COME, LET US REASON TOGETHER:

Bush would trim benefits of well-to-do: Stands by his Social Security plan with talk in prime time (Michael Kranish and Susan Milligan, April 29, 2005, Boston Globe)

President Bush, in a prime-time effort to reverse the perception that his Social Security plan is faltering, last night proposed cutting currently promised future Social Security benefits for higher-earning workers, modeling the idea on a plan put forward by a Boston investment company executive.

But Bush did not back away from his proposal for private accounts, saying it must be part of any deal. Trying to reassure people concerned about a stock market slide, he said he would allow investment in government bonds as well as stock mutual funds. Democrats have said requiring private accounts would kill chances of their support for a Social Security deal.

''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," Bush said in a nationally televised press conference. ''By providing more generous benefits for low-income retirees, we'll make this commitment: If you work hard and pay into Social Security your entire life, you will not retire into poverty. This reform would solve most of the funding challenges facing Social Security."

Bush did not provide details of his proposal for changing the benefit formula, but the White House released a statement last night saying the idea would be ''similar" to a plan put forward by Robert Pozen, chairman of MFS Investment Management of Massachusetts. Pozen said his plan calls for leaving now-promised benefits intact for those who earned an average of $25,000 annually during their working career, with the increase in benefits ''slowed down" on a sliding scale for those who earned more. Under the Pozen plan, the deepest cuts in future benefits would affect those who earned an average of more than $113,000.

In a telephone interview last night, Pozen said, ''it's ''very satisfying to have the president of the United States say that he is endorsing the plan." But Pozen said he was concerned that Bush's insistence on including his concept of private accounts in the plan might prevent Democrats -- and some Republicans -- from endorsing it.

The President needed to seem flexible, but he can't give in on private accounts until Democrats come to the table, at which point he accepts add-ons in exchange for means-testing and achieves his ends.

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Press Conference of the President (George W. Bush, 4/28/05, The East Room)

THE PRESIDENT: Good evening. Tonight I will discuss two vital priorities for the American people, and then I'd be glad to answer some of your questions.

Millions of American families and small businesses are hurting because of higher gasoline prices. My administration is doing everything we can to make gasoline more affordable. In the near-term, we will continue to encourage oil producing nations to maximize their production. Here at home, we'll protect consumers. There will be no price gouging at gas pumps in America.

We must address the root causes that are driving up gas prices. Over the past decade, America's energy consumption has been growing about 40 times faster than our energy production. That means we're relying more on energy produced abroad. To reduce our dependence on foreign sources of energy, we must take four key steps. First, we must better use technology to become better conservers of energy. Secondly, we must find innovative and environmentally sensitive ways to make the most of our existing energy resources, including oil, natural gas, coal and safe, clean nuclear power.

Third, we must develop promising new sources of energy, such as hydrogen, ethanol or biodiesel. Fourth, we must help growing energy consumers overseas, like China and India, apply new technologies to use energy more efficiently, and reduce global demand of fossil fuels. I applaud the House for passing a good energy bill. Now the Senate needs to act on this urgent priority. American consumers have waited long enough. To help reduce our dependence on foreign sources of energy, Congress needs to get an energy bill to my desk by this summer so I can sign it into law.

Congress also needs to address the challenges facing Social Security. I've traveled the country to talk with the American people. They understand that Social Security is headed for serious financial trouble, and they expect their leaders in Washington to address the problem.

Social Security worked fine during the last century, but the math has changed. A generation of baby boomers is getting ready to retire. I happen to be one of them. Today there are about 40 million retirees receiving benefits; by the time all the baby boomers have retired, there will be more than 72 million retirees drawing Social Security benefits. Baby boomers will be living longer and collecting benefits over long retirements than previous generations. And Congress has ensured that their benefits will rise faster than the rate of inflation.

In other words, there's a lot of us getting ready to retire who will be living longer and receiving greater benefits than the previous generation. And to compound the problem, there are fewer people paying into the system. In 1950, there were 16 workers for every beneficiary; today there are 3.3 workers for every beneficiary; soon there will be two workers for every beneficiary.

These changes have put Social Security on the path to bankruptcy. When the baby boomers start retiring in three years, Social Security will start heading toward the red. In 2017, the system will start paying out more in benefits than it collects in payroll taxes. Every year after that the shortfall will get worse, and by 2041, Social Security will be bankrupt.

Franklin Roosevelt did a wonderful thing when he created Social Security. The system has meant a lot for a lot of people. Social Security has provided a safety net that has provided dignity and peace of mind for millions of Americans in their retirement. Yet there's a hole in the safety net because Congresses have made promises it cannot keep for a younger generation.

As we fix Social Security, some things won't change: Seniors and people with disabilities will get their checks; all Americans born before 1950 will receive the full benefits.

