Dec. 15 (Bloomberg) -- President George W. Bush's bid to restructure Social Security and make tax cuts permanent competed with budget and trade deficit concerns during a conference of economists and executives that began today in Washington.

U.S. Treasury Secretary John Snow defended Bush's plan to fund the introduction of private Social Security accounts, saying it won't push up interest rates. ``If we fix Social Security we'll reduce the long-term outlays and be able to finance the short-term transition costs,'' Snow said in an interview from the two-day summit.

Bush attended a meeting on limiting lawsuits and plans to take part in another tomorrow, on ways to curtail spending while changing Social Security. Robert Nardelli of Home Depot Inc., Kevin Rollins of Dell Inc. and Richard Parsons of Time Warner Inc. were among the chief executives joining economic experts such as John Lipsky, chief economist at JP Morgan Chase, for the summit, which features six sessions with handpicked audiences.

Lending his political weight to proposals to limit damage awards against businesses in court cases, Bush said he'd send a legislative proposal to the Republican-controlled Congress to lower liabilities in cases stemming from medical malpractice and asbestos exposure lawsuits.

Top Priorities

``I intend to make this a priority issue,'' Bush told the summit, similar to forums he conducted with supporters during his re-election campaign. ``If we can achieve legal reform in America, it will make it a better place to start a business and/or find work.''

Bush also told reporters earlier in the day that ``Social Security reform will be at the top of my agenda.''

Bush wants to allow younger workers to divert part of their Social Security taxes to private accounts, which they could invest in stocks and bonds. Since current Social Security beneficiaries rely on the same tax dollars younger workers would be investing, the government would have to fill in the gap by borrowing, raising taxes or cutting benefits.

Shifting to private accounts would cost $1 trillion to $2 trillion over 10 years, the Congressional Budget Office said. Bush has ruled out raising payroll taxes, leaving economists to predict he will have to raise much of the money by issuing government securities.

Clout

Bush is pursuing an agenda that may be too ambitious for a second-term president, said George W. Grayson, a professor of government at the College of William & Mary in Williamsburg, Virginia. ``You have your greatest clout as president as you finish your first term,'' Grayson said.

Snow declined to comment on the cost of Bush's Social Security private account plan because Bush has yet to flesh out his proposal. ``The financial markets, the capital markets, the bond market, Wall Street will applaud the action,'' Snow said.

Bush said he'd work with Congress to pay for his plan ``so that the world financiers can take comfort in the fact that this government will address one part of the budget deficit.''

``We will deal with the deficit,'' Snow said. ``We know it's too large, and we're committed to bringing it down.'' He later told reporters the deficit would be the ``centerpiece of the second term. It's the lynchpin of second-term issues.''

David Goode, chairman and chief executive of Norfolk Southern Corp. based in Norfolk, Virginia, said that in addition to winning the war in Iraq, the administration's economic ``priorities have to be a solution to health care and attention to the trade and fiscal deficits.''

Health

At a conference panel of health experts, Health and Human Services Secretary Tommy Thompson said Bush is ``passionate'' about lowering health-care costs by allowing more small businesses to band together to negotiate and buy insurance. The administration is also trying to spur greater use of tax-free savings accounts that can be used for health care.

Bush's Social Security plan faces opposition from Democrats such as House Minority Leader Nancy Pelosi of California and Senate Minority Leader Harry Reid of Nevada. They say it would drain money from the federal retirement fund, swell the budget deficit and mostly benefit Wall Street mutual fund managers.

Harvard University economist Martin Feldstein told the conference that paying for future retirees is the most important issue facing the nation. ``If Social Security is not reformed, the payroll tax required to finance future benefits would have to increase from the current 12 percent to about 20 percent,'' he said. ``That would be a major burden on all working households and it would be a substantial drag on the economy.''

Social Security will begin running out of money in 2018 and be exhausted by 2043, the trustees for the program said in March. Economists are divided over what the introduction of private retirement accounts will do to the U.S. bond market.

Budget Deficit

The federal budget deficit is forecast to be $348 billion in this fiscal year and is likely to continue at an annual rate of about $300 billion or more for the balance of Bush's term ending in 2008, according to the CBO.

