HIGHLIGHTS
Bush Proposes Slowing Growth of Social Security Benefits

President Bush held a rare prime-time news conference on April 28 in an effort to jump-start his plan to change Social Security:

President Bush: (From April 28) "I propose a Social Security system in the future where benefits for low-income workers will grow faster than benefits for people who are better off.

"The idea was to offer up some new element of the solvency question," says National Journal's Alexis Simendinger. "Remember, we've been hearing him talk about the personal accounts part. That's supposed to be the dessert you get to make it more palatable to go for the part that we need to deal with on solvency. And so the news element of it was this very carefully scripted, arranged wording with the Hill that the White House did with Senator Chuck Grassley, the chairman of the Finance Committee on the Senate side, definitely with the House side, about exactly how much he could add to the question of how to cut benefits in order to create some way to add some solvency answers to the dilemma that Congress is facing. And his version of it is an idea he's been talking about, actually, for some months: progressive indexing."

The new idea, which would protect the low-income population, showed no sign of attracting Democratic support. "Democrats asserted it would amount to deep cuts in benefits for most retirees and transform Social Security from a broad middle-class entitlement to a program aimed at the poor. AARP, the powerful lobby for older Americans, also dismissed the latest Bush proposal, with John C. Rother, policy director for the group, describing it as 'an unnecessary and unfair benefit cut for the middle class.'" (Toner & Bumiller, The New York Times, 4/30)

The president also made clear that he is not backing down from the idea of personal accounts. When asked if he would consider it a success if Congress were to pass a piece of legislation that dealt with the long-term solvency problem, but did not include personal accounts, Bush said, "I feel strongly that there needs to be voluntary personal savings accounts as a part of the Social Security system."

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Individual Investment Accounts

A centerpiece of President Bush's Social Security plan is the idea of individual investment accounts, which will allow younger, active workers to take a part of the taxes they put into payroll taxes and put them into personal accounts that they could decide how to invest on their own within limits.

Advocates of the personal accounts say the reform will create an "ownership society." In his second inaugural address, the president even went on to suggest that the Social Security Act grew out from America's ideal of freedom and liberty.

Pres. Bush: (From January 20) "In America's ideal of freedom, citizens find the dignity and security of economic independence instead of laboring on the edge of subsistence. This is the broader definition of liberty that motivated the Homestead Act, the Social Security Act and the GI Bill of Rights. And now we will extend this vision by reforming great institutions to serve the needs of our time."

"When the program started," as TIME magazine's Karen Tumulty pointed out, "Franklin Roosevelt wasn't talking about freedom and liberty, he was talking about insurance and protection of the nation's elderly and disabled. What really is the nature of the program? That is really what the fight is going to be."

Critics, calling this philosophy "privatization", claim that retirees will be taking on risks now borne by the government. Most Democrats have flatly opposed to this idea and refused to come to the negotiation table with the Repubicans unless "personal accounts" were taken off from the plan. However, "if the Democrats are perceived at the end of the debate as anti-reform and as someone who has not taken the side of younger voters," warned John Harwood of The Wall Street Journal, "the president stands to benefit from that."

President Bush went on a 60-day, 60-city tour this spring to promote his reform plan, but the American public have yet to give the idea their wholehearted endorsement. According to an ABC News/Washington Post poll released April 25, 51 percent said they opposed personal accounts, while 64 percent said they disapproved of the president's handling of Social Security.

One thing clear about the personal accounts is that they do not solve the solvency problem of the Social Security system. "You can create your private accounts," explains Wall Street Journal's Jackie Calmes, "and the way those will be paid for, if you will, is when you retire there will be some amount that the government will hold back to be an offset against the amount of taxes you diverted to your own account. But you still leave Social Security the way it is, which is that there are going to be too many retirees in the future and too few people to support them so what you're facing are reductions in benefits for people like us, perhaps tax increases or more borrowing." Moreover, if young people get to deposit some of their payroll taxes into the personal accounts, the government has to figure out a way to pay today's retirees and coming up with that amount of money through benefit reductions, tax increases, or, again, borrowing.