NEW YORK, Jan 6 (Reuters) – The White House has written a memo arguing that changing the Social Security system will require reducing benefits as well as setting up private investment accounts, The Wall Street Journal reported on Thursday.
The memo, addressed to the administration’s conservative allies, is an attempt by the White House to convince members of the Republican Party who advocate creation of the private accounts — such as former Reps. Jack Kemp and Newt Gingrich — that cuts in benefits paid to future retirees are also necessary, the newspaper said.
The Journal said it reviewed a copy of the memo, which was part of an e-mail sent earlier this week by President George W. Bush’s director of strategic initiatives, Peter Wehner.
Social Security is projected to remain solvent until 2018, when benefit payments begin to outstrip payroll tax receipts as the huge post-war baby boom generation retires.
Bush wants the system to be changed now without raising payroll taxes and wants workers to be allowed to hold a portion of their payroll taxes as private stock and bond investments.
The memo was not released publicly and is likely to have been sent to some members of Congress and influential conservatives, according to the Journal.
Diverting payroll taxes to the private accounts without cutting any benefits, would “have serious short-term economic consequences,” the paper quoted the memo as saying.
“We simply cannot solve the Social Security problem with Personal Retirement Accounts alone. If the goal is permanent solvency and sustainability — as we believe it should be,” such accounts “for all their virtues, are insufficient to that task,” the memo continued.