[Mb-civic] Bush shifts approach on Social Security reform

[Michael Butler]

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Bush shifts approach on Social Security reform
>By Edward Alden and Holly Yeager in Washington
>Published: April 28 2005 23:19 | Last updated: April 28 2005 23:19
>>

President George W. Bush on Thursday night endorsed a controversial plan to
ensure the scheme's solvency by cutting benefits sharply for better-off
workers.


> In a rare prime-time news conference that also focused on rising petrol
prices, Mr Bush said he wanted to reform the national pension scheme so that
future benefits for low-wage workers would be preserved, while middle and
upper-income workers would receive less than currently promised.

³I propose a Social Security system in the future where benefits for
low-income workers will grow faster than benefits for people who are better
off,² he said.

The proposal comes as Mr Bush is nearing the end of a two-month effort to
build public support for reforming Social Security that has taken him to 23
states.

While the White House says he has succeeded in raising public awareness of
the problems facing Social Security, opinion polls show support for his
proposed reforms declining. An ABC News-Washington Post poll this week found
64 per cent of Americans did not approve of the way Mr Bush was handling
Social Security and 51 per cent did notsupport his plan for private
accounts, down from 41 per cent in mid-March.

While he reiterated his support for allowing younger workers to shift into
private accounts some of the money they pay into Social Security, the White
House has continued not to rule out the possibility that such accounts could
be ³added on² to the current scheme.

Private accounts that divert funds from Social Security have faced united
Democratic opposition, as well as criticism from some Republicans, raising
questions about whether such a plan could win the bipartisan backing it
needs.

The plan endorsed by Mr Bush last night calls for ³progressive indexation²
of future benefits. Currently, benefits are indexed to wage rates, which on
average have risen 1.1 per cent faster than prices over the past century.
Under progressive indexation, the anticipated shortfall in Social Security
would be closed by indexing benefits for high-wage workers to prices.
Benefits for low-wage workers, who rely on Social Security for most of their
retirement income, would remain indexed to wages, while a blended formula
would be used for middle-income workers.

If endorsed by the Congress, the proposal would effectively bring a means
test to Social Security for the first time since its creation in 1935.
Critics fear this could erode support for the programme among middle and
upper-income workers.

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