WASHINGTON - Warning of a looming crisis, President Bush renewed his call yesterday for the creation of private investment accounts as the best way to shore up the Social Security system while allowing workers to amass more money for retirement.
"For years, political leaders have agreed that something must be done, but nothing has been done," Bush said as he appointed a 16-member commission to draft a reform proposal and make recommendations to the White House this fall.
"We can postpone action no longer," he said at a sun-drenched event in the Rose Garden. "Social Security is a challenge now. If we fail to act, it will become a crisis."
The newly created commission, which has eight Republicans and eight Democrats, was touted by Bush as bipartisan. But critics charged that the president had assembled a commission entirely supportive of his campaign pledge to allow workers to invest a portion of their payroll tax money in private accounts.
Such accounts, opponents complain, would subject retirement funds to the fluctuations of the stock market and siphon off money from Social Security instead of securing the program's future.
"This is not the way to get bipartisan agreement," said House Minority Leader Richard A. Gephardt. "This is the most popular and important program this government's ever passed. It is a huge fundamental change to privatize it and to allow people to invest their accounts on their own. If you just look at the last year of experience with the stock market, you know that that is a risky idea."
Kenneth S. Apfel, the Social Security commissioner during President Bill Clinton's second term, said it was unwise for Bush to create a commission with a "skewed mandate and one-sided membership" to study an issue that demands "broad-based consensus to move forward and change."
Apfel said the composition of the panel "makes a mockery of our efforts to develop a truly bipartisan approach."
"The commission moves us further away from resolution," he added.
The new panel is to be co-chaired by former Sen. Daniel Patrick Moynihan, a New York Democrat, and Richard D. Parsons, a Republican who is a top executive at AOL Time Warner.
Bush praised Moynihan's "profound mind" and "compassionate heart" and said the former senator "has been aptly described as the nation's best thinker among politicians since Lincoln and its best politician among thinkers since Jefferson."
The president said that Parsons, who has worked to bring private-sector jobs to needy residents in New York City, "represents in our time the spirit of business statesmanship at its highest."
But some critics questioned Bush's selection of Parsons. Last year, Time Warner Inc. paid $5.5 million to settle a federal lawsuit in which the Labor Department accused the company of misclassifying employees as temporary or as independent contractors so as not to be responsible for providing benefits to them. At the time, Parsons was the president of Time Warner, which admitted no wrongdoing under the settlement.
White House officials said last night that the president still had "full confidence" in Parsons, though it was not clear whether Bush knew of the Time Warner case before he tapped Parsons.
"We have had conversations with Mr. Parsons, and he has assured us that his company acted properly," Claire Buchan, a Bush spokeswoman, said last night. Buchan added that she was not sure when the White House became aware of the lawsuit.
Hans Riemer, the director of 2030 Center, a public policy organization that advocates the rights of temporary workers, said the appointment of Parsons sent a message that the White House commission would not be "sensitive to the retirement security problems average people are facing."
Bush decided not to appoint any current lawmakers to the panel, in part because some Republicans feared that working on such a divisive matter could make them vulnerable when running for re-election next year, White House officials said earlier. The commission does include several past lawmakers, including former Rep. Tim Penny, a Democrat from Minnesota who has long championed Bush's ideas on private investment accounts.
The other appointees are mostly business executives or economists. Among the Democrats are Robert L. Johnson, chairman of the BET media company; Estelle James, a World Bank consultant; and Robert Pozen, an executive at Fidelity Investments. Among the Republican appointees are Gerald L. Parsky, a former assistant Treasury secretary in the Ford administration, and Gwendolyn S. King, who was Social Security commissioner under Bush's father.
In an interview last night, Penny defended the commission against criticism that it is stacked with members who support Bush's plans to partially privatize Social Security.
"It's not as if other perspectives are not going to be discussed and debated," he said. "Everybody is reacting to something that hasn't been written yet."
With more Americans living past age 65 and the large baby boom generation soon to begin retiring, Social Security is projected to run out of money within four decades. Without raising taxes - an idea Bush has ruled out - the president says the best way to preserve the system is to allow young workers to invest some of their payroll tax money. The stock market, Bush points out, offers far better returns than do Treasury bonds, in which Social Security money is invested now.
"Today, young workers who pay into Social Security might as well be saving their money in their mattresses," Bush said. "That's how low the return is on their contributions."
Critics of Bush's plan, many of whom support alternative ideas such as raising the retirement age or revising benefit levels, say private investment accounts would drain money out of the Social Security system and make workers' retirement plans too dependent on the vagaries of the stock market.
They also point out that the president has been unable so far to guarantee that workers who opt against creating personal investment accounts would not see their benefits cut as a result of money being removed from the system to let others create such accounts.
White House officials said yesterday that they could not estimate the cost of partially privatizing Social Security until the new commission begins its work and begins generating details, such as what fraction of payroll tax money could be invested in the private accounts.
Administration officials said the commission would hold open meetings and listen to people who disagree with the president and support alternatives to his privatization idea.
"They'll listen to a wide range of views and diverse set of ideas," said Dan Bartlett, a Bush adviser.
In defending the president's decision to fill the new commission with people who support the creation of private investment accounts, aides said a commission with too many competing views would be unproductive. They also said they believed Bush had a mandate to implement his plan.
"The president believes he would not have been elected ... had he not run on this idea of personal accounts," said White House press secretary Ari Fleischer.