When President Bush gave his State of the Union Address last year, he painted a stark and accurate portrait of Social Security.
Fifty years ago, he said, 16 workers paid Social Security taxes for every person collecting benefits. Today, three workers pay taxes for every beneficiary. In a few decades, it will be two.
"The system, on its current path," Bush warned, "is headed toward bankruptcy."
To address the problem, he courageously proposed sweeping reforms that would include allowing younger workers to create personal savings accounts (PSAs) with a portion of their 12.4 percent Social Security tax (half of which is paid by employers). He then invested much presidential time and prestige promoting the plan.
But Bush made serious mistakes in pushing what ought to have been the signature domestic issue of his second term. He tried to split the difference between conservatives, who want a Social Security system based primarily on PSAs owned and controlled by workers, and liberals, who desperately want to maintain the current system where the government owns -- and politicians control -- everyone's Social Security benefits.
Even as he proposed reform in last year's State of the Union, the president conceded he was open to "limiting benefits for wealthy retirees" (where "wealthy" really means middle class), "indexing benefits to prices rather than wages" (which would reduce promised benefits, because prices increase at a slower rate than wages) and "increasing the retirement age" (so all workers would have to pay taxes longer before receiving benefits).
Bush also said, "We must not jeopardize our economic strength by increasing payroll taxes." But two weeks later, he told reporters he was open to raising the cap on the level of income subject to Social Security taxes, which last year was $90,000.
As he bent over backward to appease Democrats, the president ultimately described a Social Security reform that threatened middle-class workers with increased taxes and decreased benefits -- while largely maintaining government ownership of those benefits.
No wonder his plan went nowhere.
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