Bush on Social Security

BUSH ON SOCIAL SECURITY….Huh? Here’s a transcript of what President Bush said about Social Security tonight:

As a matter of fairness, I propose that future generations receive benefits equal to or greater than the benefits today’s seniors get.

Secondly, I believe a reformed system should protect those who depend on Social Security the most. So I propose a Social Security system in the future where benefits for low-income workers will grow faster than benefits for people who are better off.

….This reform would solve most of the funding challenges facing Social Security.

I assume that “equal to or greater” is code for “indexing to inflation, not wage growth.” In other words, guaranteed benefits, which today are based on wage growth, would be reduced by quite a bit for everyone except the lowest wage earners. But he didn’t have the guts to actually say this, instead making it sound like no one’s future benefits would be cut.

Presumably the unvarnished truth will come later, at some time when the president isn’t on primetime TV. What a coward.

POSTSCRIPT: Technically, I assume the plan Bush is talking about involves fiddling with Social Security’s “bend points.” There are currently two bend points: the first at about $7,500 and the second at about $45,000. When you retire, you get 90% of your average income up to the first bend point, 32% up to the second bend point, and 15% of the rest of your income (up to a maximum of $90,000).

A worker with an average income of $7,500, for example, would get an initial Social Security benefit of $6,750. A worker with an average income of $45,000 would get an initial Social Security benefit of $6,750 + $12,000, or $18,750, which is 42% of their total income.

Got that? These bend points are increased each year to match wage growth for the previous year. It sounds like Bush’s plan is to continue indexing the first bend point to wages but to change both the second bend point and the $90,000 maximum so they increase only by the rate of inflation. Thus, middle income workers, who currently have 42% of their income replaced by Social Security, would see that percentage slowly erode. In 50 years, it would be more like 30%. In 75 years it would be 25%.

Or something like that. Presumably the White House will dish the details eventually.