Hawaii Dems
deride Bush plan

Isle congressmen say privatization
will not save Social Security

Hawaii's Democrats in Congress reacted to President Bush's speech by pointing to what was not said.

"Our No. 1 challenge is our federal budget," said U.S. Rep. Ed Case, but "only three sentences of the Bush speech even referred to the federal deficit or debt. Whatever his foreign policy and domestic goals, if we cannot afford them because our budget is so messed up that we will borrow from future generations, it is just a lot of talk."

Senior U.S. Sen. Daniel Inouye agreed. "The speech was overly optimistic. It did not address the fact that four years ago there was a surplus while today the deficit is approaching half a trillion dollars."

All four congressmen from Hawaii agreed that Bush's intention to "privatize" the Social Security system sets the battle lines in Congress.

U.S. Rep. Neil Abercrombie said when Bush cited doomsday dates for the federal retirement benefit system, "I heard him undermine what has been a pillar of U.S. domestic policy for three-quarters of a century. It's when someone says, 'I have just what you need to fix your car,' and starts stripping the tires off it. The president is proposing to take the wheels off Social Security."

U.S. Sen. Daniel Akaka said, "I am unsure how cutting Social Security benefits to enable privatization of the system, and adding $2 trillion to the federal debt, would allay the fears of current and future retirees about the program's solvency and the economic well-being of our country."

Inouye said: "Unlike the president, I do not believe that privatization is the answer. Consider, for example, if Social Security had been privatized a few years ago, and the system had invested in the stock of a company like Enron, which was considered a very good investment and whose executives were considered friends of the administration."

Republican Gov. Linda Lingle said she "was impressed with the president's plans to continue building on the economic momentum of the last few years, including details to 'strengthen and save Social Security' to ensure future generations will have a secure retirement.

"He also touched on matters that will help in our local efforts to address issues such as improving health care, education, work force development, energy policy and fixing the tax code.

"It was an especially poignant and emotional moment when the parents of Marine Corps Sgt. Byron Norwood, who was killed in Fallujah, gave their son's dog tags to Safia Taleb al-Suhail, the Iraqi woman who voted on Sunday. That simple act reinforced President Bush's message that 'the force of human freedom will stop terrorism,'" Lingle said.

Inouye said the speech, invoking the recent Iraq election and American military sacrifices, was "perhaps the most emotional I have heard" since he took a seat in the Senate in 1961.

"I am old enough to recall another election in another country in which we were once deeply involved," Inouye recalled. "It was South Vietnam. We applauded the result of those who voted despite the threats from the Viet Cong. But the optimism generated from that election was forgotten when we were forced to hastily withdraw from Saigon and South Vietnam.

"I noticed the president sidestepped several very important questions: When do we end or reduce our military presence in Iraq? Who will decide when Iraq reaches an 'appropriate' stage of self-reliance and self-defense?"

Inouye said the speech suggested a long-term U.S. presence in Iraq. "I hope I am wrong on this."

Bush outlines
Social Security plan

WASHINGTON -- The Bush administration unveiled a host of details about its proposal to add personal accounts to Social Security, but key questions remain unanswered, including how much guaranteed benefits will be cut and how the plan will be paid for.

Under the proposal outlined by President Bush and his aides Wednesday, Social Security benefits would not change for retirees or wage-earners age 55 or older.

But the future government guarantee would be reduced for younger workers whether or not they set up personal accounts, but more for those who choose to divert some of their payroll tax to a personal account.

Eventually, Bush envisions permitting younger workers to invest two-thirds of their payroll taxes in the new private accounts. They would be required to purchase an investment that, when combined with a monthly Social Security check, would keep their income above the federal poverty level during retirement.

Bush's aides outlined selected details as he sketched his proposals in broad terms in his State of the Union address.

They omitted other material, declining to say, for example, how large a reduction in guaranteed benefits would fall on younger workers. Some estimates put it at more than 40 percent, although Republican aides stressed that any drop should be offset, at least partially, by income from personal investments.

Nor did the administration say how it would cover the so-called transition costs to a remodeled Social Security program, which it pegged at $750 billion over a decade.

Aides said Bush was not submitting legislation to Congress, responding to requests from Senate GOP leaders that he give them leeway to fashion a measure that can pass.

"I will listen to anyone who has a good idea to offer," the president said.

Democrats, in the minority in both the House and Senate, said they would oppose Bush's proposals, and they sat in stony silence when he outlined his case for personal accounts.

"Democrats are all for giving Americans more of a say and more choices when it comes to their retirement savings. But that doesn't mean taking Social Security's guarantee and gambling with it," said Senate Minority Leader Harry Reid, D-Nev.

Senate Democrats were sending Bush a letter Thursday urging him to limit borrowing in crafting Social Security legislation, saying it would be immoral to pass this debt onto future generations.

Administration officials acknowledged that the private accounts do not solve Social Security's long-term financial woes.

Without any changes, the program, established in 1935, is estimated to begin paying out more than it collects as early as 2018. In 2042, according to the program's official estimate, its trust funds will be depleted and benefits will be paid entirely from current tax receipts. At that point, checks are predicted to be only 73 percent of the amount now promised.

Under the Bush plan, individuals born in 1949 or earlier would stay in the current system without changes. Current retirees oppose personal accounts, according to a variety of polls. By setting the age cutoff at 55, Bush showed he was looking to ease the concerns of a politically pivotal group as he seeks to build congressional and voter support for far-reaching changes in the Depression-era program.

For younger workers, the option of new personal accounts would be phased in over three years. Those born in 1965 or earlier could begin participating in 2009. Those born in 1978 and earlier could begin the next year. In the third year, all eligible workers could open personal accounts.

Once workers opt for personal accounts, they could not move back into the traditional system, though they could move their money to low-risk government bonds.

The Bush plan would allow workers to divert about two-thirds of their payroll taxes into these accounts. The remaining payroll taxes would continue to go into the Social Security trust funds, as would the entire 6.2 percent payroll tax paid by employers.

To hold down the lost income to the Social Security trust funds, individual contributions would initially be capped at $1,000 per year. That figure would rise by $100 a year until all workers could invest the full 4 percent.

Those who choose to participate would have a limited set of investment choices, similar to those available in the Thrift Savings Plan, a retirement system for federal workers.

As workers neared retirement, they would automatically be enrolled into a "life cycle" account in which investments become more conservative as investors age. Those wanting a more aggressive investment would have to acknowledge the risks in writing.

The government would be responsible for keeping track of how much money is in each worker's account, a proposal aimed at keeping administrative fees low. The administration estimates annual administrative fees would total 0.3 percent of each account balance.

As their work years end, all workers with personal accounts too small to assure retirement income above the federal poverty level when combined with their monthly government check, would be required to purchase an investment annuity to guarantee such a level.

However, any money put into an annuity could not be passed on to heirs _ and polling shows that inheritability is one of the most persuasive arguments for personal accounts.