bush warns of us pension crisis

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    bbc news

    Bush warns of US pension crisis

    President Bush faces Democrat criticism of his domestic agenda
    US President George W Bush has said that the nation's social security fund is close to bankruptcy.
    Mr Bush used his weekly radio address to warn that future generations of Americans may have to rely on private investments for a retirement income.

    He urged younger workers to begin using private accounts to ease stress on the traditional state-run system.

    Mr Bush has said reform is vital if big tax rises are to be avoided. Democrats and unions are opposed to the changes.

    "If we do not act now, government will eventually be left with two choices: dramatically reduce benefits or impose a massive economically ruinous tax increase," Mr Bush said.

    He said leaving such a situation to young Americans would be a "generational betrayal".

    Solvency issues

    Under the current US system, workers pay 6.2% of their monthly salary into the social security system and are paid out a weekly allowance when they retire.

    Mr Bush is proposing that workers are allowed to divert up two-thirds of their payroll taxes into private accounts, with a cap on the total monthly amount invested.

    If we do not fix it now, the system will not benefit our children and grandchildren

    President George W Bush

    Bush's new challenges
    Analysts say that the US's expanding elderly population, combined with a fall in the number of people of working age, means that fewer people are paying into the system even as more are taking out benefits.

    US Social Security is on course to pay out more in benefits than it collects in payroll taxes by the year 2018, according to estimates.

    In his address, Mr Bush said the system works for those near retirement and those already receiving their allowance.

    "But for younger workers, Social Security is on the road to bankruptcy.

    "And if we do not fix it now, the system will not be able to pay the benefits promised to our children and our grandchildren," he said.

    Opposition Democrats disagreed with the president, asserting that private accounts will "weaken the solvency" of the social security program.

    They say the president's plan would cost more than $2 trillion over its first 10 years.

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