The president said in the House chamber, with Vice President Dick Cheney and House Speaker Dennis Hastert, R-Ill., seated behind him, ”Social Security … on its current path, is headed toward bankruptcy. And so we must join together to strengthen and save Social Security,”
Although he said all options would be on the table, from increasing the retirement age to changing the way benefits are calculated, the president again pledged not to raise payroll taxes or change benefits for those 55 years or older.
President Bush also spoke of his proposal to allow workers to divert some of their Social Security contributions into personal investment accounts, a plan that has already met with some resistance, particularly from Democrats.
In the Democrats’ response to the State of the Union, Senate Minority Leader Harry Reid, D-Nev., called the personal accounts proposal “Social Security roulette” with a hefty transition cost of up to $2 trillion.
“Democrats are all for giving Americans more of a say and more choices when it comes to their retirement savings. But that doesn’t mean taking Social Security’s guarantee and gambling with it. And that’s coming from a senator who represents Las Vegas,” said Reid.
In his speech, President Bush said the voluntary personal accounts would be structured in a way to ensure the money could only go into a “conservative mix of bonds and stock funds” and protected from sudden market swings just before the participant’s retirement.
“We will make sure a personal account can’t be emptied out all at once, but rather paid out over time, as an addition to traditional Social Security benefits,” the president said. “And we will make sure this plan is fiscally responsible, by starting personal retirement accounts gradually, and raising the yearly limits on contributions over time, eventually permitting all workers to set aside 4 percentage points of their payroll taxes in their accounts.”
He likened the Social Security personal accounts to the Thrift Savings Plan, which lets federal workers put a portion of their paychecks into any of five broadly based investment funds.
But regardless of the specific reforms, the president issued dire warnings about the need to act. In 2018, Social Security will be paying out more than it takes in and by 2042, the president said the entire system will be “exhausted and bankrupt.”
Although those years may seem a long way off, he continued, “If you’ve got children in their 20s, as some of us do, the idea of Social Security collapsing before they retire does not seem like a small matter. And it should not be a small matter to the United States Congress.”
He plans to embark Thursday on a five-state, two-day trip to put pressure on Democratic lawmakers in North Dakota, Montana, Nebraska, Arkansas and Florida to accept restructuring Social Security, according to the Associated Press.