President Bush said Thursday that "now is the time to confront Social Security " to deal with a projected $3.7 trillion, 75-year shortfall and give younger workers the ability to invest some of their contributions into personal accounts.
Bush also promised to send Congress "a tough budget" early next year to hold the line on federal spending. "If the deficit is an issue, which it is, it's going to require some tough choices on the spending side," the president told a White House economic conference.
The president credited his tax-cutting policies with reviving the economy. Bush said his strategy will be "to grow the economy with reasonable tax policy but to make sure the deficit is dealt with by being wise about how we spend money."
"It's not going to be easy," Bush said. "It turns out (congressional) appropriators take their title seriously."
Bush said that dealing with Social Security would be a top priority. All participants on Thursday's panel, including financial service firm officials, supported Bush's Social Security plans.
AFL-CIO President John Sweeney said Wall Street's support for partial privatization was a conflict of interest, calling it "a risky scheme for America, but a sure bet for the financial services industry."
Sweeney urged the Securities Industry Association to disavow Bush's planned overhaul. "Will the financial services industry behave as professionals with a duty to speak candidly to the investing public, or will elements of the industry once again seek to make money at the expense of their customers, only this time on a much grander scale?" Sweeney said in a letter.
Bush was not specific about his own ideas for solving the problem, but laid out a few do-or-die principles.
He said that for an undefined group of seniors "nothing will change" in their benefit structure, that there should be no increase in payroll taxes and that younger workers should be moved toward private accounts for some portion of their Social Security contributions.
The audience chuckled as Bush wrapped up his list of requirements by adding, "With those principles in mind, I'm open-minded with the members of Congress."
Bush said there are more Americans who have no confidence they will ever see any Social Security benefits than people who are worried their current checks will stop coming.
"I think Congress needs to understand that," he said.
Richard Parsons, chairman and chief executive of Time Warner Inc., warned that "We're on a train wreck course."
"You can't fix this problem with no pain, without making some sacrifices but the time to start making those sacrifices is now," said Parsons, a chairman of Bush's 2001 committee on partial-privatization.
Democrats say supporters of personal accounts are exaggerating Social Security's funding problem.
Bush "wants to use an ideological solution to a manageable problem," said Rep. Robert Matsui of California, the top Democrat on the House Social Security subcommittee.
In 2018, the system starts paying out more in benefits than it collects in taxes. In 2042, the system will be able to cover 73 percent of promised benefits, according to Social Security's trustees.
The White House acknowledges that allowing younger workers to invest funds in private accounts would do little to help plug the shortfall.
"It will take more to solve the problem than just personal accounts," White House spokesman Scott McClellan said Wednesday. The transformation would be part of a "comprehensive solution to strengthen Social Security."
Bush is expected to propose details in January, but won't offer specific legislation. His summit helped bolster his plans by providing a public forum.
Bush has ruled out an increase in payroll taxes to pay for the overhaul. Experts say he would have little choice but to borrow the funds, perhaps $1 trillion to $2 trillion, in order to continue paying benefits for current and near-retirees whose checks are funded by workers' payroll taxes.
Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee, said Bush's summit was a "pep rally for privatization," when the more urgent problem is the skyrocketing federal budget deficit, which hit $413 billion in 2004.
Tackling Social Security is "putting the cart before the horse" by pursuing a program "with enormous implications for federal borrowing without doing anything about the rest of the budget," Spratt said.