WASHINGTON – The success of President Bush's push to remake Social Security (search) depends on convincing the public that the system is "heading for an iceberg," according to a White House strategy e-mail that makes the case for cutting benefits promised for the future.
Calling the effort "one of the most important conservative undertakings of modern times," Karl Rove (search) deputy Peter Wehner says in the e-mail that "the Social Security battle is one we can win." Doing so would advance the idea of limited government and could transform the nation's political landscape, he said.
"We have it within our grasp to move away from dependency on government and toward giving greater power and responsibility to individuals," Wehner, director of White House Strategic Initiatives (search), said in the e-mail. He called the Democratic Party the "party of obstruction and opposition. It is the Party of the Past."
White House spokesman Scott McClellan said the e-mail was sent Monday to "opinion leaders" to lay out "the challenges we face and the importance of seizing this opportunity to strengthen Social Security for our children and grandchildren and provide them with some ownership over their retirement savings."
Asked if it was improper for the government to send a partisan e-mail discussing political strategy, McClellan said he disagreed with that characterization. He said the message "is simply stating the serious nature of the Social Security crisis we face and why we are in this situation."
The e-mail "shows the strategy is to instill panic," said Rep. Charles Rangel, D-N.Y., the top Democrat on the House Ways and Means Committee.
Wehner's e-mail urged cuts in future promised benefits as the best approach to overhaul the system to private investment accounts. Not doing so would cause "short-term economic consequences."
Bush's 2001 Social Security commission, in a plan serving as a blueprint for the overhaul, proposed changing the benefit formula, resulting in cuts in promised benefits of 0.9 percent to nearly 46 percent. Investment accounts are counted on to make up the income loss.
McClellan cautioned that Bush had not decided on an approach. But Wehner's e-mail implied that the White House was further along in its planning than it has claimed.
"At the end of the day, we want to promote both an ownership society and advance the idea of limited government," the e-mail said. "It seems to me our plan will do so."
But to achieve the overhaul, the administration must "establish an important premise: the current system is heading toward an iceberg," Wehner said.
Lawmakers on both sides of the issue agree the future financial shortfall must be addressed, but they sharply differ on the severity and the solutions.
Bush wants to let workers divert some of their payroll taxes into investment accounts similar to a 401(k) plan. To do so, the administration must sell the need for immediate change and trying to link an overhaul to financial improvements.
"We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course," the e-mail said. "That reality needs to be seared into the public consciousness; it is the precondition to authentic reform."
But Democrats say the White House is exaggerating the system's future financial picture to dismantle the New Deal program.
"This memo shows that some in the Bush administration will resort to the worst kind of scare tactics to undermine Social Security," Rangel said.
Social Security is projected to start paying out more in benefits than it collects in taxes in 2018, according to Social Security trustees. It can pay full promised benefits until 2042. Then, it can cover about 73 percent of promised benefits. The nonpartisan Congressional Budget Office predicts solvency until 2052.
The administration may be forced to borrow $1 trillion to $2 trillion to continue paying benefits to current retirees if tax revenue is diverted into personal accounts.
If future promised benefits are not cut and the government has borrowed "trillions," an economic disaster could occur: "the markets go south, interest rates go up, and the economy stalls out," the e-mail said. "To ignore the structural fiscal issues — to wholly ignore the matter of the current system's benefit formula — would be irresponsible."
The message said that implementing the accounts and avoiding the benefit cuts would require tax increases or raising the retirement age, which is already moving to 67.