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How to save Social Security


SINCE its creation in 1935, Social Security has been the most successful social program in our nation's history. It has fulfilled its promise to keep seniors out of poverty and to provide income security to the disabled.

But Social Security has become the victim of its own success. Known as the "third rail" of American politics -- touch it and you die -- the program has been resistant to reform. Politicians have long feared that any attempt to change the program will anger voters.

Times have changed. The days of treating Social Security as an untouchable program should be over.

President Clinton, in his State of the Union address last January, promised to lead a national debate on the need to develop a bipartisan plan to save Social Security.

Social Security benefits are paid for through the payroll taxes of current workers. The program's pay-as-you-go structure has succeeded because there have always been enough workers paying into the system to fund the benefits being paid out.

21st century squeeze

The demographics of the baby boom generation will put an end to surpluses and begin to sap the program. By 2014, Social Security taxes will no longer be enough to cover benefits. By 2032, Social Security will have enough money to pay 75 percent of benefits.

In an effort to find a solution to the long-term fiscal problems of Social Security, the president is playing host to a summit on Social Security this week. As a participant in this summit, I believe that any solution to saving Social Security must include four goals.

First, we must ensure that Social Security continues to provide ,, an inflation-proof retirement benefit that lasts as long as the beneficiary lives. Currently, two-thirds of seniors depend on Social Security for more than half their income; 16 percent of seniors rely solely on Social Security for income.

Second, we must ensure the long-term solvency of Social Security. One way to do this is to improve the return on the investment of today's workers. Currently, every dollar in the Social Security Trust Fund is invested in Treasury bonds that have a long-term yield of 2.7 percent after inflation.

The comparable rate of return on diversified equity investments is 7 percent. By investing a portion of the trust funds in private markets, we can improve the financial outlook for Social Security.

Third, we must preserve Social Security as a safety net for disabled people, survivors and poor seniors. In addition to retirement benefits, Social Security also provides income security for such people. In 1996, 4 million children received Social Security survivor benefits and more than 6 million Americans received disability benefits.

Our final goal must be to encourage Americans to save for their retirement. Social Security was never intended to be the sole source of support for retirees.

That was true in 1935 when the program was created. It is even more true now, when Americans have a much broader range of options for private savings than they did 60 years ago.

At the same time, there is growing skepticism among millions of Americans that Social Security will be there for them when they retire.

Emphasis on savings

Social Security reform represents a perfect opportunity to address these related issues. With personal savings as a percentage of income having fallen from 7.6 percent in 1965 to 3.8 percent in 1997, we must look for ways to give Americans, and especially younger workers, incentives to save for retirement.

The challenge facing the country is to make sure Social Security is there for future generations, while we also give those generations, beginning with the 20-somethings of today, the tools they need to provide for their retirement.

The creation of Social Security was a historic moment in building a stronger America for the 20th century. The debate over rebuilding Social Security this year will be a critical moment in strengthening America for the 21st century.

This week's White House Summit on Social Security can focus attention on the need to reform our nation's most treasured and successful social program.

Benjamin L. Cardin represents the 3rd Congressional District in the House of Representatives.

Pub Date: 12/08/98

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