May 23 (Bloomberg) -- The Democratic Party is unified in its opposition to President George W. Bush's plan to create private Social Security accounts from payroll taxes. It's not so united over what, if anything, it wants instead.

Pressure is building on Democrats to offer ideas on how to shore up Social Security and increase the nation's retirement security, not just oppose the president's plan. The pressure threatens to expose internal rifts that have thus far been camouflaged by their universal opposition to Bush's plan.

The result is a growing dilemma for Democratic lawmakers. If they refuse to advance their own plan or negotiate with Republicans, they risk being painted as obstructionists and outflanked. If they do come to the table, they risk having Republicans exploit their internal divisions and being outvoted when the final version of the measure is crafted.

On one side of the debate are Democrats who argue that, with House Ways and Means Committee Chairman Bill Thomas now trying to widen the Social Security debate to include issues like health care and pensions, the time has come to show their cards.

``They're missing an opportunity to present what the Democrats would do with Social Security besides just opposing carving out private accounts,'' says Bob Kerrey, a former senator from Nebraska who is now president of New School University in New York. Key constituency groups such as AARP, the nation's largest senior-citizens' group, and the Teamsters union, which have opposed the Bush plan, now say they are interested in what Thomas may have to offer.

`No Interest at All'

On the other are those who side with Joe Lockhart, White House press secretary under President Bill Clinton, who says Republicans may once again shape legislation without real Democratic input, as they've done in the past. ``As long as they follow that game plan, there's just no interest at all in the Democrats to raise their head on this,'' says Lockhart, who is now a partner with Glover Park Group, a Washington consulting firm.

The Democrats' dilemma is illustrated by polls that show the party hasn't benefited from the unpopularity of Bush's Social Security proposals. A USA Today/CNN/Gallup poll taken April 29 to May 1 found that while 62 percent of Americans are worried Republicans will ``go too far'' in cutting benefits or taking other steps to fix Social Security, 61 percent worry Democrats ``will not go far enough.''

``That Bush is losing the debate is clear,'' says Will Marshall, the founding policy director of the Washington-based Democratic Leadership Council. ``That the Democrats are winning it is not as clear. It's because people don't have a clear vision of what Democrats would do.''

Political Consequences

The problem for Democrats is that any proposal they do produce would have its own political consequences. The ultimate result of a plan for bringing Social Security's finances into balance -- its trustees say the program will begin paying out more than it receives in payroll taxes in 2017 -- would be larger budget deficits, benefit cuts or higher taxes. Adding to the deficit would undercut Democratic criticism of Bush's fiscal record; benefit cuts would be opposed by the party's base; and advocating higher taxes makes many Democrats nervous.

The internal tension was underscored last week when Representative Robert Wexler, whose South Florida district has the second highest number of Social Security beneficiaries in the nation, became the first Democrat to offer a plan to address solvency with a large tax increase. In offering his plan, Wexler broke ranks with Democratic congressional leaders, who quickly distanced themselves from his proposal.

``I really don't take what he has said to have anything to do with the ongoing dialogue,'' Representative Charles Rangel of New York, the senior Democrat on the Ways and Means Committee, said in an interview. ``He felt compelled to say something, which of course is every member's prerogative.''

Wexler's Plan

Wexler's legislation would require workers to pay a 3 percent payroll tax on earnings above $90,000, the current limit on taxable earnings. Businesses would be required to pay a matching 3 percent tax. ``The American people are not stupid,'' Wexler says. ``You can't show there's a different way without proposing a plan.''

Earlier this year, Representative Dennis Moore, a Kansas Democrat, introduced a bill that would create a so-called lockbox and prevent the government from spending Social Security revenue for other purposes.

Many senior Democrats say they still believe the best strategy is to simply oppose the Republican efforts and the president's plan.

Distracting the Public

``I'm absolutely convinced what will happen is he will try to distract the public's attention'' by criticizing a Democratic proposal, says Steny Hoyer of Maryland, the No. 2 Democrat in the House of Representatives. ``Then we will have a tit-for-tat, wedge-issue confrontation like in the past. We don't think it will prove productive now.''

Even Kerrey, who thinks Democrats need to have their own proposal, warned his party against presenting a specific solvency plan until Republican leaders do so.

``The legislative branch is much, much more vulnerable on this issue than the executive branch,'' Kerrey says. Democrats should instead begin to focus more on ``progressive'' ideas to help Americans save for retirement.''

Some already are. Representative Rahm Emanuel of Illinois, a Democrat on the Ways and Means Committee, says his party has ``done a good job'' of defining its position on Social Security, while adding, ``We have more work to do defining our agenda on retirement security.''

Automatic Enrollments

Emanuel proposes measures including creating automatic enrollments in employer-sponsored 401(k) retirement plans, allowing taxpayers to deposit some or all of their federal tax refund into individual retirement accounts and a tax credit for contributing to a 401(k) or IRA.

Kerrey cited a plan by former Clinton economic adviser Gene Sperling, who proposes creating universal 401(k)s that include a 2-to-1 government match for lower-income Americans and a 1-to-1 match for middle-income earners.

While Ways and Means Democrats flatly rejected Thomas' offer to broaden the debate to include health care and private pension plans on May 19, constituency groups had a more welcoming reaction. ``We're curious to hear his ideas but we haven't talked to him yet,'' says Steve Hahn, a spokesman for AARP.

Mike Mathis, government affairs director for the Teamsters union, says that shoring up multi-employer pension plans ``is a very important issue to us.'' He's been meeting with Thomas and committee staffers to discuss ways to address these concerns.

The Teamsters want a bill that would allow union trustees of such plans to receive additional funds from employers to plug shortfalls without renegotiating contracts. ``We're very hopeful,'' Mathis says. ``We do think pension legislation's going to move this year.''

To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net

Last Updated: May 23, 2005 00:06 EDT