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Poorest Face Most Risk on Social Security

Responding to suggestions from Federal Reserve Chairman Alan Greenspan and a small group of Senate Democrats, Sen. Lindsey O. Graham (R-S.C.) said in an interview that he will lead an effort to pressure Bush to provide more generous benefits to the working poor to win passage of the president's top domestic priority. "I am trying for a plan that will meet with legitimate concerns. People worry [the accounts] will put low-income workers at risk because they cannot afford to lose money," he said.

Graham said he will soon propose a federal guarantee that those who earn less than $30,000 will do better under a partially privatized Social Security system. He would do this by cutting scheduled benefits only for those making more than $30,000 a year, offering a $500 government contribution to the individual accounts of the low-income workers and providing additional protections against precipitous market drops. "I am trying to get a bipartisan beachhead and have the administration react to it," Graham said. Bush is open to the ideas, Duffy said.

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Social Security

David C. John of the Heritage Foundation, which supports the Bush plan, said the president will eventually have to embrace significant protections and incentives for low-income workers, perhaps allowing them to put a much higher percentage of their income in personal accounts than everyone else, to win support of Democrats.

Social Security provides more than half of retirement benefits to nearly two-thirds of the nation's elderly, according to the latest Social Security Administration data. It is the only source of income for 20 percent of retirees. For those struggling to get by, Social Security is often their only safeguard.

As a result, many experts think the debate over the Bush Social Security plan will come down to one question: Is it a good deal for the neediest people? The system was created 70 years ago during the Depression by President Franklin D. Roosevelt to provide a safety net for those who could no longer work. Critics contend that Bush cannot create individual accounts without cutting the benefits promised under today's program.

Bush argues that personal accounts are the only way to guarantee all workers -- but especially those with low incomes -- generous Social Security benefits in the future. The reason, he says, is there is no way the government can fulfill its current promises without raising taxes or borrowing trillions of dollars because, starting in 2018, Americans will be taking more money out of the system in the form of benefits than they are contributing through payroll taxes. Bush envisions the personal accounts generating enough profit from investments in stocks and bonds to offset future reductions in guaranteed benefits.

In guidelines he presented to lawmakers, Bush proposed structuring the program to allow the working poor to benefit the most in the early years of the system. Starting in 2009, only those making $25,000 or less could contribute the full 4 percent of their income subject to the Social Security tax. Annual contribution limits will be set at $1,000 and rise $100 each year thereafter. It will take richer Americans as long as 32 years before they can contribute the full 4 percent of their salary, said a senior White House official who spoke on the condition of anonymity.

To limit risk, the White House supports only a small menu of relatively conservative investment options. "The narrow menu would certainly help," said Lomax Cook, a critic of the plan. "But what if some stocks and bonds don't do well? The federal government cannot guarantee performance of stocks." The senior White House official said history shows stocks and bonds are wise long-term investments. Moreover, he said, "no one is exposed to risk that does not want any risk" because the program is voluntary.

Bush has not ruled out additional protections, including a minimum guaranteed benefit regardless of how a person's investments perform.

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