Bush would trim benefits of well-to-do

WASHINGTON -- President Bush, in a prime-time effort to reverse the perception that his Social Security plan is faltering, last night proposed cutting currently promised future Social Security benefits for higher-earning workers, modeling the idea on a plan put forward by a Boston investment company executive.

But Bush did not back away from his proposal for private accounts, saying it must be part of any deal. Trying to reassure people concerned about a stock market slide, he said he would allow investment in government bonds as well as stock mutual funds. Democrats have said requiring private accounts would kill chances of their support for a Social Security deal.

''I propose a Social Security system in the future where benefits for low-income workers will grow faster than benefits for people who are better off," Bush said in a nationally televised press conference. ''By providing more generous benefits for low-income retirees, we'll make this commitment: If you work hard and pay into Social Security your entire life, you will not retire into poverty. This reform would solve most of the funding challenges facing Social Security."

Bush did not provide details of his proposal for changing the benefit formula, but the White House released a statement last night saying the idea would be ''similar" to a plan put forward by Robert Pozen, chairman of MFS Investment Management of Massachusetts. Pozen said his plan calls for leaving now-promised benefits intact for those who earned an average of $25,000 annually during their working career, with the increase in benefits ''slowed down" on a sliding scale for those who earned more. Under the Pozen plan, the deepest cuts in future benefits would affect those who earned an average of more than $113,000.

In a telephone interview last night, Pozen said, ''it's ''very satisfying to have the president of the United States say that he is endorsing the plan." But Pozen said he was concerned that Bush's insistence on including his concept of private accounts in the plan might prevent Democrats -- and some Republicans -- from endorsing it.

''I think he has to be more flexible on the type of personal accounts," Pozen said, noting that some Democrats have said they like the idea of private retirement accounts that workers could voluntarily add to their Social Security benefits.

Democratic leaders scorned Bush's proposal. ''All the president did tonight was confirm that he will pay for his risky privatization scheme by cutting the benefits of middle-class seniors," Senate minority leader Harry Reid and House minority leader Nancy Pelosi said in a joint statement. ''President Bush cannot escape the fact that privatization will weaken Social Security at a time we should be strengthening it."

Six months after winning reelection, Bush called the press conference amid an array of problems, including the stalled nomination of some of his judicial nominees, and of John Bolton to become US ambassador to the United Nations, ethics questions surrounding a key ally, House majority leader Tom DeLay, a sliding stock market, continuing violence in Iraq, and record energy prices.

At the outset of the press conference, Bush repeated his call for Congress to pass an energy bill that would open the Arctic National Wildlife Refuge for drilling and provide incentives for energy exploration.

Bush also expressed frustration that some of his judicial nominees have not been given the opportunity for a vote in the full Senate. But he said he disagreed with the comments of leading conservatives that the Democratic opposition to those judges amounted to an attack on people of faith.

''I don't agree with it," Bush said. ''I don't ascribe a person's opposing my nomination to an issue of faith. I think people are opposing my nominees because they don't like the judicial philosophy of the people I'm nominating. For the sake of fairness, the people I've nominated should get a vote."

Senate Republicans, irritated at their inability to get all of Bush's remaining judicial nominees approved, have been trying to get rid of the filibuster, depriving Democrats of a key tactic to influence those lifetime judicial appointments.

Bush's declaration that he backs the Pozen plan to help save Social Security was intended by the White House to mark a turning point in the president's effort to overhaul the program. Despite a tour of 60 cities in 60 days, a Washington Post/ABC News poll released this week showed that 64 percent of those surveyed don't agree with the way Bush has handled the issue.

Bush emphasized that if nothing is done to ensure that Social Security remains solvent, future benefits will automatically be cut as the system starts paying out more money than workers contribute into the system. Many Democrats have said Bush is exaggerating the problem and have said the system can be made sound with more modest fixes.

Pozen is a Democrat who has served as director of economic development under Massachusetts Governor Mitt Romney and also was a member of Bush's advisory commission on Social Security. Bush has previously mentioned that he found the idea ''interesting" after it was presented by Pozen to Bush's aides at a White House meeting.

The Pozen plan is known as ''progressive price indexation." Currently, the annual increase in Social Security benefits are indexed according to wages, which typically grow faster than prices. Pozen's plan calls for gradually switching the indexation of benefits to the price scale, which would cut future benefits for higher-earning retirees. Bush said the indexation plan would not affect people who are 55 years or older.

Bush, asked whether his proposal should be considered a means-based program ''where the real wealthy people might not get very much out of it," responded: ''Obviously, it is means-based when you're talking about lower income versus wealthier income. The lower-income people's benefits would rise faster." But Bush stressed that ''this is a part of the negotiation process. My job is to lay out an idea that I think will make the system more fair."

Earlier this week, Pozen also suggested that those earning more than $90,000 -- the current maximum income subject to the 12.4 percent Social Security tax split by employer and employee -- be subject to a levy of 2.9 percent on all income over that limit. Most of the money from that new levy could be put in a private account, Pozen said. Bush did not say whether he supported that idea.

Critics have called Pozen plan a deep cut in benefits for millions of future retirees. When Pozen testified about the idea at a Tuesday hearing of the Senate Finance Committee, several Republicans said they were intrigued, but the ranking Democrat, Senator Max Baucus of Montana, dismissed it.

Bush first proposed that part of the Social Security tax be put in private accounts during the 2000 campaign. He did not focus on the issue during his first term, but has made it a priority in his second term. The idea has been controversial from the start, with no Senate Democrat supporting it. Instead, Democrats and allied private groups have launched a campaign against the measure, asserting there is no ''crisis" in Social Security, as Bush has said, and saying that the president's plan does nothing to make Social Security solvent.

Bush acknowledged that fact in March, but for months he refused to give his own proposal to make the system solvent. That gave Democrats an opening to criticize the president for failing to say how he would fix the system.

Asked last night whether he could agree to a Social Security deal that did not include private accounts, Bush said: ''I feel strongly that there needs to be voluntary personal savings accounts as a part of the Social Security system. I mean, it's -- it's got be a part of the comprehensive package." Bush has proposed allowing workers to set aside 4 percent of the 12.4 percent Social Security tax for deposit into private accounts, which individuals could invest in a number of relatively conservative, government approved mutual funds. Bush said last night that the money could also be invested in government bonds.

''I know some Americans have reservations about investing in the stock market, so I propose that one investment option consist entirely of Treasury bonds, which are backed by the full faith and credit of the United States government," Bush said.

On Bolton's nomination to become UN ambassador, Bush defended his embattled nominee, saying Bolton is someone who ''isn't afraid to speak his mind" and will help bring reform to the United Nations.

''John Bolton is a blunt guy. Sometimes people say I'm a little blunt," Bush said, responding to a question of whether Bolton should be confirmed if the allegations against him prove true. Bolton has been criticized for his abrupt management style and for alleged punishment of underlings who countered his views on foreign policy and intelligence.

Bolton's nomination vote in the Foreign Relations Committee was delayed until next month because members of the committee -- including several Republicans -- wanted to examine his record more closely. But panel chairman Senator Richard Lugar, Republican of Indiana, predicted this week that Bolton would be approved by the committee.

Asked his view of the economy, Bush said, ''I am concerned about the economy," saying he was particularly concerned about the impact of higher gas prices, which he called ''like a tax."