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Bush Plan Greeted With Caution
The solvency gap between benefits promised and Social Security taxes owed would be closed by a formula change, known as progressive indexing, that would pare back benefits for everyone currently making more than $25,000 a year -- 70 percent of Americans.
For those earning the taxable maximum, $90,000, the benefit cuts would be the steepest. Such workers, retiring in 2055, would lose $13,000 of their promised annual benefit, or 37 percent. Those workers would be better off if Social Security were allowed to exhaust its trust fund and then pay out only what it can afford from future payroll taxes.
Middle-income Americans would be hit as well, although not as hard. Workers earning as little as $35,000 a year would lose a quarter of their promised benefits by 2065, although their benefit under progressive indexing would be 11 percent larger than the check Social Security could afford to issue by then.
The plan would not affect Americans currently older than 55.
By endorsing progressive indexing, Bush emphatically ended a debate in the Republican Party between some who said no cuts would be necessary with large accounts and others who said such "large account" plans are a fantasy, said Sen. Lindsey O. Graham (R-S.C.). Now, Graham said, Republicans will have to take the next, far more difficult step of reaching out to Democrats and compromising on the size of personal accounts and the way they are funded.
Democratic leaders yesterday repeated their demand that Bush set aside the private-account idea before they come to the table. "Now the lines are very clearly drawn, and we're going to essentially slug it out with the president and the Republicans," said Rep. Sander M. Levin (D-Mich.), the House Democrats' point man on Social Security.
Indeed, the president's solvency proposal only added more ammunition. "President Bush struck another blow to Americans' wallets last night when he proposed the single biggest cut in Social Security benefits for the middle-class in history," said House Democratic leader Nancy Pelosi (Calif.).
Thomas was no more accommodating, saying there is a seat for Democrats at the bargaining table even as he accused their party of leaving poor seniors destitute when it controlled Congress. "They were the ones who kept these people in poverty," he said.
But behind the scenes, both sides were at least preparing for possible talks. Democratic Senate aides have been working up proposals to address Social Security's financing gap, to be ready in the event that private accounts are dropped, they said. Thomas's expansive approach to legislation is designed in large part to draw Democrats to the table, according to lobbyists close to the Ways and Means Committee.
"The idea is to put all this together and say to the Democrats, 'How can you vote against this?' " said one lobbyist, who spoke on the condition of anonymity because he did not want to jeopardize his access to the committee.