An administration compromise on Social Security reform would represent a near-total collapse of GOP ideological aspirations to a social welfare policy of market opportunity. Bush called this vision the "ownership society," a new version of the U.S. social contract in which Americans would undertake more risk on income security, in exchange for the dramatic benefits of home ownership, control over retirement savings, employment training, and health care. Privatization of Social Security -- with the diversion of personal tax contributions to individual accounts -- would eventually replace the old fashioned pay-as-you-go Social Security transfer program currently in place. Social Security is expected to run out of funding sometime in the next few decades when expenditures overtake tax contributions. This is what people mean when they say Social Security will eventually go bankrupt.
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.
Both sides acknowledge that a combination of reduced future benefits and higher revenues will be necessary eventually. As more Americans reach retirement age, Social Security will soon bring in fewer revenues from workers' payroll taxes than it sends out in benefit checks to retirees, workers' survivors and the disabled.
For Mr. Bush, private accounts are a way of reducing Social Security's future obligations, and central to his concept of an "ownership society" in which Americans rely less on government.
Democrats, along with the seniors group AARP, oppose personal accounts because they would initially require heavy government borrowing, and could leave future retirees at risk of market downturns.
Except for the Iraq war, perhaps no other issue so tests whether Democrats' capture of Capitol Hill in this month's midterm elections will cause Mr. Bush to alter what has been a largely partisan and uncompromising governing style. At the same time, any compromises cut with the Democratic majority are sure to cost Mr. Bush the support of many Republicans, especially in the House.
Publicly, the White House isn't budging. "Private accounts are part of our proposal and we're interested in having others put things on the table, not taking things off," says administration spokesman Dana Perino.
For those who nonetheless see a Bush concession ahead, perhaps the biggest reason is this: If Mr. Bush doesn't drop private accounts, it is virtually certain that nothing will happen on Social Security, the issue he has called the top domestic priority of his second term. Democrats say Mr. Bush also must finally spell out exactly what future benefit reductions or revenue increases he could support.
Even before the Democrats came to power, privatization of Social Security was viewed skeptically by a public wary of market fluctuations, particularly in light of the 2001 stock market crash. Business Week ran a story a while back called "Safety Net Nation," which indicated that most Americans wanted some basic, government-backed safety net against downward mobility, particulary in old-age.