What comes next in Social Security saga?

By providing some details about how he would solve Social Security's long-term financing problem, President Bush has accomplished at least one task: He's ensured that the political battle over the big retirement program is fully joined at last.

His proposal for "progressive indexing," which would cut promised benefits for all but low-income workers, has loosed an outpouring of number-crunching and commentary in Washington. To supporters, Bush has bravely gone first and shown how to fix Social Security's problems while protecting the most vulnerable US workers. To critics, Bush's proposal is not as progressive as it seems - and might, in the end, undermine support for the entire system.

Now it's up to Congress to begin the arduous task of actually drafting legislation. And amid the welter of editorials, issue alerts, and policy reports, one thing seems clear, say some analysts - there is no easy way out. Big changes in benefits, or taxes, or the retirement age, would be necessary to bring eventual balance to this largest of government programs.

"Anyone who tells you that there is a painless way to fix Social Security isn't telling the whole truth," writes Ed Lorenzen, executive director of the think tank Centrists.Org, in a study of Bush's numbers.

Bush has long pushed for private accounts within Social Security, of course, so to some extent his ideas about the system have been a feature of debate for years. But even the White House acknowledges that private accounts wouldn't address Social Security's long-term financial problems. They would be, in essence, an accessory - one that the White House insists would make the system more attractive, but an accessory nonetheless.

In endorsing progressive indexing in his press conference last week, however, the president has proposed something that would have a substantial impact on the vast majority of US workers, whether they wanted it to or not. More so than with private accounts, Bush may have now launched a national debate on the core costs and promises of the system.

It's a debate he will try to foster this week, from his Tuesday discussion of the issue at a Nissan manufacturing plane in Ohio to a Wednesday speech at the Latino Small Business Economic Conference in Washington.

Progressive indexing is an idea attributed to Robert C. Pozen, a Boston-based investment executive who served on the Social Security commission Bush established in his first term.

Under this plan, the poorest 30 percent of retirees - those with incomes below around $20,000 - would see their promised benefits unchanged. Their initial retirement checks would continue to be based in part on how much US wages rose during their working career.

The other 70 percent of retirees, however, would face reductions, which would become steeper over time. That is because their initial retirement checks would be figured using the rise in prices. Over decades, prices do not generally climb as fast as wages.

It is difficult to peg exactly how much any individual would lose as a result of this change. Those now in the work force would have fewer years under any new system, and thus would face smaller cuts.

But eventually the cuts would be substantial. A worker who retires in 2075, having earned an income equal to today's average, would face a 28 percent reduction compared to benefits they would have earned through the current system, according to an analysis from the Center on Budget and Policy Priorities. Those earning only slightly more - the equivalent of around $60,000 in today's dollars - would face steeper cuts.

Benefit reductions for average workers would be the steepest in the history of Social Security, says Center on Budget and Policy Priorities economist Jason Furman. Given that Bush's progressive-indexing plan does not include raising the cap on income subject to Social Security taxes, currently $90,000, it in fact calls upon the middle class to shoulder most of the reform burden, Furman says.

Despite its name, "it is not progressive," he says. Combined with private accounts, the progressive-indexing changes could ensure that many middle- and upper-income Americans receive little if any benefit from an actual Social Security check. And that could undermine support for the system in the long run, says Furman, as it comes to be seen as just another anti-poverty program.

Proponents of progressive indexing, however, say that to measure its reductions of benefits against those promised by current law is to mislead. That is because Congress has scheduled future benefits far in excess of what the tax structure can pay for.

"The money simply will not be there," write Heritage Foundation analysts David C. John and Stuart Butler in their analysis of Bush's plan.

People at the bottom end of the wage scale need every dollar of their benefit, say proponents, while those who earn more have a much wider array of retirement and savings options to choose from. Government subsidies for those choices, such as the tax-shelter advantages of 401(k)s, should be counted as part of the overall federal retirement system.

The choice is not between benefit reductions and nothing, but between benefit reductions and tax hikes, according to the president's defenders.

"Congress would have to raise and invest $5.7 trillion today to pay all of Social Security's promised benefits between 2017 and 2080," according to Mr. John and Mr. Butler.