Treasury Secretary Snow
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Treasury Secretary John Snow:
August 14th marks the 70th anniversary of the creation of Social Security, one of the great successes of 20th century American government, and there’s never been a more important time to plan for a future that builds on the program’s history of accomplishment.
Since its inception, Social Security has helped alleviate poverty among the elderly and has improved retirement security for millions of American families. The program has a proud and important history; it ought to have a promising future for the sake of for our children and grandchildren.
But today, in its 70th year, Social Security faces grave challenges. In 2017, Social Security will begin to pay out more in benefits than it receives in revenues. In 2041, the trust fund will go broke. The reason for this change, this switch from being “in the black” to “in the red” is due to our country’s changing demographics. In 1950, 16 workers paid into the program for every retiree. Today, there are only three.
The program will be solvent for current retirees, and those who will retire soon. But the children and grandchildren of those generations are not so lucky. We need to act now to make sure the benefits of the program are there for them. Waiting to fix the program would be costly and imprudent. For each year we wait, we add $600 billion to the existing $11.1 trillion short-fall. In other words, looked at on a long-term basis, Social Security represents an $11 trillion fiscal hole which is rising annually by $600 billion. The longer we wait, the bigger the hole becomes, the fewer good policy options we have to fix it. Now is the time to act.
To address these problems, President Bush is seeking a permanent solution, not a “band-aid” approach of tax increases that has been used over 20 times in the past, and has never succeeded as a permanent fix.
The President has instead embraced progressive benefit growth to strengthen Social Security’s solvency. This allows all future retirees to receive larger benefit checks than similar retirees receive today, even after inflation. Lower- and middle-income workers would receive the largest growth in benefits, while those earning the most would see their benefits grow at the rate of inflation. Such a plan would eliminate 70 percent of the funding shortfall.
The President also believes that voluntary personal retirement accounts are the best way to modernize Social Security for a new century. These optional personal accounts would give working Americans the opportunity to build a secure nest-egg of retirement savings that they own. For millions of Americans who never before had the opportunity to save or invest, this would be a great financial milestone on the road to a secure retirement. The option to save a portion of one’s Social Security taxes in a conservative mix of bonds and stocks would build real savings that could be relied upon in retirement – assets that could be passed on to loved ones, unlike today’s Social Security benefits.
Personal accounts would also stop the practice of the government writing itself IOUs while spending workers’ money on unrelated programs. The total amount of Social Security surpluses that have been spent on other programs is at $1.7 trillion today. Allowing workers to put their Social Security dollars in personal accounts would be the ultimate “lock box” for their hard-earned retirement dollars.
Social Security’s 70th anniversary reminds us of how far we have come, and how important it is to protect this program for future generations. Let’s celebrate this milestone by giving the gift of a solvent program – and one that increases individuals’ control over their own dollars – to our children and grandchildren.
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Former Senator Bob Dole