Poor retirement planning

Adding progressive indexing hasn't helped the president's Social Security plan to gain broad support - nor should it.

President Bush has made no headway in convincing Americans they need to introduce market risk and sacrifice into Social Security. In fact, the more he talks the further behind he falls. After two months on the road gaining no traction, Bush took to prime time television recently and still couldn't convey a clear vision for changing the popular retirement program.

There is a good reason Americans aren't buying into this politicized campaign. They've realized they can't trust Bush with Social Security. He doesn't want to reform the program; he wants to deform it.

To his one-note mantra of "personal accounts," Bush has now added "progressive indexing." He needed to do something. His plan to replace a guaranteed retirement payment with one tied to the rise and fall of the stock market never caught on.

At least by mentioning progressive indexing, Bush has begun to address the true threat to Social Security - its future cost. But what a solution. As Bush described it, all but the poorest workers would see a significant reduction in the growth of their future retirement benefits by linking the amount to price inflation rather than wage growth, as is now done. Prices rise slower than wages, so over the next 70 years, workers who make $36,000 or more would see their promised benefits shrink by anywhere from 28 percent to 49 percent.

Progressive indexing may be one piece of the funding puzzle, but by relying on it exclusively, Bush would destroy the program's egalitarian roots. Social Security is supported by all workers and benefits all. If it becomes little more than a retirement plan for the poor, it could quickly lose popular support.

Even after interrupting sweeps-week programming, Bush failed to spell out a coherent plan that is reasonable enough to gain broad support. He hasn't even won over congressional Republicans.

The program could be made sound without risk or dramatic reductions in benefits. First, Bush would have to drop his demand for private accounts, which are too expensive and unpopular. Then, he should raise the limit on wages subject to the payroll tax, which is currently capped at $90,000. That alone could solve most of the program's financial shortfall. Finally, he could make smaller tweaks to the benefits formula and retirement age without drastically cutting payments.

Democrats have shown little courage in facing this problem, but Bush has been too deceptive. Until he can be straight with Americans on what he intends for Social Security, the discussion isn't likely to move forward, nor should it.

[Last modified May 7, 2005, 01:02:18]