Bush Delays Private Accounts As Olive Branch To Democrats

WASHINGTON (Dow Jones)–President George W. Bush still thinks private accounts are needed to help shore up the Social Security system, but he postponed their implementation in his fiscal 2008 budget as a goodwill gesture to Democrats, White House budget director Rob Portman said Monday.

“We do include private accounts in the budget, but as an olive branch, I suppose you could say, they are delayed,” Portman said at a briefing on Bush’s budget request, adding that “as a practical matter, probably they would not be able to be implemented until 2012.”

The budget includes voluntary retirement accounts, which Democrats fiercely oppose, beginning in 2012, when workers would be able to divert as much as 4% of their Social Security taxable earnings, up to a $1,300 yearly limit. The accounts would cost $29.3 billion in 2012 and $637.4 billion over a decade.

In last year’s budget, Bush proposed rolling the accounts out two years earlier. The delay helps the administration reach its target of balancing the budget in five years, and shows Bush hasn’t given in to Congressional pressure to abandon the plan.

“The president continues to believe that this is part of the answer to Social Security, particularly for younger people,” said Portman, who heads the Office of Management and Budget.

Democrats, however, haven’t backed down in their opposition, saying private accounts would undermine the structure of Social Security and jeopardize future benefits. Senate Finance Committee Chairman Max Baucus, D-Mont., called the idea’s reprisal a “total waste of time.”

“Even though the American people have rejected Social Security privatization, even though it couldn’t pass a Republican Congress – much less this Democratic one – the White House is at it again,” Baucus said. “I led the fight to defeat Social Security privatization in 2005, and I don’t intend to let this bad idea back on the table.”

A bipartisan Social Security fix looks to be a non-starter with the Democrats inflexible on private accounts and the White House resisting a hike in payroll taxes.

Nonetheless, Portman lauded Bush’s “great political courage” on entitlement reform and said the president wants Democrats to come to the negotiating table without conditions.

“He’s made clear that there will be no preconditions, that all sides should come together and we can talk about these issues, and that there would be no preconditions on our side, nor should there be on the other side,” Portman said. “And I think this is exactly the way we must proceed. It’s the only way to proceed.”

Bush’s budget blueprint for fiscal 2008 proposes $96 billion in savings on mandatory programs over five years, an amount the White House says is a first step in reforming entitlements, which threaten to crowd out all discretionary spending by 2040.

By Henry J. Pulizzi, Dow Jones Newswires