Reform Key to Strengthening Social Security
By John W. Snow
Social Security remains on an unsustainable course, requiring prompt, responsible and bipartisan action to fix the program for our children and grandchildren. The government has made promises it cannot afford to keep under the current "pay-as-you-go" system, and President Bush is leading administration-wide efforts to strengthen and save the 70-year-old program for future generations.
America's changing demographics are at the heart of the system's pending insolvency. It used to be that 16 workers paid taxes to support one retiree, but that ratio has dropped to nearly 3-to-1 today and will be 2-to-1 by the time today's young workers retire. By 2017, Social Security will be paying out more in benefits than it takes in. By 2041 ? when younger workers begin to retire ? the system will be bankrupt.
President Bush has laid out principles for reform ? such as not changing benefits for those Americans 55 or older, not increasing the payroll tax rate and the creation of voluntary personal accounts so that younger workers can build a nest egg ? but he has also asked that the American people have dialogue, and that the Congress bring forward a variety of proposals. That dialogue is occurring and those proposals are coming forth, so great progress is being made toward a more specific plan to save and strengthen the system.
Voluntary personal retirement accounts are a key component of reform. Personal accounts would replace the empty promises of the current system with real assets of ownership. A young person who earns an average of $35,000 a year over his or her career would have nearly a quarter million dollars saved in his or her own account upon retirement.
The President's call to achieve permanent solvency, without tax increases, and to include the creation of voluntary personal accounts will substantially improve the system. By enacting comprehensive reform, we would also eliminate the long-term threat of Social Security's unfunded obligation. Personal retirement accounts will actually pre-fund retirement benefits that the current pay-as-you-go system owes already. It's like when someone prepays their home mortgage ? sure, you incur costs now, but it reduces bigger costs down the road.
In the State of the Union Address, President Bush called for an open, candid review of the options to strengthen Social Security permanently for our children and grandchildren. The President pledged to work with members of Congress to find the most effective combination of reforms. The President believes that we must move ahead with reform, because our children's retirement security is more important than partisan politics.
For more information, please check www.StrengtheningSocialSecurity.gov.
About the Author
President George W. Bush nominated John William Snow to be the 73rd Secretary of the Treasury on January 13, 2003. Snow graduated in 1962 from the University of Toledo. He later earned a Ph.D. in economics from the University of Virginia. Snow graduated with a law degree from the George Washington University in 1967, and then taught economics at the University of Maryland and University of Virginia, as well as law at George Washington.
