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Social Security benefits may change
White House may tie increases to inflation, not wages, which could lower payouts; ad blitz to begin.
January 4, 2005: 12:51 PM EST

WASHINGTON (CNN) - As part of its effort to reform Social Security, the White House is seriously considering changing the way benefits are calculated, a shift that could mean lower benefits for future retirees.

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Administration officials insist, however, President Bush has not made a decision to embrace the approach and the first White House priority is a massive public relations campaign this month to raise awareness of their version of the system's problems.

As reported in the Washington Post Tuesday, the reform idea would be to use inflation rates instead of workers' wages to calculate Social Security benefits.

The approach, known as "price indexing," was advocated by the president's Social Security Commission in 2001, a panel Bush has cited for having recommendations he generally supports.

Though the president has started to speak out about his belief Social Security must be reformed, and has advocated private accounts for younger workers, he has, so far, been vague about how he would pay for that as well as other specifics.

He has promised, however, that those at or nearing retirement would not see their benefits cut.

White House spokesman Scott McClellan confirmed changing the formula for benefits is one option administration officials have been discussion with GOP members of Congress. He refused, however, to define what Bush means when he talks about not touching benefits for those "near" retirement.

Instead, he repeated the president's oft-used phrase that he doesn't want to "negotiate with himself" by discussing specifics in public.

Changing the way benefits are calculated could cut benefits significantly for future Social Security recipients.

Republican support

It is an idea that has support among senior Republicans on Capitol Hill.

Senate Majority Leader Bill Frist, R-Tenn., told CNN it is an idea he "would strongly support, that we adjust benefits according to price increases and not wages."

The Republican leader cited this as a way to help pay for private accounts for younger workers, which he believes would yield more money in the end.

"We need to remember that you can have access to the personal accounts, which will grow much faster than either prices or wages," Frist said.

One Republican lawmaker with close ties to the White House acknowledged to CNN that although there is much concern in Congress about the political consequences of advocating any benefit cuts, it is the leading approach among options to pay for Bush's reform ideas.

"The only other way to pay for reform, for private accounts, is borrowing, and for those in our party concerned about the deficit, that's not the way to go," the GOP lawmaker told CNN.

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Although the president has not yet offered a private account proposal, some rough estimates say the transition cost could be between $1 trillion and $2 trillion.

Administration officials said that while price indexing is something the White House is seriously considering, the president has not decided yet to push it.

White House officials are planning a large scale public relations campaign, starting this month, to sell the American people on the idea that Social Security is a program that is in crisis and needs to be fixed.

Administration sources said they intend to follow models used during the presidential campaign using the Internet, local and regional media and other non-traditional sources in addition to speeches from the president and his aides to lay out problems in the system.

"We want to spark a national debate about the problem before we really embrace solutions," said an administration official.

Democrats' worries

Many Democrats have said they think the White House is overstating the crisis in order to sell a long-standing GOP proposal, diverting some of the system into the private sector.

They note that the Social Security Trustees estimate the system may go into the red in little more than a decade, but it won't deplete its reserves until 2042, and even then recipients would still get 73 percent of the current benefit level.

A separate Congressional Budget Office analysis puts the date for the depletion of reserves at 2052, and says payouts after that would be 81 percent of the promised level.  Top of page


-- from CNN White House Correspondent Dana Bash




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.