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April 29, 2005

The press conference: more details emerge

President Bush moved the ball forward in his prime-time press conference last night, outlining principles for Social Security reform that he thinks should guide Congress's deliberations. What's new here -- what the President hasn't explicitly said before -- is that he's endorsing what is basically a slightly revised version of the thoughtful and fair package of measures proposed in the 2002 report of the Presidential Commission to Strengthen Social Security to rein in the runaway growth in benefits.

• Benefits Should Grow Faster in the Future For Low-Income Workers Than For Those Who Are Better Off. Under a reformed system, low-income workers should receive benefits that grow faster than inflation. In order to return the system to solvency, the benefit increases for wealthier seniors should grow no faster than the rate of inflation. This would be accomplished by adopting a sliding-scale benefit formula, similar to the Pozen approach.
• Eliminate Poverty Among Future Seniors. Today, roughly two million retirees who paid into Social Security their whole lives are collecting benefits that leave them below the poverty line. The President believes we should make good on a great national commitment: if you work hard and pay into Social Security your entire life, you will not retire into poverty.
• This Reform Would Solve Approximately 70 Percent Of The Funding Problems Facing Social Security. A responsible, reasonable and sustainable rate of benefit growth for wealthier seniors will help return the system to fiscal balance and would enable us to help those seniors in the greatest need.
• Replace The Empty Promises Being Made to Younger Workers With Real Money. Younger workers should have the option of putting a portion of their payroll taxes into a voluntary personal account which will allow them to build a nest egg that belongs to them. This money will give workers an opportunity to receive a higher rate of return than the current Social Security System can provide.
• Voluntary Personal Accounts Should Include The Risk Free Option Of Investing In Treasury Bonds. Voluntary personal accounts should include an investment option that allows workers to invest in U.S. Treasury bonds, which have no risk. Workers who have reservations about investing in the markets will still be able to rely on a Social Security check that is equal to or higher than today's retirees.

Posted by Don Luskin at April 29, 2005 7:52 AM | Print

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