President Bush challenged a hesitant Congress on Wednesday to "strengthen and save" Social Security , saying the nation's costliest social program was headed for bankruptcy unless changed. Bush's plan would cut guaranteed retirement benefits for younger Americans but would not affect checks for people now 55 and older.
Bush, in his State of the Union address, pledged to work with Congress "to find the most effective combination of reforms," although he has ruled out some remedies such as raising Social Security taxes.
Democrats said that Bush's proposal to divert Social Security revenues into private investment accounts was dangerous and that there were better ways to fix the program, the 70-year-old centerpiece of the New Deal.
Republicans stood and cheered when Bush urged lawmakers to approve "voluntary personal retirement accounts." Democrats sat in stony silence, underscoring the partisan divide on an issue likely to dominate the year in Congress. Democrats also groaned and grumbled when Bush said Social Security would require drastically higher taxes, massive new borrowing or severe benefit cuts unless the system is changed.
Bush's speech spanned problems at home and abroad, but it was the first State of the Union address since the Sept. 11, 2001, terrorist attacks that focused most heavily on domestic issues. Despite Democrats' criticism, he offered no hint of a timetable for a troop withdrawal from Iraq. He pledged to confront regimes that promote terror and pursue weapons of mass destruction, and singled out Syria and Iran. Returning to his inaugural address' theme of spreading democracy, Bush hailed the success of Sunday's elections in Iraq.
"And the victory of freedom in Iraq will strengthen a new ally in the war on terror, inspire democracy reformers from Damascus to Tehran, bring more hope and progress to a troubled region," he said.
Bush also promised to push forward for Mideast peace, including $350 million in aid to the Palestinians. "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," the president said.
With more than 1,400 Americans killed in Iraq and the United States spending more than $1 billion a week on the war, Bush urged Congress to support his request for an additional $80 billion. "During this time of war, we must continue to support our military and give them the tools for victory," he said.
While key allies like Germany and France opposed the war, Bush said his administration "will continue to build the coalitions that will defeat the dangers of our time."
House Minority Leader Nancy Pelosi, delivering the Democratic response, challenged Bush on Iraq.
"We all know that the United States cannot stay in Iraq indefinitely and continue to be viewed as an occupying force," she said. "Neither should we slip out the back door, falsely declaring victory but leaving chaos. ... We have never heard a clear plan from this administration for ending our presence in Iraq."
Emboldened by his re-election, Bush called on lawmakers to move on several controversial fronts, including liberalizing the nation's immigration laws, imposing limits on medical malpractice lawsuits, simplifying taxes and extending the life of the tax cuts enacted during his first term.
He also urged passage of long-stalled energy legislation and promised to send Congress a budget next week that holds discretionary spending below inflation. Warning Congress that it will face painful choices, Bush said his budget would substantially reduce or eliminate more than 150 federal programs.
Bush said his wife, Laura, would lead a nationwide effort to reduce gang violence by encouraging young people to remain crime free. In a nod to conservatives, he renewed support for a constitutional amendment to ban gay marriage.
Transforming Social Security is a political gamble for Bush and for Republican allies wary of taking big political risks. While Bush cannot run for another term, most GOP lawmakers face re-election next year and are nervous about tampering with a system that Americans like and see no immediate need to overhaul.
Democrats, on the other hand, face a risk of appearing as obstructionists if they simply oppose all of Bush's plan.
Under Bush's Social Security plan, workers would be allowed to divert up to two-thirds of their payroll taxes into private investment accounts, according to a Social Security expert who was briefed on the plan Wednesday. Contributions would be capped at $1,000 per year, rising each year by $100. Social Security's guaranteed benefits would be reduced to make up for money diverted to the private accounts.
A variety of solutions have been proposed over the years, such as limiting benefits for wealthy retirees, raising the retirement age, indexing benefits to prices rather than wages, discouraging early collection of Social Security benefits and changing the ways benefits are calculated, Bush said.
"All these ideas are on the table," Bush said. "I know that none of these reforms would be easy. But we have to move ahead with courage and honesty because our children's retirement security is more important than partisan politics."
Social Security is expected to start losing money in 2018 or 2020, according to differing estimates from Social Security trustees and Congress' budget analysts, and to be unable to provide full benefits beginning in 2042 or 2052.
"It's wrong to replace the guaranteed benefit that Americans have earned with a guaranteed benefit cut of 40 percent or more," Reid said in the Democratic response to Bush's address.
Bush spoke from the rostrum of the House chamber, with Vice President Dick Cheney and Hastert seated behind him. More than two dozen guests were invited to sit in the first lady's box with Laura Bush, including relatives of fallen U.S. troops, a pilot helping tsunami victims and individuals whose presence were meant to underscore Bush's domestic agenda, such as education, Social Security medical malpractice and other areas.
The capital's political establishment, from members of Congress and the Cabinet to the diplomatic corps and Supreme Court justices, gathered for the address. Security was intense, as it was for Bush's inauguration Jan. 20. Police closed off streets surrounding the Capitol and its office buildings.
Calling for major changes in Social Security, Bush said the program was "created decades ago, for a very different era." With financial problems that grow worse each year, he said, the system "on its current path is headed toward bankruptcy. And so we must join together to strengthen and save Social Security."
Trying to calm the concerns of older people, Bush said Social Security is strong and fiscally sound for the more than 45 million Americans now receiving benefits and millions more who are nearing retirement.
"I have a message for every American who is 55 or older: Do not let anyone mislead you. For you, the Social Security system will not change in any way," the president pledged.
Bush did not disclose how deeply benefits would be cut for younger workers and he did not estimate how much it would cost to divert money from Social Security revenues into private investment accounts.
Anticipating objections, the president pledged that any system of private accounts would have ample safeguards.
"We will make sure the money can only go into a conservative mix of bonds and stock funds," he said. "We will make sure that your earnings are not eaten up by hidden Wall Street fees. We will make sure there are good options to protect your investments from sudden market swings on the eve of your retirement. We will make sure a personal account can't be emptied out all at once, but rather paid out over time, as an addition to traditional Social Security benefits."
He said that private accounts would allow workers' money to grow over time faster than in the current system. "And best of all the money in the account is yours, and the government can never take it away."