Speeches, Public Comments and Analyses

George W Bush, President
Press Conference
December 20, 2004.

There's really very little on which to comment in the press conference, because there is very little actually said.

John (sp)?

Q Thank you, Mr. President. You've made Social Security reform the top of your domestic agenda for a second term. You've been talking extensively about the benefits of private accounts, but by most estimations private accounts may leave something for young workers at the end but wouldn't do much to solve the overall financial problem with Social Security. And I'm just wondering, as you're promoting these private accounts, why aren't you talking about some of the tough measures that may have to be taken to preserve the solvency of Social Security, such as increasing the retirement age, cutting benefits or means testing for Social Security?

PRESIDENT BUSH: Yeah. No, I appreciate that question.

First of all, let me put the Social Security issue in proper perspective. It is a very important issue, but it's not the only issue -- very important issue we'll be dealing with. I expect the Congress to bring forth meaningful tort reform. I want the legal system reformed in such a way that we are competitive in the world. I'll be talking about the budget, of course. There's a lot of concern in the financial markets about our deficits, short-term and long-term deficits. The long-term deficit, of course, is caused by some of the entitlement programs, the unfunded liabilities inherent in our entitlement programs.

I will continue to push on an education agenda. There's no doubt in my mind that the No Child Left Behind Act is meaningful, real reform that is having real results. And I look forward to strengthening No Child Left Behind. Immigration reform is a very important agenda item as we move forward.

But Social Security as well is a big item, and I campaigned on it, as you're painfully aware since you had to suffer through many of my speeches. I didn't duck the issue, like others have done in the past. I said this is a vital issue and we need to work together to solve it.

Now the temptation is going to be, by well-meaning people such as yourself, John, and others here as we run up to the issue, to get me to negotiate with myself in public, to say, you know, "What's this mean, Mr. President, what's that mean?" I'm not going to do that. I don't get to write the law. I'll propose a solution at the appropriate time, but the law will be written in the halls of Congress. And I will negotiate with them, with the members of Congress, and they will want me to start playing my hand -- "Will you accept this, will you not accept that, why don't you do this sort of thing, why don't you do that?"

I fully recognize that this is going to be a decision that requires difficult choices, John. Inherent in your question is do I recognize that. You bet I do. Otherwise, it would have been done.

And so I am -- I just want to try to condition you. I'm not doing a very good job, because the other day in the Oval when the press pool came in, I was asked about this -- a series of questions on -- a question on Social Security with these different aspects to it, and I said I'm not going to negotiate with myself and I will negotiate at the appropriate time with the law writers, and so thank you for trying.

The principles I laid out in the course of the campaign and the principles we laid out at the recent economic summit are still the principles I believe in, and that is, nothing will change for those near Social Security, payroll -- I believe you're the one who asked me about the payroll tax, if I'm not mistaken -- will not go up.

And I know there's a big definition about what that means. Well again, I will repeat, don't bother to ask me. Oh, you can ask me. I shouldn't -- I can't tell you what to ask, it's not the holiday spirit -- (laughter) -- but I am -- it is all part of trying to get me to set the parameters, you know, apart from the Congress, which is not a good way to get substantive reform done.

As to personal accounts, it is judgment essential to make the system viable in the out years, to allow younger workers to earn an interest rate more significant than that which is being earned with their own money now inside the Social Security trust.

The crux of the president's support for private accounts would be that they earn higher (real) rates of of return and therefore allow the Social Security Trust Fund to pay lower benefits, while insuring the workers get the same (combined) benefit, but see later.

But the first step in this process is for members of Congress to realize we have a problem. And so for a while, I think it's important for me to continue to work with members of both parties to explain the problem, because if people don't think there's a problem, we can, you know, talk about this issue till we're blue in the face, and nothing will get done.

And there is a problem. There's a problem because now it requires three workers per retiree to keep Social Security promises. In -- in -- in -- in 2040 it'll require two workers per employee (sic) to meet the promises. And when the system was set up and designed, I think it was like 15 or more workers per employee. That is a problem. The system goes into the red -- in other words, there's more money going out than coming in -- in 2018. There is an unfunded liability of $11 trillion.

