WASHINGTON (AP) - President Bush said Thursday the Social Security investment accounts he is proposing would have rules to prevent workers from gambling away their retirement money. He appealed for congressional action to shore up the system and said lawmakers supporting him wouldn't be risking their seats.
"This is an issue on which I campaigned and I'm still standing," Bush said at an economic conference promoting his domestic proposals, including Social Security, his leading legislative issue for next year.
"The crisis is now," he said, pressing for an overhaul of the system, which will be under increasing financial pressure as the baby boom generation retires and claims benefits.
He is proposing that workers be allowed to take part of the Social Security taxes they now pay into the system and instead invest in private accounts. But he said there would be restrictions on the money.
"You can't take it to the race track and hope to really increase the returns. It's not there for the lottery," Bush said.
He compared the structure of the accounts to the investment plan available to federal workers - the Thrift Savings Plan, a tax-deferred retirement investment plan similar to a 401(k).
"There will be reasonable guidelines that already exist in other thrift programs that will enable people to have choice about where they invest their own money, but they're not going to be able to do it in a frivolous fashion," Bush said.
He spoke to a Social Security panel, which included officials from financial service companies and others supporting his overhaul for the program.
Investments are not without risk, as seen by the Thrift Savings Plan's annual returns. Federal workers have five investment options, including government and corporate bond funds, a stock fund that tracks the S&P 500, an international fund and other stock funds.
The stock funds performed well in the 1990s, with annual returns ranging from 20 percent to 43 percent. But in the 2001 recession and later, they have posted annual losses as high as 22 percent. Over 10 years, all the funds were profitable.
One of Bush's panelists talked about the resiliency of the U.S. economy and noted the unreliability of the financial markets.
"Everybody knows we faced an incredible number of shocks in the last several years. These shocks, which, by the way, destroyed almost half of the stock's market value in a short period of time," said James Glassman, senior economist with JP Morgan Chase.
The shocks, including the 2001 terrorist attacks and the corporate accounting scandals, "were potentially as devastating as the shocks that triggered the Great Depression," he said. "And yet, the experts tell us the recession we just suffered in the last several years was the mildest recession in modern times."
Away from the conference, AFL-CIO President John Sweeney said Bush's planned overhaul was "a risky scheme for America, but a sure bet for the financial services industry."
Sweeney urged the Securities Industry Association to disavow Bush's approach.
"Will the financial services industry behave as professionals with a duty to speak candidly to the investing public or will elements of the industry once again seek to make money at the expense of their customers, only this time on a much grander scale?" Sweeney said in a letter.
Financial services companies strongly disagree.
"The fees are structured to be so minimal that in fact, even the studies have show that under any set of proposals Wall Street doesn't make any money on this for another seven or eight years," said Liz Ann Sonders, chief investment strategist for Charles Schwab and Co. and a member of the economic panel Thursday.
Supporters of personal accounts argue that if the system is not changed, future retirees will not get the benefits being promised today. Though going to a system of investment accounts means the government would cut promised benefits, participants could make up the difference through their investments.
"This result is superior, particularly compared to the returns you would get leaving that money with the government," said Richard Parsons, chairman and chief executive of Time Warner Inc. and a chairman of Bush's 2001 commission on partial privatization.
"People ought to be able to start to save on their own behalf to create wealth for themselves so that they have that wealth to look to in their later years, as opposed to a government promise only, which at some point in time is going to have to come up empty," he said.
But five years after Bush first campaigned on a Social Security overhaul, he has yet to provide details of a plan despite three recommendations from his commission, none of which he endorsed.
He also recognizes the political difficulty of taking on a program vitally important to a large voting bloc that is called the untouchable third rail of politics. Republican leaders have been pressing the White House to offer more than a broad outline of changes.
"The great desire for people in Congress is for me to negotiate with myself," Bush said Wednesday about presenting plan details.
Addressing concerns about the record budget deficit, Bush also promised to send Congress "a tough budget" early next year to hold the line on spending.
"You will see fiscal discipline exercised inside the Oval Office this coming budget cycle," the president told the economic conference.