Address Outlines Sweeping Plan, Rescue of Social Security

President Clinton proposed a rescue plan for the Social Security system Tuesday night, presenting in his sixth State of the Union address the most sweeping domestic agenda of his second term.

Eight hours after his lawyers began telling the Senate why he should not be removed from office, the president offered to the nation a map of social programs intended to protect Americans’ health and retirement. The plan allows investment of Social Security funds in the private sector for the first time.

Admonishing the nation not to become complacent at a time of continuous prosperity, Clinton declared: “How we fare as a nation far into the 21st century depends upon what we do as a nation today.

“With our budget surplus growing, our economy expanding, our confidence rising, now is the moment for this generation to meet our historic responsibility to the 21st century,” he said.

His program is built on a strict parceling of the anticipated budget surplus over the next 15 years. He would allocate 62%, more than $2.7 trillion, to Social Security and the rest primarily to Medicare, a new retirement savings program dependent on private investment and military and education needs. The budget surplus is expected to be $4.4 trillion over that period.

Clinton spoke at one of the more extraordinary junctures in the history of the presidency, with the diplomatic corps, the Cabinet, the House, Senate and the robed justices of the Supreme Court--Chief Justice William H. Rehnquist was absent--arrayed before him. He made no reference to his impeachment by the House of Representatives or his trial in the Senate.

Reflecting the divisions caused by the trial, six members of the House and one senator, all Republicans, said that they would boycott the address. Some Republicans had said that the president should postpone the speech. House Speaker J. Dennis Hastert of Illinois reminded members of Congress earlier that they should greet Clinton in a dignified manner.

Clinton’s introductory plea for “civility and bipartisanship” was greeted with applause from both sides of the aisle, and the president was rewarded with the conventional cheering and standing ovation upon his arrival in the chamber where House members, one month ago to the day, voted to impeach him.

GOP Shows Restraint

But Republicans appeared noticeably restrained as Clinton, his face unlined but his hair grown noticeably more silver and his delivery occasionally halting, outlined a program that would expand the federal government’s role in an array of domestic arenas.

Sen. William V. Roth Jr. (R-Delaware), chairman of the Senate Finance Committee, said that he had “grave concerns” about investing Social Security funds in the stock market. In addition, he said, “I’m particularly concerned that under his proposal there are no tax cuts for the next 15 years.”

Sen. Diane Feinstein (D-Calif.), called Clinton’s use of budget surpluses to shore up Social Security “the right idea.” But, she added, “I am one Democrat who believes that, in these years of burgeoning surpluses, the fair thing to do is return some of it to taxpayers.” She said she would support an across-the-board tax cut for all Americans.

Rep. Ed Royce (R-Fullerton): “I’m concerned about having a government board investing taxpayer money in the stock market. The possibilities for abuse . . . are unlimited.”

For Clinton, the speech represented his grandest opportunity to remind the nation of his strengths: those of a president focused on the domestic and economic issues that the public, in opinion surveys, lists time and again as its greatest concerns.

Taking advantage of that opportunity in the midst of the impeachment drama offered the president perhaps the most forceful defense he can present. If his Senate trial, as many political scientists think, is ultimately a political rather than judicial test, then maintaining strong poll ratings may be his ultimate weapon.

Perhaps the greatest applause of the speech went to civil rights heroine Rosa Parks and home-run hitter Sammy Sosa of the Chicago Cubs, both seated in the first row of the gallery with First Lady Hillary Rodham Clinton and Tipper Gore, the wife of the vice president. Clinton saluted his wife’s role “advancing our ideals at home and abroad.” His declaration--”I honor her”--won another standing ovation.

Clinton was interrupted by applause 96 times during the one-hour, 17-minute speech, but as Clinton continued, the cameras showed empty seats in the House chamber.

Speech, Budget Afford Clinton a Platform

Perhaps more than those of his recent predecessors, Clinton’s State of the Union speech, and the budget he will present Feb. 1, offer the president what his advisor Douglas B. Sosnik called a “center of gravity” to project his most ambitious goals for the coming year. Tuesday’s call for reform of Social Security was as dramatic as any program he has espoused since 1994, when he called for universal health insurance.

In a surprise, Clinton said that the Justice Department would sue the tobacco industry to recover the accumulated costs borne by federal taxpayers of treating people with smoking-related diseases. The suit would seek to recover hundreds of billions of dollars from the nation’s five major tobacco companies.

At its heart, the program Clinton presented to the joint session of Congress this year was built around the need to tackle the most pressing problems facing the nation as it nears a new century and the opportunities presented by the extended period of economic growth that has marked the end of the decade and the first federal budget surplus since 1969.

“Our fiscal discipline gives us an unsurpassed opportunity to address a remarkable new challenge: the aging of America,” Clinton said. “With the number of elderly Americans set to double by 2030, the baby boom will become a senior boom. So first and above all, we must save Social Security for the 21st century.”

Appealing for bipartisan cooperation at a moment of sharp partisan division, the president said: “I reach out my hand to those of you of both parties in both houses and ask you to join me in saying: We will save Social Security now.”

The goal is to extend the actuarial security of the retirement program to 2055. Without revisions, analysts have predicted that the demands of an aging population combined with lowered payroll taxes from a reduced work force would deplete the fund by 2032.

In addition to transferring nearly two-thirds of the budget surplus to the Social Security fund over 15 years, Clinton would create a trust fund, overseen by private managers, to make equity investments--a course that has drawn deep skepticism from labor unions and others in the traditional Democratic constituency.

