4.29.2005
President Touts 'Progressive Indexing' Plan (USATODAY.com)
Posted 4/28/2005 10:35 PM
By Susan Page and Oren Dorell, USA TODAY
WASHINGTON — President Bush has been touting the glories of adding individual investment accounts to Social Security since his first campaign for president. He says the proposal would allow workers to accumulate wealth and pass it on to their heirs.
With the Social Security debate at a near-standoff in Congress, Bush is trying to get things moving by endorsing a plan to do something more difficult: curb benefits so the system can sustain the retirement of the huge baby-boom generation.
"So far, we've been talking about the dessert, the sweetener, which is personal accounts," says Boston financier Robert Pozen, who devised the proposal that Bush embraced. "Solvency is the spinach that needs to be eaten first."
Under Pozen's plan, called "progressive indexing," workers with annual incomes of $25,000 or less would continue to have their initial retirement benefits based on the increase in average wages over their years in the workforce. High-income workers, those with annual income of $113,000 or higher, would instead have their initial benefits based on the increase in prices during their working years.
For those in between, initial benefits would be based on a changing "blend" of wage and price increases. The effect on their benefits would depend on precisely how the indexes were weighed.
The change sounds semantic, but the impact would be considerable. Wages historically rise faster than prices, which means the retirement benefits for better-paid workers would be significantly lower than under the current system.
(More ... USATODAY.com - President touts 'progressive indexing' plan) ¶ 21:47
By Susan Page and Oren Dorell, USA TODAY
WASHINGTON — President Bush has been touting the glories of adding individual investment accounts to Social Security since his first campaign for president. He says the proposal would allow workers to accumulate wealth and pass it on to their heirs.
With the Social Security debate at a near-standoff in Congress, Bush is trying to get things moving by endorsing a plan to do something more difficult: curb benefits so the system can sustain the retirement of the huge baby-boom generation.
"So far, we've been talking about the dessert, the sweetener, which is personal accounts," says Boston financier Robert Pozen, who devised the proposal that Bush embraced. "Solvency is the spinach that needs to be eaten first."
Under Pozen's plan, called "progressive indexing," workers with annual incomes of $25,000 or less would continue to have their initial retirement benefits based on the increase in average wages over their years in the workforce. High-income workers, those with annual income of $113,000 or higher, would instead have their initial benefits based on the increase in prices during their working years.
For those in between, initial benefits would be based on a changing "blend" of wage and price increases. The effect on their benefits would depend on precisely how the indexes were weighed.
The change sounds semantic, but the impact would be considerable. Wages historically rise faster than prices, which means the retirement benefits for better-paid workers would be significantly lower than under the current system.
(More ... USATODAY.com - President touts 'progressive indexing' plan) ¶ 21:47
