By Dan Froomkin
Special to washingtonpost.com
Tuesday, December 7, 2004; 11:08 AM

Initial signs suggest that the White House's campaign to add private accounts to Social Security will hinge on getting the public to embrace two bold but disputable assertions.

One of those assertions is that the estimated $1 trillion to $2 trillion in new government spending required to create these private accounts is in fact not a cost but a savings.

Don't try that at home.

The other is that the Social Security system is in crisis -- $10 trillion short -- and that private accounts alone will entirely resolve the problem.

But the crisis is not imminent. And some economists question whether adding near-term debt to address a long-term problem is a good idea. Even some who support partial privatization say increased taxes or reductions in guaranteed benefits still may be needed to put the federal retirement program back in kilter.

Press Secretary Scott McClellan was the public face of the White House's first major Social Security salvo yesterday. President Bush also met privately with congressional leaders, but details were scarce.

And McClellan wasn't explaining his new assertions as much as he was repeating them -- insistently -- over and over again.

Yesterday's press briefing is worth a look.

McClellan's message of the day: "There will be some up-front transition financing that will be needed to move toward a better system that will allow younger workers to invest a small portion of their own money into personal savings accounts. But it will be a savings over the current system. The current system is simply unsustainable."

Without using the word himself, he acknowledged that borrowing is "what you're looking at doing as part of the transition to a better Social Security system."

And four times, McClellan asserted that "The cost is $10 trillion if we do nothing."

Here's an excerpt:

"Q So the principle is that at least some of the transition costs will be financed --

"MR. McCLELLAN: We keep talking about cost. It's a savings, because the cost is $10 trillion of doing nothing, and this will actually be a savings from that cost of doing nothing.

"Q The borrowed money will have to be paid back. It's not imaginary, right?

"MR. McCLELLAN: And it will be a savings over the overall costs under the current system.

"Q That's your belief, but for now, the money will be borrowed and will have to be paid back.

"MR. McCLELLAN: It will be a savings over the long-term.

"Q What about the short-term, right now --

"Q And what is the basis for $10 trillion?

"MR. McCLELLAN: Bob has the floor. April, you've had your question, Mark, you've had your question. Bob, it's your question. I'll come back to you if I can."

Ron Hutcheson and William Douglas write for Knight Ridder Newspapers: "President Bush on Monday signaled his determination to overhaul Social Security, even if it means piling up huge new government debt to pay for the transition to a partially privatized system. . . .

"The president didn't provide details of his proposal, but White House spokesman Scott McClellan said Bush is willing to add to government debt to cover transition costs, which are estimated at $1 trillion to $2 trillion over 10 years.

"Administration officials contend that any short-term harm from a big increase in deficit spending would be more than offset by long-term savings in the Social Security system. Independent financial experts don't necessarily disagree, but many warn that adding $1 trillion or more to government debt could be dangerous to the economy, so the details of any overhaul are of immense importance."

Hutcheson and Douglas explain the "transaction costs": "Under the current system, payroll taxes on today's workers pay for benefits to current retirees. Bush's plan would disrupt the cross-generation income transfer by letting workers put aside money for their own retirement. That would leave a big funding gap for retirees who depend on the current income-transfer system."

Warren Vieth and Janet Hook write in the Los Angeles Times: "In a meeting with congressional leaders of both parties, the president conceded that his vision for Social Security would require significant short-term borrowing, according to a participant in the closed-door session. . . .

"Independent analysts have estimated the government would initially need to borrow more than $1 trillion. The administration declined to provide its own figure, but said that if the program was not restructured to handle the coming wave of baby-boom retirees, the cost would be $10 trillion. . . .

"McClellan said the transition debt should not be regarded as a cost, because it eventually would reduce Social Security's long-term unfunded liability. That is the difference between the level of benefits promised to retirees over the next 75 years and the estimated payroll taxes that will be available to pay them.

"The shortfall is attributable in part to the looming retirements of the baby-boom generation, which will leave the nation with fewer workers supporting more retirees. According to government projections, the system will start paying out more than it takes in by 2018, and the Social Security trust fund will be depleted by 2042."

David Espo and Deb Riechmann report for the Associated Press on the private meeting with Bush: "Skeptical Democrats told the president any legislation must be bipartisan to prevail, according to participants in a session that signaled the likely start of a fierce struggle. . . .