Our duty to save Social Security begins with making the system permanently solvent, but our duty does not end there. We also have a responsibility to improve Social Security, by directing extra help to those most in need and by making it a better deal for younger workers. Now, as Congress begins work on legislation, we must be guided by three goals. First, millions of Americans depend on Social Security checks as a primary source of retirement income, so we must keep this promise to future retirees, as well. As a matter of fairness, I propose that future generations receive benefits equal to or greater than the benefits today's seniors get.

Secondly, I believe a reform system should protect those who depend on Social Security the most. So 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. By providing more generous benefits for low-income retirees, we'll make this commitment: If you work hard and pay into Social Security your entire life, you will not retire into poverty. This reform would solve most of the funding challenges facing Social Security. A variety of options are available to solve the rest of the problem, and I will work with Congress on any good-faith proposal that does not raise the payroll tax rate or harm our economy. I know we can find a solution to the financial problems of Social Security that is sensible, permanent, and fair.

Third, any reform of Social Security must replace the empty promises being made to younger workers with real assets, real money. I believe the best way to achieve this goal is to give younger workers the option, the opportunity if they so choose, of putting a portion of their payroll taxes into a voluntary personal retirement account. Because this money is saved and invested, younger workers would have the opportunity to receive a higher rate of return on their money than the current Social Security system can provide.

The money from a voluntary personal retirement account would supplement the check one receives from Social Security. In a reformed Social Security system, voluntary personal retirement accounts would offer workers a number of investment options that are simple and easy to understand. I know some Americans have reservations about investing in the stock market, so I propose that one investment option consist entirely of Treasury bonds, which are backed by the full faith and credit of the United States government.

Options like this will make voluntary personal retirement accounts a safer investment that will allow an American to build a nest egg that he or she can pass on to whomever he or she chooses. Americans who would choose not to save in a personal account would still be able to count on a Social Security check equal to or higher than the benefits of today's seniors.

In the coming days and weeks, I will work with both the House and the Senate as they take the next steps in the legislative process. I'm willing to listen to any good idea from either party.

Too often, the temptation in Washington is to look at a major issue only in terms of whether it gives one political party an advantage over the other. Social Security is too important for "politics as usual." We have a shared responsibility to fix Social Security and make the system better; to keep seniors out of poverty and expand ownership for people of every background. And when we do, Republicans and Democrats will be able to stand together and take credit for doing what is right for our children and our grandchildren.

And now I'll be glad to answer some questions, starting with Terry Hunt

Bush Recasts Message on Social Security: He favors a means-based approach to benefits, though he does not offer specifics. It appears to be an effort to gain backing from Senate moderates. (Doyle McManus, April 29, 2005, LA Times)

President Bush, seeking support from Democrats and moderate Republicans for an overhaul of Social Security, said Thursday that he favored changing the pension system so that benefits for low-income workers would grow faster than those for wealthy retirees.

Bush, speaking at a nationally televised news conference, said such a change "would solve most of the funding challenges facing Social Security." He cited a proposal by a Democratic policy expert to reduce the rate of growth in benefits for wealthy workers but did not explicitly endorse the plan, saying it was up to Congress to work out the details.

With the president's ambitions for restructuring Social Security apparently stalled despite weeks of barnstorming to mobilize public support, his endorsement of what he called means-based benefits appeared designed to inject momentum into the debate. Aides said it was also a response to Senate moderates from both parties who had called on Bush to lay out specific steps to shore up the finances of the system. [...]

He repeated, with vigor, many of the lines from his campaign speeches of the last two months to persuade a skeptical public that the Social Security system was in financial trouble because of the coming wave of baby boom retirees and needed an immediate fix.

But he also threw out several signals of what kind of changes he was willing to negotiate with Congress — in phrases that may have sounded obscure to much of the public.

For example, he proposed that in restructuring the program, future retirees should receive benefits "equal to or greater than the benefits today's seniors get" — a promise that sounded generous but left room for a cutback from what workers now expect their future benefits to be. That's because Social Security benefits are constructed to rise over time, and historically have done so faster than the rate of inflation.

He proposed a pledge to increase benefits for low-income workers enough to keep them above the poverty line, a guarantee not in current law. "If you work hard and pay into Social Security your entire life, you will not retire into poverty," he said.

Aides said those proposals were intended to rebut complaints from Democrats and some Republicans that the president had called for major changes in Social Security but had not laid out specific steps that would improve the pension system's solvency. Instead, Bush has focused on adding individually directed investment accounts to Social Security, even though his aides acknowledged that such accounts would not help with solvency.

In addition, the idea of an antipoverty guarantee for low-income workers has been popular among moderate Republicans in the Senate, whose votes Bush will need to pass any overhaul plan.

Posted by Orrin Judd at April 29, 2005 6:41 AM