President Bush said on Thursday that addressing the long-term problems in Social Security would reassure the financial markets, offering a rationale to offset criticism that his plan to add personal investment accounts to the retirement system would require up to $2 trillion in new government borrowing.

On the second day of a White House conference on economic issues, Mr. Bush continued to lay the groundwork for a strong effort by the White House and its allies to overhaul Social Security and pursue an economic agenda next year that also includes re-examining the tax code, limiting lawsuit awards and reining in the growth in government spending.

"What I'm saying is we're going to submit a tough budget," Mr. Bush said, setting the stage for a new budget that holds down the growth of domestic spending. "And I look forward to working with Congress on the tough budget."
As he did throughout his re-election campaign, Mr. Bush largely avoided talking about the specific steps to assure the long-term solvency of Social Security. Social Security trustees estimate that if no changes are made, the system will start running short of money to pay full benefits to retirees in 38 years.

In particular, Mr. Bush never mentioned the near certainty that without raising taxes, which he has ruled out, any plan to add personal investment accounts to Social Security and improve its financial condition would include a reduction in the guaranteed retirement benefit. 

His aides say there really is no guaranteed benefit in the long run, because without any changes to the system, Social Security will not be able to afford to meet its promises.

Mr. Bush used the conference, which was intended to build public and legislative support for his agenda, to begin addressing the likelihood that the plan on personal accounts would require borrowing hundreds of billions or even trillions of dollars at a time the government runs up large deficits. A big new borrowing program could bring political and economic risks for the administration.

Mr. Bush, his aides and some participants in the conference suggested that addressing the long-term financial pressures on Social Security would give new confidence to the financial markets by showing the government to be confronting one of its biggest economic problems, the imbalance between the benefits it has promised to future retirees and the revenue that Social Security, set up as it is now, can be counted on to generate to money for those benefits.
Their basic argument was that borrowing as much as $2 trillion in the short run would be a bargain, because it would help create a new system that would take care of the more than $10 trillion in benefits payments over the next 75 years that the government has not provided for.

Mr. Bush cast dealing with the long-term problems of Social Security as part of a broader fiscal policy approach under which he would also meet his promise of cutting the budget deficit in half over five years. 

The president has not fully explained how he would sharply reduce the deficit while also absorbing the costs of his Social Security program, pursuing new tax cuts and paying for the war in Iraq.

Mr. Bush said his administration would "send a message not only to the American people that we're here for the right reason, but we'll send a message to the financial markets that we recognize we have an issue with both short-term deficits and the long-term deficits of unfunded liabilities to the entitlement programs." 

Sitting with him at a panel discussion on Social Security and other budget questions, Liz Ann Sonders, chief investment strategist at the Charles Schwab brokerage firm, said a plan to address long-term fiscal imbalances was "absolutely what the market wants to see." 

Mr. Bush's spokesman, Scott McClellan, said later, "Markets will look favorably on a plan that addresses the long-term sustainability of Social Security."

One expert who was not at the conference, Gary Gensler, a former top executive at the Goldman Sachs investment firm and the official in the Clinton administration who oversaw government borrowing, said Mr. Bush and his team were wrong in saying the markets would forgive additional borrowing in the short run to ease the need for borrowing in the long run.

"Their politics are overwhelming their economic reason," Mr. Gensler said in a phone interview, referring to the Bush administration. "They have to diffuse the issue of the $2 trillion. So they're saying that we already have this obligation and we're just changing it from an actuarial imbalance into a legal debt."

The markets, Mr. Gensler added, "aren't going to see it that way" and would probably drive up interest rates.

The first order of business on Social Security, Mr. Bush told the conference, was "to convince people that there is a problem that needs to be addressed."

There were no real dissenting viewpoints from the panelists. Away from the conference, some opponents of Mr. Bush's approach, mostly liberals who want to preserve the current Social Security program, said in interviews that the administration was exaggerating the scale of the problem to create an air of crisis that justified radical but unnecessary changes like creating private investment accounts.

Noting that Social Security can pay full benefits for at least 38 years, Mark Weisbrot, co-director of the Center on Economic Policy Research, a liberal research group, said the system's financial condition now was no worse than it has been at most points in the last few decades.

"This whole idea that Social Security needs to be fixed is false," Mr. Weisbrot said.

Democrats in Congress say they support taking some action to deal with Social Security. But many say Mr. Bush is leaving the false impression that personal investment accounts will take care of the system's financial problem.

"If the president insists on privatizing Social Security," Representative Robert T. Matsui, Democrat of California, said, "he needs to tell us how he's going to pay for the enormous costs and how the benefit cuts imposed will affect future retirees."