Treasury secretary seeks to curb benefits costs
NEW YORK -- Delivering his first address as Treasury secretary, former banking titan Henry M. Paulson pledged yesterday to seek a bipartisan compromise with Congress to shore up federal benefit programs such as Social Security and Medicare, whose runaway costs threaten the nation's long-term financial health.
The odds of success in that quest are quite low. President Bush devoted much of the first year of his second term to seeking to overhaul Social Security and got nowhere. If Democrats capture either house of Congress in November's elections, they'll be even less likely to compromise with Bush on social policy. Even if Republicans triumph, the president's lame-duck status will make him politically weaker with each passing month.
Still, Paulson vowed to try.
``The biggest economic issue facing our country is the growth in spending on the major entitlement programs," Paulson said, stressing the need to rein it in.
Once baby boomers -- born between 1946 and 1964 -- begin retiring in 2008, federal finances for retirement and health care will face progressively worse strains. Absent phased-in changes, lawmakers eventually may be forced to choose among steep tax increases, deep spending cuts, or an unpleasant mix of both.
Until recently, Paulson was the powerful chief executive officer of Wall Street behemoth Goldman Sachs & Co. Many colleagues wondered why he'd take a job in Washington for a lame-duck president facing a Congress with no stomach for overhauling Social Security, Medicare or Medicaid.
But Paulson thinks his Wall Street clout can help push a bitterly divided Congress to tackle issues that could drive foreign and domestic investors to abandon US Treasury bonds, forcing the Treasury to offer higher interest rates that could choke the economy.
The call was welcomed on Wall Street.
``Mr. Paulson clearly has a lot of credibility in financial markets," said Richard Berner, the chief US economist for banking giant Morgan Stanley. That's one of the things he brings to the table."
