Social Security debate continues to heat up

President Bush took his Social Security sales pitch to North Carolina and Pennsylvania yesterday while Democrats in Washington continued their efforts to counter his plan to incorporate private savings accounts for younger workers in the program.

Mr. Bush said his reform ideas will allow seniors to continue receiving their checks while allowing younger workers a chance to build their own retirement nest egg to compensate for the system’s “empty promises.”

“Some of you probably think there is a kind of bank, a Social Security trust bank, but that’s not what’s happened over time,” Mr. Bush told a friendly audience in Raleigh, N.C. “Every dollar that goes into Social Security has been paid out, either to retirees or [other] government programs.

“There are empty promises,” he said. “There’s no pile of money that you thought was there when you retired. That’s not the way the system works.”

Mr. Bush said his plan is to allow workers younger than 55 the option of taking up to three-quarters of what the government takes in payroll taxes to fund Social Security and funneling it into safe stocks and bonds that they will own, much like the popular tax-free 401(k) retirement plans.

Currently, 6 percent of an employee’s salary up to $90,000 is taken by the federal government to support Social Security. Employers pay another 6 percent.

Mr. Bush said that approximately 2 percent of a worker’s pay still would go into traditional Social Security to help keep the system afloat so it could pay back at least what is promised to workers if no changes to Social Security are made.

“It’s a complement to Social Security,” Mr. Bush said. “It is to mirror. It’s to help out. It’s to enable you to retire.”

Under the current system, Social Security is expected to begin running a deficit in 2018 and is projected to be able to pay only 73 percent of what is promised by 2042.

The president — whose stop in Blue Bell, Pa., marked the seventh state he has visited since his inauguration to sell Social Security reform — said that under his plan a 20-year-old worker earning $35,000 a year would have $250,000 in his personal account when he retires. The White House bases that estimate on the market return of about 4 percent annual gain on investments over the past 70 years.

Mr. Bush said his plan would be tightly regulated, require workers to invest more conservatively as they approach retirement, and prohibit them from withdrawing the equity in their accounts all at once.

“You can’t say, ‘Let’s have a good retirement system,’ and let somebody take their money down to the lottery and invest it,” Mr. Bush said. “There’s a way to manage risk and get a better return than that which is in the Social Security trust.”

Democrats are nearly united in opposition to Mr. Bush’s reform proposal, arguing that Social Security is not in a “crisis” that requires radical remedies immediately.

Sen. Jon Corzine, New Jersey Democrat and a former chief executive officer of the Goldman Sachs investment firm, said he has “experience with market risk,” and “it’s real.”

“Markets don’t move in a straight line,” Mr. Corzine said. “You can have a whole host of outcomes depending on how market performance goes. I don’t think the American people understand they are taking on this risk in a way that may in turn lead to folks’ having to pony up to the tax collector’s doorstep later on” to keep Social Security solvent.

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