Bush said that any permanent solution must include his 10-year, $ 754 billion plan for private retirement accounts, a program Democrats bitterly oppose. To soothe the nerves of those at or near retirement he said he would leave current benefits alone for Americans 55 or older.

“Fixing Social Security permanently will require an open, candid review of the options,” he told wary members of Congress and millions of Americans watching on television in a speech that laid out a blueprint for his second term.

In a speech equally divided between domestic and foreign topics, Bush promised that following Iraq’s watershed elections last Sunday the United States would begin a “new phase” and increasingly focus on training Iraqi forces to allow for an eventual US pullout.

He rejected appeals from some Democrats for setting a troop withdrawal timetable. “We will not set an artificial timetable for leaving Iraq, because that would embolden the terrorists and make them believe they can wait us out,” he said. Many Republicans put ink on their index fingers to show solidarity with Iraqis, who used this as a mark to prove they had voted, and held them high when Bush talked about the elections.

In an emotional moment that brought tears to Bush’s eyes, the parents of Sgt. Byron Norwood, a US Marine killed in Iraq, were singled out for applause. The mother, Janet, embraced an Iraqi woman near her who had been introduced as one of those enabled to vote by the US military sacrifice.

Bush reflected a growing optimism over a possible end to the Middle East conflict, saying the goal of Palestinian statehood “is within reach” and promising $ 350 million in extra aid for the Palestinians in a bid to create a favorable environment for peace negotiations.

Across the Middle East, Bush said the United States expected a “higher standard of freedom” and specifically mentioned the need for two key US allies, Saudi Arabia and Egypt, to embrace democratic reforms. He called on Syria “to end all support for terror and open the door to freedom.” Facing significant opposition to his goal of revamping Social Security this year, Bush said the system is “headed toward bankruptcy” and he wanted to work with both parties in Congress to “find the most effective combination of reforms.”

<B>Increasing the retirement age</B>

Some Democrats groaned and hissed when Bush said the system would be bankrupt by 2042. The issue is one of the most contentious in American politics and Democrats have accused Bush of engaging in scare tactics to convince people the system is in crisis. Democratic Sen.

John Kerry of Massachusetts, who lost the presidential election to Bush in November, said in a statement after the speech that the best way for bipartisanship is to work together “on the real crises facing our country, not to manufacture an artificial crisis.”

Bush laid out some options: Limiting benefits for wealthy retirees, indexing benefits to prices rather than wages, which would effectively slow their growth; increasing the retirement age, and discouraging early collection of benefits.

“All these ideas are on the table. I know that none of these reforms would be easy. But we have to move ahead with courage and honesty, because our children’s retirement security is more important than partisan politics,” Bush said to applause.

Those ideas have been talked about by politicians for years to control the program’s fast-rising costs – with 2018 looming as the year when the system begins paying out more than it takes in. But the options have never gained traction due to political opposition.

A payroll tax of 12.4 percent split evenly between workers and their employers funds the current Social Security system. Under Bush’s plan, workers could shift 4 percentage points of that contribution toward a private account. But initially the contribution would be capped at $1,000 per year and would gradually rise.

The accounts would be modeled after Thrift Savings Plans for federal government employees and would offer only a few, regulated investment options to minimize the investment risk. Various independent estimates have put the transition cost of moving to private accounts at $ 1 trillion to 2 trillion over 10 years.

The White House estimated the Bush plan would cost less than those predictions, $ 664 billion through 2015, money that would be borrowed. To service that debt would cost another $ 90 billion.

<B>Steve HOLLAND</B>

REFORM OR ROULETTE?

<B>Democrats say they will hold Bush ‘accountable’</B>

■ The top two Democrats in the Congress vowed on Wednesday to work with President Bush, but also slammed him on key issues like Iraq and his bid to revamp the Social Security retirement program. In delivering their party’s response to Bush’s State of the Union address, they also urged the conservative president to work from the political center. “We can do better,” said Senate Minority Leader Harry Reid of Nevada. Reid, in one of a number of jabs, described as a high-stakes gamble Bush’s drive to allow workers to invest some of their Social Security taxes in stocks and bonds. “The Bush plan isn’t really Social Security reform,” said Reid. “It’s more like Social Security roulette.” House of Representatives Minority Leader Nancy Pelosi of California called Sunday’s elections in Iraq “a significant step toward Iraqis taking their future into their own hands. Now we must consider our future in Iraq.” “The United States cannot stay in Iraq indefinitely,” Pelosi said. “Neither should we slip out the back door, falsely declaring victory but leaving chaos.” But, Pelosi said, “We have never heard a clear plan from this administration for ending our presence in Iraq. And we did not hear one tonight.” Reid and Pelosi spoke from a congressional meeting room shortly after Bush addressed a joint session of the Republican-led Congress. During last November’s elections, Republicans expanded their majorities in the House and Senate after they denounced Democrats as partisan obstructionists.