WASHINGTON -- Treasury Secretary Henry Paulson reminded Congress this week that Social Security's shaky financial structure is only going to get worse unless something is done to fix it, sooner rather than later.
A sobering report on the growing financial insolvency of the nation's biggest income-transfer program warns that Social Security faces a $13.6 trillion shortfall in the not-too-distant future.
A tsunami wave of baby boomers who begin retiring at the end of this decade means that by 2017 (just 10 years from now), Social Security will begin paying out more in benefits than it receives in payroll taxes.
The government projects the system's so-called reserves will be spent by 2041, and we will face two very unpopular choices: Cut future benefits substantially or raise payroll taxes through the roof.
The White House pointedly stated this week that both were out of the question on President Bush's watch. For his part, Paulson must believe that any increase in taxes would undermine future economic growth. His purpose, rather, is to get Congress thinking again about restructuring the system so that we can save it, perhaps in a much different form, for future generations.
Still, the report's stark choices -- hike taxes or slash benefits, or both -- left out the possibility of pursuing another reform: Let workers put some of their payroll taxes into personal-investment accounts they would own and that would yield higher returns on their money and thereby build a larger retirement nest egg than Social Security could ever hope to provide.
Bush, to his credit, bravely tried to sell this idea after his re-election, but it failed to win much support in Congress. House and Senate Democratic leaders, with their heads in the sand, said the system was in good shape and not in any danger of insolvency (when they knew better).
In a shameful case of demagoguery and fear mongering, Democrats and the AARP, the nation's retiree lobby, said Bush's idea would destroy Social Security and workers risked losing all of their money in the stock market.
Support for the idea plunged and sent frightened Republicans into the tall grass. The proposal never reached a vote in Congress.
Everyone apparently forgot that President Clinton proposed letting the government invest some payroll taxes in the stock market, in the belief that the higher returns could be used to finance future benefit checks.
His dopey scheme went nowhere. The idea of the government buying stocks and owning huge portions of the economy was pure socialism and would wreak havoc in our economy. Still, Clinton's proposal was based on a larger point: A sturdy retirement system requires investments, and one of the best places to build wealth is in the stock market.
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