Bush's Social Security Sleight of Hand

President Bush didn't mention a new proposal for privatizing Social Security in the State of the Union, but it's in his budget. (By Charles Dharapak -- Associated Press)

Bush also wants to change the way Social Security benefits are calculated for most people by adopting so-called progressive indexing. Lower-income people would continue to have their Social Security benefits tied to wages, but the benefits paid to higher-paid people would be tied to inflation.

Wages have typically risen 1.1 percent a year more than inflation, so over time, that disparity would give lower-paid and higher-paid people essentially the same benefit. However, higher-paid workers would be paying substantially more into the system than lower-paid people would.

This means that although progressive indexing is an attractive idea from a social-justice point of view, it would reduce Social Security's political support by making it seem more like welfare than an earned benefit.

Bush is right, of course, when he says in his budget proposal that Social Security in its current form is unsustainable. But there are plenty of ways to fix it besides offering private accounts as a substitute for part of the basic benefit.

Bush's 2001 Social Security commission had members of both parties, but they had to agree in advance to support private accounts. Their report, which had some interesting ideas, went essentially nowhere.

What remains to be seen is whether this time around Bush follows through on forming a bipartisan commission and whether he can get credible Democrats to join it. Dropping numbers onto your opponents is a great way to stick your finger in their eye. But will it get the Social Security job done? That, my friends, is a whole other story.

Sloan is Newsweek's Wall Street editor. His e-mail issloan@panix.com.