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Conservatives Put Off by Bush's Talk of Tax Hike

The president's effort to overhaul Social Security gets tougher when he angers key backers.

February 18, 2005|Peter Wallsten and Warren Vieth | Times Staff Writers

WASHINGTON — President Bush's push to transform Social Security is in trouble, despite intense salesmanship designed to build support in Congress and with the public.

Democrats are united against the president on the issue. A new national poll shows the idea is losing ground with taxpayers. Many Republicans in Congress remain hesitant to promote letting workers under 55 privately invest a portion of their Social Security payroll taxes.

And Thursday, Bush's political challenge became more daunting as one of his key constituencies -- economic conservatives -- fumed at his new willingness to consider a tax increase to pay for the changes.

The president has called for a broad overhaul of Social Security, contending it will be bankrupt by mid-century. But the private accounts at the center of the overhaul come with a high transition cost -- estimated at $1 trillion or more.

During the transition, less money would be paid into the system even as it paid out at current benefit levels. Bush said earlier this week that he would not rule out paying those transition costs by raising the current wage cap of $90,000 that can be taxed for retirement.

On Thursday, a number of conservatives said that directly contradicts Bush's earlier promise that he would refuse to raise taxes.

"It's exactly the wrong way to go," said Richard Lessner, executive director of the American Conservative Union, which is hosting the annual Conservative Political Action Conference that started Thursday. Attendees were buzzing about the concession by a president whose tax-cutting agenda has made him a hero.

"If you're looking to rally the American people around a reform plan, you don't lead off with a tax increase or benefit cuts," Lessner said. "Those are both political losers."

John Lott, an economist at the conservative American Enterprise Institute and a supporter of private accounts, said the fact that Bush was discussing a tax increase suggested the White House had veered off course.

"Bush has backed himself into the corner on a false issue," Lott said Thursday. "This tells me that the White House hasn't made the strongest argument that they could make."

That point was underscored in a national survey, published Thursday, showing that public support for Social Security overhaul has slipped since Bush began campaigning for private accounts.

A Wall Street Journal/NBC News poll found that Americans supported keeping Social Security "basically as is," by 50% to 40%. That contrasts with a similar survey in January, before Bush began touring the nation and leaning on lawmakers to make his pitch, when Americans favored private accounts 46% to 44%.

Those results are similar to other recent surveys -- many showing public trepidation at overhauling the 70-year-old retirement program.

While meeting with reporters Thursday, Bush was asked whether his new openness to a payroll tax increase contradicted his previous no-new-taxes promise. He said only that he recognized the political challenges ahead and that he has just begun the campaign.

"I agree, you can't cram an issue down people's throats," said Bush, who has visited nine states in the last two weeks to promote his Social Security agenda. "As a matter of fact, the best way to get this issue addressed in the halls of Congress is for the American people to say, 'Why don't we come together and do something?' And so the first priority of mine is to convince the people we have a problem. And I'm going to do that a lot."

He again stressed that he is opposed to increasing the Social Security payroll tax rate of 12.4% that is split between workers and employers -- leaving open the possibility of raising the $90,000 wage cap.

Bush's changing language on taxes reflects an ambiguity -- one that some strategists say is deliberate. There are competing interests within the GOP, with some opposed to borrowing the transition costs and others convinced that financing the changes through taxes or benefit cuts could politically cripple the party.

The mixed signals continued Thursday night at the conservative conference, which brought to Washington more than 3,000 Republican activists from across the nation. Addressing the opening banquet, Vice President Dick Cheney drew hearty applause when he declared that "we must not increase payroll taxes on American workers" as part of the Social Security overhaul.

"Combined with the federal income tax burden that's already too high, endless increases in the payroll tax would take a heavy toll on American workers," Cheney said.

During his reelection campaign, Bush pledged to overhaul Social Security, and he began pressing the issue of private accounts in December.

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