President Bush outlined his politically risky plan to revamp the Social Security retirement system in a State of the Union speech yesterday night that also stressed the need to stay the course in post-election Iraq. The US Constitution says the president shall from time to time report on the state of the union, and it is an annual exercise that Bush this year will use to lay out a second-term blueprint, from the need for fiscal discipline in the US budget to urging North Korea to return to talks on its nuclear program.

But Social Security and Iraq are the lead priorities, and Bush is under pressure on both fronts. Minority Democrats are already calling his cherished plan for private retirement accounts dead, and on Iraq, they are demanding a specific exit strategy, which the president has been unwilling to give. Bush spoke at 9 pm (0200 GMT yesterday) 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 whose regular television programming will be pre-empted.

The White House said Bush would for the first time give specific details of his Social Security overhaul plan and offer to work with Democrats to get it passed this year. He is expected to say that to reduce the impact on the budget deficit, he would phase in the changes. ?This is not legislation or every aspect of how the reforms should take place, but it will advance the ball. It will move forward the debate about why we need to permanently fix the Social Security system,? said a senior Bush administration official.

<B>Bush to warn of cuts</B>

Bush was to argue Social Security benefit cuts or tax increases if the system is left as it is and will offer to provide the ?political leadership? to change it, the official said. Democrats fear Bush?s plan to let workers have the option of investing part of their earnings in private accounts would put them at the mercy of the whims of the stock market. They are also worried about the impact on already yawning US budget deficits due to the estimated transition cost of $ 1 trillion to $ 2 trillion over 10 years. Many of Bush?s fellow Republicans are also wary, fearing in particular they could suffer at the ballot box if voters perceive they are tampering with government benefits on which millions of Americans depend.

Senate Democratic leader Harry Reid of Nevada said on Tuesday that none of the 44 Democrats in the Senate would back a plan that diverts Social Security taxes into accounts that workers would invest in stocks and bonds. Opponents argue it would only add to Social Security?s financial problems, force big cuts in benefits and add to ballooning budget deficits. ?President Bush should forget about privatizing Social Security,? Reid. ?It will not happen. The sooner he comes to that realization, the better off we are.? On Iraq, Bush will cite the Iraqi elections on Sunday as evidence US policy is working, and say the American mission there must continue until Iraqi security forces are trained and equipped to defend themselves.

?He will talk about our mission and our mission is very clear: We will help the Iraqi people train their own security forces so they can control their own destiny,? the senior official said. House Democratic leader Nancy Pelosi of California said Democrats were not calling for a strict troop withdrawal timetable, but said Bush needs to craft an exit plan. ?It doesn?t have to be a strict timetable. But the president must begin the process, and if he does not announce that tomorrow night at the State of the Union then I think he will be seriously delinquent,? Pelosi said on Tuesday.

<B>By Steve HOLLAND</B>