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Retirees, Bush Spar Over Private Investment Accounts


The largest U.S. organization of senior citizens, the AARP, is mobilizing its 35 million members against a White House plan to make private investment accounts a part of the U.S. retirement system known as Social Security. The organization's chief executive spoke in Los Angeles, where he agreed with President Bush that the Social Security system needs an overhaul, but disagreed with Mr. Bush on how to do it.

White House officials say private investment accounts would give workers a sense of ownership over the public pension program, and offer them some freedom in making investment decisions about the money that they pay into the system.

William Novelli of the AARP takes issue with Mr. Bush, although he agrees the system is troubled. He says too many workers of the "Baby Boom" generation, born after World War Two, are headed for retirement. He addressed a civic group called Town Hall Los Angeles, then spoke with VOA.

"We don't take issue at all with what the president has done in terms of putting this on the top of the agenda, and secondly, saying that we've got to fix social security now for future generations,” he said. “We agree 100 percent with both of those. Where we disagree is the idea of taking money out of social security to set up private accounts."

Analysts note that the Social Security system, enacted in 1935, gave pensioners monthly payments at age 65. The average life expectancy then was just 62. Today, the average American lives for 77 years.

Mr. Novelli's organization, originally called the American Association of Retired Persons (AARP), is politically influential. Conservative critics accuse it of being too liberal. Ironically, says Mr. Novelli, some targeted the group when it backed President Bush on a program that others considered too conservative.

In 2003, the AARP supported a plan backed by the White House to help seniors pay for prescription drugs. The plan successfully passed Congress and will be fully implemented next year. Critics say it is good for the drug companies, but does not go far enough in helping seniors. The AARP considers it a step in the right direction.

Mr. Novelli says the administration's plan to change Social Security is a different matter, and that private investment accounts introduce risk into a program that was supposed to be risk-free.

"Secondly, it would be very, very expensive to fund the transition to that program,” he added. “And then third is, it's not even necessary. It doesn't fix solvency, and there are easier, more moderate ways to deal with the issue."

Among the proposals being publicly debated are reduced benefits, a raise in Social Security taxes and a higher retirement age.

The issue is on the minds of many inside and outside government. Former Louisiana Senator John Breaux, a moderate Democrat who is friendly with Republicans in the White House, supports the president's plan and says a combination of changes, including private investment accounts, would put the system on a better financial footing. He co-chaired a national commission on retirement policy several years ago, and is now vice chairman of a commission that will recommend revisions in U.S. tax law.

He says the Social Security system can continue making payments until 2041, even with no changes, and that many in Washington fail to see the urgency of the problem.

The former senator, however, believes the issue is pressing. He spoke at a recent forum of the Milken Institute, a private research center in Los Angeles.

"2041! I mean, most members of the Congress are worried about the next 12 months, and you tell them that the program is going to fully pay everybody, every month, the full check until the year 2041 is saying, ‘you want me to do what?’" he said.

He says he considers action in Congress unlikely in the near future, and says that is unfortunate.

William Novelli agrees, saying the most likely scenario is that Congress will leave the problem for the next generation. His worst fear, however, is that President Bush's plan for private investment accounts will be enacted. He says the issue is polarizing, but he agrees that now is the time to figure out how to keep the system solvent.

In the face of some recent polls that show support for the president's plan is slipping, Mr. Bush and senior administration officials are traveling the country in a 60-day effort to convince Americans that the problem is urgent. Mr. Bush says he is open to ideas on fixing Social Security, but says that private investment accounts should part of the solution.

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