For we sadists, George W. Bush is becoming ever more fun to watch unloading his knockout punches on Democrats. Such as from today's press conference:
Q: Mr. President, you say you're making progress in the Social Security debate. Yet private accounts is the centerpiece of that plan, something you first campaigned on five years ago and laid before the American people, remains, according to every measure we have -- poll after poll -- unpopular with a majority of Americans.
So the question is, do you feel that this is a point in the debate where it's incumbent upon you, and nobody else, to lay out a plan to the American people for how you actually keep Social Security solvent for the long term?
PRESIDENT BUSH: First of all....I have not laid out a plan yet -- intentionally. I have laid out principles. I have talked about putting all options on the table because I fully understand the administration must work with the Congress to permanently solve Social Security. And so one aspect of the debate is will we be willing to work together to permanently solve the issue?
Personal accounts do not solve the issue. Personal accounts will make sure that individual workers get a better deal with whatever emerges as a Social Security solution....
But it's very important for people to understand that the permanent solution will require Congress and the administration working together on a variety of different possibilities.
Q: But, sir, but Democrats have made it pretty clear that they're not interested in that. They want you to lay it out.
PRESIDENT BUSH: Well -- (chuckles) -- I'm sure they do!
Q: And so, what I'm asking is, don't --
PRESIDENT BUSH: The first bill on the Hill always is dead on arrival. I'm interested in coming up with a permanent solution. I'm not interested in playing political games. (Chuckles.)
Q: But why not lay out a plan --
PRESIDENT BUSH: I'm interested in working with members of both political parties.
Q: Will you say if you're specifically supportive of an income test for the slowing of future benefits? Could that get some kind of bipartisan consensus going?
PRESIDENT BUSH: David, there are some interesting ideas out there. One of the interesting ideas was by this pellow (sic) -- by the -- a Democrat economist named Pozen. He came to visit the White House -- didn't see me, but came, tossed some interesting ideas out talking about making sure the system was progressive.
Now, let's introduce Robert Pozen:
In a viable legislative package, personal retirement accounts supply the political sweetener that allows the passage of benefit reform, which reduces Social Security's long-term deficit.
.... progressive indexing. This means the continuation of wage indexing for all workers with average career earnings of $25,000 or less. It also means not touching the benefit formulas of anyone already in or near retirement (workers aged over 55 today). Conversely, the initial benefits of all workers with average career earnings above $113,000 retiring after 2011 would be increased by price indexing. Almost all these workers receive significant amounts of retirement income from company plans and other savings vehicles in addition to Social Security.
The initial benefits of workers falling between these two groups would be increased by a proportional blend of wage and price indexing.
While the Social Security benefits of most middle and high earners would still rise under progressive indexing, they would grow more slowly than under the current system. To make this package politically attractive, Congress should offer all workers the chance to offset most of this slower growth in traditional benefits by allowing them to invest two percentage points out of the 12.4% in payroll taxes they pay on all wages up to an annual maximum ($90,000 in 2005 and rising yearly). This money would be invested in a standard balanced account, with 60% of assets in a broad-based American stock index, such as the Wilshire 5000, and 40% in a high-quality bond index, such as the Lehman Aggregate Bond index.
This combination of progressive indexing and balanced accounts would cut the long-term deficit of Social Security by half, from a present value of $3.8 trillion to $1.9 trillion over the next 75 years. Of course, the transition from the current system to this combination would require some federal borrowing before the system's economics are reversed. But under reasonable estimates of participation in investment accounts, all borrowing would be completed by the end of the 75-year period. At that time, the Social Security system would be in financial balance and would be self-sustaining.
The time for this type of reform is running out. After the baby-boomers start to retire in 2011, their benefit formulas will in effect be locked in—politically it is virtually impossible to change these formulas for those in or near retirement. Thus, to fix the long-term finances of Social Security, Congress has a one-time opportunity to link personal retirement accounts with benefit reform through the introduction of progressive indexing. That opportunity should not be missed.
So, Harry and Nan, what say you?
Wednesday, March 16, 2005
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