The Bush administration said in a new report Monday that Social Security is facing a $13.6 trillion shortfall and that delaying needed reforms is not fair to younger workers.
A report issued by the Treasury Department said that some combination of benefit cuts and tax increases will need to be considered to permanently fix the funding shortfall. But White House officials stressed that President Bush remains opposed to raising taxes.
The Treasury report put the cost of the gap between what Social Security is expected to need to pay out in benefits and what it will raise in payroll taxes in coming years at $13.6 trillion.
It said delaying necessary changes reduces the number of people available to share in the burden of those changes and is unfair to younger workers. “Not taking action is thus unfair to future generations. This is a significant cost of delay,” the report said.
In another key finding, the report said: “Social Security can be made permanently solvent only by reducing the present value of scheduled benefits and/or increasing the present value of scheduled tax increases.”
The paper went on to say: “Other changes to the program might be desirable, but only these changes can restore solvency permanently.”
While the language of the Treasury report seemed to indicate that the administration would consider raising taxes along with reducing benefits as a way to deal with the funding shortfall, the White House was quick to reject that possibility.
“The president is not advocating for tax increases or benefit cuts,” said White House spokesman Tony Fratto.
“Everyone understands that the choices available in the current structure of Social Security, that absent reform, tax increases and benefit cuts are inevitable,” Fratto said. “That’s why the president believes it makes more sense to reform the program sooner than later.”
Treasury Secretary Henry Paulson, Bush’s point person on Social Security reform, said he has had a number of discussions with members of Congress from both parties over the issue of fixing the problems in Social Security with the looming retirement of 78 million baby boomers.
“While differences over personal accounts and taxes dominate the public debate over this issue, in my conversations I found that there are many other things on which people agree,” Paulson said in a statement accompanying the issues report.
“By focusing on areas of agreement, I hope these issue briefs will narrow the divide and spur further discussion of reforms,” Paulson said.
Heavy emphasis on Social Security reform
Bush had hoped to make Social Security reform the top domestic priority of his second term. Bush put forward a Social Security reform plan in 2005 that focused on creation of private accounts for younger workers but that proposal never came up for a vote in Congress, with Democrats heavily opposed and few Republicans embracing the idea.
While Democrats have fought to protect current benefit levels, Republicans have been adamant that taxes should not be raised to cover the Social Security shortfall.
Phil Swaigel, Treasury’s assistant secretary for economic policy, told reporters that the plan was to issue about six issue briefs on Social Security over the next three months. But he said it was “unclear” at the moment whether the papers would lead to a new push to get an overhaul program through Congress next year.
Many believe such an effort would be highly unlikely to gain success in 2008, a presidential election year when one-third of the Senate and all House members will also be facing re-election.
Paulson, however, has said even if he is not able to achieve an agreement during the short time the current administration will be in office, he hopes to lay the groundwork for the next administration and a new Congress to tackle the problem.