Retirees May Face Benefit Cuts If Social Security Isn't Changed
Associated Press
WASHINGTON -- Social Security benefits to retirees would have to be cut by nearly a third by 2039 if no changes are made to the system to keep it afloat, congressional investigators said Tuesday.
The General Accounting Office, the investigative arm of Congress, examined the current system and how it fares for future retirees in a report prepared for Sen. Larry Craig (R., Idaho), chairman of the Special Committee on Aging, which met Tuesday.
To avoid cuts in benefits, payroll taxes would have to be raised 46% to restore financial solvency to the system, the report said.
The sooner Congress addresses the inevitable decline in Social Security revenue when baby boomers begin retiring in five years, the easier it will be for future generations to keep the system afloat, the report concluded.
"The squeeze on the federal budget will begin as the baby boom generation starts to retire," Comptroller General David Walker, who heads the GAO, said in his testimony. "Actions taken today can ease both these pressures and the pain of future actions."
But with the 2004 election already looming over Congress and the White House, little more than campaign rhetoric is expected in the coming year.
Several Republicans and Democrats have called for a cease-fire on Social Security as a campaign tool, but so far, that idea has not gained widespread traction.
President Bush in his 2000 campaign advocated letting younger workers invest a portion of their payroll taxes in the stock market, helping to shore up future funding. But the commission he appointed to recommend a plan got sidelined by the 2001 terrorist attacks.
Massive, record federal deficits -- $455 billion for this year and $475 billion for next -- and military and financial obligations in Iraq and Afghanistan, have called into question whether the White House can realistically lead Social Security reform any time soon.
Last year, Social Security paid nearly $454 billion in benefits to more than 46 million people. Beneficiaries are expected to grow to more than 68 million by 2020 as the large baby boom generation settles into retirement.
Also, fewer workers will be paying into the system to fund benefits for the huge number of retirees. Falling fertility rates threaten the system's financial future even further.
Labor force growth will begin to slow after 2010, and by 2025 it is expected to be less than a third of what it is today.
Copyright (c) 2003 The Associated Press
Updated July 29, 2003 11:56 p.m. |
