Bush Puts Social Security at Top of Economic Conference

December 16, 2004

Bush Puts Social Security at Top of Economic Conference

ASHINGTON, Dec. 15 - President Bush opened a broad campaign for his economic agenda on Wednesday, calling for a reduction in "frivolous lawsuits" while his economic team laid out the arguments for overhauling Social Security and the tax code.

"The cost of frivolous lawsuits in some cases make it prohibitively expensive for a small business to stay in business or for a doctor to practice medicine," Mr. Bush said. "Those who have been hurt ought to have their day in court. But a judicial system run amok is one that makes it really hard for small businesses to stay in business."

But much of the day was devoted to the public relations campaign to replace part of the current Social Security program with a system of private savings accounts.

Kicking off a televised two-day conference packed with like-minded economists and business executives, Mr. Bush's economic team laid out arguments for shifting responsibility from the government to individuals and for borrowing as much as $2 trillion to cover upfront costs.

Vice President Dick Cheney warned gravely about the looming financial problems of Social Security, declaring that "younger people are understandably concerned" about receiving benefits.

Treasury Secretary John W. Snow acknowledged that shifting to personal savings accounts could require an unprecedented surge of new federal borrowing and predicted that "Wall Street would applaud" because the government would eventually meet its long-term obligations.

And in a separate forum on Wednesday, a top White House official ruled out the last lingering suspicion that Mr. Bush might pay for his plan by raising payroll taxes.

White House officials said they are planning a major public campaign to sell the nation on Mr. Bush's agenda, which also includes overhauling the income tax, reducing regulation of business and restricting lawsuits brought against corporations.

But they made it clear on Wednesday that their priority would be Social Security. Anticipating intense opposition from many quarters - including the huge lobbying group for retired people, AARP - administration officials are enlisting support from a wide array of outside groups.

The outside organizations include research groups like the Heritage Foundation and the Cato Institute and several new groups, some financed by business groups, with names like the "Alliance for Worker Retirement Security" and "Women for Social Security Choice."

The conference on Wednesday served to preview many of the themes Mr. Bush is likely to invoke as he tries to sell the nation on his economic agenda.

On overhauling the income tax, a panel of experts hand-picked by the White House called for a system that would primarily tax consumption - the money people actually spend rather than income from savings and investment.

Administration officials strongly suggested that Mr. Bush had already decided on the main elements of his major initiatives.

In overhauling the tax code to make it "simpler and fairer," Mr. Bush plans to appoint a bipartisan commission later this month that will submit proposals to the Treasury Department.

But Robert Nichols, a spokesman for the Treasury Department, said Mr. Bush would give the panel "very specific instructions on what he wants" and expect a set of recommendations by "early next year."

The plans for Social Security are even clearer, because Mr. Bush already has three separate recommendations from a commission he appointed in 2001.

"Social Security will be first, because that is where the momentum is," predicted Brian Wesbury, chief economist for an investment firm in Chicago and a participant in the White House conference.

But Mr. Bush faces formidable opposition from Democrats and many powerful lobbying groups, as well as skittishness among some Republican lawmakers about voting for cuts in future retirement benefits.

AARP charged earlier this week that Mr. Bush's plan for private accounts would undermine Social Security and put future generations of retirees at great economic risk.

"Just to switch to this new system could require as much as $2 trillion or more in benefit cuts, new taxes or more debt," declared William Novelli, the association's chief executive, in a statement shortly before the White House conference got under way. "Most of us would then have to pay twice as much to gamble on this new plan."

Administration officials acknowledge that their plan would require unprecedented borrowing, because payroll tax revenues would plunge immediately, while government benefits to retirees would decline gradually over several decades.

But administration officials said the long-term savings would more than make up for the transition costs, leaving the government in much better shape after 50 or 60 years.

"If we fix Social Security, we'll reduce the long-term outlays and be able to finance the short-term transition costs," Mr. Snow said in an interview with Bloomberg News. "The financial markets, the capital markets, the bond market, Wall Street will applaud the action."