Video: Reforming Social Security

By David Gregory Chief White House correspondent
NBC News
updated 11/11/2004 8:18:28 PM ET 2004-11-12T01:18:28

President Bush’s call to revamp Social Security is at the heart of what he calls an ownership society, where government controls less money, in his vision, and individuals control more.

“That's why I believe younger workers ought to be able to take some of their own payroll taxes and set up a personal savings account, a personal savings account they call their own,” says Bush.

The idea is for such a worker to voluntarily contribute roughly two percent of his or her payroll or social security tax and set it aside to create a private savings account.

Supporters say such accounts could help shore up the strapped program, because workers could get more from the stock market than the government.

“You could have had, at the beginning of Social Security, chimpanzees throwing darts at the Wall Street Journal and you would have a much, much more secure system than we have today with the politicians in charge,” says Ed Crane of the Cato Institute.

The problem with all this is the transition to a new system. The taxes you pay today go to pay the Social Security benefits of today's retirees. If workers started to pay less in, the government would have less to pay out -- a lot less.

The president's own blue ribbon panel estimated three years ago that it would cost the government $2 trillion over time to make Social Security semi-private by creating the savings accounts.

So what then?

With the government running a deficit of more than $400 billion, the choices aren't easy. Either the government borrows more money to cover the costs of current retirees or, opponents say, worse.

“The basic story is that, you know, you either talk about cuts in benefits and or tax increases,” says Dean Baker. “Nothing gets you around that arithmetic.”

Proponents of change including the president haven't said how they'll pay the bill, but argue reform can't wait.

“Obviously, if it were easy it would have already been done,” says Bush.

On this politically sensitive issue, top Democrats have already made it clear the president is in for a fight. Bush counters that the election has given him political capital and Social Security is one of the areas where he intends to spend it.

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