Overhaul Tour Stops in S. Carolina
President Bush, pressing his case for restructuring Social Security, said Monday that adding personal investment accounts would modernize the program in the same way that cellular telephones had transformed communications.
Addressing a joint session of the South Carolina Legislature, Bush said that “telling younger workers they have to save money in a 1930s retirement system is like telling them they have to use a cellphone with a rotary dial.”
“If young people are confident they can improve their retirement by investing in a conservative mix of bonds and stocks, the government should not stand in their way,” he said.
Many opinion surveys show that Bush’s plan for private investment accounts has not taken hold with the public, and he may face an additional hurdle after last week’s stock sell-off that dropped the Dow Jones industrial average to a 5 1/2 -month low.
The Dow continued its decline Monday, falling 16 points to close at 10,071, after posting its steepest daily drop in two years on Friday. But the Standard & Poor’s 500 and the Nasdaq indexes rose slightly on Monday.
Asked whether now was the wrong time to talk about putting Social Security money into the stock market, Bush said: “No ... now’s the right time to talk about permanently fixing Social Security because every year we wait, it costs $600 billion more for the next generation.
“I think most people will tell you that if you hold money over a long term, the rate of return on a conservative mix of bonds and stocks clearly is greater than that which the government earns on your behalf,” Bush said in an interview with CNBC’s Ron Insana.
“There are ways to design plans that take risk out,” Bush said. “You switch your mix of bonds and stocks to an instrument ... that will take care of any market swings toward the end of your retirement.”
The president appeared to be referring to plans that weight a portfolio more heavily toward bonds as a worker nears retirement, because those investors have fewer working years to make up for big stock-market declines.
Bush wants to allow workers under age 55 to divert a portion of their Social Security payroll taxes into private investment accounts and give up part of their traditional benefit.
In his remarks to the South Carolina Legislature, the president likened the proposed accounts to IRAs and 401(k) retirement accounts.
“We’re not talking about a new culture,” he said. “We’re talking about a culture that’s already taken hold in our society, where workers from all walks of life are watching their money grow, are making decisions on behalf of their families with where they invest.”
Although many Democratic lawmakers say they support retirement accounts, they also are nearly unanimous in saying the accounts should not be funded by the payroll tax, which they argue would harm the existing Social Security system. Some Republican lawmakers are wary of the idea as well.
South Carolina Gov. Mark Sanford, a Republican, said that the president had ample time to sway public opinion before the political imperatives of the 2006 midterm elections took hold, making lawmakers less likely to take any controversial actions
Sanford, a former congressman, also hailed the president for addressing state lawmakers. “This was a chance to pollinate the drivers of political opinion at the state level,” he said.
In his remarks, Bush restated his determination to continue making his case. “The people expect us ... to lead with conviction and confidence, not by reading the latest poll or listening to the latest focus group,” he said.
Bush has said that private accounts by themselves would not shore up the uncertain finances of the Social Security system, and that the accounts should be part of a broader financial overhaul. On Monday he said that a number of potential solutions were “on the table,” although he did not endorse any of them.
He said they included raising the retirement age and linking initial Social Security benefit levels to price inflation rather than to wage increases. That change would mean that initial benefits would rise more slowly over time.
The visit to South Carolina was part of a national tour by Bush and senior administration officials, dubbed “60 Stops in 60 Days,” to promote the Social Security overhaul.
Although the 60-day period does not end until May 1, opponents of the president’s personal account idea said Monday it was clear that the administration was failing to accomplish its objectives.
“It’s been a disaster,” said Roger Hickey, co-founder of Americans United to Protect Social Security, an umbrella group for several organizations opposed to personal accounts. “We’d love to have him out there for another 60 days.”
Democratic pollster Guy Molyneux said public opinion surveys might be showing no groundswell for Bush’s plan because “Americans are starting to understand that this involves a cut in guaranteed benefits.”
Hickey said Bush’s 60-day campaign had been successful in one respect. Bush has launched a national dialogue that will lead to steps to shore up the retirement system, he said, although the solution may not include the personal accounts Bush is seeking and could be delayed until a future session of Congress.
“This will be discussed widely in the next election campaign,” Hickey said. “It will be a referendum on privatizing Social Security.”
Times staff writer Warren Vieth in Washington contributed to this report.
