Current Bush Plan - May 2005

With support at 45% (Post-ABC poll, mid April) for his ‘private accounts’ proposal and at 31% for his overall handling of the Social Security issue, President Bush brought out yet another plan in his 29 April press conference. The ‘new’ idea rests on progressive indexation – a change in law that will give workers less money by tying their benefits to inflation instead of wage growth as is now the case.

In the same breath, however, Mr Bush described it as a system "where benefits for low-income workers will grow faster than benefits for people who are better off."  Some liberal pundits have even called the plan ‘progressive’.  A broad view might be less flattering.

What Mr Bush did not mention is that the plan "would reduce annual benefits for an average wage-earner who is 25 today and retires in 2045 by 16 percent.… For an average-earner who retires in 2075, the benefit reduction would be 28 percent." The plan amounts to massive cuts for middle-income wage earners. Low incomes will suffer a lesser impact. Of course, the wealthy will take the greatest cuts, but Social Security benefits have never been a significant part of their retirement income. BTW, Mr Bush apparently was referring to ‘higher incomes’ as something over $58,000 a year.

It is unlikely the new plan will garner much more support than Bush’s ‘private accounts’. And  as the Senate Finance Committee goes into debate on the proposal, still missing is a comprehensive plan for the restructuring. Committee Democrats remain unified in opposition, and support is cracking among GOP members.

Nonetheless, the attempt to do away with Social Security – and speaking realistically, current administration proposals are aimed at nothing less – is not dead in the water.  Mr Bush has extended his 60-stops in 60 days stump blitz and at least one massive ad campaign effort is being formed up in support of the new plan. A campaign of equal size is being mounted by a consortium of liberal opponents.

If the recent experience with Medicaid cuts – voted down by both houses and then slipped back into the budget bill in conference – is any model, it pays to keep an eye on the issue until it’s well buried.