FROM THE OFFICE OF PUBLIC AFFAIRS
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March 14, 2005
JS-2310
Remarks of Assistant Secretary for Financial Markets Tim Bitsberger
before the Institute of International Bankers Annual
Washington Conference
Washington, DC
Thank you for having me here today to represent the Bush Administration and the Treasury Department.
As you all know, the Department has some significant priorities before it in the coming months. To name a few: strengthening Social Security for future generations, reforming the tax code so that it is fairer, simpler and more pro-growth, and growing the economy, creating jobs and exercising the fiscal discipline needed to reduce the deficit.
Today I'd like to focus my remarks on an issue that is key to our fiscal health: strengthening Social Security for the 21st Century. While Social Security is sound for today's seniors and those nearing retirement, it must be fixed for younger workers.
The baby-boom generation begins to turn 60 next year. The longer we wait to address the challenges confronting Social Security, the costlier the solutions. Let me spend a few minutes talking about the nature of the problem and how it escalates over time. The demographics of our society have changed dramatically resulting in fewer workers to support each retiree. In 1950, there were 16 workers paying into the system for every one beneficiary. Today, there are only about three. When today's youngest workers retire, there will only be two.
Additionally, Americans are getting older – by 2035, 20 percent of all Americans will be over the age of 65. And people are living longer – life expectancy has hit a high of 78 years. These demographic shifts have created significant challenges for Social Security and threaten its solvency.
According to the 2004 Social Security Trustees Report, the cost of doing nothing to fix the system has reached $10.4 trillion - that's twice the combined wages and salaries of every working American last year. In 2018, Social Security will begin to pay out more than it takes in. The shortfalls will grow larger with each passing year until the system is bankrupt in 2042.
The system simply cannot keep the promises its held out to our children and grandchildren. If we don't act now to fix it, the only options will be drastically higher taxes, massive new borrowing, or sudden and severe cuts in Social Security benefits or other government programs.
The President has demonstrated the political courage necessary to take on the great responsibility of fixing Social Security. He believes our children's retirement security is more important than partisan politics and has shown the leadership needed to confront this challenge.
The President has put forward some basic principles to guide reform.
The President believes we must make Social Security permanently sound. We need to solve this now rather than pass the burden on to future administrations and future generations with a short-term fix.
The President has said that there will be no benefit changes for those born before 1950. Social Security will not change for those 55 or older. There are 45 million Americans receiving Social Security benefits now and millions more nearing retirement. For these Americans, Social Security benefits are secure and will not change in any way.
The President has ruled out an increase in tax rates. We will not jeopardize the economic strength of our nation by raising payroll tax rates. The Social Security payroll tax, which was once 2 percent, is now 12.4 percent – that's $1 out of every $8 we earn. Raising taxes further on American workers would stifle economic growth and depress job creation.
Another important principle is to ensure fairness. We must ensure that lower-income Americans get the help they need to have dignity and peace of mind in their retirement. Reform should maintain the progressivity of the system.
And finally, critical for younger workers, is the establishment of personal retirement accounts. This will allow younger workers to build a nest-egg for retirement that the government cannot take away. They provide ownership, control and the opportunity to watch your assets grow over time. They offer a chance to receive a higher rate of return from sound, long-term investing beyond anything the current system can deliver. The accounts would be voluntary and offer workers various low-cost options similar to those available through the retirement system available to federal workers.
With this framework guiding us, the Administration looks forward to working with Congress to fix Social Security once and for all for future generations.
As a part of this effort, Secretary Snow recently launched a tour in which Administration officials will crisscross the nation to take the President's message to the American people. As the Secretary has stated, real progress is being made and a meaningful national dialogue is underway. Another tool in our efforts to foster a productive discussion on the challenges currently faced by Social Security is a Web site Treasury launched a few days ago: www.StrengtheningSocialSecurity.gov. I encourage you all to take a look.
The President has committed to creating an environment that welcomes the discussion of all good ideas and the Administration looks forward to a productive debate on the many questions and issues before us.
Thank you for having me here today to discuss this important issue.
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REPORTS