2003 Social Security Trustees’ Report
• Point: The Trustees’ Report shows that inaction is not an option
The report clearly shows why inaction on Social Security is not a responsible option, and why President Bush is right to call for bipartisan action to modernize Social Security for the 21st century.
“Although (Social Security and Medicare) are currently running annual surpluses, these will give way to rapidly rising annual deficits soon after the baby boom generation begins to retire in about 2010. The growing deficits will lead to rapidly mounting pressures on the Federal budget in a decade and exhaustion of trust funds beginning in little more than two decades that will not permit full payment of currently scheduled benefits. In the long run, these deficits are projected to grow at unsustainable rates.” – From the Summary of the 2003 Report
“Though highly challenging, the financial difficulties facing Social Security and Medicare are not insurmountable. But we must take action to address them in a timely manner. The sooner they are addressed the more varied and less disruptive can be their solutions.” – From the Summary of the 2003 Report
The 2000 report issued by the Trustees during the Clinton administration similarly stated: “The Board of Trustees believes that the long-range financing problem facing Social Security should be addressed in a timely way.” Recently, Alan Greenspan also stated, “The aging of the population means that the government will inevitably need to make a number of changes to its retirement programs. . . Early initiatives to address the economic effects of baby-boom retirements could smooth the transition. . . If we delay, the adjustments could be abrupt and painful.”
• Point: The data in the report support the Trustees’ call for action.
The Trustees’ report makes it clear that we cannot afford to wait until insolvency is near before acting to strengthen Social Security.
“Overemphasis of . . . the 75-year period can lead to incorrect perceptions and policy that fails to address sustainability. . . extending the calculations (to the infinite time horizon) adds $7.0 trillion (in present value) to estimated unfunded obligations, making the total open group unfunded obligation $10.5 trillion.” — p.61 of the Report
“The annual cost of Social Security benefits represents 4.4 percent of gross domestic product (GDP) today and is projected to rise to 7.0 percent of GDP in 2077.” — From the Summary of the 2003 Report
“Projected OASDI tax income will begin to fall short of outlays in 2018 and will be sufficient to finance only 73 percent of scheduled annual benefits by 2042, when the combined OASDI trust fund is projected to be exhausted.” — From the Summary of the 2003 Report. These annual cash deficits would grow without bound under current law.
• Point: Personal accounts are critical to ensuring system sustainability
Past Social Security rescues have focused solely on tax increases and benefit reductions. Personal Social Security accounts embody the required “creative thinking” about “changing needs.” Independent analyses show that Social Security will offer higher benefits for the money if personal accounts are established. They also verify that the proposals would not change benefits for those now in or nearing retirement.
Of the existing legislative proposals to attain Social Security solvency, only the personal account proposals would make the program permanently sustainable.
The report shows near-term Social Security surpluses (through 2018) followed by large long-term deficits. This is precisely the situation that calls for personal accounts, which allow for the investment of near-term surpluses to reduce long-term deficits.
With informed public discussion and creative thinking that relates the principles underlying these programs to the economic and demographic realities of the 21st century, as well as to the changing needs and preferences of working and retired households, Social Security and Medicare can continue to play a critical role in the lives of all Americans.” – From the Summary of the 2003 Report
• The public agrees with the Trustees that inaction is not an option
The public cares too much about Social Security to tolerate the “do nothing” plan in the face of the evidence presented in the Trustees’ report. This is why personal account advocates – as the only ones with specific proposals for sustaining Social Security – are carrying the day.
A Zogby poll in July 2002 found that voters favored allowing younger workers the option of investing a portion of their payroll taxes in a personal account by a margin of 59% to 34%. — Zogby International, July 8-12, 2002
39% of the opponents of personal accounts said that they would be more likely to shift towards favoring accounts, rather than back a candidate for office who opposed personal accounts while offering no plan for making Social Security sustainable. – Zogby International, July 8-12, 2002
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1 Final Report of the President’s Commission to Strengthen Social Security, December 2001. , “Analysis of Reform Models Developed by the President’s Commission to Strengthen Social Security,” General Accounting Office. Sample quote: “Median monthly benefits. . . for those choosing individual accounts are always higher. . . than for those who do not choose the account. . .” — p.6. Memoranda by the Office of the Chief Actuary of SSA.
