- The Washington Times - Sunday, June 5, 2005

President Bush’s chief economic adviser was asked at a recent media briefing if the White House would accept a sharply reduced version of his personal retirement accounts plan.

White House economist Allan B. Hubbard answered without hesitation that “it’s on the table.”

Mr. Bush has proposed a plan that would let younger workers invest 4 percent of their income — up to two-thirds of the 6 percent of income currently earmarked for Social Security payroll taxes — in government-approved, diversified stock or bond mutual funds. But Mr. Hubbard indicated that the size and shape of that plan is wide open to negotiation.

Asked late last month at a luncheon briefing hosted by the Hoover Institution if Mr. Bush would be willing to accept a scaled-down 2 percent, instead of his more ambitious 4 percent plan, the head of the White House’s National Economic Council suggested that he might.

“We are open to negotiations for the American people,” Mr. Hubbard said.

Mr. Bush has set forth a few hard-and-fast principles about what he positively would not accept, including payroll-tax rate increases and benefit cuts. But White House advisers and outside allies have made it clear that he may be willing to give up a great deal in his proposal to enact a minimum level of private investment savings in the Social Security system.

“You don’t have to start out that big, because the political pressure will build over time to expand the accounts,” said Hoover economist John Cogan, a key member of the presidential commission Mr. Bush appointed in 2001 that came up with several options to implement his plan.

How far Mr. Bush may be willing to go in this regard could be seen in the surprising response that Mr. Hubbard gave to another reporter’s question. Asked if the president would consider swapping his plan for “add-on” accounts that would not come out of Social Security funds, he replied, “We haven’t ruled it out; we haven’t ruled it in. But we’re certainly willing to discuss it.”

Private-accounts advocates agree that Mr. Bush would be willing to make significant concessions to get a piece of his investment reforms passed, but giving up private accounts altogether is not in the cards, they say.

“I think they would probably be willing to go along with something that wasn’t as extensive as his original proposal as long as it had carve-out [personal] accounts,” said Michael Tanner, chief Social Security analyst at the Cato Institute, a staunch advocate of private accounts.

But Mr. Tanner also thinks the president’s strategists have decided that being very conciliatory at this juncture in the legislative process serves their interests because it further magnifies the Democrats’ intransigence.

“The White House is being very careful not to take anything off the table. Right now the polls are showing that the Democrats are looking very bad because of their refusal to negotiate. So in order to emphasize that, the White House is willing to bend over backwards to appear willing to discuss anything,” he said.

?The more reasonable they appear, the more unreasonable the Democrats appear,? he said.

But some analysts say that the Democrats soon may be forced to come to the table with Republican leaders when draft legislation is taken up in the House Ways and Means Committee by its chairman, Rep. Bill Thomas of California.

“There’s growing polling evidence that the Democrats haven’t got that much more life left in the ‘just say no’ position,” said Dirk Van Dongen, president of the National Association of Wholesaler Distributors, and a leader in the business coalition lobbying for private accounts.


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