Bush says overhaul Social Security

WASHINGTON – President Bush said Thursday that “now is the time to confront Social Security” by allowing younger workers to invest part of their payroll tax in the stock market. But missing from his remarks was an acknowledgment that those personal accounts alone would not erase a projected $3.7 trillion shortfall in the retirement program over 75 years.

Leaving open the possibility of reduced benefits or other changes, panelists at a White House economic conference said more changes to Social Security, which was created in 1935, will be needed to keep it afloat. Bush spokesman Scott McClellan says personal accounts are part of the solution.

Richard Parsons, CEO of Time Warner, who was co-chairman of a 2001 commission on Social Security, said, “There is a limit to how much you can tax, which means either benefits will have to come down” or, he joked, more money will have to be printed.

Former Democratic congressman Tim Penny, who served on Bush’s commission, described personal accounts as “part of the solution … part of a package.”

McClellan said that the bipartisan commission’s report offered “some innovative ideas.” One proposal would slow increases in benefits by calculating them based on inflation, not rising wages.

But Bush’s pledge to rescue Social Security focuses solely on his proposal for personal accounts. They would generate some savings because workers who choose them would get smaller Social Security checks.

Bush has ruled out increasing withholding taxes and aides say he doesn’t believe the answer is to eliminate the limit on the amount of income that is taxed for Social Security, which is $90,000 next year.

Critics say that leaves Bush with few options for reducing the shortfall. Among them: reducing benefits, limiting them for richer retirees, raising the retirement age or borrowing money.

AFL-CIO President John Sweeney said this week that personal accounts would “slash guaranteed benefits, turn America’s retirement safety net into a high-risk gamble and threaten our economy by incurring massive new public debt.”

Terry McAuliffe, chairman of the Democratic National Committee, said the transition to personal accounts would cost at least $2.2 trillion, increasing federal budget deficits. Beneficiaries would “see a guaranteed reduction in their benefits,” he said.

Bush has not made a specific proposal, but he said “nothing will change” for people who get checks and that personal accounts would be optional.