Jan. 6 (Bloomberg) -- President George W. Bush isn't expected to include the costs of his plan to overhaul Social Security in next year's budget, an omission that underscores the political and economic difficulties in achieving his chief domestic goal.

Bush announced he would press Congress this year for legislation to allow younger workers to divert a portion of their Social Security payroll tax into private investment accounts. The probable absence of a budget number was confirmed by Kevin Bishop, an aide to Senator Lindsey Graham, the South Carolina Republican who is sponsoring a bill to create the accounts, and by two administration officials who spoke on condition they would not be named.

Even supporters of private accounts said the likely decision will complicate Bush's efforts to pass a plan. ``It's better to put it in your budget and make it transparent than try to look like you're trying to pull a fast one,'' said Robert Bixby, executive director of the Concord Coalition, a budget research group.

Bush hasn't settled on the final details of his plan. The transition to the accounts could add $1 trillion to $2 trillion to the deficit over the first ten years, based on Congressional Budget Office figures. The president's 2001 Social Security commission presented a plan that would cost $346.2 billion over five years.

Including the plan's costs in the 2006 budget, which must be delivered to Congress by Feb. 7, would make it difficult for the president to honor his pledge to reduce the nation's deficit, make $1.7 trillion in tax cuts permanent and fund the war in Iraq, according to budget experts.

`Can't Do'

``You can do Social Security, fund the war and make the tax cuts permanent, but you can't do those things and cut the deficit in half at the same time,'' said Stanley Collender, an author on budget issues and senior vice president at Financial Dynamics Inc., a Washington consulting firm.

Failing to include costs in the budget may hamper the administration's ability to win Democratic support, which many Republicans say will be necessary to present the restructuring of the retirement system as a consensual undertaking.

``If you're serious about reforming Social Security, then the budget plans should reflect that so we won't have to deal with that later,'' said Representative Allen Boyd, a Florida Democrat who is co-sponsoring a private-account bill in the House with Jim Kolbe, a Republican from Arizona.

Representative Ben Cardin of Maryland, a senior Democrat on the Ways and Means Committee who is being courted by Republicans to support the accounts, said he would find it difficult to support the plan if its impact on the deficit, which reached a record $412 billion last year, isn't reflected in the budget.

Not Credible

``If he doesn't show how he's going to pay for it, then it's not a credible proposal from the point of view of, I think, most Democrats,'' Cardin said.

Chad Kolton, a spokesman for the Office of Management and Budget, declined to comment on whether Bush would include costs for the accounts in the budget.

``Going through the process of evaluating the proposals that are out there is what needs to take place before we can legitimately consider what the specific impact on the budget might be,'' he said. ``I don't think it's going to have an impact at all'' on support in Congress.

Not spelling out the costs would give a skewed and false picture of the government's finances, said Collender. ``Any deficit estimate, any borrowing estimate, that doesn't include something for Social Security is going to be wildly wrong,'' he said.

A recent White House memo said Congress will also have to cut Social Security benefits in order to shore up the program.

Reid's Role

Democrats in Congress have signaled that they will demand an accounting. Senate Minority Leader Harry Reid of Nevada, House Minority Leader Nancy Pelosi of California and other prominent Democratics sent a letter to Bush on Nov. 22 asking that an estimate of the cost of the Social Security plan be included in the budget proposal.

Only with such an estimate, the letter said, would ``Congress and the American people be able to weigh the difficult trade-offs between large-scale borrowing, Social Security benefit cuts, tax increases, and other spending reductions that may be required.''

Social Security will begin paying out more in benefits than it takes in through taxes in 2018, according to the system's trustees. The retirement of the generation born in the years after World War II will bankrupt the system, and the best way to ensure future retirees receive benefits is through private accounts, Bush said Dec. 9 after meeting with the trustees at the White House.

'The Time Is Now'

``The time is now, the time is ready to solve this problem,'' Bush said. Private accounts would provide a better return on tax dollars while allowing the government to scale back its debt to future retirees, their supporters say.

The commission Bush named in 2001 created three plans that would allow workers to invest from 2 to 4 percentage points of the 12.4 percent payroll tax in private accounts.

Democrats who oppose the plan say Bush is exaggerating Social Security's financing shortfall, which the trustees estimate will be $3.7 trillion over 75 years. Social Security is not a ``pressing crisis,'' said Senator Jon Corzine, a New Jersey Democrat.

``It is nowhere near the kind of crises that we have with Medicare, Medicaid and prescription drug'' coverage, Corzine said in a Jan. 4 interview.

Tax Dollars

If Bush's plan is enacted, the government would need to find a way to pay benefits to current retirees who depend on the same tax dollars that would be invested in stocks and bonds.

Private-account advocates say including any of the plan's costs in the budget would ignore savings it would create over time. ``If you put it in the budget, you're spelling out the pain without any of the benefits,'' said Michael Tanner, a Social Security expert at the Cato Institute, a research group that supports limited government and private accounts. ``You're just giving people a target to shoot at,'' said Tanner.

Bishop, Senator Graham's aide, said Bush doesn't have to budget for Social Security changes for next year, even though the president wants to pass it into law before then.

``The president's not settled on a particular plan, so it's probably not going to be in the budget,'' he said. ``Senator Graham understands that reality.''

Not Convincing

Democrats may not find this argument convincing, said Ed Lorenzen, a former aide to Texas Representative Charlie Stenholm, a Democrat who co-sponsored a private-account bill in the House.

``A lot of the Democrats they could potentially get to support them tend to be more fiscally conservative,'' said Lorenzen, now executive director of Centrist.org, a group that advises Democrats on fiscal issues. ``The budget is going to be one key sign towards whether the administration's goal is seriously addressing the fiscal issues, and how much of it is just an ideological agenda.''

The approach stands in contrast to the administration's strategy on passing Medicare legislation. In its fiscal 2004 budget, the president included $400 billion over ten years in costs to restructure Medicare. The bill passed Congress and became law in December of 2003, 10 months later.

`Impossible'

Collender, the budget analyst, said ``it's impossible'' for Bush to square his Social Security plan with his promise to cut the deficit in half by 2009, given all the administration's other budget commitments. Those include the $50 billion to $100 billion being spent this year in Iraq; $350 million to help victims of the Asian tsunami; and a prescription drug plan that will cost $1 trillion over ten years starting in 2011.

Leanne Abdnor, a Republican member of Bush's 2001 commission, said Bush has no good options on Social Security and the budget.

``If they don't do it, they're signaling to people they're not as serious about this as they said,'' said Abdnor, now president of For Our Grandchildren, an Alexandria, Virginia-based advocacy group that supports private accounts. ``If they do do it, they're slamming into the deficit.''

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

Last Updated: January 6, 2005 00:09 EST