blueturk
02-03-2005, 02:24 PM
Leave it to Dubya to push for a plan that isn't even planned yet.
SOCIAL SECURITY
White House notes plan lacks solutions for shortfall
By Michael Kranish, Globe Staff | February 3, 2005
WASHINGTON -- The Social Security plan outlined last night by President Bush does not include any direct means of dealing with the projected $10.4 trillion shortfall that he and his advisers say is driving his desire to overhaul the system, and it leaves unsaid whether Bush thinks a cut in future benefits is necessary, White House officials acknowledged.
Bush did provide new details about the size of what he calls "voluntary personal retirement accounts." One-third of Social Security taxes could be invested in the private accounts and the plan would apply only to those younger than 55. Those and other details tracked what Bush and his aides have said for months, and build on a similar proposal put forward by Bush's handpicked Social Security Commission in 2001.
But Bush did not endorse the more painful aspects of his commission's recommendations, such as cutting future promised benefits by switching from wage to price indexing. Prices are rising more slowly than wages, so a switch to price indexing would reduce benefits. Instead, Bush left that politically difficult choice up in the air, saying: "Fixing Social Security permanently will require an open, candid review of the options. . . . I will work with members of Congress to find the most effective combination of reforms."
Bush also ruled out raising payroll taxes. But he laid out a number of options he said are "on the table," including raising the full-benefit retirement age, which tops out at 67, or changing the way benefits are calculated in a way that would reduce now-promised payments to future retirees. He said "none of these reforms would be easy," and he endorsed none, asking Congress for suggestions.
It is far from clear whether Congress will be eager to tackle those choices. Senate minority leader Harry Reid, who argued in the Democratic response last night that Bush's plan would result "in a benefit cut of 40 percent or more," has said he doubts any Democrat will support private accounts. Republicans, meanwhile, are not as united in favor of Bush's proposal as they were for earlier legislation for tax cuts, and some have said they were eagerly awaiting more details from Bush.
After weeks of internal White House debate, the White House decided that it was too risky politically for Bush to embrace any mention of benefit cuts. Instead, the White House talked specifically only about the need to pay for at least a 10-year period of transition to private accounts. The White House said that would cost $664 billion; other estimates for a longer transition period put the cost between $1 trillion and $2 trillion.
But Bush has said the total cost of fixing what he has frequently called a "crisis" is much higher -- $10.4 trillion to make the system permanently solvent. The White House yesterday made clear that Bush's plan for private accounts was not expected to make up for that shortfall. The White House official who addressed several dozen reporters yesterday was asked whether it was fair to say that plan had "no effect whatsoever on the solvency issue." The official replied: "That is a fair inference. We're not making representation that the personal accounts alone are fixing the system's finances."
Senator John E. Sununu, the New Hampshire Republican who favors larger personal accounts than proposed by Bush, said he liked the direction of Bush's plan and said it might negate the need for cutting benefits: "This program in and of itself could put us on the path to solvency." Sununu, who backs a plan allowing 6 percent of wages in private accounts -- two points higher than Bush -- thinks benefit cuts could be avoided by cutting the growth in federal spending and taking advantage of the profits of private accounts.
Bush viewed his State of the Union speech as an opportunity to spell out his belief in the merits of private accounts. Under his plan, workers could set aside as much as 4 percent of their wages -- out of the 12.4 percent already paid by workers and their employers for Social Security taxes -- into private investment accounts. Workers could put as much as $1,000 into the accounts in the first year, rising by $100 annually thereafter.
The White House said the amount of guaranteed benefits currently paid by the system would be reduced by the amount that goes into the private accounts. That might not have been clear to listeners who heard Bush last night say "the account will provide money for retirement over and above the check you will receive from Social Security." The amount above the current benefit comes from the potential profit of the private account's investment. Bush did not mention potential losses that could occur in an account invested in what he called a "conservative mix of bonds and stock funds."
Under Bush's proposal, an annuity plan would be established so that workers do not withdraw all their money in a lump sum from the accounts upon retirement.
Workers born in 1965 or earlier could contribute to the plan starting in 2009. The funds would not be available until retirement. Unlike a 401(k) retirement plan, which is sponsored by employers, workers could not withdraw money early in emergency or borrow against it. But the money could be passed on to heirs.
The voluntary plan would be modeled on a government retirement system known as the Thrift Savings Plan, to which federal employees can contribute in addition to paying Social Security taxes. That plan offers workers a purposefully limited range of options designed to be somewhat conservative. A website for the plan indicates that the funds provided a return similar to a stock index fund.
