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Bush Praises Account Returns

Private investing as part of a Social Security revamp would yield much more interest than is now earned, the president says.

April 22, 2005|From Reuters

WASHINGTON — Despite a sag in the stock market this year, President Bush said Thursday that private retirement accounts as part of Social Security would draw a higher rate of return than the current system.

Bush promoted his plan to use a portion of the Social Security payroll tax to fund private accounts amid signs Republicans were giving up trying to build Democratic support for the idea.

Bush told the Independent Insurance Agents and Brokers of America that private accounts would benefit from "the miracle of compound interest" and gain more than the 1.8% real rate of return Social Security now receives.

"At that rate, it will take you nearly 40 years to double your money. If you put the money in the market and get a 4% return, your money will double in about 18 years.

"If you get the historical market average of 7%, your money will double in just over 10 years," Bush said.

Stocks are off by more than 5% since Dec. 31 amid fears of inflation and rising interest rates, even with Thursday's strong rally.

White House spokesman Scott McClellan said he did not believe the market decline would hurt Bush's efforts to sell private accounts.

"You have to look at the market over time," he said, citing Social Security experts who predicted what he called a conservative estimate that the rate of return would be at least 4.6% for private accounts.

On Capitol Hill, Senate Finance Committee Chairman E. Charles Grassley, an Iowa Republican who will play a lead role in drafting Social Security legislation and ushering it through the Senate, said he was abandoning hope of a bipartisan proposal and would begin the process with a Republican-only bill.

Democrats have closed ranks against private accounts.

"I find it very difficult to find Democrats that want to sit down and talk to me and we're getting close to the summer period of time when I said I wanted a bill out for discussion," Grassley told reporters.

He said he planned to work with Republican members of his committee to craft a bill that addressed Social Security's solvency problems and Bush's individual account proposal.

Sen. Max Baucus of Montana, the top Democrat on the panel, said Bush would have to take private accounts off the table.

In his speech, Bush said he would not attack any member of Congress who put forth a credible idea for changing Social Security.

"When somebody puts an idea on the table, you can rest assured the White House will not attack them," he said.

But a conservative group that has had close ties to the Bush administration, the Club for Growth, said it reserved the right to run a television ad against South Carolina Republican Sen. Lindsey Graham for proposing what it considered a tax increase for Social Security.

Graham, who joined Bush on a trip to Columbia, S.C., on Monday, has proposed raising the cap on Social Security taxes paid by high-income earners. The Club for Growth and other conservative groups call that a tax increase.

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