The plan, likely to run into sharp controversy in Congress, which must approve it before it could take effect, would limit the investment to no more than 15% of the Social Security fund.

As projected by the Office of Management and Budget, the use of the surplus largely to meet the demands imposed on the Social Security system by the baby boom generation would so sharply reduce the government’s need to borrow that the publicly held debt would fall by two-thirds.

The test will be whether Clinton, if he remains in office, is able to fend off pressure coming largely from the narrow Republican majority in the House to use the surplus to pay for an across-the-board tax cut and from some Democrats and allied groups to produce even greater increases in spending for domestic programs.

Signaling what aides said was his intention to fulfill an activist role for the final two years of his second term, Clinton set out dozens of goals.

They included strengthening the nation’s education system by stressing academic achievement, particularly in low-performing schools, putting 100,000 more teachers in classrooms over the next seven years and toughening discipline and promotion requirements.

“While our fourth-graders outperform their peers in other countries in math and science, our eighth-graders are around average and our 12th-graders rank near the bottom,” the president said. “We must do better.”

The president also proposed a $6.1-billion program to help families pay for long-term health care, a $2-billion plan to help potential workers with disabilities surmount barriers to finding jobs and a $1-billion effort to help 200,000 welfare recipients join the work force.

By using the surplus to pay for Medicare and Social Security, rather than spending the surplus on other programs, administration officials argued that they would bring the publicly held national debt to a level, when compared with the gross domestic product, that would be lower than at any point since 1917.

It is currently about 45% of the gross domestic product, the value of the nation’s economic output of goods and services and it would fall to 10% in 2014.

The president also called for steps to expand insurance coverage of prescription drug costs for the elderly.

Universal Savings Accounts Discussed

Another large part of the surplus, 11%, would go toward establishing what the administration is calling universal savings accounts. It would earmark $33 billion a year, or $500 billion over 15 years, to help individuals save privately for retirement.

As sketched by Gene Sperling, who heads Clinton’s National Economic Council, the program would give Americans incentives to save, particularly those who are not participating in such retirement programs as a 401(k) plan.

As structured by the administration but subject to reworking by Congress, Sperling said, the program would be built around a distribution by the government of a specific amount to each worker, perhaps $200 or $300, so that every American could open a retirement savings account. If individuals chose to contribute more, the sums would be matched at progressive levels and up to a certain limit by the government. Those with lower incomes would receive larger matches--say $1 from the government for every $1 an individual set aside in the investment account.

Clinton also proposed initiating a new round of global trade talks intended to halt the flow of jobs to countries where production is cheap because wages are low and environmental concerns are ignored.

“We must tear down barriers, open markets and expand trade. At the same time, we must ensure that ordinary citizens in all countries benefit from trade--pressing for trade that promotes the dignity of work, the rights of workers, the protection of the environment,” the president said.

Clinton is planning to seek a $12-billion increase beyond original plans in the Pentagon’s budget for fiscal 2000, which begins on Oct. 1, 1999, and a $110-billion increase over six years. Most of the increase would be spent on weapons modernization and a 4.4% pay increase for personnel. Many military personnel are being lured by higher pay to the private sector.

“It is time to reverse the decline in defense spending that began in 1985,” the president said.

Clinton also pointed proudly to what he described as administration diplomatic successes in Northern Ireland, Bosnia and the Middle East peace process. But he gave no hint of what he hoped to do this year to build on U.S. world leadership.

“No nation in history has had the opportunity and responsibility we now have to shape a world more peaceful, secure and free,” Clinton said.

He called on the Senate to ratify the comprehensive nuclear test ban treaty, which has languished there for two years since Clinton signed it. And he urged Congress to pay almost $1 billion in back dues to the United Nations.

“America needs a strong and effective U.N.,” he said. “I want to work with this new Congress to pay our dues and our debts.”

He also called for an increase in research on vaccines to protect against chemical and biological weapons and the training of police, firefighters and medical personnel to counteract such weapons in major metropolitan areas.

Samuel R. Berger, the president’s assistant for national security affairs, said that Clinton was seeking a 70% increase--to a five-year total of $4.2 billion--in the budget for programs aimed at preventing the economically pressed Russian government from trying to solve its cash problems by selling weapons of mass destruction inherited from the collapsed Soviet Union.

Berger said that the plan will include “more money for dealing with nuclear materials and safety.” That will buy and destroy 50 tons of Russian plutonium, enough to make thousands of nuclear weapons. He said that the plan also includes funding to pay the salaries of 8,000 Russian scientists in civilian research.

Times staff writers Norman Kempster, Sam Fulwood III and Judy Lin contributed to this story.

Video clips of highlights of the State of the Union address and the full text of the speech are on The Times’ Web site: https://www.latimes.com/union

Highlights of the president’s plan:

Social Security: Transfer some of the budget surpluses over the next 15 years to the Social Security retirement income fund, with up to a quarter of the money to be invested in the stock market.

IRAs: Spend 11% of surpluses to create “universal savings accounts”-- government-subsidized savings accounts to help individuals save for retirement.

Education: Make federal aid to education contingent on school districts meeting certain requirements, including tougher performance standards.

Medicare: Devote about 15% of projected budget surpluses over the next 15 years, or about $600 billion, to the Medicare health care program for the elderly.

Parental tax credits: Allow stay-at-home parents with children less than 1 year old to claim assumed child-care expenses of $500 under the Child and Dependent Care tax credit program.

Defense: Boost defense spending by $12 billion next year to improve pay and benefits for troops, strengthen recruitment and retention programs, modernize weapon programs and improve military readiness.’

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