Bush Shifts Pension Stance

Bush has been promoting a plan to let workers under age 55 divert a portion of their Social Security payroll taxes into private investment accounts. But he has not settled on how to replace that diverted money -- an estimated $1 trillion or more over a decade that would be needed to pay benefits to current retirees.

The president, in an interview published Wednesday in several regional newspapers, left the door open to the idea of raising the cap on wages subject to the Social Security tax as a way to help cover the transition costs of private accounts. Earnings above $90,000 are not subject to tax now.

"I've been asked this question a lot, and my answer is that I'm interested in good ideas," Bush said, according to the Birmingham (Ala.) News. "The one thing I'm not open-minded about is raising the payroll tax rate, and all the other issues are on the table, and that's important for people to know."

He was drawing a distinction between the amount of earnings subject to the Social Security tax and the 12.4% tax rate, paid half by workers and half by employers, which he is opposed to raising.

As Bush campaigned for private Social Security accounts Wednesday in New Hampshire, the ninth state he has visited recently to promote the idea, his proposal received cautious support in Washington from Federal Reserve Chairman Alan Greenspan.

"If you're going to move to private accounts, which I approve of, I think you have to do it in a cautious, gradual way," Greenspan told the Senate Banking Committee. The comment was his first on private accounts since Bush made them the top domestic priority of his second term.

Greenspan warned that establishing the investment accounts could have a major effect on interest rates. He did not say what that effect might be, but other economists have said that new borrowing by the government as part of creating the accounts might have the effect of driving up interest rates.

In telling the regional newspapers that he was open to raising the $90,000 wage cap, Bush appeared to contradict previous statements by him and his staff.

The mixed signals reflected the increasingly difficult job facing the White House as it tries to bring together competing interest groups in order to revamp the nation's popular, 70-year-old retirement system.