"Bush 'said several times he ran on this' issue during his successful campaign for a second term, said Rep. Bob Menendez, D-N.J., who attended the White House session. He quoted the president as saying he 'intended to spent a lot of his political capital' on it."

Allan Sloan writes in his Washington Post business column: "Here's the deal: Say that wage earners put $60 billion a year of Social Security tax payments into personal accounts rather than having the money go to the Treasury. The Bushies argue that we shouldn't add the $60 billion to the deficit because the personal accounts would reduce the government's future Social Security obligations by more than $60 billion. Account holders, you see, would get a smaller guaranteed benefit than other Social Security recipients. Adding the personal accounts to the deficit, they say, is like prepaying your mortgage and having to show it as a loss.

"But as Peter Orszag of the Brookings Institution points out, a dollar of debt today is a far more tangible taxpayer obligation than a dollar of benefits years down the road. Congress can cut benefit formulas -- it has done so with Social Security, and will soon do so again. But Congress can't reduce the federal debt by fiat the way it can reduce benefits."

Sloan also writes: "You can actually make the case that the president's marketing of his Social Security 'reform' has been brilliant. Why? Because it has diverted people from asking a basic, simple question. Which is this: Wasn't Social Security designed to be a safety net for old people? When did it change from something designed to keep you from being poor into something to supposedly help make you rich?"

Mike Allen writes in The Washington Post: "Treasury Secretary John W. Snow woke up yesterday and read in a major newspaper for the second Monday in a row that President Bush has decided to replace him, but the former railroad executive still had not gotten the word directly from the White House. . . .

"Bush's aides have been telling Snow that they appreciate his work and that they are sorry about all the speculation, while fueling it with tepid endorsements and silence from the president."

So who will replace him? There's some talk that it might be White House Chief of Staff Andrew H. Card. Jr.

Andrew Balls writes in the Financial Times: "Promoting a White House lieutenant might ease the internal politics of the administration, and give a more prominent role to the Treasury. Mr Snow has had difficult dealings on Capitol Hill because he was not seen to be speaking for the White House. Mr Card, or another insider, would not have that handicap.

"But it might not raise confidence on Wall Street, and among international investors, on the administration's commitment to restoring fiscal discipline, not to mention finance ministers around the world, concerned about the decline of the dollar."

On CNN yesterday, Judy Woodruff asked correspondent Dana Bash: "More reporting today about the likelihood that John Snow will leave his position as treasury secretary. What are you hearing about that and about a replacement?

"BASH: Well, Judy, it's not going to happen today, we're told. Probably not tomorrow. This is something that has been in the works and been talked about for some time. I have not talk to a single senior official who has -- who has said that John Snow is going to stay in his job.

"But there was one report that you're referring to that perhaps the White House chief of staff, Andy Card, was in line to take that job. He was asked by a reporter in the Oval Office today whether or not he is going to take it, and he said -- his answer was, 'No, categorically no.' So he says that he's not going to be in that job, but Secretary Snow, according to officials, is probably not going to be in after a couple months."

John D. McKinnon writes in the Wall Street Journal: "Other insiders on the list of possibilities include Joshua Bolten, a former Goldman Sachs Group Inc. investment banker who has gained experience dealing with Congress as White House budget director; and Glenn Hubbard, who did a stint as chief economist in the Bush White House before returning to Columbia University's Graduate School of Business, where he is now dean. All three men exemplify the administration's disciplined, stay-on-message style. A spokesman for Mr. Bolten declined to comment, and Mr. Hubbard didn't immediately respond to a request for comment late yesterday."

Peter S. Canellos writes in a Boston Globe column that "President Bush will enter his second term with a sharply different team. But what is different pales in comparison to what will remain the same: Donald Rumsfeld will continue as defense secretary, and as long as he stays the neoconservatives who dominated the first term will hold sway over foreign policy.

"Whither the neocons was the great question of the Bush campaign. And it was, perhaps, the most important question of the entire 2004 election, because it would define Bush's doctrine of preemption. But it was not answered until last weekend, when Rumsfeld confirmed that he was keeping his job.

"Bush presented his idea that the United States should destroy terrorist threats before they strike, but his fierce rhetoric never included a standard for judging such threats. Must a threat be immediate or merely potential? Would the country ever be justified in acting against nations simply to hasten the spread of democracy?"

