Officials - Bush plan would cut some survivor benefits

Thursday, May 12, 2005

WASHINGTON -- President Bush's preferred approach for Social Security would mean smaller survivor benefits for middle and upper-income children and widows than they are now promised, a top administration official said Wednesday.

At the same time, Bush envisions no changes in the benefit system for the disabled, said Allan Hubbard, chairman of the National Economic Council and the administration's point man on Social Security.

In addition to retirees, Social Security provides benefits to the disabled as well as to children under 18 who have lost a working parent. Surviving spouses can also qualify for a benefit until the child turns 16.

"The president is committed to making sure the disabled are taken care of just as they've been promised they'd be taken care of," Hubbard said. Bush also believes the approach he's talked about "will provide adequate and reasonable benefits for beneficiaries, which includes survivors, widows and the retirees," he said.

Tied to benefits

Other administration officials were more specific in saying the changes Bush has in mind would apply to surviving children and widows.

"It's tied to the worker's benefits. If the worker's benefits grow more slowly, then the survivors' benefits will" do the same, said Cathie Martin, a White House spokeswoman.

"However, if we don't do anything, they're going to be cut" anyway, she added.

She referred to the official forecast by the Social Security Board of Trustees, which predicts the program will begin paying out more in benefits than it receives from payroll taxes in 2017. The same forecast predicts the program's trust funds will be drained in 2041, after which federal law mandates benefit cuts.

The interview occurred in the run-up to Social Security hearings before the House Ways and Means Committee, a new phase in Bush's struggle to win legislation from Congress.

"Politically, we're already kind of taking the next step and the president kind of handed the ball to us," said Rep. Jim McCrery, R-La., chairman of the panel's Social Security subcommittee.

Hubbard said the administration welcomed the hearings as a "signal that the legislative process is getting serious."

Progress has been slow on the measure, with polls indicating public opposition to personal accounts, Democratic lawmakers almost unanimously opposed to them and many Republicans reluctant to make major changes in the program.

Bush has urged enactment of a bill that guarantees permanent solvency for the Depression-era program at the same time as it creates a new system of voluntary personal accounts for younger workers. The accounts would be funded through a portion of payroll taxes.

With future guaranteed benefits trimmed to help restore solvency, the theory is that retirees would have the proceeds of the personal accounts to make up some of the difference.

At the same time, Bush has repeatedly stressed that the personal accounts would allow millions of Americans to retire with a nest egg to be passed along to heirs -- something the current Social Security system does not provide.

At the same time, White House officials said during the day that about 15 percent of all retirees under Bush' plan would likely not be able to pass along a Social Security inheritance -- a figure that rises to 30 percent for those with lower lifetime wages. They would have to spend their entire personal account to make sure they remained out of poverty in their older years, according to tentative administration projections.

At a news conference late last month, Bush spoke favorably of a change in Social Security that would mean smaller benefits for future retirees of middle and higher incomes than they are now guaranteed. Lower-income retirees would fare better under the same approach, guaranteed at least the same level of benefit as they are now promised.

Administration officials pointed at the time to a proposal drawn up by Robert Pozen, an investment executive who has outlined a plan to slow the growth in future retirement benefits for an estimated 70 percent of beneficiaries.

Hubbard said the same principle would apply in the future to benefits going to children whose suffer the loss of a parent. Their so-called survivor benefit would be adjusted along the same lines as their parent's retirement benefit would have been.

That would mean no change for survivors of a parent with income in the bottom 30 percent of wage earners. Other survivors would find their benefit reduced from current guarantees, with the change growing more pronounced for higher and higher income families.

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