By Jeff Bliss
June 30 (Bloomberg) -- A rare internal battle is brewing among House Republicans, pitting some top party leaders against Ways and Means Committee Chairman Bill Thomas, over whether to shore up Social Security's solvency or just focus on new retirement benefits.
Republican leaders will oppose legislation that contains benefit cuts, a retirement age increase or a rise in taxes to improve the system's solvency, said a senior Republican lawmaker, who asked not to be identified. The leadership wants any House legislation to focus on creating private investment accounts, the lawmaker said.
Thomas, however, said yesterday that solvency ``would be part of the retirement bill'' his committee is developing. ``We're going to address it,'' he said. Thomas said he hopes to get a vote on retirement legislation before a congressional recess in August.
Thomas may face some dissent within his own committee. Representatives Sam Johnson of Texas and Phil English of Pennsylvania, both Republicans on the committee, said that it would be wise to proceed with Social Security legislation without the measures to ensure solvency. Shoring up the system's finances could be addressed in separate legislation later this year or next, they said.
``We have never said we will increase taxes, reduce benefits or raise the retirement age,'' said Johnson, who's co- sponsoring a bill that would create accounts using Social Security's cash reserve.
Political Risk
While Republicans might want to avoid the political risk of making benefit cuts to address solvency, such a move has its own peril. It would call into question the urgency of President George W. Bush's demand for an immediate overhaul of Social Security to secure its finances. The Social Security system will begin paying out more money than it takes in through payroll taxes by 2020.
In addition, avoiding solvency while approving personal accounts would exacerbate the federal deficit, which swelled to a record $412.6 billion in 2004. Bush has vowed to cut the deficit in half by 2009.
Representative John Boehner, an Ohio Republican, said that while he remains ``a big believer'' in personal accounts, ``solvency should be the No. 1 goal.''
``The surplus helps to mask the true size of the federal budget deficit,'' Boehner said in an interview. When the ``surplus begins to go south the whipsaw effect on this budget process is going to be tremendous. We have a huge budget problem.''
Representative Jim Kolbe, an Arizona Republican, said ``you can't have a bill that's only dessert and no spinach.''
Steady Decline
Polls show there has been a steady decline in support for Bush's handling of Social Security since early February, even though he campaigned in 60 cities to promote his overhaul plan.
Americans disapprove of Bush's overhaul plan by a ratio of more than 2-to-1, a new low for the White House, according to a Gallup/USA Today/CNN poll conducted June 24 through June 26.
Increasing taxes to address solvency issues before the 2006 mid-term elections won't appeal to Republican voters, said Max Pappas, director of policy at Freedom Works, an advocacy group formed by former Republican House Majority Leader Dick Armey.
``Solvency isn't something that motivates people to go vote,'' Pappas said.
As part of his proposal to add personal accounts to Social Security, Bush has backed a plan to tie benefit increases for wealthy and middle-income Americans more to inflation rather than wages, which is the current practice. The change would slow the growth of benefits since wages historically rise faster than prices.
Cash Reserve
Last week, House and Senate Republicans unveiled legislation that would use the cash reserve of Social Security to create the accounts. Bush proposes letting workers younger than 55 divert as much as a third of the 12.4 percent Social Security payroll tax into personal accounts that could be invested in stock and bond funds. The administration estimates it would cost the government $754 billion in revenue over 10 years.
Representative James McCrery, a Louisiana Republican who heads the Social Security subcommittee, outlined the plan to fund private accounts with the Social Security reserve to Republicans in a meeting yesterday.
``No member who talked about this, and dozens of members did, had a single negative comment,'' said Representative Roy Blunt of Missouri, the No. 3 Republican.
The legislation on its own would pass the House if voted on now, Blunt said.
Hastert
House Speaker Dennis Hastert declined to say if provisions aiding solvency would be part of any Social Security legislation, calling the accounts bill ``a first step.''
At least one Republican lawmaker remains opposed to the private accounts plan. Representative Heather Wilson, a New Mexico Republican from a politically competitive district, said the presentation didn't convince her to support the accounts.
``I've opposed the privatization of Social Security,'' she said.
Democrats said they aren't budging from near-unanimous opposition to any bill with accounts, which they charge would destroy the current system by draining it of funding.
``It's directly contrary to what we'd agree is prudent public policy,'' said Representative Earl Pomeroy, a North Dakota Democrat who's a member of the Social Security subcommittee. ``This is the time we ought to be shoring up'' the system, not diverting money to accounts, he said.
Resistance
Republican supporters of the Senate's version of the accounts legislation are also running into resistance within their own party. Senator Trent Lott, a Mississippi Republican and co-sponsor of the Senate measure, said the bill didn't have the votes to pass in the Finance Committee.
``When it comes to Social Security, this is the biggest bunch of chickens,'' he said.
Senator Charles Grassley, the Finance Committee's chairman, said June 28 that he agreed that legislation with personal accounts in it couldn't pass his panel.
Grassley said he does have a ``rough consensus'' on a solution to continued solvency, including changes to the retirement age and how benefit increases are calculated, and a proposal to generate additional revenue. The last provision will be crafted ``in such a roundabout way you aren't even going to recognize it as a tax increase,'' he said.
Some Republicans are trying to avoid politically painful votes to cut benefits or raise the retirement age before the 2006 election, said Thomas Mann, a political analyst with the Brookings Institution, a public policy research group in Washington.
``They are looking for a legislative vehicle to provide a safe political haven in 2006, not to make Social Security solvent,'' Mann said. ``The odds increasingly favor no new law being enacted by this Congress.''