Money Challenges Must Be Addressed
President Bush has said strengthening Social Security will be a top priority of his administration. This is welcome news for today’s and tomorrow’s workers, who pay a portion of their hard-earned wages in exchange for the promise of income security should they become disabled, retire or die.
Much has changed since Social Security was created in 1935. Americans are living longer, families are having fewer children and baby boomers will soon start retiring. As a result, where there used
to be 40 workers per retiree, there are now only about three, and soon it will fall to two workers per retiree. These demographics matter because Social Security is not a savings plan. The taxes paid by today’s workers finance the benefits of today’s retirees, and as the number of workers per retiree declines, Social Security’s finances worsen. The math just doesn’t add up.
According to Social Security’s independent scorekeepers, benefits promised under current law will exceed revenues in just 14 years. If left alone, by the time today’s 29-year-olds hit their full retirement age, Social Security will only be able to pay out 73 percent of benefits. While current retirees or those nearing retirement will receive 100 percent of what they have been promised, their children and grandchildren face an uncertain future unless we strengthen Social Security’s finances.
Addressing Social Security’s financing challenges will take hard work. We must make strengthening Social Security a fiscal priority, because there is no free lunch. Policymakers must eventually choose between slowing the growth of benefits, raising taxes, borrowing or finding other ways to increase Social Security’s revenues.
In the past, Congress addressed imminent Social Security funding crises by increasing Social Security taxes, raising the retirement age, and other benefit reductions. These strategies only deferred the day of reckoning and failed to create a firm financial footing for Social Security. That is why, once more, Social Security faces a financial shortfall. However, this challenge also creates an opportunity for Social Security to evolve beyond its Great Depression roots and into the 21st century.
If we learn from history and take the difficult step of acting before the crisis is at hand, we could do more than simply secure a modest (but vital) Social Security benefit. We could also give all workers an opportunity to own and control a voluntary personal account — a retirement nest egg that would back Social Security benefits with tangible assets instead of government promises and could be passed to children and grandchildren. According to scorekeepers from both the Clinton and Bush administrations, plans that include personal accounts: 1) provide sustainable funding for Social Security; 2) improve the government’s bottom-line in the long run; and 3) reduce or eliminate the need to increase taxes or cut benefits.
Social Security’s financial shortfall is already on the books. The funds we dedicate to making voluntary personal accounts part of the program will help close that gap. Like families who invest in a new home or a new business, personal account plans build assets today to ensure a sound, sustainable Social Security in the future.
The most important question lawmakers must ask themselves at this critical crossroads is whether they will legislate for the next generation, not the next election.
Lawmakers who are serious about strengthening Social Security for our children and our grandchildren will need to think boldly and focus on the long term. Any plan that shores up Social Security addresses one of the greatest long-term fiscal challenges the federal government faces, and involves tough choices.
The greatest disservice to our children and grandchildren would be to give in to those who stick their heads in the sand and claim there is no problem to be fixed and who simultaneously use Social Security as a political club to beat down those who would dare to strengthen it. Inaction does not mean Social Security will be preserved the way it is. It ultimately means today’s younger workers, as well as future workers, will face benefit reductions of nearly one-third, payroll tax increases of nearly 50 percent, unprecedented debt or severe cuts in other government programs.
The seniors with whom I’ve spoken do not want to leave that kind of legacy to their families, nor should any responsible lawmaker.
Rep. Clay Shaw (R-Fla.) is chairman of the Ways and Means subcommittee on Social Security.