Bush Prepares for State of the Union Address

With the Iraqi elections under his belt and hopes for a controversial Social Security facelift, President Bush prepared to highlight both as key issues for his second term in his Wednesday night State of the Union (search) address.

The speech, which the president prepared to deliver on Capitol Hill, was scheduled for 9 p.m. EST. The FOX News Channel will carry the speech and the Democratic response live, and will offer analysis after they conclude.

Bush's ideas for changing the 70-year-old Social Security (search) program by offering private retirement accounts scored just two sentences in last year's State of the Union. This year, it's the signature topic of his 40-minute speech before Congress and a nationally televised audience.

The White House says Bush will offer new details about his plan to let younger workers divert some of their Social Security payroll taxes into personal investment accounts.

But the testy, partisan debate over his plan to overhaul Social Security has already been heating up — on the Hill and off.

"What many Democrats feel is, get our fiscal house in order," Democratic strategist Rich Masters told FOX News on Wednesday, referring to the large national deficit that has mounted on Bush's watch. "You could extend the life of Social Security by rolling back some of the tax cuts. We are literally robbing from the Social Security fund to pay for these massive tax cuts."

"That is total nonsense and everybody knows it," Brad Blakeman, who worked on the Bush-Cheney 2000 presidential campaign, fired back on FOX. "Social Security is broke and we need to fix it. If President Bush hadn't offered those tax cuts, we wouldn't have come out of the Clinton recession."

Some experts say that while the president will seek to reassure Americans who are at or near retirement that they can expect to get their Social Security checks as expected, he'll leave larger questions unanswered.

"He's leading with the dessert and not revealing the spinach," Peter Orszag, an economist at the Brookings Institution (search) and a former Clinton White House adviser, said Tuesday.

Social Security is projected to start paying out more in benefits than it collects in taxes in 2018, according to Social Security trustees, and can pay full promised benefits only until 2042. The nonpartisan Congressional Budget Office has projected that the program will be solvent until 2052.

"The real question is how he will restore solvency to Social Security?" Orszag said. "What benefit reductions will be needed and what are the debt implications? The type of questions he's prepared to address won't answer that."

Michael Tanner, an economist at the Cato Institute (search), said Bush likely will define, for the first time, what he means when he says that people who are at or near retirement will not experience any changes in Social Security benefits. The libertarian think tank has been a longtime proponent of investment accounts, and is pressing for larger accounts by letting workers invest all, not just part, of their payroll taxes.

"The president is very liable to say something like if you're over the age of 50 or 55, you'll remain in the current system," Tanner said. "If you look at the bills on the Hill, it's mostly 55 years old, so that would be my suspicion" about how Bush will define at or near retirement.

Bush's advisers have settled on a proposal for structuring the personal accounts to resemble the Thrift Savings Plan (search), a tax-deferred retirement investment plan for federal workers similar to a 401(k) plan. The idea is to minimize risk for people at the outset by offering as few as three to five diversified investment funds.

"I don't think you're going to get anything from Bush on the size of the accounts, or how they're going to restrain the growth in benefits," Tanner said.

Other domestic initiatives Bush is expected to mention in his speech include getting Congress to:

— Require high school students to take the math and reading tests now required of younger students under the No Child Left Behind law (search).

— Pass his energy bill.

— Place limits on medical malpractice lawsuits.

— Approve an immigrant guest worker program.

— Confirm his nominees for federal judgeships.

Bush's proposal to rewrite the income-tax code, meanwhile, is clearly an initiative on the back burner. A senior official who briefed reporters on the speech Tuesday didn't mention it when he first rattled off issues Bush would emphasize, although when pressed, said it remained a key Bush second-term item. The official said that making first term Bush tax cuts permanent also remained a priority.

Bush will devote the first half of his speech to domestic matters and the second half to international issues. As for the latter, Bush will say that the trio of elections in Iraq, Afghanistan and in Palestinian territories offer evidence that democracy is expanding. And he'll reaffirm his commitment to using diplomacy to deter the nuclear ambitions of North Korea and Iran.

On Iraq, Bush will encourage the international community to support the Iraqis following their historic election last weekend, urge the international community to help train Iraqi security forces and make the struggling nation a model for democratic reform in the Middle East.

Although he will propose that families of U.S. troops killed in Iraq, Afghanistan and war zones receive an extra $250,000 in government payments, Bush is not expected to outline any exit strategy for U.S. troops as Democrats in Congress are demanding.

Under pressure from his conservative base, the president will reiterate his plans to send Congress what he's described as a "tough budget, no doubt about it" — one which he claims will slice the federal budget deficit in half in five years.

In his speech, Bush also is expected to herald gains in the U.S. economy, which finished 2004 with its best performance in five years despite slowing in the final stretch. Economic growth clocked a 4.4 percent increase for all of last year, spurred by brisk consumer and business spending, although the last quarter growth rate of 3.1 percent was the most sluggish since the first quarter of 2003.

The Associated Press contributed to this report.