Social Security on the First Date By RAMESH PONNURU

January 30, 2009
Op-Ed Contributor
Social Security on the First Date By RAMESH PONNURU

DEMOCRATS will probably get their way on most policy matters over the next two years, but bipartisan accomplishments won't be easy. Congressional Republicans won their elections too, and they didn't do so by promising to agree to everything that Democrats want. Yes, Democrats have the votes to muscle through a lot of bills without much Republican support — or any, as the stimulus package passed by the House this week shows. But on some occasions Republican support could be useful.

Take Social Security, which President Obama has suggested he wants to reform. A strategy that is supported only by Democrats could result in their having to take full responsibility for a tax-heavy bill, and some would balk at that prospect. This means that the most likely result is inaction.

This, after all, is what happened when Republicans tried to reform Social Security. President George W. Bush proposed restraining the growth in benefits and allowing young workers to invest some of their payroll-tax contributions for themselves. In 2005, Democrats almost unanimously believed that personal accounts "carved out" of Social Security were a deal-breaker.

Instead, they wanted to raise taxes, especially on high earners. They also thought that young people, especially those with low or moderate incomes, should be encouraged to build capital in savings accounts — but only if these accounts were "added on" to Social Security and seeded with tax credits. Congressional Democrats were not willing to cooperate with Mr. Bush, and Congressional Republicans did not want to take full responsibility for reforming Social Security. So nothing was done.

The stalemate continues today. To break it, each side will have to give up at least one cherished goal. Republicans must accept that Mr. Bush's dream of letting individuals invest Social Security funds is dead. In return, Democrats will need to take tax increases off the table.

This compromise seems more likely than other solutions (though less likely than further stalemate), in part because both sides should agree that solvency will require reductions in the growth of benefits. Progressive price indexing is a good option. Under current policy, tomorrow's retirees get greater benefits than today's. Progressive indexing would keep that rule for low-income workers.

Benefits for high-income workers would, on the other hand, keep up only with inflation. This policy should be palatable to Democrats. If they agree to take the remaining steps to make the program solvent without tax increases, then Republicans should agree to finance the "add-on" savings accounts that Democrats favor.

This deal has something for everyone. Incumbents in both parties would be able to campaign on having saved the program. Republicans would get a big spending cut and avoid tax increases. Democrats would have blocked Mr. Bush's personal accounts, and put most of the burden of rescuing Social Security on the affluent.

Mr. Obama would also be able to make good on a campaign promise. During his debates with John McCain, he said Americans would see a "net spending cut" under his presidency. Given the amount of stimulus spending that Mr. Obama envisions over the next few years, this kind of large, long-term spending reduction is the only way for that net cut to happen. Mr. Obama could demonstrate that his pledges to get past the stale partisan debates of the past weren't just talk.

Most important, this compromise would result in good policy. Social Security needs to be brought into balance, and reasonable spending cuts would do less economic damage than tax increases. Long-term investment is still a good idea for young people. Besides, the ideological divide over "carve-out" and "add-on" accounts is absurd: whether the accounts are inside or outside Social Security is largely a question of accounting.

And who knows? Cooperation on Social Security could pave the way for bipartisan solutions on everything from tax reform to Medicare, by building good will and showing that such accomplishments are possible.

Ramesh Ponnuru is a senior editor for National Review.

http://www.nytimes.com/2009/01/30/opinion/30ponnuru.html?sq=Ponnuru%20Social%20Security&st=cse&scp=1&pagewanted=print

http://snipurl.com/by4be