SOCIAL SECURITY: PROGRAM'S BENEFITS FACE GRIM FUTURE
Washington, D.C. - If you've attended one of my town hall meetings, you are accustomed to my use of facts and figures.
I have always focused on numbers and statistics during my years of public service --- for they can assist us in projecting financial benefits and financial challenges of legislative changes into the future.
Now, I'd like to outline some grim financial statistics facing Social Security. These numbers show a financial shortfall that will undermine our children's retirement security. Social Security has to be fixed, and I want to describe the problem we face. First, it is true that Social Security is heading toward bankruptcy. Second, Social Security will not be changed for Americans born before 1950. For these Americans, your benefits are secure.
But it is clear that the numbers do not add up, and we must acknowledge that the current system design is unsustainable.
How did the financial numbers arrive in such a state of disarray?
One cause of Social Security's growing fiscal problem is demographics. Americans are living longer --- which is certainly good news. However, in terms of the Social Security system, today's life expectancy of 77 years was not contemplated when Social Security was designed. In 1935, the average American did not live long enough to actually collect benefits. In addition, millions of baby boomers will begin retiring in just three years, doubling the number of retirees by 2031. Finally, our families are having fewer children. All of these factors are causing a dramatic shift in the worker-beneficiary ratio.
This worker-beneficiary figure leads us to a critical systemic problem.
When Social Security was conceptualized in the 1930s, President Franklin D. Roosevelt envisioned a system in which each generation of workers would support its own retirement. Changes instituted in 1939 embraced the current pay-as-you-go financing, in which workers support current retirees.
When the system was first designed, there were 42 workers to support each retiree. Today, 3.3 workers support each Social Security beneficiary. When today's younger workers retire, there will only be two workers paying for every one beneficiary.
These numbers mean that just 13 years from today, the government will begin to pay out more in Social Security benefits than it gets in revenue --- and that is when the shortfalls begin growing. When today's younger workers begin to retire in 2042, the system will be bankrupt.
The financial numbers our children and grandchildren will face are staggering. Doing nothing to fix our Social Security system would mean that our children and grandchildren would have to borrow an estimated $10.4 trillion --- or $93,693 for each American household. Each year we wait costs an additional $600 billion.
Social Security needs to be fixed soon. President Bush wants to work with anyone who has a good idea.
Retirement security for the next generation should not be compromised by politics, and that is why the president and this Congress believe we must have an open review of options to strengthen Social Security --- with Republican and Democratic support.
This is an American problem that affects the retirement security of our children and grandchildren. Postponing a review of possible solutions in the face of this looming financial crisis is not in the American spirit of solving our problems.
Federal Reserve Chairman Alan Greenspan stated that Congress has the choice to do something in advance, or "wait until the problem is right on you, in which the solutions are going to be very painful."
At a Ways and Means Committee hearing I participated in recently, the Public Trustees of the Social Security Trust Fund stated, "The reason to act soon is to avoid the forced necessity of more precipitous action later."
That advice seems prudent. I do not want to face the day when we realize that our lack of action was the cause of the loss of our children's financial freedom .