Editorial: Social Security/Three risks to Bush's new plan

Editorial: Social Security/Three risks to Bush's new plan:

"• Bush's answer to Social Security's solvency problem, described in soothing lingo as 'progressive indexing,' amounts to a dramatic change in the way retirement benefits are calculated. Wisely, the president would exempt the poorest 30 percent of workers from this change. But he certainly doesn't exempt middle-income Americans. A worker earning $59,000 in today's dollars and retiring in 2055 would see a benefit cut of 31 percent -- or at least as much as if Congress did nothing at all and let the Social Security trust fund expire. That would sharply erode the program as a foundation of retirement security.

• So far, the president has said almost nothing about new revenues as part of a solution. This means, ipso facto, that benefit cuts would be deeper than necessary. Simply raising the cap on earnings subject to Social Security taxes, from $90,000 now to $140,000, would solve nearly half of the system's projected shortfall, while asking upper-income Americans to make exactly the same contribution to Social Security that they made in the 1970s and 1980s. If Congress did raise the earnings cap, it would have to impose benefit cuts only about half as deep as those proposed by the president.

• The president continues to insist on private retirement accounts that are 'carved out' of Social Security -- that is, funded by rebating a portion of current payroll taxes to younger workers. This has two grave consequences: It would require hundreds of billions of dollars in new government borrowing, at a time when Washington already is deeply in the red, and it would require Social Security to make a second round of benefit cuts in the future to recover the lost revenue."