Bush seeks $1 trillion debt boost

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President Bush, saying the economic recovery is firmly in place, yesterday proposed adding $1 trillion to the national debt to fund the cost of shifting to a partially privatized Social Security system.

The massive increase in debt, coming on top of a $7 trillion national debt that is growing by about $500 billion a year, adds controversy to what was already promising to be a difficult reform to get enacted.

The debt increase is acknowledged in the 2004 Economic Report of the President, which was penned by the White House Council of Economic Advisers and released yesterday.

The Social Security privatization plan has largely disappeared from Mr. Bush's speeches and budget blueprints, although it was a major campaign platform in the 2000 election. It was judged to be politically palatable at the time because it would draw on some of the government's large projected surpluses to finance transition costs from the current government-funded pension system.

But those surplus projections have disappeared and been replaced by record federal deficits, and Mr. Bush had not previously revealed how he would fund the plan, which would enable workers to put some of their Social Security contributions into private accounts that are invested in stocks and other securities.

Because Social Security relies on current payroll taxes to fund today's retirees, the question has been how to divert money to private accounts and still meet the pension program's obligations.

The economic report for the first time tentatively provides the answer -- with borrowing -- as well as a rationale for the decision that asserts that adding the cost of privatizing the program to the national debt would have little detrimental effect on the economy or workers.

"Since the budget surpluses forecasted a few years ago have not materialized, critics argue that adding personal retirement accounts to Social Security is impossible or impractical," it says.

"In reality, the need to add resources to the Social Security system is no less pressing now that the surpluses have disappeared; indeed, it may be even more so."