SOCIAL SECURITY
White House notes plan lacks solutions for shortfall
By Michael Kranish, Globe Staff | February 3, 2005
WASHINGTON -- The Social Security plan outlined last night by President Bush does not include any direct means of dealing with the projected $10.4 trillion shortfall that he and his advisers say is driving his desire to overhaul the system, and it leaves unsaid whether Bush thinks a cut in future benefits is necessary, White House officials acknowledged.
Bush did provide new details about the size of what he calls "voluntary personal retirement accounts." One-third of Social Security taxes could be invested in the private accounts and the plan would apply only to those younger than 55. Those and other details tracked what Bush and his aides have said for months, and build on a similar proposal put forward by Bush's handpicked Social Security Commission in 2001.
But Bush did not endorse the more painful aspects of his commission's recommendations, such as cutting future promised benefits by switching from wage to price indexing. Prices are rising more slowly than wages, so a switch to price indexing would reduce benefits. Instead, Bush left that politically difficult choice up in the air, saying: "Fixing Social Security permanently will require an open, candid review of the options. . . . I will work with members of Congress to find the most effective combination of reforms."
Bush also ruled out raising payroll taxes. But he laid out a number of options he said are "on the table," including raising the full-benefit retirement age, which tops out at 67, or changing the way benefits are calculated in a way that would reduce now-promised payments to future retirees. He said "none of these reforms would be easy," and he endorsed none, asking Congress for suggestions.
It is far from clear whether Congress will be eager to tackle those choices. Senate minority leader Harry Reid, who argued in the Democratic response last night that Bush's plan would result "in a benefit cut of 40 percent or more," has said he doubts any Democrat will support private accounts. Republicans, meanwhile, are not as united in favor of Bush's proposal as they were for earlier legislation for tax cuts, and some have said they were eagerly awaiting more details from Bush.
After weeks of internal White House debate, the White House decided that it was too risky politically for Bush to embrace any mention of benefit cuts. Instead, the White House talked specifically only about the need to pay for at least a 10-year period of transition to private accounts. The White House said that would cost $664 billion; other estimates for a longer transition period put the cost between $1 trillion and $2 trillion.
But Bush has said the total cost of fixing what he has frequently called a "crisis" is much higher -- $10.4 trillion to make the system permanently solvent. The White House yesterday made clear that Bush's plan for private accounts was not expected to make up for that shortfall. The White House official who addressed several dozen reporters yesterday was asked whether it was fair to say that plan had "no effect whatsoever on the solvency issue." The official replied: "That is a fair inference. We're not making representation that the personal accounts alone are fixing the system's finances."
Senator John E. Sununu, the New Hampshire Republican who favors larger personal accounts than proposed by Bush, said he liked the direction of Bush's plan and said it might negate the need for cutting benefits: "This program in and of itself could put us on the path to solvency." Sununu, who backs a plan allowing 6 percent of wages in private accounts -- two points higher than Bush -- thinks benefit cuts could be avoided by cutting the growth in federal spending and taking advantage of the profits of private accounts.
Bush viewed his State of the Union speech as an opportunity to spell out his belief in the merits of private accounts. Under his plan, workers could set aside as much as 4 percent of their wages -- out of the 12.4 percent already paid by workers and their employers for Social Security taxes -- into private investment accounts. Workers could put as much as $1,000 into the accounts in the first year, rising by $100 annually thereafter.
The White House said the amount of guaranteed benefits currently paid by the system would be reduced by the amount that goes into the private accounts. That might not have been clear to listeners who heard Bush last night say "the account will provide money for retirement over and above the check you will receive from Social Security." The amount above the current benefit comes from the potential profit of the private account's investment. Bush did not mention potential losses that could occur in an account invested in what he called a "conservative mix of bonds and stock funds."
Under Bush's proposal, an annuity plan would be established so that workers do not withdraw all their money in a lump sum from the accounts upon retirement.
Workers born in 1965 or earlier could contribute to the plan starting in 2009. The funds would not be available until retirement. Unlike a 401(k) retirement plan, which is sponsored by employers, workers could not withdraw money early in emergency or borrow against it. But the money could be passed on to heirs.
The voluntary plan would be modeled on a government retirement system known as the Thrift Savings Plan, to which federal employees can contribute in addition to paying Social Security taxes. That plan offers workers a purposefully limited range of options designed to be somewhat conservative. A website for the plan indicates that the funds provided a return similar to a stock index fund.