Yesterday President Bush travelled to Iowa to promote his plan to reform social security. Iowa is the 20th state Bush has visited to promote his plan, which the public is receiving with increasing doubt and skepticism. Notably Senator Charles Grassley (R-IA) -- who is also Senate Finance Committee Chairman -- said yesterday that there is room for compromise on the size of private incestment accounts. While President Bush is promoting a plan to divert four percentage points of the payroll tax into a private account, Grassley believes the amount is negotiable, and stated he plans to make compromise an issue when the Finance Committee meets on Social Security this summer. Grassley also noted that even though he is in favor of establishing these accounts, he does not believe they address the problem of social security solvency. He said, "I like personal accounts.... So you have personal accounts as an issue in and of themselves, and then over here, you've got the solvency problem. I want to deal with both of them." The Finance Panel is planning on holding Social Security hearings in April, however no dates have been set yet. For more details on Bush's visit to Iowa and recent Social Security happenings, click here. Also check this Economic Policy Institute briefing paper on how Social Security fits into the Bush budget. The paper, by Max Sawicky, is aptly titled "Collision Course."

Following up on last week's Watcher article on Social Security, it appears that speculation among conservatives for private accounts continues to grow. Each week it seems more and more conservative economists and analysts break with the administration's view on personal accounts. To read about it, click here. Also, see this article in tompaine.com that discusses how millions of disabled workers, spouses, and child beneficiaries would be left out under the privatization plan. The article is by Nancy Cauthen of the National Center for Children in Poverty. Click here to read a Newsday article on the lobbying efforts of labor organizations on behalf of the Social Security program.

Although no timetable is set for legislation yet, proponents of estate tax repeal will push this year to gather the 60 votes necessary to clear a measure repealing the tax. This is projected to happen despite widespread concerns about an exploding budget deficit; record-low levels of national revenue; very high potential future costs of Medicare liabilities, Social Security reform, and Alternative Minimum Tax reform; as well as the fact that Congress and the President are looking to further cut taxes. The House has more than enough votes to pass a permanent repeal measure, while the real fight would take place in the Senate to get a supermajority that would back repeal legislation. A new book on estate tax repeal is out, titled Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth. Written by Michael Graetz and Ian Shapiro, the book seeks to answer how the estate tax, which has been around since 1916 and is paid by less than the wealthiest two percent of Americans, was voted in 2001 to be phased out through 2010 with broad bipartisan support and almost no coordinated opposition. The authors of the book, as well as other supporters of the estate tax, believe that estate tax repeal is not only morally irresponsible (because the tax is extremely progressive) but also economically irresponsible. Len Burman, who is authoring a new report, "Options to Reform the Estate Tax," has noted that permanent repeal would result in both a static annual cost of about $50 billion in revenue, as well as a drop in charitable contributions of about $17 billion annually. He also notes in a recent Tax Policy Center Issue Brief that raising the exemption to $3.5 million would cut the number of farms and businesses liable for the tax by 75 percent, to just over 100, with only about 10 small businesses affected. Given our current deficits, Congress would be wise to consider reform options to the estate tax, as opposed to permanent repeal. When Burman's paper outlining reform options becomes available, it will be posted here.

The Social Security and Medicare Boards of Trustees released their 2005 annual report which states that "exhaustion" of the trust fund will occur one year earlier than predicted, or in 2041 as opposed to 2042. The report also finds that the amount of tax revenues taken in will fall below the amount the trust fund will pay out starting in 2017. The SSA originally stated this would happen in 2018. Now, they predict that the Social Security program will need to supplement trust fund receipts with general revenues in order to pay be able to pay people full benefits a year earlier. The new report also projects a Social Security shortfall of $4 trillion over the next 75 years. This number is up from the $3.7 trillion figure that economists and politicians have been quoting. Max Sawicky of the Economic Policy Institute notes that the Social Security crisis is not nearly as pressing as the problems being created by our large budget deficits, which were largely due to the administration's tax cuts. These deficits will hinder the government's ability pay for any and all of programs down the road, including Social Security and Medicare. The Congressional Budget Office estimates that in 2042, when the Social Security shortfall will supposedly be 1.37 percent of GDP, the overall budget deficit will be much greater than that --10.7 percent of GDP. Sawicky says, "While the administration tries to fiddle with a relatively small-scale Social Security shortfall, it is creating overall budget deficits that are burning a hole as far as the eye can see. Instead of focusing on a relatively small and distant problem, the administration would better serve the nation by fixing the much bigger and more immediate problem it has created." This is a sentiment echoed widely by economists and policy analysts, many of whom see the large costs of tax cuts and future skyrocketing costs of Medicare as much more serious problems. For more information see this Washington Post article and this report by the Center on Budget and Policy Priorities. For more from the Social Security Administration, click here.