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Bush said the retirement system, in which worker payroll taxes pay for the benefits of current retirees, will face growing strains as the number of senior citizens grows in proportion to the working-age population.

"These changes signal a looming danger," Bush said.

Sen. Harry Reid of Nevada insists: "There is no emergency at this time." The incoming Senate Democratic leader argues that Social Security trust funds will provide full benefits for almost 50 years.

Bush's Social Security plan, a main theme of his re-election campaign, would give younger workers the option of diverting a portion of payroll taxes into private accounts.


Sen. Lindsey Graham, a South Carolina Republican, has floated a proposal to raise the income level subject to Social Security tax from $87,900 now to as much as $200,000. The proposal would generate $1 trillion over 10 years mostly by raising taxes on the rich. It was seen by many on Capitol Hill as one way the Republicans could try to attract some Democratic support to Bush's proposal.
However, Bush earlier this week ruled out any increase in payroll taxes and reiterated his opposition in the radio address.

"We must not increase payroll taxes, because higher taxes would slow economic growth," Bush said.

By ruling out a payroll tax increase, Bush left himself few options other than a sharp increase in government borrowing to pay for the transition. That increase would come as the government already faces high budget deficits.

Reid said he would not support a plan that requires "massive increases in debt."

Social Security reform and simplification of the U.S. tax code are the two main items on Bush's economic agenda for his second-term economic agenda.

The White House has signaled it intends to move forward first on Social Security. Bush plans to appoint a panel of experts to study tax reform for at least a few months before starting a legislative push.

My feeling is that the "income level subject to social security tax" is going to get played with more than Paris Hilton at a Teamster convention.

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