If Bush plan not the answer, then what is?

Friday, February 4, 2005

President Bush not only didn't avoid touching the third rail, he threw himself across the tracks.

Speaking in Omaha on Friday, Bush admitted that he doesn't have all the answers when it comes to Social Security.

"I fully recognize a personal retirement account is not the only thing needed ... to solve Social Security permanently," he told an audience of about 7,000.

"But it's a part of a solution. And, I believe I have a responsibility as someone who has put the issue on the table to be a constructive voice in coming up with a solution that will save Social Security for younger workers."

Bush by no means has widespread support in Congress. No Democrats have endorsed his plan, and many Republicans question his plans to tinker with a program that provides benefits to 45 million Americans, with a wave of baby-boomers on its way.

When the President said Social Security was on its way to bankruptcy, he was met with jeers from Democrats, reminiscent of the British House of Commons.

But what's the truth?

According to a synopsis in the Detroit Free Press, here are some of the facts about Social Security.

* Yes, Social Security has problems. Income may not be able to keep pace with rising costs. The number of workers paying taxes into the system has plunged from 16 some 50 years ago, to three today and a projected two by 2050.

* No, Social Security won't be exhausted and go bankrupt. The system's trustees project that the system can pay full retirement benefits until 2042, and the Congressional Budget Office projects it can do so until 2052. Even by those dates, the system can cover 73 percent of annual retirement-benefit costs indefinitely.

* But there are still problems. By 2018, annual revenues will start falling short of annual retirement-benefit costs. By 2027, the shortfall will be about $200 billion, rising over time. The system will have to use cash from income-tax revenues that otherwise would go to other government programs like defense or national parks, or, more likely from the sale of more Treasury bonds, leading to more national debt.

* According to the Free Press analysis, Bush's proposal would do nothing to bring Social Security closer to solvency, which Administration officials acknowledge.

According to his plan, Americans born after 1949 could divert 4 percent of their wages into new, voluntary personal-investment accounts, which would start with a cap of $1,000 for the first year, 2009. Participants could choose among handful of conservative stock and bond funds, managed by a private fund manager. Sorry, no tapping into the accounts before retirement or borrowing against them. They would be converted into annuities upon retirement.

* People who use the new accounts would have their traditional benefits reduced, roughly dollar-for-dollar. While they would have the chance to invest in assets that earn much more, they could actually earn much less, too.

President Bush has a narrow window of opportunity between now and the next congressional election to get something done, if anything, on Social Security. If his proposals are not the answer, it's up to his friends and opposition to come up with something better.

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