Bush issues call to slash spending, create TSP-like retirement system

Calling the state of the union "confident and strong," President Bush issued a call Wednesday evening for steep cuts in domestic spending and for the creation of a system of private retirement accounts similar to the federal Thrift Savings Plan within the Social Security program.

"America's prosperity requires restraining the spending appetite of the federal government," Bush said. "I welcome the bipartisan enthusiasm for spending discipline."

Bush promised to send a budget to Congress next week that will hold the growth of discretionary spending below inflation and cut the federal budget deficit in half by 2009.

"My budget substantially reduces or eliminates more than 150 government programs that are not getting results, or duplicate current efforts, or do not fulfill essential priorities," Bush said. "The principle here is clear: A taxpayer dollar must be spent wisely, or not at all."

Based on preliminary figures published by the Office of Management and Budget last year, George Krumbhaar, a longtime congressional staffer now working as a private consultant, projects that more than half of nondefense discretionary programs will see proposed funding cuts in fiscal 2006, nearly double the average in recent years.

The cuts will come on top of a tough fiscal 2005 budget that held government programs outside of homeland security and defense to an average 1 percent increase.

But the administration has had limited success in convincing Congress to eliminate programs it has rated as performing poorly. In the fiscal 2005 omnibus appropriations package passed late last year, Congress funded all but one of 13 programs that President Bush proposed eliminating because OMB evaluators had concluded they were ineffective or could not demonstrate they were achieving intended results. Two of the 13 programs received budget increases.

Only one program the administration had targeted for elimination--a Small Business Administration effort to provide startup companies with technology and reference materials--actually was canceled. It had received $14 million in fiscal 2004, but earned a "results not demonstrated" rating on OMB's evaluation.

While calling for domestic spending cuts, Bush boasted in his address of recent efforts to beef up federal operations. "We have created a new department of government to defend our homeland, focused the FBI on preventing terrorism, begun to reform our intelligence agencies, broken up terror cells across the country, expanded research on defenses against biological and chemical attack, improved border security, and trained more than a half million first responders," he said.

The president also called in his speech for the creation of private retirement investment accounts under the Social Security program. Such accounts "should be familiar to federal employees, because you already have something similar, called the Thrift Savings Plan, which lets workers deposit a portion of their paychecks into any of five different broadly based investment funds. It is time to extend the same security and choice and ownership to young Americans."

With more than 3 million investors, the TSP is the largest individual-account retirement system in the country, and some say that's proof that an efficient system at least that large is possible. But whether the TSP model could expand successfully to more than 100 million workers remains to be seen.

Shawn Zeller, Amelia Gruber and Denise Kersten contributed to this report.