By BILL STRAUB
Scripps Howard News Service
May 03, 2005
Addressing employees at the Nissan North America manufacturing plant in the central Mississippi town of Canton, Bush said reform is necessary because the current system isn't collecting enough money to pay out future retirement benefits.
"So a lot of younger workers out there will be paying into a system that's bankrupt," the president said. "And that's not fair."
While the system doesn't face bankruptcy - it receives a continuous flow of money - Social Security trustees predict trust funds will run dry by 2041, necessitating a 30 percent cut in benefits. Bush said he wants to avert that potential train wreck by offering a plan that would protect benefits for low-income retirees while reducing payouts to others.
"The American people now understand we have a problem," Bush said. "And our leaders must choose - do nothing and guarantee a massive tax hike, or a 30 percent benefit cut, or act now to keep the promises of Social Security for the 21st century."
The trip to Mississippi - a state he carried by 20 points in his 2004 re-election - marked the first time the president had ventured outside of Washington since expressing support for a means-tested system to address a looming Social Security solvency problem.
As briefly outlined by the president, those in the lowest 30 percent of the economic strata would continue to receive promised benefits, with the remaining 70 percent receiving less than called for under current projections. The lower 30 percent would continue to receive annual increases based on wage growth. Everyone else will see benefits based on a combination of wage growth and inflation.
Since inflation generally grows at a slower rate than wages, middle- and upper-income beneficiaries will collect less than they would under current rules. The system could be compared to a faucet - while the lower 30 percent get hot water, the remaining 70 percent receive a combination of hot and cold, with the coldest water reserved for the wealthiest retirees.
The proposal has not attracted rave reviews inside Washington from Democrats or Republicans _ such GOP stalwarts as Kansas Sen. Sam Brownback and Virginia Sen. George Allen have expressed reservations. The Center for American Progress, a liberal think tank, calculated that a 30-year-old worker making $43,680 annually at the Nissan North America Manufacturing Plant that Bush visited in Canton, Miss., would receive 18.2 percent less in Social Security benefits under the Bush plan than he or she would realize under current law.
"You know, you hear all this talk about benefit cuts," Bush said. "We're talking about making sure benefits grow at the rate of inflation - that's what we're talking about. You've been promised something. It ought to grow at the rate of inflation."
Bush maintains that those in line to receive less can make up the gap with the second phase of his plan _ permitting younger workers to divert a portion of their payroll taxes into private, federally-approved investment plans. Since several of those proposed plans involve stock investments, the private accounts could theoretically grow at a faster rate than the current pay-as-you-go Social Security system.
Senate Democratic Leader Harry Reid of Nevada said the president is taking credit for bringing Social Security's long-term problems to the public's attention, but "his solution is worse than the problem. In fact, under his plan, many middle-class seniors would do worse than if Congress did absolutely nothing."
"The president and Democrats simply have different goals," Reid said. "The president wants to replace Social Security with a privatized program and cut middle class benefits. Democrats' goal is to strengthen the program and protect benefits as much as possible."