The U.S. government ended the fiscal year 2004 on Sept. 30 with a $412 billion budget deficit. It's the largest in history in dollars, while smaller as a percentage of the economy -- 3.6 percent -- than the shortfalls the government ran in the mid- 1980s under President Ronald Reagan.

Henry Aaron, an economist at the Brookings Institution in Washington, said Bush's proposal would diminish national savings and push up the current account deficit from a record $166.2 billion reached in the second quarter.

``If one wanted to set the most perverse possible agenda, one that would exacerbate the U.S. budget deficit, increase our current account deficit, reduce savings still more, President Bush's agenda would be ideal,'' Aaron said.

Debt Limit

Bush's goal of reducing the deficit in half in five years will be reached, said Richard Clarida, the Treasury Department's chief economist until 2003 and now chief economic strategist at the Clinton Group Inc., a hedge fund based in New York. ``Economic growth will generate additional tax revenues, and it's important to continue the spending discipline.''

Before leaving Washington for the holidays, Congress approved an $800 billion increase in the U.S. debt limit to $8.184 trillion. The U.S. saw four consecutive years of surpluses from 1998 to 2001 and has had deficits every year since. Democrats blame Bush's 10-year, $1.85 trillion tax cuts.

With the cost of the war and reconstruction in Iraq reaching $122 billion and U.S. spending on domestic security topping $80 billion after the Sept. 11 attacks, Bush is banking on rising economic growth to deliver more revenue to the U.S. Treasury.

``The main theme for the Bush administration in the second term will be the structural deficit and that will get larger as they tackle Social Security and tax reform,'' said Kathleen Stephansen, director of economic research at Credit Suisse First Boston in New York.

Trade Deficit

The U.S. trade deficit widened to a record $55.5 billion in October, fueled by a rise in oil prices and imports from China before the holidays. The deficit reached $500.5 billion in the first 10 months of the year, surpassing the record for all of 2003, the Commerce Department said.

Some economists fear that's driving a long-term decline in the dollar that will make it harder for the U.S. to borrow the $1 trillion to $2 trillion that would be needed to restructure Social Security.

``The dollar is about halfway through a multiyear correction,'' said C. Fred Bergsten, an economist at the Institute for International Economics.

Dollar's Slide

Bush said today that U.S. policy is for a ``strong dollar.'' Taking reporters' questions after a White House meeting with Italian Prime Minister Silvio Berlusconi, Bush said markets should decide values between the dollar and the euro.

The dollar fell to $1.3403 versus the euro at 4 p.m. in New York from $1.3298. The dollar is down about 6 percent this year against the euro, which reached a record high of $1.3470 on Dec. 7.

A weaker dollar contributed to inflation concerns this year. Federal Reserve policy makers yesterday raised the benchmark U.S. interest rate a quarter point to 2.25 percent, the fifth increase since June, in a bid to return borrowing costs to a level that prevents inflation from accelerating without stifling growth.

The U.S. economy, the world's largest, grew at a 3.9 percent annual rate in the third quarter, the Commerce Department said.

`Risks' on Horizon

The economy is ``in reasonably good shape but I am a little bit concerned about some risks that are out there on the horizon,'' said Bruce Bartlett, a columnist and former Treasury official under Bush's father, President George H. W. Bush.

Gross domestic product will probably grow 3.5 percent next year, according to the median estimate of economists surveyed by Blue Chip Economic Indicators this month.

``It is growing, but not at a pace that it should be at this stage of a recovery,'' said Senator Jon Corzine, a New Jersey Democrat and former co-chairman of Goldman, Sachs & Co. ``We are developing these deep imbalances over time, which is most dramatically demonstrated by the current account deficit which is starting to erode the dollar.''

``There are the beginning signs of a loss of confidence in our economic policies by the markets,'' Corzine said.

Treasury Secretary Snow said he's ``confident the economy will continue to grow and with that we'll see lots of new jobs.''

To contact the reporter on this story: William Roberts in Washington wroberts@bloomberg.net

Last Updated: December 15, 2004 17:01 EST