WASHINGTON (AP) - Future Social Security benefits could be cut almost in half for some younger workers under a plan President Bush is considering for overhauling the nation's retirement system.
Bush so far has refused to discuss the difficult financial trade-offs that would be required to remake the system to let younger workers divert some of their payroll taxes into personal investment accounts. He has said he will use as a model proposals from his 2001 Social Security commission to craft a proposal that Congress will consider this year.
Under the commission plan that lawmakers said Tuesday was being discussed as the framework for the overhaul, Social Security benefits for younger workers would be cut by 0.9 percent to 45.9 percent from traditional benefits. Investments in the personal accounts would be counted on to make up the loss in income.
Supporters of Bush's idea argue that the current projected level of traditional benefits is not guaranteed in any case, and they note that the Social Security system is projected to start running a shortfall in 2042.
"Social Security has promised to pay benefits way in excess of what it's going to be able to pay," said David John, Social Security senior analyst at the Heritage Foundation.
But opponents claim the Bush administration is exaggerating the problem. The retirement system will be able to pay full promised benefits until 2042, and then will be able to cover about 73 percent, they say.
"The Bush administration has finally acknowledged that the centerpiece of its plan to radically overhaul Social Security is a benefit cut of more than 40 percent in the coming decades for every American senior," said House Democratic Leader Nancy Pelosi, D-Calif. "This is the equivalent of forcing seniors today to live at a 1940s standard of living."
But Senate Majority Leader Bill Frist, R-Tenn., said any change to the system would not affect current retirees. "Young people today recognize it's their money they're putting into Social Security," Frist said Tuesday on CNN. "They own that money. They would like to be able to invest in personal accounts if they want to, a nest egg that can help them in later retirement."
Cuts would occur by changing the formula used to calculate benefits in order to address the system's future shortfall. The growth in benefits would be slowed dramatically by tying them to inflation rates instead of wages. The rate of inflation grows more slowly than wages over a person's lifetime.
For example, a person retiring at age 65 in 2021 with a two-earner income of $35,277 is promised $1,194 in monthly benefits, in 2001 dollars. If the formula is changed, the monthly benefit would be reduced by 0.9 percent to about $1,088 per month.
The younger the worker, the more dramatic the cuts. For a person retiring at age 75 in 2075, the monthly promised benefit of $2,032 would be cut by 45.9 percent to $1,099 a month. Investments in the personal account would be expected to make up the difference.
