New Bush Plan for Social Security Gets Mixed Response

Published June 1, 2005

Reaction to President George W. Bush’s suggestion for a sliding scale of benefits for Social Security recipients has been mixed, with critics accusing the president of changing Social Security into a poverty program and supporters arguing the proposed changes will keep the system solvent while continuing to provide benefits to all retirees.

Bush raised the idea of different formulas to measure retirement benefits, based upon a person’s income level, during a rare nationally televised press conference April 28.

Under the proposed formula, low-income retirees would continue to have their benefits tied to the rate of growth in wages over their working career, as is now done for all retirees. Wealthy Americans would have their benefits determined by the growth in prices, which is generally lower than the growth in wages. Middle-income workers would have their benefits determined by a blend of the two approaches, resulting in lower benefits than they would receive under the current system, but not as big a cut as wealthy retirees would receive.

The news conference was only the fourth of Bush’s presidency, and it was announced just one day earlier. The major television networks all carried the event, but only after some last-minute negotiation with the White House, which agreed to start it 30 minutes earlier than planned to accommodate the networks’ programming schedules.

Poorer Workers Receive More

“I propose a Social Security system in the future where benefits for low-income workers will grow faster than benefits for people who are better off,” Bush said. The president reiterated his support for allowing younger workers to put some of their Social Security taxes into private retirement accounts.

Sean Tuffnell, project manager for Social Security outreach at the National Center for Policy Analysis, said his organization “was encouraged” by the president’s comments.

“The idea of progressive indexing of benefits is a reasonable alternative,” Tuffnell said. “We would prefer to see a system where that is not necessary, but understanding the political alternatives, it is probably needed to get reform passed.

“The key here is that it’s a two-part proposal,” Tuffnell continued. “One, it’s a reduction in the growth of government-provided benefits. Two, it’s personal accounts to help people who are affected by the first part.”

Democrat lawmakers in Congress, who have nearly universally rejected the president’s reform proposals, maintained their opposition.

Middle-Income “Cuts” Derided

“All the president did tonight was confirm that he will pay for his risky privatization scheme by cutting the benefits of middle-class seniors,” said Senate Minority Leader Harry Reid (D-NV) and House Minority Leader Nancy Pelosi (D-CA) in a joint statement. “President Bush cannot escape the fact that privatization will weaken Social Security at a time we should be strengthening it.”

Tuffnell said the Reid-Pelosi statement mischaracterizes Bush’s proposal.

“The indexing change has nothing to do with private accounts,” he said. “It has to do with an $11 trillion unfunded liability that we face.”

Broad Benefit Increases Claimed

On the May 1 edition of Fox News Sunday, White House Chief of Staff Andrew Card said middle-income and high-income earners “would get an increase in benefits as compared to what they would get if nothing were to happen.” This is because the system by 2041 is expected to be able to pay only three-fourths the promised benefits if no changes are made.

The news conference came shortly after Bush wrapped up a 60-day tour of the country to drum up support for Social Security reform, including allowing younger workers to divert some of their Social Security taxes into private accounts.

Both Sides Losing Support

The increase in support the president hoped for apparently did not materialize. Many polls indicate citizens are skeptical, with the president’s approval ratings sliding to the mid-40 percent range. The strongest support for his plan comes from young workers, the strongest opposition from older workers and retirees.

Social Security appears not to be a winning issue for either side. Democrats in Congress, who have been virtually unanimous in opposing the president’s plans and in refusing to negotiate, recently decided to soften their rhetoric after learning from focus groups that they were being viewed as obstructionists, according to an April 17 Associated Press article by Glen Johnson.

“People feel like it doesn’t show a good-faith effort,” a Democrat aide told Johnson on condition of anonymity.

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.