Bush targets the cherished monthly cheque
United States President George W Bush’s two successful presidential campaigns have proved that social security is no longer the sacred cow of American politics.
For generations, it was considered politically fatal to touch the government-run pension system.
But in 2000 Bush became the first president since the programme’s inception in 1935 to be elected while openly supporting “partial privatisation” of the system.
In November, he widened his victory margin after a campaign that saw the pension issue gain prominence.
Two weeks into his second and final four-year term, Bush made social security reform the centrepiece of his domestic agenda.
On Wednesday he devoted 1 100 words — more than a fifth of his 50-minute State of the Union address — to the issue. Bush called social security “a symbol of the trust between generations ... in need of wise and effective reform”.
With an ageing population and the massive post-war “Baby Boom” generation poised to begin retiring, the current ratio of three workers per retiree will decline to two active workers by 2030.
The US programme is sustained by a tax of 12,4% on income. By most government estimates, it will begin paying out more than it collects by 2018, with annual social security deficits building to more than $300-billion by 2033. The predicted unfunded “liability” to retirees and current workers was expected to exceed $11-trillion over the coming decades — roughly equal to the annual US gross domestic product.
Bush promised that current retirees and older workers would see no change in their promised pensions, but laid out a proposal that would allow younger workers to keep part of their current pension taxes to invest in individually owned accounts — in exchange for a lower guaranteed benefit in the future. Workers would have a legally enforceable property right to the money in their own accounts and could even leave it to their heirs.
Over the decades, court precedents have clearly established no property rights in the current social security system, leaving payments to the whims of Congress.
As the debate over social security heated up in recent weeks, the White House increasingly talked about “personal accounts”, while opposition Democrats derided the idea as “privatisation”.
Most Democrats argued that the programme’s life can be extended, perhaps indefinitely, by recurring tinkering with the social security formula, including hiking payroll taxes and raising the future retirement age, currently 65 and already slated to increase to 67 in future years.
Social security was first implemented by president Franklin D Roosevelt as the core of Great Depression-era “New Deal” social reforms. The pension programme sharply reduced poverty among the elderly and helped make generations of working-class Americans loyal voters for the centre-left Democratic Party.
Over the years, Democrats often questioned the social security loyalty of their Republican opponents, who frequently vowed in vain that they would never touch the cherished monthly cheques of the US’s pensioners. Today, Democrats in Congress dispute the administration’s claim of a “social security crisis”. — Sapa-dpa