced in a stuffy hearing room, quizzing economic experts on "progressive indexing" and "dedicated financing."
As hundreds of people began gathering in the park for another rally on how Democrats and their allies will fight the Republican-led attempt to restructure Social Security, the Finance Committee was wrestling with ominous-looking red charts showing economic growth versus projected growth, the cost of the Bush tax cuts and looming debts as the population ages.
And as President Bush neared the end of his 60-day Social Security road show, Democrats and Republicans on the committee sought to push the months-old discussion on Social Security in a new direction: turning philosophy into policy.
Political showmanship has dominated the discussion on Social Security since the winter, when President Bush announced his plan to allow workers to invest a third of their payroll taxes in private investment accounts. But sloganeering doesn't make law; that requires work and compromise.
The job of sorting it out has fallen to the Senate Finance Committee, chaired by Republican Sen. Charles Grassley, 71, a corn and soybean farmer from Iowa.
Unlike many congressional committees, the Finance Committee has a history of Republican and Democratic cooperation, and it has achieved bipartisan support for several of the president's trademark initiatives, including tax cuts and the Medicare prescription drug benefit.
Aides say the committee works essentially the same under Grassley as it did under the ranking Democrat, Sen. Max Baucus of Montana, who was chairman when Democrats last held the Senate. The two men meet weekly and consider themselves friends.
"We almost always agree," Baucus said at Tuesday's hearing, "and I think that's because we both have the same approach for finding practical solutions, not on ideology, but on the practical matters of getting things done."
But, Baucus went on, directing his comments to Grassley, "This is one of the few times we don't agree. You favor private accounts, I don't. We agree to disagree agreeably."
As the Baby Boom generation retires, the amount of money Social Security pays out is scheduled to outpace payroll taxes by 2017. President Bush has proposed augmenting Social Security by allowing workers under 55 to invest one-third of payroll taxes in private investment accounts, though he acknowledges that alone won't make the system solvent.
Opponents, including almost every congressional Democrat, say that shifting money from Social Security to private accounts will undermine the system and that the government would have to cut guaranteed benefits to pay for it. Democrats also say it's risky to invest Social Security funds in the stock market.
The committee heard options from four witnesses Tuesday, including two conservative economists who support larger private accounts than the president has proposed. Republicans were most interested in the comments of a third, Robert C. Pozen, chairman of MFS Investment Management of Boston, who advocated private accounts and something called "progressive indexing."
His plan, which was most like the president's, would cut benefits for all but the poorest retirees. "Personal accounts are a way to supplement people's retirement income," Pozen said. "Benefit slowdown, I think, is a better term than benefit cut."
Democrats were most taken by Peter R. Orszag, an economist at the Brookings Institution, a left-leaning think tank, who said Bush's plan for private accounts would cause nothing but misery for Social Security.
He advocated finding new revenue sources, such as reneging on the president's tax cuts for the richest Americans, or using money raised by the estate tax. He said Bush's plan "comes with the mother of all magic asterisks" because it cuts benefits while adding trillions to the public debt.
Politically, President Bush has continued to take a beating on Social Security, a fact not lost on Democrats. This week he finishes his 60-day, 60-stop campaign to pitch his idea to the public, but he has yet to offer many specifics, and Americans remain skeptical. A Washington Post-ABC News poll released Tuesday found that public support for diverting payroll taxes to investment accounts has dropped 10 points since March, to 45 percent.
Democrats, elated, call his plan "a nonstarter."
"Those of you that are bad-mouthing every other suggestion out there, suggest your own plans," Grassley groused. He noted that Congress has revamped Social Security when a president has pushed it. He encouraged cooperation and said, "I will not lose that opportunity to bring about changes in Social Security, so that there's ownership and preservation of this program for our children and grandchildren."
Grassley plans to hold one more hearing next month before drafting legislation for his committee to consider. Baucus acknowledged only that Grassley was right, Social Security needs saving, and it's better to do it now than later. But he would go no further.
"I know we'll find a way to resolve this one," he said. "Though maybe not immediately."
When the hearing ended, Baucus went outside to the park and joined other Democratic leaders on the stage for the rally. Before a cheering crowd, with red, stop sign-shaped "No" posters blowing in the breeze, they promised to block the president's plan.