WASHINGTON -- A day after the stock market sustained one of its biggest drops in history, President Bush said Tuesday the U.S. economy will eventually exceed growth projections once his tax package is passed and takes effect.
Monday's stock sell off, a 4 percent drop in the Dow Jones Industrial Average and more than 6.5 percent in the NASDAQ, shouldn't diminish the hopes for a proposal to let taxpayers set up private retirement accounts with their Social Security savings, the president said.
"Markets go up and markets go down, but over the last 20 years, they have gone up as a whole,'' he said, during an interview with Morris News Service and reporters from nine other regional newspaper chains. "The only way to achieve a Social Security system that is solvent is to get a better return.''
Tuesday, the Dow closed up about 1 percent, and the NASDAQ regained almost 5 percent.
Bush noted that the 20-year average return in the stock market has been significantly better than the 2 percent earned annually on the Social Security trust fund, which is invested in government bonds.
Acknowledging fluctuations in the stock markets, Bush said his approach would not be to allow workers to use the riskiest investments.
"The plan is not to let people invest in the 'Lottery Mutual Fund,' or take it to the track,'' he said.
Bush has been pushing his concept of some type of private accounts for most of the presidential campaign and credited support for it as one of the factors in his victory.
Federal Reserve Chairman Alan Greenspan and other conservative economists have praised the accounts as one way to overcome the looming deficits in Social Security when the Baby Boom generation starts retiring in 10 years. Tuesday, former Clinton Treasury Secretary Robert Rubin added his support during a press conference sponsored by an organization of retired federal officials interested in fiscal policy, the Concorde Coalition.
"There's enormous shortfall in terms of retirement security, and one very good use of part of the (federal budget) surplus would be to set up mandatory savings accounts,'' Rubin said.
He and other Concorde members also were very critical, though, of Bush's tax cut pending in the Senate after a nearly party-line approval by the House. They object to phasing in the reductions in income-tax rates over the next 10 years as Bush proposes because they say there is no way to guarantee predictions of huge surpluses will actually pan out.
"I don't think we're in a position to confidently project 10 years ahead and, in effect, enact a permanent tax program, increasing in scope over a 10-year period, against the uncertainty that's out there and the risks that the projected surplus will disappear,'' said Paul Volcker, former Federal Reserve chairman.
Bush dismissed those concerns as pessimism and political sniping. He predicted that the economy would flourish as a result of his tax cuts.
"There are people who will say anything,'' he said. "I think you are going to see a meaningful tax-relief package passed and that I will sign, and it will be retroactive in nature, and that it will help this economy and we will all benefit from it, and we will be awash with money again at the federal level.''
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