WASHINGTON – The Bush administration predicts financial markets would applaud a costly overhaul of Social Security (search) for tackling long-term financial obligations weighing on the federal budget.
"I look forward to working with members of Congress to resolve this long-term unfunded issue so that the world financiers can take comfort in the fact that this government will address one part of the budget deficit," President Bush (search) said Wednesday.
Democrats accused the White House of trying to create a crisis to help sell lofty Social Security plans that would reward Wall Street (search) and jeopardize the fiscal health of the country in a time of record deficits.
Bush "wants to use an ideological solution to a manageable problem," said Rep. Robert Matsui of California, the top Democrat on the House Social Security subcommittee.
Social Security is the Bush administration's top legislative priority for next year, and is the centerpiece of the White House's economic conference Thursday. The two-day panel included business leaders, economists, experts and advocates in agreement with Bush on such issues as partial privatization of Social Security, the state of the economy, trade and taxes.
Bush wants to let workers divert some of their payroll taxes that help fund retirees' benefits into personal investment accounts. The White House acknowledges the change would do little to help plug what is projected to be a $3.7 trillion shortfall over 75 years.
"It will take more to solve the problem than just personal accounts," White House spokesman Scott McClellan said. The transformation would be part of a "comprehensive solution to strengthen Social Security."
But Bush has said little about his plans, including how to pay for them, since running on the issue in the 2000 campaign.
"The great desire for people in Congress is for me to negotiate with myself," Bush said. "And therefore, I will continue to articulate principles that I think are important and reach out to members of both parties to fashion a plan that solves the problem."
Bush is expected to propose details in January, but won't offer specific legislation. His summit helped bolster his plans by providing a public forum.
Bush has ruled out an increase in payroll taxes to pay for the overhaul. Experts say he would have little choice but to borrow the funds, perhaps $1 trillion to $2 trillion, in order to continue paying benefits for current and near-retirees whose checks are funded by workers' payroll taxes.
Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee, said Bush's summit was a "pep rally for privatization," when the more urgent problem is the skyrocketing federal budget deficit, which hit $413 billion in 2004.
Tackling Social Security is "putting the cart before the horse" by pursuing a program "with enormous implications for federal borrowing without doing anything about the rest of the budget," Spratt said.
The administration, concerned about the soaring deficit, may not include borrowed costs in the new budget. That's because officials view such costs as a prepayment on long-term Social Security obligations, much like paying off a 30-year mortgage early.
"By taking that off the books of the country for the longer term we're going to put U.S. fiscal policy in a much stronger position," said Treasury Secretary John Snow.
"Whatever we do is going to be visible. Transparent and open. Above board. I think the markets will reward us for that," Snow said, adding that "I am convinced we'll be applauded by the bond market, applauded by Wall Street for facing up to the issue of Social Security and having a real fix that brings the system into actuarial balance."
Democrats said they would not propose their own Social Security plan and were waiting for the president's details.