First, in 1983 when the growth in the trust fund was planned and legislated to account for the baby boomers' retirement, the idea of building a large reserve was so that reserve could be drawn upon. The idea was not to create an ever larger reserve never to actually be used. But note that the president is now claiming that using this reserve is "the problem".
 
Second, that unfunded liability of $10.4 trillion (the President overstated the estimated amount) is not what will have to be paid by 2017, or even during the 75 years over which the American Academy of Actuaries says is the appropriate projection, it is the estimated, cumulative cost over the "infinite future". But as the actuaries note, the solution for the 75 year shortfall ($3.4 trillion) is exactly the same as the solution for the longer one./1/ The higher number's sole value is as a "scare factor"

And I understand how this works. You know, many times legislative bodies will not react unless the crisis is apparent, crisis is upon them. I believe the crisis is.

And so for -- for a period of time, we're going to have to explain to members of Congress the crisis is here. It's -- lot less painful to act now than if we wait. That's --

Q (Can I have clearance to ask a follow-up ?)?

PRESIDENT BUSH: No. (Laughter.) (Chuckles.) Otherwise it'll make everybody else jealous, and I don't want that to happen.

Angle.

Q Thank you, sir. Mr. President, on that point, there is already a lot of opposition to the idea of personal accounts, some of it fairly entrenched, among the Democrats. I wonder what your strategy is to try to convince them to your view. And specifically, they say that personal accounts would destroy Social Security. You argue that they would help save the system. Can you explain how?

PRESIDENT BUSH: Yeah. I will try to explain how without negotiating with myself. (Chuckles.)

It's a very tricky way to get me to play my cards, I understand that.

I think what you all -- people ought to do is to go look at the Moynihan commission report. The other day, in the discussions at the economic summit, we discussed the role of a personal account. It was what -- how a personal account would work, and that is that people could set aside a negotiated amount of their own money in a(n) account that would be managed by that person but under, you know, serious guidelines. As I said, you know, you can't use the money to go to the lottery, you know, or take it to the track. There would be -- it's like the -- some of the guidelines in some of the thrift savings plans right here in the federal government.

And the younger worker would gain a rate of return which would be more substantial than the rate of return of the money now being earned on the Social Security trust. And over time, that rate of return would enable that person to be -- have an account that would make up for the deficiencies in the current system. In other words, the current system can't sustain that which has been promised to the workers. That's what's important for people to understand. And the higher rate of return on the negotiated amount of money set aside would enable that worker to more likely get that which was promised.

Now the benefits, as far as I'm concerned, of the personal savings account is, one, it encourages an ownership society. One of the philosophies of this government is if you own something, it is -- it makes the country a better -- the more people who own something, the country's better off. You have a stake in the future of the country if you own something.

Secondly, it's capital available for -- when people save, it provides capital for entrepreneurial growth and entrepreneurial expansion, which is positive. In other words, it enhances savings.

And thirdly, it means that people can take their own assets, their own retirement assets, and pass them on if they so choose to -- to their family members, for example. That's positive. That's a step.

Earlier in this press conference, the President argued that the value of the private retirement accounts could be used offset the benefits paid from the Social Security Trust Fund, yet now he is claiming that the private accounts can be used to build a mini-estate to be passed on to one's family members. It can't be used for both -- at least for those who require social security benefits as a core part (if not all) of their retirement income.

The Social Security system was designed in a -- obviously in a -- in a -- in an era that has long been -- long gone, and it's worked in many ways. It's now in a precarious position, and the question is whether or not our society has got the will necessary to adjust from a defined benefit plan to a defined contribution plan.

Note that this changes the fundamental concept for which social security was created -- to assure our elderly they would not live in poverty. A defined contribution plan guarantees no such thing.

And I believe the will will be there. But I'm under no illusions. It's going to take hard work. It's going to take hard work to convince a lot of people, some of whom would rather not deal with the issue -- why deal with the issue unless there's a crisis? -- and some of whom have got preconceived notions about the benefits of what may be possible.

Footnotes

1. American Academy of Actuaries, "An Actuarial Perspective on the 2004 Social Security Trustees Report", http://www.actuary.org/pdf/socialsecurity/trustees_apr04.pdf, pg. 3, viewed 12/26/04 4:37 PM EDT