Bush Talks Social Security, Unveils Few Details

Texas Gov. George W. Bush reaffirmed Monday his call for fundamental reforms in Social Security but refused to provide details on the key elements of his plan to transform the nation’s retirement program for the elderly.

Speaking to a small audience of supporters at a senior center here, Bush repeated his long-standing pledge to allow younger workers to divert part of their Social Security payroll taxes into individual accounts they could invest in the stock market for their retirement.

But Bush refused to say how large his proposed personal investment accounts would be, how he would fund them or whether the government would guarantee to make up the difference if workers lost money on their investments.

“The days of delaying, dividing and demagoging are over,” Bush declared. “When I am elected, this generation and this president will save Social Security.”

Bush Hoping for Voters’ Patience

With his ambitious but often fuzzy approach, Bush appeared to be taking a double gamble.

First, he’s betting that Americans are now sufficiently concerned about the long-term viability of Social Security--and comfortable with depending on the stock market for a portion of their retirement income--to accept individual accounts as a central element of the program.

Second, he’s betting that voters will allow him to describe his reform plans only in broad terms, while leaving many central questions unanswered. Bush and his aides argue that he needs to retain flexibility on such questions to negotiate a bipartisan agreement with Congress if elected.

“The main objective here is to get something done, and . . . the way to get something passed is not to come in with a hard and fast proposal but to work with the Congress in fixing it,” Larry Lindsey, Bush’s chief economic advisor, told reporters after the speech.

But by refusing to flesh out his ideas, Bush may be leaving himself open to Vice President Al Gore’s charge that the Texan has “a secret plan” to privatize Social Security. While continuing their criticism of individual accounts as “risky,” Gore’s campaign Monday denounced Bush’s speech for failing to provide more specifics.

“They are attempting to fool the American people by not answering the hard questions,” said Chris Lehane, Gore’s campaign spokesman.

Even without many details, the speech deepened the likelihood that Social Security and Medicare will emerge as two of the key points of debate between Bush and Gore this year. Speaking Monday at Beaver College in Ambler, Pa., a suburb of Philadelphia, Gore described his differences with Bush as “the clearest and the starkest” alternatives offered in the history of Social Security.

Gore is arguing that the federal government, drawing on projected federal budget surpluses, can stabilize Social Security and Medicare for decades without making major changes to either program. Indeed, Gore says Washington can even afford to enlarge both programs with a new prescription-drug plan under Medicare and increased monthly payments for stay-at-home mothers and widows under Social Security.

Bush, by contrast, is arguing that both Social Security and Medicare will face unsustainable costs as baby boomers retire unless structural changes are made now. For each program, he’s proposing basic reforms with the common goal of shifting power from government to individuals.

“There is a fundamental difference between my opponent and me,” Bush said Monday. “He trusts only government to manage our retirement. I trust individual Americans.”

In his own speech Monday, Gore fired back: “Today when Wall Street is booming I know that plan sounds appealing . . . but in reality the Bush Social Security privatization plan would weaken our economy and undermine the basic guarantee of a minimum decent retirement.”

Bush’s speech continued his effort to take the offensive on an issue that has usually placed Republicans on the defensive. Though Democrats have often rallied senior voters by accusing Republicans of planning to cut Social Security, Bush is aggressively accusing President Clinton and Gore of squandering opportunities to modernize the program before the baby boom retires.

Although Bush’s speech was billed as a major policy statement, in fact it added no specific details to his existing statements on Social Security. As he has for months, Bush said he would seek bipartisan agreement to reform Social Security around six basic principles. These included:

* No change in the existing benefit system “for those now retired, or nearing retirement.” Bush aides, though, refused to say at what age he would consider current workers “nearing retirement” and thus exempt from his proposed reforms.

* No direct investment by the Social Security Trust Fund in the stock market. Though Clinton had proposed that idea, Gore has renounced it as politically infeasible.

* No changes in the existing Social Security programs for disabled workers and surviving spouses.

* No increase in the current 12.4% Social Security payroll tax.

* An option for younger workers to divert part of their payroll tax into personal retirement accounts that could be invested in the stock market. Bush did not say how large those accounts should be, but aides have indicated he would support diverting about two percentage points of the existing payroll tax into the voluntary accounts.

Bush said workers would be allowed to invest only “in steady, reliable funds,” with day trading prohibited. These accounts aim to both provide more retirement income and ease the long-term pressure on Social Security’s finances by allowing workers to tap into the stock market’s dynamic growth. Critics like Gore say they would leave workers’ retirements too heavily exposed to the fluctuations in the stock market.

And in his final principle, Bush said he would guarantee that all of the anticipated Social Security surplus will be “dedicated to Social Security.”

Though politicians in both parties now widely endorse that goal, Bush’s precise choice of words actually offers a clue toward one of the sharpest disputes between him and Gore.

Over the next decade, before the baby boom’s retirement begins to strain the program, the Social Security system is expected to take in about $2.2 trillion more in taxes than it pays out in benefits.

That surplus is at the heart of Gore’s competing plan for stabilizing the system. He says all of it--together with some funds from the anticipated surplus in the federal operating budget--should be used to pay off the $3.5-trillion publicly held national debt by 2013.

Once the debt is paid off, government would save the roughly $230 billion a year it now makes in interest payments; starting in 2011, Gore would transfer those funds directly into the Social Security system. He projects that those massive transfers would allow the system to pay current benefits until 2054.

Bush, by contrast, appears to envision using a significant portion of the Social Security surplus to fund the individual retirement accounts, rather than pay down debt. Bush did not commit to that approach Monday, but Lindsey told reporters “it is certainly a live option.”

In fact, since Bush has already allocated virtually all of the surplus he anticipates in the federal operating budget to proposed tax cuts and new spending, it’s not clear where else he could obtain the money needed to fund the accounts.

Showing Support for Medicare Reform

Though Bush focused Monday mostly on Social Security, he also reaffirmed his support for a bipartisan Medicare reform plan sponsored by Sens. John B. Breaux (D-La.) and Bill Frist (R-Tenn.). That plan would transform Medicare from the current program, where Washington directly compensates doctors and hospitals, into a system where the government provides seniors subsidies to purchase private insurance.

“This is a realistic reform--balancing personal and public responsibilities,” Bush said. “Just as important, it keeps government out of the business of setting prices or dictating treatments, which it must never do.”

The plan’s goal is to lower costs by increasing competition, though Gore and other critics say it would result in higher premiums for seniors who want to remain in the conventional program. The plan would also provide the elderly with subsidies to help them purchase prescription drugs, though the benefit is more narrowly targeted toward low-income seniors than the plan Gore and Clinton have proposed.

Times staff writer Edwin Chen contributed to this story.