Time to negotiate on Social Security

Is there still a chance for Social Security reform? The Wall Street Journal writes that a chastened President Bush is still committed to fixing the problem:

President Bush tried and failed to fix Social Security's long-term finances with his own party in control of Congress. His determination to keep trying, even as Democrats take over, is fueling speculation that he is ready to meet their price for coming to the bargaining table: dropping his goal of letting workers create private retirement accounts.

While Democrats don't take over the House and Senate until January, already some in both parties are reading tea leaves for signs of administration flexibility, including in recent remarks by Treasury Secretary Henry Paulson and White House Chief of Staff Josh Bolten.

Were the president to drop private accounts and call their bluff, Democrats would be challenged to make good on their professed willingness to help ensure Social Security's solvency.

This is in line with a report in the WashPost – “Social Security up for discussion”:

With the elections over and Democrats poised to take control on Capitol Hill, the Bush administration is making a fresh push to persuade them to help rein in the rising costs of Social Security and government health-care programs by offering to open talks with "no preconditions."

Well, I would prefer one precondition: if the White House is going to drop private savings accounts, the Democrats should agree to no additional FICA taxes. Already, some 70% of Americans spend more in payroll taxes than income taxes due in no small part to the fact that the payroll tax rate has steadily risen over time. When Social Security was in its infancy, the rate was 1% - it now stands at 6.2%; some (like me) would argue the rate is actually 12.4% since employers have to match your payment. Of course, since this expense doesn’t live in a vacuum, businesses are forced to pass on the cost in either higher prices or depressed wages.