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Last Updated: Tuesday, 1 February, 2005, 14:33 GMT
Bush gears up for pensions battle
The BBC's Clive Myrie
By Clive Myrie
BBC News, Washington

President Bush is expected to launch one of the big political battles of his second term when he gives his State of the Union address on Wednesday.

President George W Bush
Bush says private accounts will help save Social Security
He is set to promote his plan to reform Social Security, the US public pensions scheme.

The 70-year-old programme is one of the sacred cows of American life - so much so that analysts say for a politician to touch it means instant death.

But the number of pensioners drawing benefits is rising relative to the number of workers paying in, and Mr Bush says if nothing is done, the scheme will run out of money.

Pension reform debate

Over a family game of mah-jongg at a coffee shop in Baltimore, Social Security is a hot topic.

Three generations have come together for a game, and each generation has its own concerns.

There's Katie Hackerman, now in her 80s, who relies heavily on her government pension.

Leslie Becker
Once my generation takes all the Social Security - not all of it but a good chunk of it - there's not going to be much left for the younger generation
Leslie Becker,
Baby boomer

"It would be difficult, really difficult without Social Security," she said.

Her monthly Social Security cheque pays all of her rent.

Her daughter Leslie Becker, in her 50s, is one of millions of Americans who'll retire in the next 20 years.

"My generation, the Baby Boom generation, once we take all the Social Security - not all of it but a good chunk of it - there's not going to be much left for the younger generation. People are panicking," she said.

Members of the next generation include her own daughter Abbey, a university student.

"It's not something an 18-year-old normally thinks about," Abbey admitted, but added, "I have to get a job that pays really well because if I don't have enough money to retire through the Social Security programme, I don't know what I'm going to do."

Bush calls for action

At present, all workers pay a percentage of their earnings direct to the government, which then doles out pensions to retired and disabled people.

Mr Bush's suggestion is to allow workers to put some of their Social Security contributions into private retirement accounts.

But critics say that the accounts will expose Americans to financial risk in the stock market, bankrupt the system more quickly and benefit only investment firms.

Pro-Bush plan advertisement
The number of pensioners per worker is rising
And it will be incredibly expensive to switch from one system to another - with costs running into the trillions of dollars.

The White House says it is worried about what it calls a looming crisis.

The Bush administration says the figures speak for themselves.

In 1950, 16 taxpayers supported one retiree.

But with people living longer and birth rates falling, today there are only 3.3 workers supporting each pensioner, and by 2018 the system will be paying out more money than it takes in.

This isn't scare mongering, the president says, just cold hard facts.

"If you're in your mid-20s and you're beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt unless the United States Congress is willing to act now," he said in a recent speech.

He wants Congress to allow workers to put some of their taxes into private investment accounts, which could give higher returns towards their pensions.

Winners and losers

Some Republican lobby groups are backing the president's plans.

But critics say despite demographic changes, a few minor adjustments would keep the pension system going for decades, and that President Bush is only hyping the crisis for political gain.

Bush's plan to reform Social Security will be a huge windfall for Wall Street
Tony, USA

"We've always had an aging population and Social Security has survived. He wants more privatisation and creating private investment accounts would put millions of dollars into the coffers of Wall Street firms," said Mark Weisbrot of the Center for Economic and Policy Research.

It will be 70 years in August since President Franklin Roosevelt signed law creating Social Security, which has allowed millions to retire with dignity, and he has a special place in the nation's heart because of this.

George W Bush is fully aware he could bolster his own legacy if he gets credit for coming up with a formula to save Social Security.

He says he wants Americans to be less dependent on central government, and that partially privatising pensions would do this.

But it is an uncertain project, and whatever the outcome, the battle will be fierce - and very risky.

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