AUSTIN, Texas (AP) â€” With the Social Security system now as old as some retirees claiming benefits, George W. Bush today outlined a plan that would allow workers to invest part of their payroll taxes in private accounts. He also promised to strengthen Medicare.
Presidential rival Al Gore has called Bush's Social Security plan too risky, and a Gore spokesman said today the proposal would put the government in a position where it would have to bail out people who invest unwisely.
While Bush did not specify how large a portion could be put in private accounts, the most commonly discussed option is 2 percentage points of the current 12.4 percent Social Security payroll tax.
Bush also pledged to:
â€”Maintain current benefits for those at or near retirement.
â€”Put payroll taxes off limits to prevent borrowing against the Social Security trust fund.
â€”Refuse to increase the current 12.4 percent payroll tax used to fill the trust fund.
â€”Preserve the system's current provision to pay benefits to widows, widowers and the disabled.
â€”Refuse to let the government itself invest Social Security funds, preferring instead to let individuals make the choice.
``There is a fundamental difference between my opponent and me,'' the Republican presidential contender said, alluding to Democratic Vice President Gore in remarks prepared for delivery at a senior citizens center outside Los Angeles.
``He trusts the government to manage our retirement. I trust individual Americans. I trust Americans to make their own decisions and manage their own money.''
Gore, speaking today outside Philadelphia, also was talking about Social Security, arguing that it was risky to chance retirement savings on the whims of the stock market.
Spokesman Chris Lehane said of Bush, ``He's going to put the American taxpayers and the government in a position where they'll have to provide an S&L bailout for those folks whose investments do not pan out.''
Lehane noted that while Gore pledges not to raise the retirement age, Bush makes no such promises. And he said the cost of a privatization plan would be high â€” up to a trillion dollars â€” because the government would have to continue paying current benefits to retirees while younger workers divert some of their money to private accounts.
Turning to Medicare, the medical insurance program for the elderly, Bush said he would:
â€”Guarantee access for all senior citizens.
â€”Give every recipient a choice of health plans, including a plan providing prescription drug coverage.
â€”Refuse to increase the taxes for Medicare, which is funded with a portion of the Social Security tax.
â€”Cover the expenses for low-income seniors.
â€”Allow streamlined access to the latest medical technologies.
â€”Change the way Medicare solvency is measured by analyzing both the hospital insurance and physician insurance components of the plan.
``When I am president, I will lead Republicans and Democrats to reform and strengthen Medicare and set it on firm financial ground,'' Bush said in a speech that quoted President Kennedy, a Democrat, and such Democratic reform advocates as Sens. Daniel Patrick Moynihan of New York and Bob Kerrey of Nebraska.
While many of the principles have already trickled into Bush's stump speeches, the idea of reforming Social Security could present one of the defining issues of the general election campaign.
Gore favors paying down the national debt and using the savings in interest payments to shore up the existing Social Security system.
The vice president, delivering his own speech Social Security today at Beaver College in Amber, Pa., said last week: ``Think about what happens when that first generation of Americans retires in a bear market. They would be left trying to live on worthless paper and we as a nation could be left stuck with sky-high bailout costs.''
Discussion of Social Security reform is driven by several factors: an increase in life expectancy, the impending retirement of the 77-million strong baby boom generation and the resulting decline in the number of workers to support the retirees' benefits.
The current system is funded through a ``tax-and-transfer'' method, in which benefits are paid directly with money collected from payroll taxes. That leaves it vulnerable to a declining workforce and an increasing number of dependents. The existing system is now projected to become insolvent in 2037.
Bush argues that private investment accounts are a necessary and cost-effective way to keep the system solvent.
The accounts would face some regulation to guard against speculation, but Bush argues that if the money is invested over time, retirees will get the long-term benefits of compounding interest.
For example, if a 22-year-old earning $20,000 per year were allowed to invest 2 percent of his payroll tax at the relatively modest rate of return of 5.5 percent, by the time he retired at age 67, his account would be worth $101,775 â€” plus his remaining Social Security benefit.
A person the same age earning $30,000 would be left with an account of $152,675.
By contrast, the existing system pays benefits derived from a variety of factors, including a worker's former salary. The average monthly check is $660, or about $8,000 per year.