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Summary

Although the Social Security system is now running surpluses of income over outgo, its board of trustees projects that its trust funds would be depleted in 2037 and only 72% of its benefits would be payable then with incoming receipts. The trustees project that on average the system's cost would be 14% higher than its income over the next 75 years; by 2075 it would be 46% higher. The primary reason is demographic: the post-World War II baby boomers will begin retiring in less than a decade and life expectancy is rising. By 2025 the number of people age 65 and older is predicted to grow by 75%. In contrast, the number of workers supporting the system would grow by 13%. The trustees project that Social Security's surplus of taxes and interest will cause the system's trust funds, comprised exclusively of federal bonds, to grow to a peak of $6 trillion in 2024. The system's outgo would thereafter exceed its income and the trust funds would fall until their depletion. However, the trustees project that the system's taxes by themselves would fall below its outgo in 2015. At that point, other federal receipts would be needed to help pay for benefits (in effect making good on the federal bonds held by the trust funds). If there are no other surplus governmental receipts, policymakers would have three choices: raise taxes or other income, cut spending, or borrow the money. Mirroring this adverse outlook are public opinion polls showing that fewer than 50% of respondents are confident that Social Security can meet its long-term commitments. There also is a widespread perception that Social Security may not be as good a value in the future as it is today. These concerns and a belief that a remedy lies partly in increasing national savings have led to proposals to substantially revamp the system. Others suggest that the system's problems are not as serious as its critics claim. They argue that it is now running surpluses, that the public still likes it, and that there is risk in some of the new reform ideas. They contend that only modest changes are needed. Today, the ideas range from restoring solvency with minimal changes to scrapping the system entirely for something modeled after IRAs or 401(k)s. This broad spectrum was clearly reflected in the report of a 1997 Social Security Advisory Council. Three very different plans were presented, none of which received a majority's endorsement. Similar diversity is reflected in the many reform bills introduced in the 105th and 106th Congresses. In his January 2000 State of the Union message, President Clinton renewed his call for crediting the Social Security trust funds with general revenues equal to the interest savings achieved by using Social Security surpluses to buy up publicly-held federal debt. In his 1999 message, he had proposed general fund infusions equal to a little more than half of the next 15 years' overall budget surpluses. Under both proposals part of the trust funds were to be invested in stocks. Presidential candidate George W. Bush favors allowing workers to put some of their Social Security taxes in personal accounts where they could invest in stocks if they desired to. Presidential candidate Al Gore supports the President's plan, but not the part calling for investing the trust funds in stocks. He does endorse, however, the creation of personal accounts with government matching contributions, which workers could invest in stocks.

Related Legislation:
• S.1999

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