Bush to set out polices at home and abroad

US President George W. Bush prepares for the State of the Union address in the White House family theatre. Picture / Reuters

WASHINGTON - President Bush prepared to warn Americans in his State of the Union speech that Social Security is "headed toward bankruptcy" unless overhauled and he urged wary members of Congress to work with him to change it.

"Fixing Social Security permanently will require an open, candid review of the options," Bush said in speech excerpts released by the White House. "I will work with members of Congress to find the most effective combination of reforms."

On Iraq, Bush planned to say the United States will open a "new phase" in post-election Iraq. He said US forces will shift to an increasing focus on training and equipping Iraqi security forces.

"The new political situation in Iraq opens a new phase of our work in that country," he said.

Bush will speak at 9 p.m. EST (3pm NZ time) from the House of Representatives to a joint session of Congress, Cabinet officers, Supreme Court justices and other luminaries, and millions of Americans at home.

Facing deep opposition from Democrats and uncertainty from fellow Republicans, Bush planned to offer details of his proposal to create voluntary private accounts in Social Security, a major change to the 70-year-old sacred cow of American politics.

Bush said Social Security is in need of "wise and effective reform."

"Social Security on its current path is headed toward bankruptcy. And so we must join together to find the most effective combination of reforms," he said.

To try to placate those worried about private accounts, Bush would leave unchanged Social Security benefits for Americans 55 and older, Republican sources said.

The idea is to let younger workers divert into private accounts some of the contributions they pay for Social Security.

Sources said the accounts would be modelled after Thrift Savings Plans for federal government employees and would offer only a few, regulated investment options to minimise the investment risk.

PITCHED BATTLE

Announcement of his plan will set the stage for a pitched battle this year over the direction of Social Security, which experts say will begin paying out more in benefits than it collects in contributions starting in 2018.

Democrats are vowing a fight and the AARP, a powerful lobby group that represents 35 million senior citizens, said it would oppose any plan that takes money out of the current Social Security system.

Senate Democratic leader Harry Reid of Nevada says he has an agreement from 44 Democrats in the 100-member Senate to oppose private accounts, a serious obstacle to the president unless he is able to pick some off with inducements.

"We will be first in line to work with him," Reid said. "But when he gets off track, we will be there to hold him accountable. And that's why we so strongly disagree with the president's plan to privatise Social Security."

Bush will also call for fiscal austerity, days ahead of submitting a budget proposal to Congress for fiscal 2006 that aides said will call for a near-freeze in the overall growth of government spending other than military funding.

Bush will resist laying out a specific timetable for the withdrawal of US troops in the wake of Sunday's elections in Iraq.

"We will increasingly focus our efforts on helping prepare more capable Iraqi security forces -- forces with skilled officers and an effective command structure," Bush said.

In a bid to create a favourable environment for Middle East peace negotiations, Bush will also pledge greater assistance for the Palestinians. Sources said it includes an aid package that could total nearly $350 million to bolster development and security.

In his excerpts, he said the United States will help Israel and the Palestinians find peace.

"To promote peace and stability in the broader Middle East, the United States will work with our friends in the region to fight the common threat of terror, while we encourage a higher standard of freedom," he said.

- REUTERS