FROM THE OFFICE OF PUBLIC AFFAIRS

February 18, 2005
JS-2266

The Honorable John W. Snow
Statement on Social Security Reform
New York, NY
February 18, 2005

Good morning. It's great to be here in New York, and I especially appreciate the opportunities I've had this week to talk with financial leaders about the long-range fiscal health of the nation's Social Security system, and the implications of both reform and of inaction.

New York's financial community is acutely aware of the problems that the program faces. They understand what an enormous impact Social Security can have on our economy overall, and they are interested in seeing the system successfully reformed in a way that protects beneficiaries as well as our economy - for the near term as well as for long term.

The financial leaders I met with share the President's concern that Social Security needs to be fixed. They know that if those of us in the government don't pursue and enact meaningful changes now, the Social Security system will eventually need to be propped up with massive tax increases, which will send terrible shockwaves through our economy.

The American economy is the most dynamic and resilient in the world, but we cannot take that for granted, and this is something uniquely understood by financial leaders who watch and participate in our markets every day. They understand, as our President understands, that we must plan for the future and deal with looming financial threats when we see them. Wall Street is familiar with this way of thinking, which is why they share the President's interest in saving and strengthening the Social Security system. To ignore the problem, I think they agree, is to deny reality.

These leaders live in the real world and make hard choices every day. The same can be said for our President. His leadership on Social Security reform displays his great courage as well as his dedication to doing what is right for the American people, for generations to come. Tackling the problems of Social Security is simply more important than partisan politics, and the President won't ignore this problem or leave it as an ugly inheritance for future presidents and future generations

I've been pleased to be able to discuss the President's vision on Social Security in more detail during my meetings here in New York this week. I've emphasized, for example, that Social Security reform will not impact those who those born before 1950 – their Social Security checks will not change.  Of course, people 55 and older will have an interest in the issue – but more because they care about the financial future of their children and grandchildren and want them to have a Social Security benefit they can count on when they retire. 

We've had terrific discussions here in New York about the possible structure of personal accounts, and how younger workers would be able to learn about their financial choices, build a nest egg and benefit from sound long-term investment in the free market system without disrupting the system of benefits for their parents and other generations of retired beneficiaries.

Some of the most compelling conversations I've had this week, with some great financial minds here in New York, were about the irrefutable facts, the undeniable fact that the Social Security system is on an unsustainable path. We've looked at the demographics, at the arithmetic, and it cannot be denied: Just 13 years from now – around 2018 – the system will begin paying out more than it takes in. People are living longer and having fewer children, so there are fewer workers to support retirees. We had 16 workers paying into a system for every one beneficiary in 1950, and today we only have about three workers for every beneficiary. That ratio will drop to two-to-one by the time today's young workers retire.  

And when those young workers retire, in 2042, the system will be exhausted, bankrupt. Today's 30-year-old can expect a 27% benefit cut from the current system when he/she reaches retirement age. Without action, our children and grandchildren will be faced with huge benefit cuts or massive tax increases.  

Social Security has been patched up in the past. We've raised taxes to take us through a few more generations of retirees. But the patches don't last because our demographics are working increasingly against us. We need lasting, meaningful reform. Part of lasting reform ought to be the option, for younger workers, to build a nest egg and I'm excited to be talking with the financial community about how to make that opportunity a reality in a fiscally responsible way that will not unsettle our financial markets. The President believes that a gradual approach to the establishment of personal retirement accounts – phasing in account participation and slowly phasing up the amount of allowable contributions – is the way to achieve those goals.

It's been a pleasure to spend this time with the terrific financial minds and the good American hearts here in New York this week. This issue is important to all Americans, and it's important that we continue to work together to strengthen Social Security for our children and grandchildren.

Thank you.