Obama backs off on Social Security plan

JACKIE CALMESTHE NEW YORK TIMES

WASHINGTON -- President Barack Obama is eager to seek a bipartisan solution to ensure the long-term solvency of Social Security, people who have spoken with him say, but he is running into opposition from his party's left and from Democratic congressional leaders who contend that his political capital would be better spent on health care and other priorities.

Obama considered announcing the formation of a Social Security task force at a White House "fiscal responsibility summit" that he will convene Monday. But several Democrats said that idea had been shelved, partly because of objections from House and Senate leaders.

Obama signaled in his campaign that he would support addressing the retirement system's looming financing shortfall, in part by applying payroll taxes to incomes above $250,000. But that would ignite intense opposition from Republicans, especially with the economy deep in recession. Liberal Democrats are already serving notice that they will be equally vehement in opposing any reductions in scheduled benefits for future retirees. But any solution, budget analysts said, must include a mix of both approaches, though current beneficiaries would see no change.

Despite the long-running partisan divide over benefits and taxes, the advocates for a compromise see an opportunity, given that the stock markets' slide has discredited the idea of carving private accounts from Social Security. Former President George W. Bush demanded such accounts as the centerpiece of any compromise, while Democrats and some Republicans were just as opposed, dooming his effort in 2005.

"The carve-out account is off the table," said Sen. Lindsey Graham, a South Carolina Republican who has long sought a deal.

This month, Obama unexpectedly approached Graham when he was at the White House to meet with Rahm Emanuel, Obama's chief of staff. Graham, a vocal foe of Obama's $787 billion stimulus plan, said in an interview: "I know he's sincere about wanting to do something about entitlements generally, health care and Social Security. And I want to help him."

Despite Obama's interest, his political and policy advisers are divided, with most arguing that taking on Social Security would overload a legislative system already strained by the economy and war.

Within the administration, "the question is whether it helps you in moving the rest of the agenda or hurts you," said John Podesta, an informal adviser to Obama and former chief of staff to President Bill Clinton, who is head of the Center for American Progress, a left-leaning research group.

Podesta is among those arguing for action sooner rather than later. "What this crisis has proven," he said, "is that we need to have a basic benefit that keeps people out of poverty, and that we need to work at both ends -- toward fiscal sustainability and toward ensuring that people, particularly at the bottom, have an adequate benefit."

For some Democrats, another reason to act is that with their party in control of the White House and Congress, they are positioned to produce a solution more to their liking. And while neither the changes nor the fiscal benefits would take effect soon, a compromise would send a reassuring signal to markets and to foreign investors who worry about the nation's huge looming liabilities for promised social benefits, advocates said.

Those who oppose action said Obama must focus on his bigger priority -- health care legislation to expand access to insurance and reduce the costs of care. They argue that success there would help control the unsustainable growth of Medicare and Medicaid, the government's other major benefit programs, which together pose a far greater fiscal problem.

Social Security still runs a surplus, and its reserves will not be exhausted until 2041, after which enough payroll taxes will come in to cover 78 percent of benefits, according to the 2008 annual report of the program trustees. Medicare, by contrast, requires big infusions from general revenues each year; its hospital trust fund is already running annual deficits and will be exhausted by 2019.

The problems of both programs, as well as those of Medicaid, are sharpened as the generation born from 1946 to 1964 reaches retirement age.