Trustees Foresee an Earlier Insolvency for Social Security
By DAVID STOUT
ASHINGTON, March 23 - The Social Security and Medicare programs will run short of money even faster than recent projections had anticipated, trustees for the programs said today in a report that immediately intensified an already bitter political debate.
Beginning in 2017, not 2018 as previously projected, the revenue from Social Security payroll taxes will be less than the benefits the government will be paying out, Treasury Secretary John W. Snow said, forcing the government to dip into reserves.
Moreover, those reserves, which have been built up by surpluses and will keep benefits at their normal levels even after payroll taxes are insufficient, will be depleted in 2041, not 2042, as previously anticipated, Mr. Snow said. After 2041, under the new projections, the government could pay only three-quarters of the promised level of benefits.
"The numbers published today leave no question that Social Security reform is needed, and it is needed soon," Mr. Snow said in a message accompanying release of the trustees' report. "Reform of this system, for the sake of our children, grandchildren and the financial future of our country, is a very real and pressing matter."
And Medicare faces even greater long-range challenges, Mr. Snow said, because of spiraling increases in health care costs in addition to the demographic trends: baby-boomers marching into retirement, to become an army of beneficiaries.
Mr. Snow said Medicare's hospital insurance trust fund is now projected to become insolvent in 2020 - a year earlier than anticipated in last year's report.
President Bush and his Republican allies in Congress can be expected to seize upon today's report to argue that changes are needed now - and Democrats were already accusing Republicans of distortion and promoting unsound ideas.
Mr. Bush has ruled out an increase in the payroll tax rate, now 6.2 percent, to finance Social Security. But he has not ruled out raising the ceiling for the income to be taxed, now $90,000. Medicare is also financed through payroll taxes (1.45 percent on all earnings) and gets additional money from general federal revenues. Employers must match worker contributions to both programs.
The centerpiece of Mr. Bush's proposals for change is the creation of personal, individual accounts within the Social Security system for people who are not now close to retirement age.
Mr. Bush has championed such accounts, which would be voluntary, as a way for people to accumulate more savings, through conservative stocks and bonds, than they could expect to get in straight Social Security payments.
But Democratic critics say Mr. Bush's idea will weaken Social Security by diverting money from the payroll taxes that finance it and will only lead to earlier insolvency. They have said, too, that Medicare faces bigger long-range problems than Social Security does, despite the president's recent emphasis on the latter program in his cross-country trip to promote his ideas.
"The so-called Social Security crisis exists in only one place: the minds of Republicans," said the Senate minority leader, Harry Reid, Democrat of Nevada, noting that the Congressional Budget Office had estimated that even without changes, the system could pay full benefits until 2052, or 11 years longer than today's estimate by the trustees, and then be able to pay 78 percent of benefits.
"The program is on solid ground for decades to come," Mr. Reid said. "We need to address the program's long-range challenges, but it would make no sense to cut Social Security's funding by diverting payroll taxes from the trust fund."
The A.F.L.-C.I.O. president, John Sweeney, agreed with Mr. Reid that today's report showed the basic soundness of Social Security. "There is no need to rush into a reckless scheme to divert trillions of dollars out of the Social Security trust funds and into private accounts," he said. "Let's take the time to get it right."
Senator Reid said he and his party colleagues were eager to work "in a bipartisan way" to solve the problems of the retirement and medical-care systems for the elderly.
Treasury Secretary Snow sounded a similar note. "Successful reform of these programs should be seen as a shared responsibility, not an opportunity to engage in partisan politics," he said.
The six-member board of trustees for Social Security and Medicare is not entirely devoid of politics. Mr. Snow heads the board, whose other members include Labor Secretary Elaine Chao and Secretary Michael O. Leavitt of the Department of Health and Human Services. The other members are Social Security Commissioner Jo Anne Barnhart and two public trustees: Thomas Saving of Texas and John L. Palmer of New York.
Ms. Barnhart was nominated for a six-year term as commissioner by President Bush and confirmed by the Senate in 2001. She previously held posts in the executive branch and in Congress and was once a top aide to Senator William V. Roth Jr., Republican of Delaware.
Dr. Saving is a professor of economics at Texas A&M University. He was appointed to the Social Security and Medicare board by President Bill Clinton. He has also served on President Bush's Commission to Strengthen Social Security. Dr. Palmer, also appointed by President Clinton, is an economics professor at Syracuse University.
Copyright 2005 The New York Times Company | Home | Privacy Policy | Search | Corrections | RSS | Help | Back to Top |
