FROM THE OFFICE OF PUBLIC AFFAIRS

January 12, 2005
JS-2190

The Honorable John W. Snow
Statement on Social Security Reform
New York, NY
January 12, 2004

It's terrific to be in New York, to see our great financial markets in action and spend time with the people who make Wall Street run. I've spent the last two days talking with the financial community about how much the continued strength of our economy will be dependent on a successful re-vamping of our Social Security system. Leaders here on Wall Street share this view, and our conversations have been extremely productive.

Social Security is a great American institution. The President is committed to keeping its promise for today's retirees and those nearing retirement, and to strengthening Social Security for our children and grandchildren. But the current system is financially unsustainable and needs to be fixed.

The demographics that led to this fate were becoming apparent by the 1970s – not enough babies born to support the baby boom generation when they retire – and life expectancy was already increasing.

We've gone from a program in 1950 that was adequately paid for by 16 workers for every one beneficiary, to one that is now paid for by about three workers for every one beneficiary today. Those numbers will soon be two-to-one.

Because of this demographic reality, the current social security system will pay out more in benefits than it brings in revenue beginning in 2018 and shortfalls will grow larger with each passing year. And, by 2042, when workers in their 20's begin to retire, the system will be bankrupt.

What this means is that people who are now retired or near retirement will be taken care of. They will receive their full benefits. But in order to pay the scheduled benefits for future generations the government would need to find massive amounts of additional money. This could be done through additional borrowing, raising taxes, or cutting other federal spending. Each option would have a very negative impact on our economy and our financial markets. This is something Wall Street understands, and it is why they are interested in credible reform.

As these leaders know, the United States has an expensive problem on our hands, and waiting to fix it would be financially foolish. Given the repercussions that denial and delayed action would have on both domestic and global financial markets – and on future beneficiaries -- it would be irresponsible to leave this problem to another day.

From Wall Street's leaders, I'm hearing broad consensus for the need to reduce Social Security's long-term structural deficit - currently forecast to be more than a $10 trillion shortfall. The people behind the institutions of Wall Street understand that if we fix the system and put it on a sustainable course, it will benefit our country's financial future.

During my time here in New York, we've had discussions about the President's belief that the establishment of personal retirement accounts should be one part of a comprehensive plan to fix Social Security for future generations. People here on Wall Street understand that the structure of those accounts would be designed to benefit retirees, not Wall Street investment firms. They welcome a sincere solution to Social Security for the right reasons, for the broader financial stability that a solution will bring to our economy and to our markets.

A bi-partisan effort in the 109th Congress can achieve the goal of preserving Social Security benefits for retirees and near-retirees, while modernizing the program, without increasing payroll taxes. As I have expressed to the financial community here this week, the Bush Administration is dedicated to achieving that goal. We look forward to working with both sides of the aisle in Congress on Social Security solutions, based on our shared understanding that not acting would be irresponsible.