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An insecure system

PRESIDENT BUSH deserves some praise for revealing the first details of his Social Security plan this week. But he did not discuss the hidden effect of his proposal: limiting the stake the middle class now holds in the system. Democrats should oppose any compromise based on the erosion of the key principle of social insurance.

According to the concept that has undergirded the Social Security system from its inception, the government taxes workers in the expectation that, when they retire, Social Security will provide all of them a significant monthly benefit. These checks, which vary based on lifetime contributions, have been high enough to gain wide support for the system across income groups and generations.

That would change under the plan outlined by the president Thursday. Bush promised that disabled people would still receive benefits, and those at the lowest income levels would get an increase. To generate money for these, and to reduce the pressure on the federal budget, he would cut the future growth in benefits for many people born after 1949.

He didn't get specific, but other plans embracing his assumptions cut benefits gradually. Over several decades, people earning $30,000 a year or more in today's money would get much less of their income replaced by Social Security than they do today. A popular social insurance system would evolve into a means-tested welfare program, the kind that traditionally enjoys little support.

Bush's insistence on the inclusion of private accounts would be a sweetener for these cuts in middle-class benefit growth. But the private accounts, by providing an alternative source of retirement income, could further reduce broad support for the taxes needed to maintain benefits for poor people.

Bush is right that Social Security faces a long-term funding program that should be addressed. He is wrong to rule out an increase in the payroll tax as one option. He failed to mention another approach -- an increase in the cap on income that is subject to the tax. The ceiling is now $90,000. This ought to be part of any compromise plan.

Any solution to Social Security problems requires a bipartisan approach similar to that which produced the last major changes in 1983. The system has been accumulating government bonds ever since in the expectation they would be used for benefits.

Instead of maintaining tax rates at 1990s levels in anticipation of paying off the bonds, Bush has delivered tax cuts that have increased the national debt. As part of negotiations on Social Security, Democrats should insist on a reexamination of all federal revenues. Future generations of retirees should not be victimized by the reckless fiscal policies of the Bush administration.

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