President Bush called last night for a historic restructuring of Social Security that would allow younger workers for the first time to invest some of their payroll taxes in the stock market, declaring in his annual State of the Union address that without change the venerable program is headed toward bankruptcy.
Speaking to a joint session of Congress and a national television audience, Bush sketched out in more detail than before the top domestic goal of his second term, but he stopped short of providing a complete blueprint, leaving himself negotiating room with skeptical lawmakers. Under his plan, workers younger than 55 could divert up to 4 percent of income subject to Social Security taxation into individual investment accounts beginning in 2009.
President Bush arrives on the floor of the Congress to deliver the State of the Union speech. Behind him are House Speaker J. Dennis Hastert (R-Ill.), left, and Vice President Cheney.
(Melina Mara -- The Washington Post)
Highlights of the Proposal|
ELIGIBILITY: People born before 1950 would not be affected.
INDIVIDUAL ACCOUNTS: People born in 1950 or later could divert up to 4 percent of income subject to Social Security taxes into individual accounts, up to $1,000 a year -- a cap that would be phased out.
WHEN: The accounts would be phased in between 2009 and 2011.
OPTIONS: Workers would be able to choose among several stock, bond and mixed-investment funds.
LIMITATIONS: Participants would have no access to the accounts before retirement and could not borrow against the balance.
AT RETIREMENT: Participants would be required to buy annuities to ensure steady payments out of the accounts over a lifetime.
OVERSIGHT: The federal government would administer accounts.
With Social Security as its centerpiece, the address laid out an exceptionally ambitious agenda as Bush gears up for another four years, one that will challenge powerful constituencies and test the capacity of a president reelected with a slim majority to simultaneously wage war abroad and transform government at home. Celebrating the success of elections in Iraq and vowing a new effort to make peace between Israelis and Palestinians, Bush also promised to rewrite the U.S. tax code, liberalize the nation's immigration laws and rein in what he views as litigious legal system.
Bush used his speech to reinforce his inauguration theme of spreading democracy overseas, literally repeating much of the same language about "ending tyranny in our world." He offered no new programs or initiatives intended to achieve such a goal, but after criticism that his administration had been selective in promoting freedom, he directly if politely challenged two close allies with autocratic governments, Saudi Arabia and Egypt, to reform their systems.
He had sterner words for two other nations in the Middle East, demanding that Syria stop harboring terrorists and that Iran give up its nuclear development programs, all but encouraging Iranians to rise up against the religious government in Tehran. Yet he refrained from using the same provocative language about North Korea, which has been building a nuclear weapons program and was part of Bush's original "axis of evil" identified in his State of the Union address three years ago.
The emotional highpoint of last night's event came near the end when Bush introduced the parents of a U.S. Marine from Texas, Sgt. Byron Norwood, who was killed in the assault on Fallujah, Iraq. As Norwood's mother tearfully hugged another woman in the gallery, the assembled senators and representatives responded with a sustained ovation, and Bush's face appeared creased with emotion.
"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 as he ruled out setting an "artificial timetable" for withdrawing troops from Iraq. "And when that result is achieved, our men and women serving in Iraq will return home with the honor they have earned."
In their response, Democratic leaders drew a careful line, promising not to let partisanship get in the way of progress while vowing to stand up to Bush on matters of principle. "We will be first in line to work with him," said Senate Minority Leader Harry M. Reid (Nev.). "But when he gets off track, we will be there to hold him accountable."
Reid signaled that Social Security was one area where the Democrats would fight. "Democrats are all for giving Americans more of a say and more choices when it comes to their retirement savings," he said. "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's plan to restructure Social Security faces near-unanimous opposition from congressional Democrats, who see the program as one of their party's most enduring legislative legacies and do not believe it is facing the dire crisis depicted by the president. When Bush asserted that the program was "headed to bankruptcy" by 2042, many Democrats in the chamber responded with loud catcalls.
Republican lawmakers, meanwhile, have approached the issue cautiously, worried that voters will turn on them if they think the GOP is cutting one of the federal government's most popular programs. But they stowed their doubts for the evening as they rewarded their president with 66 interruptions for applause during the 53-minute speech.
Bush said personal accounts would allow workers to harness the power of the stock market to build retirement nest eggs to cushion them against reductions sure to come in promised Social Security benefits. His plan would allow people younger than 55 to funnel a portion of their Social Security taxes into personal accounts, where the money could be invested in one of several tightly controlled stock or bond funds.
By itself, however, such accounts would not solve the program's long-term projected fiscal problems, and Bush signaled he will work with Congress to fashion a comprehensive plan. "Fixing Social Security permanently will require an open, candid review of the options," he said. "I know that none of these reforms would be easy. But we have to move ahead with courage and honesty, because our children's retirement security is more important that partisan politics."
The president listed several other options for strengthening Social Security, including increasing the retirement age, cutting benefits for the wealthy and curbing the growth of benefits by indexing them to inflation rather than wages. "All these ideas are on the table," he said.