Bush likely to lose Social Security battle

WASHINGTON — When you retire, should you expect your standard of living to go down, stay the same or gradually rise along with society in general?

That, in a nutshell, is what the Social Security debate is all about. And it's why President Bush is likely to lose it; nobody wants to tread water for the rest of his/her life.

Americans tend to think that when they retire, because of regular increases in Social Security benefits, now pegged to wage increases, they will keep up with their friends and their neighbors. Yes, they know they won't be rich and that they'll have to "make do" and be careful with spending. But they don't expect to become second-class citizens or fall into poverty, even though fewer and fewer employers are providing pensions.

The White House says that because there used to be 16 workers supporting everyone on Social Security, and there will be only two workers supporting each retiree, benefits must be cut for future retirees (not those near retirement or already there). Democrats say that is true but that there won't be a true crisis until Social Security runs out of money, possibly in 2042, and that changing the nature of the program in a major way is unwarranted for now.

The administration says the future is now and suggests cutting the growth of benefits by pegging increases to inflation, which tends to rise slower than salaries. Since this could cut benefits of future retirees by as much as a third of what they otherwise would be, Bush wants to let workers put into private accounts part of the payroll taxes they now pay into Social Security. The money would be invested in mutual funds or bonds that could be tapped to help make up for smaller benefits.

The administration assumes workers would be willing and able to manage their accounts to improve their future standard of living. The administration also is betting that commissions and administrative costs would be kept in check, that the stock market continues to rise, that fraud and theft would be avoided. The administration argues that borrowing $2 trillion for the transition would not harm the economy, even with a record deficit.

Critics say a better answer is raising the payroll tax or delaying the age when Social Security benefits may be collected beyond 67.

Bush says no. He says this is a generational problem. Polls show young workers don't expect Social Security to be there when they need it and are less averse to the risk of private accounts than older people. They like the idea of potentially making more than they'd get in Social Security benefits and passing on any leftover savings to relatives if they die young.