April 5 (Bloomberg) -- Private accounts must be part of any permanent Social Security fix, said Karl Rove, President George W. Bush's deputy chief of staff, expressing optimism Congress will end a partisan standoff and pass such a measure this year.

``The personal retirement account has to be part of the long- term solution,'' Rove, Bush's chief political and policy adviser, said in an interview in Washington yesterday. ``The public and Congress are becoming aware that it's a serious problem.''

Bush wants Congress to pass legislation allowing workers younger than 55 to invest in stocks and bonds as much as a third of the 12.4 percent tax they and their employers pay into the Social Security program. Bush and Republican congressional leaders acknowledge that it's politically impossible to pass sweeping legislation without some bipartisan support.

Almost all Democrats have rejected accounts created with a portion of Social Security funds. The only Democrat to back a personal account is Representative Allen Boyd, a Florida Democrat. And lately, congressional Republicans have indicated they're skittish about private accounts.

``Accounts are being overly sold and tremendously demagogued,'' Senator Lindsey Graham, a South Carolina Republican, said on March 8. ``If they want solvency without accounts, I'm willing to sit down and talk.'' Republican Senator Olympia Snowe of Maine said Feb. 15 Social Security needs lawmakers' ``full attention'' and need not be changed this year.

`Big Issue'

Some Republican leaders, including House Speaker Dennis Hastert of Illinois and Senate Finance Committee Chairman Charles Grassley of Iowa, also have sounded pessimistic about the prospects for Social Security overhaul this year. One bipartisan worry: Private accounts would add to the federal budget deficit, at least in the short term.

Rove denied that Republican apprehension was any cause for serious concern. ``This is a big issue,'' he said. ``It's a big fundamental reform. It's vital to the country, and nothing ever comes easy.'' He pointed to initial reluctance in Congress to pass Bush's tax cuts, an education bill and a resolution authorizing the U.S. to invade Iraq.

``All of these things people have at one time or another thrown up their hands and said we're worried or concerned, but at the end of the day,'' it's an issue too important to ignore, he said.

Rove suggested that a middle ground, preferred by Democratic Senators Ben Nelson of Nebraska, Kent Conrad of North Dakota and Ron Wyden of Oregon, that includes adding private accounts created with funds outside the Social Security program, isn't acceptable as a long-term solution.

`Paycheck to Paycheck'

``We've already got add-ons; they're called IRAs and 401(k)s,'' Rove said. ``What we face is, we need to do something for the working man who's living from paycheck to paycheck and doesn't have extra money to put aside for retirement. That's the person for whom a personal retirement account is most important and most vital.''

House Ways and Means Committee Chairman Bill Thomas, a California Republican, has suggested that restructuring of Social Security might be part of a bigger piece of legislation the addresses long-term health-care costs and perhaps includes changes aimed at streamlining tax law.

``It's an interesting idea,'' Rove said in the interview. While ``there may be some attraction to taking long-term care issues and rolling them in with Social Security,'' he said, ``tax reform I think is a separate issue.

``Let's see what happens in the marketplace for those ideas in the United States Congress,'' Rove said.

Few Limits on Debate

Bush has offered few limits on the scope of the debate, and lawmakers such as Graham who've advocated raising the $90,000 limit on income taxed to fund Social Security shouldn't be chided for such suggestions, Rove said.

Bush has said a higher payroll tax rate isn't an option, although he hasn't ruled out raising the cap.

``The president has said he's going to provide cover for anybody who want to discuss the issues and people have a right to discuss them,'' Rove said.

AARP, the country's largest lobbying group for people over 50 years old, is organizing demonstrations and running advertisements that oppose the president's plan. Bush travels today to pitch his plan in West Virginia, the 20th state he's visited since outlining his proposal in his Feb. 2 State of the Union speech.

Promotion

Rove, 54, was elevated in February to deputy White House chief of staff overseeing domestic and international policy, after having the title of special presidential adviser throughout Bush's first term.

In yesterday's interview, Rove also said Bush won't name a successor to Federal Reserve Chairman Alan Greenspan anytime soon, and ruled out any government intervention to curb rising oil prices.

Rove, the architect of Bush's 3.5-million-vote re-election victory over Massachusetts Democratic Senator John Kerry in November, said changing Social Security, the retirement program born out of the Great Depression, is ``vital to the country, and nothing ever comes easy.''

``The last time we addressed Social Security in a substantive way was 1983,'' he said. ``If personal accounts had been part of the solution in 1983, think about it, the market since 1983 is up 800 percent. Imagine how much more secure people's retirements would be if starting in 1983 they'd been able to put money aside as the market grew, as it does over time, dramatically.''

To contact the reporters on this story: Brendan Murray in Washington brmurray@bloomberg.net

Last Updated: April 5, 2005 00:09 EDT