- The Washington Times - Thursday, February 3, 2005

President Bush told Congress last night in his annual State of the Union address that “you and I share a responsibility” to make sweeping changes to Social Security that he said might include, for those who are now younger than 55, cutting benefits and increasing the retirement age.

“Thirteen years from now, in 2018, Social Security will be paying out more than it takes in … By the year 2042, the entire system would be exhausted and bankrupt,” the president said as a chorus of “no” rose from the Democratic side of the chamber.

“I recognize that 2018 and 2042 may seem like a long way off. But those dates are not so distant, as any parent will tell you,” he said, turning in the critics’ direction. “If you’ve got children in their 20s, as some of us do, the idea of Social Security collapsing before they retire does not seem like a small matter. And it should not be a small matter to the United States Congress.

“You and I share a responsibility. We must pass reforms that solve the financial problems of Social Security once and for all.”

It was the first time that the president openly discussed the possibilities of raising the retirement age beyond 65 and “limiting benefits” of Social Security.

In the first State of the Union speech of his second term and in contrast to those of his first term, Mr. Bush concentrated on domestic matters, including moral values, one of the key issues in his presidential win over Sen. John Kerry, Massachusetts Democrat.

“Our second great responsibility to our children and grandchildren is to honor and to pass along the values that sustain a free society. So many of my generation, after a long journey, have come home to family and faith and are determined to bring up responsible, moral children,” he said. “Government is not the source of these values, but government should never undermine them.”

In the 55-minute speech interrupted for applause 63 times, Mr. Bush ventured further than ever into the touchiest of all domestic issues — Social Security, which an aide to former House Speaker Thomas J. “Tip” O’Neill once dubbed “the third rail of American politics.”

He discussed “discouraging early collection” of benefits, “indexing benefits to prices rather than wages” and “changing the way benefits are calculated.”

“All these ideas are on the table,” he said. “I know that none of these reforms would be easy. But we have to move ahead with courage and honesty.”

Democrats savaged the president’s Social Security plan in their response, which was delivered by Senate Minority Leader Harry Reid of Nevada and House Minority Leader Nancy Pelosi of California.

“It’s wrong to replace the guaranteed benefit that Americans have earned with a guaranteed benefit cut of 40 percent or more,” Mr. Reid said. “Make no mistake, that’s exactly what President Bush is proposing.”

In the foreign-policy segment of the speech, the president said America has entered a “new phase” in Iraq, which held its first free elections in a half-century over the weekend. He called for spreading democracy into other Middle East regimes.

For example, for the first time, Mr. Bush singled out Saudi Arabia and Egypt as Middle East regimes that need to move toward democracy. And he pledged $350 million to the Palestinian Authority to support “political, economic and security reforms.”

“America will stand with the allies of freedom to support democratic movements in the Middle East and beyond, with the ultimate goal of ending tyranny in our world,” he said, recalling the lofty rhetoric of his second inaugural two weeks earlier.

On Iraq, Mr. Bush said the election on Sunday “opens a new phase of our work in that country.”

Although he refused to set “an artificial timetable for leaving Iraq, because that would embolden the terrorists and make them believe they can wait us out,” Mr. Bush said U.S.-led efforts to establish democracy there are proceeding on pace.

“We are in Iraq to achieve a result: a country that is democratic, representative of all its people, at peace with its neighbors and able to defend itself. And when that result is achieved, our men and women serving in Iraq will return home with the honor they have earned,” he said to applause.

Several times throughout the speech, Mr. Bush addressed guests who joined first lady Laura Bush in her balcony box. Among them were Homira G. Nassery, an Afghan, and Safia Taleb al Suhail, an Iraqi. Both recently voted in their nation’s first free elections in decades.

Mr. Bush said Mrs. al Suhail called Iraqi dictator Saddam Hussein “the real occupation” and offered thanks “to the American people who paid the cost, but most of all to the soldiers.”

Mr. Bush also singled out the parents of U.S. Marine Corps Sgt. Byron Norwood of Pflugerville, Texas, who was killed during the assault on Fallujah, Iraq. To William and Janet Norwood, he said: “We honor freedom’s defenders, and our military families, represented here this evening by Sergeant Norwood’s mom and dad.”

But Democrats said Mr. Bush did not adequately articulate an exit strategy from Iraq.

“We have never heard a clear plan from this administration for ending our presence in Iraq,” Mrs. Pelosi said in the Democratic response. “The United States cannot stay in Iraq indefinitely and continue to be viewed as an occupying force. Neither should we slip out the back door, falsely declaring victory but leaving chaos.”

Mr. Bush also singled out Syria as a regime that continues to “harbor terrorists and pursue weapons of mass murder.”

