It’s now confirmed — Social Security reform is off the table for this year and perhaps for the rest of President Bush’s term of office. Treasury Secretary Paulson said as much in a statement last week. This is how it happened.

Shortly before delivering this year’s State of the Union address, President Bush removed language from it calling on Democrats to negotiate on reforming Social Security with all options on the table. For weeks before the speech, Secretary Paulson had tried to entice Democrats to the table by signaling the administration’s willingness to consider any and all options. Numerous outside conservative advocacy groups worked Capitol Hill and the press on behalf of the White House to convince conservatives that considering a tax increase would be required to bring Democrats to the table.

Their efforts collapsed, and the president was forced to withdraw from the issue before delivering his speech because most conservatives found talking about tax increases unacceptable, and liberals were unwilling to discuss creating real personal retirement accounts substituting for part of the current system and financed by a portion of workers’ payroll taxes.

Rep. Rahm Emanuel of Illinois put a stake through the heart of the president’s negotiating strategy when he told a reporter that if the president wanted to do something on Social Security, he would have to lead the charge himself because the Democrats weren’t going to participate. Conservative columnist Robert Novak confirmed the collapse of the president’s strategy, reporting, “Democrats refuse to talk with Republicans about personal accounts ‘carved out’ of the present system. Indeed, a ‘carve out’ is now a dead letter. New personal retirement accounts could be passed only as an ‘add on’…,” that is, a new entitlement program, paid for by additional tax increases.

On the right, while the White House had made headway convincing some conservative organizations to include tax increases in the discussion, a substantial number of conservatives led by Reps. John Shadegg of Arizona and Mike Pence of Indiana revolted against the White House strategy. They understood this latest stumble by the administration was just the most recent misstep in a long line of missteps that has placed the Social Security reform effort on a slippery slope to perdition — to large middle-class tax increases, large future benefit cuts, and a huge new entitlement program of add-on accounts that would end up being more about income redistribution than retirement security and prosperity.

For over two years, a senior fellow at the Institute for Policy Innovation, Peter Ferrara, and I have been warning against the administration’s proposed “progressive price indexing” to cut future Social Security benefits by close to 40% for young workers. We said the administration’s obsession with cutting future benefits not only would blow back and lead to a tax increase but also would undermine efforts to achieve real personal accounts. Mr. Ferrara, who wrote the first book on personal retirement accounts for the Cato Institute, said that Democrats never would accept benefit cuts without “balancing” them with large tax increases and would agree to personal retirement accounts only if they were “add-on” accounts. He was right. Rep. Emanuel pulled the plug on negotiations.

President Bush is to be commended for recognizing reality and making this strategic retreat, in which there is no shame when continuing to pursue a failed strategy will only make matters worse. Withdrawing now, when there is no hope of success, will allow conservatives time, and another presidential election, to reorganize themselves and build the grassroots support necessary to enact real Social Security reform with real personal retirement accounts a few years down the road.

Unfortunately, some conservatives don’t appreciate the prudence of a strategic retreat. Illustrative is the vice president for policy and economics at the Independent Women’s Forum, Carrie Lukas, who in a January 25 article on National Review Online attacked Mr. Pence as “unprincipled” and “foolish” for rejecting new taxes. Shame on her.

Instead of urging conservatives to embrace a tax increase in order to get a deal with Democrats, backers of real personal accounts should give up the strategy as unsound and undoable. Until a grassroots volunteer army for true reform can be raised, conservatives should take the position they held at the beginning of the Bush administration, as embodied in the Ryan-Sununu bill, which sought real personal accounts and lower taxes and envisioned higher, not lower, retirement income.

To reignite grassroots enthusiasm for personal accounts, particularly among young people who have the most to lose if Social Security isn’t fixed, conservatives should offer proposals that harness the broad consensus that already exists in the country for reforming the program.

If the president wants to make one more run at doing something serious about Social Security before he leaves office, he should offer legislation to stop raiding Social Security to pay for other programs and use its surpluses and interest due the Trust Fund to finance a refundable tax credit for anyone who opens a Head Start Retirement Account for a child under 18.

Mr. Hunter is president of the Social Security Foundation and senior fellow at the Institute for Policy Innovation.