Bush Pushes Social Security Reform in State of Union

President Bush urged lawmakers to “move ahead with courage and honesty” on the dicey issue of Social Security during his State of the Union address Wednesday night, asserting that dramatic change is necessary to steer the government-run retirement system away from bankruptcy.

Speaking to a joint session of Congress gathered in the House chamber for slightly less than an hour, Bush said all ideas dealing with Social Security, which serves more than 45 million Americans, “are on the table.” But he took the opportunity to promote his idea for private savings accounts “because our children’s retirement security is more important than partisan politics.”

Social Security served as the focal point for the speech that annually provides the president with an opportunity to hail past successes and turn the nation’s attention to the year ahead. But Bush also touched on a myriad of subjects, reiterating his support for a constitutional amendment banning gay marriage, extolling spending discipline as a means to cut into the nation’s growing deficit and recognizing the troops for the sacrifices they are making in Iraq.

The dramatic high point came near the end of the speech when Bush introduced Janet and Bill Norwood of Pflugerville, Texas, sitting with first lady Laura Bush. Their son, Marine Sgt. Byron Norwood, was killed in the assault on Fallujah.

The couple was greeted with a roar by the assembled lawmakers and Bush appeared to temporarily choke up. Mrs. Norwood, appearing nervous at the adulation, received a hug from Taleb al-Suhail, a leader of the Iraqi Women’s Political Council who was seated next to Mrs. Bush.

Al-Suhail, representing those who voted in last weekend’s Iraqi elections, flashed a “V” for victory when she was greeted by the crowd.

But it was for the most part a Social Security address, offering Bush a platform to, for the first time, describe his cure for an ailing system.

The president’s proposal makes diverting a portion of an individual’s payroll tax into a private investment account voluntary, and anyone born before 1950 will not be affected by the proposal but will collect the benefits under the current system.

The payoff is simple, Bush maintains – those investing in private accounts stand a good chance of increasing their benefits over what they would receive from Social Security.

Bush has been warning for some time about a growing crisis in Social Security, warning that the 70-year-old legacy of the New Deal will begin paying out more money than it collects beginning in 2018 and exhausting system trust funds by 2042, thus requiring dramatic steps.

But foes insist the president is overstating the degree of the problem, maintaining that a few financial adjustments are more appropriate than a complete system overhaul.

“Social Security has been a terrific success, and we need to make sure it remains a success for generations to come, which may require we make some changes,” said Sen. Joe Lieberman, D-Conn. “But we must not change our core commitment to provide a safety net for our seniors that they can count on.”

The new system would be phased in over a three-year period. Administrative costs would be low, according to the White House, about 30 cents for every $100 invested, since most of the paperwork will be handled by the federal government instead of Wall Street.

The White House also questions estimates that the transition to the new system could approach $2 trillion. The administration puts the cost at $754 billion through 2015.

Those opting to participate will be permitted to channel up to two-thirds of their Social Security taxes into what the White House described as “diversified and secure funds.”

Six options will be offered – three stock funds, one of which will include international investments; a corporate bond fund; a Treasury bond fund; and a “life cycle” fund that decreases reliance on stocks as an individual ages, lowering risk.

“Fixing Social Security permanently will require an open, candid review of the options,” Bush said. “I will work with members of Congress to find the most effective combination of reforms.”

But some lawmakers said they are unwilling to work with the president on the issue if it means diverting needed funds from Social Security. Democrats in particular, with some Republicans, assert they will only support a private accounts plan if it’s offered over and above Social Security.

“There’s a lot we can do to improve American’s retirement security, but it’s wrong to replace the guaranteed benefit that Americans have earned with a guaranteed benefit cut of 40 percent or more,” said Senate Democratic Leader Harry Reid of Nevada. “Make no mistake, that’s exactly what President Bush is proposing.”

The Bush plan would add to the nation’s already spiraling budget deficit and calling it reform is inaccurate, Reid said.

“It’s more like Social Security roulette,” he said. “Democrats are all for giving Americans more of a say and more choices when it comes to their retirement savings. But that doesn’t mean taking Social Security’s guarantee and gambling with it. And that’s coming from a Senator who represents Las Vegas.”

Bush also used the State of the Union address to warn Congress about future belt tightening. With the deficit expected to hit $368 billion this year and an ongoing war draining national resources, the president said austere steps are required.

“America’s prosperity requires restraining the spending appetite of the federal government,” Bush said. “I welcome the bipartisan enthusiasm for spending discipline. So next week I will send you a budget that holds the growth of discretionary spending below inflation, makes tax relief permanent, and stays on track to cut the deficit in half by 2009.”

The budget, Bush said, will substantially reduce or eliminate more than 150 government programs “that are not getting results, or duplicate current efforts, or do not fulfill essential priorities.”

The principle, he said, is clear – “a taxpayer dollar must be spent wisely or not at all.”

Bush also renewed his call from the 2004 campaign trail to reform the nation’s massive and complicated tax code.

“To build the prosperity of future generations, we must update institutions that were created to meet the needs of an earlier time,” he said. “Year after year, Americans are burdened by an archaic, incoherent federal tax code. I have appointed a bipartisan panel to examine the tax code from top to bottom.”

In an address loaded with controversial proposals, the president also touched on immigration – an issue that has him at odds with some members of his own party. He again asked lawmakers to pass his proposal to establish a guest worker program that will provide American companies with the labor it needs while maintaining control over the nation’s borders.

“We should not be content with laws that punish hardworking people who want only to provide for their families, and deny businesses willing workers, and invite chaos at our border,” he said. “It is time for an immigration policy that permits temporary guest workers to fill jobs Americans will not take, that rejects amnesty, that tells us who is entering and leaving our country, and that closes the border to drug dealers and terrorists.”

Bush lauded the nation’s efforts in the war on terror, noting that the federal government has “taken unprecedented actions to protect Americans.” And he vowed to continue to build the sort of international coalitions “that will defeat the dangers of our time.”

America, Bush said, remains a target for terrorists, “and we will stay on the offensive against them until the fight is won.”

Iraq, Bush said, is “a vital front in the war on terrorism” and he asserted the United States will succeed there because the Iraqi people value their freedom – as exhibited by the successful elections staged there on Sunday.

“The terrorists and insurgents are violently opposed to democracy, and will continue to attack it,” he said. “Yet the terrorists’ most powerful myth is being destroyed. The whole world is seeing that the car bombers and assassins are not only fighting coalition forces, they are trying to destroy the hopes of Iraqis, expressed in free elections.”

America’s commitment to Iraq remains steady, said Bush, who again refused to set a timetable for the withdrawal of U.S. troops.

“We are in Iraq to achieve a result – a country that is democratic, representative of all its people, at peace with its neighbors and able to defend itself,” Bush said. “And when that result is achieved, our men and women serving in Iraq will return home with the honor they have earned.”

American troops, Bush said, are “unrelenting in battle, unwavering in loyalty, unmatched in honor and decency, and every day they are making our nation more secure.”

On another Middle East issue, Bush expressed optimism over the prospect for peace between Israel and the Palestinian Authority. Secretary of State Condoleezza Rice will be visiting the region next week to discuss how the United States can assist in ending terror and build the institutions of a democratic state.

To promote democracy, Bush said he will ask Congress for $350 million to support Palestinian political, economic and security reforms.

“The goal of two democratic states, Israel and Palestine, living side by side in peace is within reach,” he said, “and America will help them achieve that goal.”

The president also offered a stern warning to Syria and Iran, calling on them to “end all support for terror and open the door to freedom.”

(E-mail Bill Straub at StraubB(at)shns.com.)