Bush: Cut Retirement Benefits for Middle Class

Apparently, "middle-income" workers are classified as those earning between $25,000 and $90,000. Bush proposes cutting benefits by 25% for "middle-income" workers currently under 55 years old.


USA Today

Bush takes on still more political risk
By Linda Feldmann, The Christian Science Monitor

WASHINGTON — George W. Bush is a well-known risk-taker — and well-known for not giving up when he has a bee in his bonnet.

As with Iraq, so with Social Security, the president has made clear that he is pressing ahead in his goal of dramatic change. Even though his much-vaunted "60-day, 60-stop" barnstorming campaign to sell the public on Social Security reform has ended, the events continue without a break.

On Tuesday, Bush will hold a "conversation on strengthening Social Security" at a Nissan manufacturing plant in Canton, Miss., and on Wednesday, Social Security will be the focus when he appears at the Latino Coalition's Small Business Conference here in Washington.

The only alteration will be the message: He has heightened public attention to Social Security's eventual shortfalls and made his pitch for "voluntary personal retirement accounts." Now, despite solid Democratic opposition to his plan and slippage in polls, Bush is ready to start addressing the system's solvency issue with a plan to reduce benefits for 70% of future retirees, while keeping low-income workers out of poverty.

"He doesn't have anything to lose," says John Zogby, an independent pollster. "But oddly enough, he still could emerge a winner on this by compromise, by being the guy who moved the dime on the issue. We're talking about indexing according to inflation, we're talking about raising the retirement issue. Those were equally third-rail pieces of Social Security, and now they're on the table, at least."

Indeed, the nonpartisan Pew Research Center agrees that Bush has succeeded at least in putting Social Security on the public's radar screen. A center poll in February found that three-quarters of Americans want the government to act on the system's eventual shortcomings either right away or in the next few years.

But if Bush must ultimately compromise on private accounts — most likely, give up on them — then that could doom any deal. Democrats face criticism for having "no plan," but in fact, individual members have proposals, and Senate aides have been formulating proposals on future financing for Social Security if the president is willing to drop personal accounts carved out of Social Security payroll taxes.

Analysts noted that in his press conference last Thursday night, Bush did not issue any ultimatums requiring that legislation include personal accounts. Such a move could kill any chance of reform, as it did for President Clinton when he demanded early in his presidency that healthcare reform must result in universal coverage.

Bush seemed to choose his words carefully. When asked if he would consider it a success for Congress to pass legislation without personal accounts, he came close to, but at least did not threaten, a veto. Such accounts have "got to be a part of a comprehensive package," he said.

Mike Tanner, a booster of personal accounts at the libertarian CATO Institute, does not believe Bush would sign a bill without personal accounts. But "one would never reach him," he adds. "House Republicans, among others, would never accept that."

Severe polarization on Capitol Hill makes it all the more difficult for the two parties to find common ground. So ultimately, on his No. 1 domestic goal, Bush may wind up famous for advancing the conversation but not radically changing the way Social Security works. In last week's press conference, held during TV prime time in the White House's ornate East Room to lure network coverage, Bush made news by unveiling the "spinach" portion of his Social Security plan: benefit cuts.

The president's proposal is known as "progressive indexing," and would leave benefits intact for low-income workers but phase in cuts for workers earning $25,000 or more. The plan would not apply to current workers age 55 or older, and would address about 70% of the projected shortfall in Social Security.

For workers earning $90,000 or more, the limit on income that faces payroll taxes, their benefits would be cut by 37%. Middle-income workers would lose 25% of their benefits.

According to the Pew survey, a majority of Americans support the idea of limiting "benefits for wealthy retirees." But Bush has so far not embraced another concept that Pew found 60% support for: raising the cap on taxable income. Economic-conservative activists oppose such a change, which they see as a tax increase.

Among opponents of Bush's Social Security plans, reaction to the latest move came as no surprise. House minority leader Nancy Pelosi (D) of California called it "the single biggest cut in Social Security benefits for the middle class in history."

John Rother, the top lobbyist for AARP, does not expect any change in approach (i.e., opposition) by the seniors lobby.

"He came out for specific benefit cuts that were widely understood as something he favored anyway," says Mr. Rother. But at least, he added, "the awareness of Social Security's fiscal challenges has increased."