By Adam Entous
CRAWFORD, Texas (Reuters) - Facing record budget deficits, the Bush administration likely will turn to short-term government borrowing to help finance its plan to add personal retirement accounts to Social Security , officials said on Saturday.
President Bush economic advisers have been analyzing financing options for more than a year in preparation for Bush's second-term push to overhaul the Social Security system. Officials say no final decisions have been made.
Bush's advisers believe a short-term increase in borrowing is likely necessary to finance the transition to private accounts. They say this increase is economically feasible, and that the cost of doing nothing would be far greater long-term.
While the nation's debt load would increase initially, it would fall as the reforms are phased in, advocates say.
"In talking about moving some of those costs forward to make some reform to the system, it may ultimately involve some borrowing in the short-term," said Chad Kolton, spokesman for the White House Office of Management and Budget.
One analysis this year by the White House Council of Economic Advisers found that tapping the bond markets to pay for private accounts would increase the nation's debt-to-GDP ratio by 23.6 percentage points by 2036.
Under this scenario, the debt held by the public would increase by as much as $4.7 trillion. But the new government bonds would be repaid 20 years later, eliminating Social Security's unfunded liability while reducing the tax burden in the long term, advocates said.
'TRANSITION FINANCING'
Democrats have vowed to protect Social Security from "privatization" by Bush and his Republican allies in Congress. The president already is under fire over record federal budget deficits, and Democrats warn that the nation's mounting debt load could become a drag on economic growth.
"We need to wait and see the specific plan," Kolton said. "That will determine what needs there are for transition financing, and how and when they will have to be instituted."
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