September 25, 2007
The Bush administration stepped up its attempt to build support for restructuring Social Security yesterday, saying in a Treasury Department report what it has said elsewhere: that the popular program will require either tax increases or cuts in benefits to remain viable in its current form.
For much of the past year, Treasury Secretary Henry M. Paulson Jr. has been meeting with members of Congress from both parties in hopes of provoking action to put Social Security on secure financial footing. While those discussions have yielded no solutions, Paulson said, they have revealed that members of Congress share the administration's concern about severity of the problem.
"While differences over personal accounts and taxes dominate the public debate over this issue, in my conversations, I found that there are many other things on which people agree," Paulson said in a statement released with an issue brief by the department. "Everyone I talked with recognizes the seriousness of the problem, and most agreed on some of the principles and policies that must be part of the solution."
Social Security is coming under intensifying financial stress as baby boomers begin to retire. The system, according to the report, is projected to begin paying out more in benefits than it collects in payroll taxes by 2017. Without changes, by 2041 Social Security would have depleted all of its reserves and lawmakers would have to either raise taxes or the system would have to pay substantially lower benefits than it now promises.
The longer policymakers wait to address the problem, the more severe the tax increases or benefit cuts will have to be, the report said, echoing warnings made by others, including Social Security trustees and congressional researchers.
After his 2004 re-election, President Bush proposed a plan to restructure Social Security by reducing future benefits promised to middle- and high-income workers while allowing younger workers to divert a portion of their Social Security taxes into personal investment accounts.
That would have for the first time subjected the popular New Deal-era program to the whims of the investment market, a change that would have removed the rock-solid promise about the level of Social Security benefits collected by retirees but was a change Bush and others said would allow workers to probably come out ahead.
The proposal, however, was crushed by Democratic opposition and Republican skepticism, and it was dropped before coming to a vote in Congress.
Paulson has been pushing to revive the discussion of Social Security's future since taking office last year. He said the issue papers that Treasury plans to release over the next three months will build on the shared concern over Social Security's future by dispassionately laying out the problems and some ways to fix them. Future issue papers will examine some of those remedies, including the effect of indexing benefits by income.
"By focusing on areas of agreement, I hope these issue briefs will narrow the divide and spur further discussion of reforms," Paulson said in the statement. Paulson believes "the solutions are known," added Michele Davis, a Treasury spokeswoman. "It's just a matter of how you put the pieces together," she said.
Given the coming presidential election and Bush's unpopularity, administration officials have all but abandoned hopes of enacting an overhaul of Social Security before the president's term ends in 16 months. But Paulson has said he would consider it an achievement if he could remove some partisanship from the debate, Davis said.
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