The window already may be closing on the most likely compromise that could trigger an agreement between President Bush and Congress to restructure Social Security. And that narrowing opportunity increases the odds that the parties will carry this fight into the 2006 election and probably beyond.
Bush's top goal in the debate is to divert part of the payroll tax into private investment accounts. But with that idea facing enormous resistance, more people in both parties are considering "add-on" investment accounts that could be established outside of Social Security. Yet that possible compromise increasingly looks like a dead end too.
Though the White House takes heart from polls showing most Americans believe Social Security faces significant long-term problems, signs of opposition continue to mount for Bush's centerpiece proposal to fund investment accounts through the payroll tax.
Last week, an alliance of leading financial companies quit a coalition promoting the idea. More important, five Senate Republicans joined all 44 Democrats and independent James M. Jeffords of Vermont to support a resolution opposing any Social Security restructuring that would massively increase the federal debt.
That was an ominous sign for Bush because, absent a big tax increase, diverting payroll taxes into private accounts would require trillions in borrowing. If the senators supporting that resolution hold firm, they could sustain a filibuster to block any plan to fund -- or "carve out" -- private accounts from the payroll tax.
This opposition helps explain the interest in accounts that would be added on to Social Security, rather than carved out from it. Earlier this month, Jeffords and every Senate Democrat -- except Nebraska's Ben Nelson -- sent a letter to Bush opposing carve-out accounts. But in that letter, the 44 senators said they were open to negotiating add-on investment accounts that "would be established entirely separate and apart from Social Security." Rep. Clay E. Shaw Jr. (R-Fla.) has been promoting that idea, and Sen. Orrin G. Hatch (R-Utah) proposed a variation on it last week.
Some of those closely watching the debate believe that if any Social Security deal is reached -- admittedly a big if -- add-on accounts will be at its core.
A deal could work like this: Government would provide tax credits to match retirement savings for low- and moderate-income workers, establishing what amounts to a universal 401(k) plan. That would meet Bush's goal of encouraging wider ownership of financial assets.
