Bush Says New Plan for Social Security Benefits Young (Update2)
April 29 (Bloomberg) -- As a top lawmaker announced plans for moving forward on Social Security legislation, U.S. President George W. Bush went to Falls Church, Va., to promote a plan that would slow the growth of benefits for middle-income and wealthy workers while shielding low-income wage earners.
``If Congress were to enact that, it would go a long way toward making the system solvent for a younger generation of Americans,'' Bush said.
As Bush spoke, House Ways and Means Chairman Bill Thomas said his panel will begin hearings May 12 and try to move legislation to the floor in early June. ``What the president has done is fundamentally courageous,'' said Thomas, a California Republican. ``What the Republicans will do is follow.''
The goal, Thomas said, will be to secure permanently the financial stability of the system. The Senate Finance Committee under Chairman Charles Grassley, an Iowa Republican, began work this week on a Social Security bill.
Republicans hold majorities in both chambers of Congress. Several Republican senators have expressed reservations about Bush's plan to allow workers to invest up to one-third of their Social Security payroll taxes in private accounts.
The Social Security trustees forecast the system will begin paying out more than it receives in payroll tax revenue in 2017 and exhaust its surplus in 2041. At that point, the system would be able to pay 74 percent of scheduled benefits from tax collections.
Stalemate in Congress
In a press conference last night, Bush endorsed slowing the growth of Social Security benefits for middle-income and wealthy retirees in the future.
Democrats in Congress have opposed Bush's plan to create personal accounts funded with Social Security payroll taxes, and the president's remarks last night did nothing to break the stalemate.
Representative Charlie Rangel of New York, the leader of Democrats on Ways and Means, said in a statement today that Bush's plan is a ``disguised'' strike at most Social Security beneficiaries. House Democratic Whip Steny Hoyer of Maryland said Bush's plan puts ``the burden of change on the middle class.''
Montana Senator Max Baucus, the senior Democrat on the Finance Committee, said last night he was ``saddened'' by Bush's insistence on private accounts and that the other measures Bush outlined ``would mean additional cuts for Americans.''
`Partisan Politics'
Bush today urged opponents to ``set aside partisan politics and focus on solving America's problems.''
``Eventually what's going to happen in this debate is that those who block meaningful reform are going to be held to account in the polls,'' Bush said in Falls Church.
Bush spoke on stage with four young adults aged 23 to 29 at today's event telling them, ``if you're a younger worker and you start paying into the payroll system today and 2041 is about the time you start retiring, I'm telling you, the system's going to be bankrupt unless we do something about it.''
The president's new proposal keys off a progressive indexing plan offered by Robert Pozen, chairman of Boston-based MFS Investment Management, White House spokesman Scott McClellan said today.
Pozen, a member of Bush's 2001 Social Security commission, testified before the Senate Finance Committee on April 26, drawing praise from White House economic adviser Al Hubbard. Pozen's plan reflects the president's principles, Hubbard said.
Closing the Gap
McClellan said enactment of Pozen's proposal would solve ``70 percent'' of the $11 trillion future funding gap in the Social Security program. That assessment is similar to one by the Center on Budget and Policy Priorities in Washington, which estimated progressive indexing would close 73 percent of Social Security's 75-year financing gap.
The center, a non-profit group that says Bush's tax cuts have created unsustainable long-term U.S. deficits, also concluded indexing would mean ``a large benefit cut'' for many Americans.
``Benefit cuts are inevitable,'' Michael Tanner, who heads the Social Security project at the Cato Institute in Washington. Because Thomas has a firm majority of 23 Republicans to the 17 Democrats on the committee, a bill along the lines of Bush's suggestions is likely to emerge, Tanner said.
``Any plan is going to have to reduce benefits; this is a more reasonable way to protect the poor,'' said Tanner, who is one of the witnesses slated to testify on May 12. ``If we did nothing they would have to be cut about 26 percent across the board'' because of the funding gap, he said.
Pozen's Plan
Pozen proposes that workers who earned an average of $25,000 or less per year over their careers be protected from cuts in the growth of their benefits. They would see their Social Security benefits rise according to the program's current formula, which computes benefit levels based on wage growth.
Under Pozen's proposal, workers who average $113,000 or more in earnings would see benefits rise along with consumer prices, which historically increase at a slower rate than wages. Benefits for middle-income workers would grow according to a formula based partly on wages and partly on prices.
Workers who opted for personal accounts would see an additional cut, according to the president's plan. The result, according to the Center on Budget and Policy Priorities, would be that ``millions of middle-income workers would receive little or no Social Security benefits in retirement.''
For example, under a system of progressive price indexing and the accounts Bush has proposed, defined Social Security benefits would be reduced by 66 percent, from $22,100 a year to $7,510 in 2005 dollars, for one who earns an average of $36,000 a year today, according to the center.
``We need to address a number of provisions in Social Security, not just in terms of age and benefit payout, but also, frankly, the share of the pie based upon who the individual is,'' Thomas said today.
To contact the reporter on this story:
William Roberts in Washington at wroberts@bloomberg.net
Last Updated: April 29, 2005 17:34 EDT |