With the neocons almost certainly remaining the dominant force in foreign policy, Canellos writes: "Iraq is looking less like the past and more like the prologue."

Charles Babington and Walter Pincus write in The Washington Post: "White House and congressional leaders yesterday broke a logjam that has stymied major legislation to restructure the nation's intelligence community, prompting lawmakers to schedule a House vote today on the long-debated measure. . . .

"Vice President Cheney spent part of the weekend phoning key House members to help broker the compromise, lawmakers said. . . .

"Last night, the White House issued a letter signed by President Bush saying 'it is imperative that Congress act this week' to pass the bill."

Philip Shenon writes in the New York Times: "The bill's supporters described the last-minute revisions, which were worked out with the White House in weekend negotiations directly overseen by Vice President Cheney and his staff, as minor."

Mary Curtius writes in the Los Angeles Times that this is a triumph for Bush.

"Bush's ability to move the legislation -- over opposition from the Pentagon and its backers -- has become a test of his political clout as he prepares to launch his second term. The president has said that he plans to pursue an ambitious legislative agenda that will include efforts to restructure Social Security and alter the nation's tax code. He is eager to demonstrate that the newly expanded congressional Republican majorities in the House and Senate are united behind his leadership."

John Lancaster writes for washingtonpost.com this morning: "Three years after the fall of the Taliban, Hamid Karzai was sworn in Tuesday as Afghanistan's first popularly elected president in a dignified, heavily guarded ceremony attended by hundreds of Afghan and foreign guests, including Vice President Cheney and Defense Secretary Donald H. Rumsfeld.

"Security for the inauguration was intense even by the standards of this dust-caked, heavily militarized city. Major roads were closed, U.S.-led multinational troops patrolled by foot and armored vehicle and sharpshooters manned rooftops with telescopic sights while helicopters whirred overhead. . . .

"Cheney was accompanied from Washington by his wife, Lynne, and Karen Hughes, a political adviser to President Bush."

Stephen Graham of the Associated Press notes that Cheney is the highest-ranking American official to visit Afghanistan since the fall of the Taliban in 2001.

Terence Hunt writes for the Associated Press: "President Bush on Monday moved to replace Mary Frances Berry, the outspoken chairwoman of the U.S. Civil Rights Commission who has argued with every president since Jimmy Carter appointed her to the panel a quarter century ago.

"But Berry balked at leaving now, arguing through a spokesman that she and vice chairman Cruz Reynoso, who also is being replaced, have terms that run until midnight Jan. 21, 2005. The White House maintained that their six-year terms expired Sunday and that Berry and Reynoso had been replaced."

Deb Riechmann writes for the Associated Press: "President Bush chose a Marine base in southern California -- one with one of the highest casualty rates in Iraq of any U.S. military base or installation -- to thank American troops fighting Iraqi insurgents.

"Bush was to deliver a speech on Iraq and have lunch with troops Tuesday at Camp Pendleton, 38 miles north of San Diego. More than 21,000 Marines serving in Iraq and neighboring nations are part of the 1st Marine expeditionary Force based there."

Bush is flying all the way there and back in one day.

Yesterday, the Associated Press reported, "Leaders from Iraq, Jordan and Senegal paraded through the White House Monday morning. By afternoon, President Bush was hosting Elmo and the Cookie Monster at a children's holiday party."

Peter Baker writes in The Washington Post: "President Bush tied yesterday's deadly assault on a U.S. consulate in Saudi Arabia to the upcoming elections in neighboring Iraq, depicting it as part of a broader campaign by Islamic extremists to drive Americans out of the Middle East."

Bush made his comments speaking in the Oval Office alongside Iraq's interim president, Ghazi Yawar.

But, Baker writes: "Bush's attempt to draw a connection struck some outside foreign policy specialists as an oversimplification that ignored the complicated web of alliances and animosities that plague the Middle East. Rather than an attack on democracy, they said, the attack probably stemmed from the long-running struggle by Islamic extremists against the decidedly undemocratic Saudi monarchy backed by Washington."

Here's the transcript of the photo op. At one point, Bush turned for a softball question from the al-Arabiya Arab-language satellite news channel -- and by mistake called on their more radical archrivals.

"Are you Al Jazeera?," asked Bush.

"Al Arabiya," came the reply.

"I mean, Al Arabiya. Welcome."