“Syria still allows its territory, and parts of Lebanon, to be used by terrorists who seek to destroy every chance of peace in the region. … We expect the Syrian government to end all support for terror and open the door to freedom.”

He demanded that Iran — which he called “the world’s primary state sponsor of terror” — to cease its pursuit of nuclear weapons. He pledged to continue working with European allies to “make clear to the Iranian regime that it must give up its uranium-enrichment program and any plutonium reprocessing and end its support for terror.”

On peace efforts in the Middle East, Mr. Bush said, “The goal of two democratic states, Israel and Palestine, living side by side in peace is within reach — and America will help them achieve that goal.”

Mr. Bush announced that the United States would offer to the newly elected Palestinian leaders a financial aid package that could total nearly $350 million to bolster development and security. The U.S. aid would help Palestinians prepare for Israel’s withdrawal from the Gaza Strip later this year and is expected to be tied to Palestinian efforts in stopping violence and carrying out reforms.

Rep. Jim Kolbe, who is chairman of a House of Representatives Appropriations subcommittee overseeing foreign aid, predicted that the new Palestinian funding package would pass Congress.

“I think it will be controversial, but I think we can get it through,” the Arizona Republican said.

The move to aid the Palestinians signals Mr. Bush’s support for Palestinian leader Mahmoud Abbas, elected last month to replace the late Palestinian leader Yasser Arafat, whom Mr. Bush shunned as an obstacle to peace.

The president’s comments came on the same day Israeli Prime Minister Ariel Sharon announced that he will meet Mr. Abbas in Egypt on Tuesday to hold the first summit between the two sides in four years of armed conflict.

The talks, to be joined by Egyptian President Hosni Mubarak and Jordan’s King Abdullah, would aim to solidify a shaky cease-fire by setting into motion a peace process based on the “road map” to a Palestinian state, proposed by the Quartet — the United States, the United Nations, Russia and the European Union.

New U.S. Secretary of State Condoleezza Rice is due to meet Mr. Sharon and Mr. Abbas separately during a trip to Jerusalem and Ramallah on Monday.

Unlike Mr. Bush’s previous State of the Union addresses, which were dominated by foreign-policy themes like the “axis of evil,” last night’s speech was dominated by domestic policy. And the domestic initiative that Mr. Bush emphasized the most was Social Security reform.

“For younger workers, the Social Security system has serious problems that will grow worse with time,” he said. “If steps are not taken to avert that outcome, the only solutions would be drastically higher taxes, massive new borrowing, or sudden and severe cuts in Social Security benefits or other government programs.”

Mr. Bush said workers should be allowed to divert a portion of their payroll taxes into private market accounts that likely would earn a greater rate of return than the 3 percent offered by Social Security.

Such accounts would be available to workers born in 1950 or after because the administration does not want to frighten older workers who are close to retirement.

“I have a message for every American who is 55 or older: Do not let anyone mislead you,” he said. “For you, the Social Security system will not change in any way.”

According to a senior administration official, speaking before the president’s address, younger workers would be able to divert 4 percent of their salaries to personal accounts in one of five investment vehicles with varying degrees of risk. These funds are known as large cap, small cap, international, corporate bonds and Treasury bonds.

As workers near retirement, an increasing portion of their savings accounts would be shifted out of aggressive stock funds and into conservative bond funds. Those who wish to stay in the more aggressive funds would have to sign forms and obtain approval from their spouses.

The senior administration official said the cost of setting up these personal savings accounts would be $664 billion over 10 years or less than a third of the $2 trillion cost expected by many. The president did not say how the federal government would recoup that $664 billion, although he insisted that he would not raise taxes.

Mindful of growing federal deficits, Mr. Bush urged Congress to restrain its spending.

“My budget substantially reduces or eliminates more than 150 government programs that are not getting results, or duplicate current efforts, or do not fulfill essential priorities,” he said.

The president also promised to “free small businesses from needless regulation and protect honest job creators from junk lawsuits.”

“Justice is distorted, and our economy is held back, by irresponsible class actions and frivolous asbestos claims,” he said. “I urge Congress to pass legal reforms this year.”

Mr. Bush also renewed his call for passage of his energy bill.

“Nearly four years ago, I submitted a comprehensive energy strategy,” he said. ” Four years of debate is enough — I urge Congress to pass legislation that makes America more secure and less dependent on foreign energy.”

Turning to social issues, Mr. Bush extolled a “culture of life” and repeated his call for a constitutional amendment defining marriage as between a man and a woman. He also demanded up-or-down votes by the Senate on his stalled judicial nominations.

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