Moynihan’s Plan to Cut Payroll Taxes Finds His Party in a Thicket of Disarray : Politics: Democratic timidity in the face of a golden partisan opportunity makes partisans question the future of the party.

WASHINGTON —  Sen. Daniel Patrick Moynihan (D-N.Y.) may have written the epitaph for his hot-wire proposal to cut Social Security payroll taxes paid by workers and their bosses. Asked recently why so few fellow Democrats had embraced the plan, he told a television interviewer: “I don’t know. If we can’t get behind an issue like this, a principle, I’m not sure who needs the Democratic Party.”

Alas, for the Democratic Party the Moynihan plan has become the symbol of a vessel adrift, if not irrelevant. A slow and divided response, an inability to recognize a golden partisan opportunity and a propensity to place governing over politics are painful reminders of what ails the Democrats, as shown by their recent decline in national public-opinion polls. Even party loyalists shake their heads in dismay.

“Democrats made a mistake, so far, not being very, very aggressive about Social Security,” Gov. Mario M. Cuomo (D-N.Y.) told Washington reporters the other day.

Others have voiced more scathing criticism. “We are a timid party,” said a veteran Senate aide. “Politics has to do with emotionalism,” a Democratic consultant added. “The fact that Democratic politicians did not have a visceral response to Moynihan shows that they are brain-dead and skittish about George Bush.”

Some Democratic congressional insiders say that a salvage mission is not too late. They continue to hope internal discussions will produce an acceptable clone of the Moynihan plan that will capture its essence and eliminate its shortcomings, while making everyone forget the several weeks during which they lost momentum. But, given the Democrats’ disarray on the issue, the prospect of passing anything more than a bookkeeping gimmick appears wildly optimistic.

The rapid rise and fall of the Moynihan proposal is traceable to its details and to how it has been handled.

Moynihan has repeatedly blasted the “thievery” of masking the federal deficit with the Social Security surplus that accumulated in recent years. Yet Republicans and Democrats have sanctioned this practice, both in the 1983 bipartisan Social Security plan--for which Moynihan was a key architect--and in federal budgets designed to meet the Gramm-Rudman-Hollings annual deficit ceilings.

Crafters of the 1983 rescue led the public to believe that surplus funds would be set aside for recipients to use decades later. Because of complicated federal financing practices, however, that could not happen. Instead, their plan assumed that surplus Social Security money would be used in the short term to reduce the federal debt, which now exceeds $3 trillion, and that the debt would be restored later as baby-boomers reach retirement.

So far, that has not happened because the huge deficits of the Reagan era have left no budget surplus. But commitments to the eventual beneficiaries have continued to grow.

Part of the Democrats’ problem has been Moynihan himself.

By unveiling his proposal at a Capitol Hill press conference on Dec. 29, without notifying other key party figures, he caught them unaware and scattered across the nation. It was during the holiday break, no time or place to understand the complexities and ramifications of his plan. Then, Moynihan went incommunicado as he left for three weeks’ travel overseas.

Democrats had previously welcomed Moynihan’s success in spotlighting the regressive tax policies of the Reagan-Bush era--increasing Social Security taxes for everyone while giving big tax breaks to the wealthy.

But once they looked over the newest plan, key legislators such as House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) and Senate Finance Committee Chairman Lloyd Bentsen (D-Texas) rejected Moynihan’s premise of putting Social Security on an annual pay-as-you-go basis.

An inability to resolve public qualms about future benefits was also a factor in the decision by the potent American Assn. of Retired Persons to oppose Moynihan’s proposal.

With their eyes focused on public-opinion polls, Democrats have feared the political impact of the unstated premise of Moynihan’s plan: an increase in other taxes to compensate for cutting the payroll tax, half of which is paid by employers.

That concern was made crystal clear when Sen. Ernest F. Hollings (D-S.C.) proposed a 5% value-added tax, the equivalent of a national sales tax.

A more palatable alternative to Moynihan, pushed by House Majority Leader Richard A. Gephardt (D-Mo.), is a tax credit that would refund to all workers 10% of their annual Social Security payment. Because the credit would be paid from the federal Treasury, it would avoid the controversy raised by Moynihan’s plan--depleting money from Social Security. But some Democrats are nervous about being assigned blame for increasing the federal deficit.

This latest failed drama has led some Democrats to conclude that they should stop worrying so much about “responsibility” for the affairs of state. Instead, they argue, Democrats should focus on how to regain the White House and how to counter Bush’s strategy of preempting Democratic issues.

“Part of our problem is that we present ourselves to the public as though we govern,” said Rep. Robert G. Torricelli (D-N.J.). “The Democratic message needs to address concerns of the mid- and late-1990s. We need to move away from the current national political debate, even at the risk of saying things not now politically acceptable.”

In recent weeks, House and Senate Democrats have spent almost as much time at closed-door party retreats in Washington suburbs as at legislative business.

These sessions have had a Marshall McLuhanesque focus on the message--prompted, in part, by Gephardt and lessons he drew during his 1988 presidential campaign of appealing to public opinion.

An important lesson for Democrats following three consecutive presidential losses has been that a party’s image is shaped substantially by its standard-bearer every four years--a personality problem. If the nominee’s performance or themes do not appeal to voters, then all party efforts to articulate a message will have little impact.

Until they have a national spokesman, Democrats will be represented by disparate voices on Capitol Hill. Given the lack of a clarion message or a take-charge, articulate leader, the Social Security exercise suggests that Moynihan’s forebodings about his party may have hit the mark.