In his State of the Union address this week, President Bush pushed his plan to overhaul Social Security and add optional private accounts for younger workers, as the White House unveiled some new details of how that plan would work.

In a wide-ranging speech that also called for restraining federal spending, halving the deficit and reforming the tax code, the president called Social Security "a great moral success of the 20th century," but said that the system is "in need of wise and effective reform."

"The system ... on its current path, is headed toward bankruptcy," Bush said Wednesday. "Today, more than 45 million Americans receive Social Security benefits, and millions more are nearing retirement -- and for them, the system is sound and fiscally strong. 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."

For younger workers, Bush said, "The Social Security system has serious problems that will grow worse with time ... . In 2018, Social Security will be paying out more than it takes in. And every year afterward will bring a new shortfall, bigger than the year before."

For example, Bush said, in the year 2027, the government will have to come up with an extra $200 billion to keep the system afloat. "By 2033, the annual shortfall would be more than $300 billion. By the year 2042, the entire system would be exhausted and bankrupt. If steps are not taken to avert that outcome, the only solutions would be dramatically higher taxes, massive new borrowing, or sudden and severe cuts in Social Security benefits or other government programs," said Bush.

Of reform recommendations that have included limiting benefits for wealthy retirees, indexing benefits to prices rather than wages, increasing the retirement age, discouraging early collection of Social Security benefits and changing the way benefits are calculated, Bush said, "All these ideas are on the table," but added, "I know that none of these reforms would be easy."

Promising to work with Congress to find the "most effective combination of reforms," Bush said, "I will listen to anyone who has a good idea to offer."

Proclaiming that the best way to make the system "a better deal for younger workers" is through voluntary personal retirement accounts, Bush said, "We will set careful guidelines for personal accounts."

Bush's plan, which would be phased in starting in 2009, would allow workers who are under age 55 this year to put up to 4 percent of their wages subject to the Social Security payroll tax into personal accounts -- administered by the federal government -- that they could invest in stocks and bonds and could draw on only after retirement. Private firms would contract with the government to manage the investment funds.

The plan would reportedly limit contributions to those accounts to $1,000 the first year, with a cap that would rise each year in increments of $100 above natural wage growth. The money put into the accounts would come out of the payroll taxes that pay current Social Security beneficiaries, requiring the government to borrow around $754 billion between 2009 and 2015 to maintain current benefit levels, according to White House estimates.

According to a report by MarketWatch, retirees who opt to divert payroll taxes into personal accounts would get to keep only the returns that exceed the real 3 percent rate of return earned on the Social Security trust fund's Treasury bonds, so if a worker's personal account earned a real return of 3 percent or less, they would receive only the same guaranteed benefit paid to all retirees.

Bush also promised to send Congress a budget that "holds the growth of discretionary spending below inflation, makes tax relief permanent, and stays on track to cut the deficit in half by 2009." He said that his budget plan "substantially reduces or eliminates more than 150 government programs that are not getting results, or duplicate current efforts, or do not fulfill essential priorities." The budget is slated for release Feb. 7.

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