FROM THE OFFICE OF PUBLIC AFFAIRS

March 4, 2005
JS-2294

Treasury Secretary John W. Snow
Prepared Remarks to: New Orleans’ Metro Chamber Alliance
New Orleans, LA
March 4, 2005

Thank you so much for having me here today. It's a pleasure to be here in this vibrant city.

A special group of folks with an historic task will be here in New Orleans in a few weeks. On March 23^rd, the President's Advisory Panel on Federal Tax Reform will holding a meeting here. They'll be exploring perceptions about the fairness of the tax code and focusing on how our tax system affects families.

The Tax Reform Panel is made up of a group of great Americans; smart, thoughtful individuals who are giving generously of their time and intellect to the historic undertaking of reforming our cumbersome tax code into something that is more fair, simple and pro-growth. I am deeply appreciative of their efforts, and I believe the American people, and the American economy, will benefit greatly from their work.

So I'm glad they'll be holding a meeting in New Orleans. It is a great American city – full of enterprise and industry, art and music. I appreciate how much the people in this room have contributed to making this city a terrific place to live, and to visit, as well as how much you contribute to the local, state and national economies.

Being an entrepreneur and running a business, no matter how small, is what makes the American economy tick – both locally and nationally. I appreciate that, and President Bush appreciates that.

We know that businesses like yours create jobs. That's why the President's tax cuts were designed with small business in mind. And those tax cuts worked. Today's announcement that 262,000 new jobs have been created is good news for America and the growth of our economy. More than just a statistic, this number means that 262,000 Americans who have been looking for a job found one.

Evidence of our economic health abounds: In addition to continued job growth, we've also seen new jobless claims decline and productivity continue to expand. GDP growth for 2004 was 4.4 percent. The unemployment rate is down to 5.2 percent - lower than the average rate of the 1970s, 1980s and 1990s. Inflation, interest rates, and mortgage rates remain at low levels. Homeownership rates are at record highs.

Our economy is dynamic and resilient – the envy of the world. But of course we still face economic challenges as a country. We need to keep taxes low and stay on this path of economic growth and job creation. We also need to continue looking down the field and make sure that our economy is not disrupted by things that we can avoid - things that we can fix, today.

I'm talking about Social Security… the fact that we have an opportunity to save a system that is, unfortunately, unsustainable in its current form. We have a chance, this year, to save Social Security for the sake of our children and grandchildren.

The terrific news today is that people are talking about the issue. The President's leadership has drawn critical attention to the problem and is creating movement. Progress, real progress, is being made. 

When the President took this issue to the country in his State of the Union Address, he said his objective was to engender a broad national dialogue to get people talking about this issue. 

He wanted Americans to talk about Social Security, and a national conversation has begun as a direct result.

Over lunch counters, over breakfast and dinner tables all over America… the topic is Social Security reform. It's the front page story in virtually every newspaper. It's on the evening news. And it's there because of the President of the United States. It's there because of the courage that he's had to directly confront and deal with what so many in political life call the "third rail."

The American people respect leaders who call a spade a spade. The President touched the "third rail" without fear, and now we're moving forward. Neighbors and co-workers are talking about it; families are talking about it; Congress is talking about it. 

We've seen a clear shift in the course of the last month or so from the question: "Is there a problem?" to the question: "How do we fix it?"

I imagine that you are talking about it with your spouse and family members, your business partners, customers and employees. Those conversations are critical, and I hope our meeting here today can help make them even more lively, more productive.

First, I need to let those of you know that if you are 55 or older – raise your hand if you're 55 or older – your Social Security benefits are solid. They will not change. You don't need to change your retirement plan or strategy because of Social Security reform, period.

But now I'll ask: how many of you have children or grandchildren? Raise your hands. It's those children and grandchildren, those young workers and future workers, who we need to be worried about. They are the ones for whom we need to fix this system.

This might be hard to explain to some of your relatives or neighbors, especially if they are retired or near retirement and are worried about their benefits. The threat to Social Security in the near future makes more sense when you look at the simple arithmetic. Social Security has enough money now because for decades we have had more than enough workers paying into the system, supporting the retirees drawing benefits.

In 1950, there were 16 workers to support every beneficiary of Social Security - a very comfortable ratio of those paying in versus those drawing benefits. Today there are only 3.3 workers supporting every beneficiary. By the time today's youngest workers – many of you have children in that age group – turn 65, there will only be two workers supporting each retiree.

Just three years from now, in 2008, the first baby boomers will begin to retire. In 2018, 13 years from now, the government will begin to pay out more in Social Security benefits than it collects in payroll taxes. By 2042, when younger workers begin to retire, the system will be bankrupt. Under the current system, today's 30-year-old worker will face a 27 percent benefit cut when he or she reaches normal retirement age.

We must make Social Security better for those younger workers.

If we do not act to fix the system, the only solutions available for younger generations will be dramatically higher taxes, massive new borrowing or sudden and severe cuts in benefits or other government programs.

And I don't think I need to tell you that dramatically higher taxes are ruinous for an economy – even one as resilient and strong as ours. You know this because you see what taxes do to your business. When taxes are higher, it slows you down. When they are lower, it frees you up to do what you do best: grow and create jobs.

The President knows that an increase in the payroll tax rate hurts workers and job-creating small businesses like yours, and he won't do that. He also won't leave the problem for future generations and future presidents to deal with.

What he'd like to see, instead, for future generations is an ability to save some of their payroll taxes, to build a nest egg that belongs to them, not to the government. Something they could pass on to their heirs. A nest egg that would have a real return on investment, far better than the rapidly-weakening promise of Social Security benefits.

Albert Einstein believed, and the President and I agree, that compound interest is one of the most powerful forces in the universe.

With voluntary personal accounts, younger workers would have the chance 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 today's retired beneficiaries.

For the life of me, I can't imagine why anybody would argue against young workers having the ability to invest and build a better retirement for their future. It costs the Social Security system nothing to do so, it will cost current and near-retirees nothing, it gives our children and grandchildren a better retirement, and it helps our country create a larger pool of savings. And as the president has said the retirement security of our young people is too important for partisan politics. Why wouldn't we do this? I have not heard one good reason not to and I can't figure out why anybody would oppose it.

Social Security reform that doesn't raise payroll tax rates, that protects benefits for today's seniors, and that improves the system dramatically for our children and grandchildren can be achieved.

We are part of an exciting moment in American history, where a President's courageous leadership has inspired a national discussion and, I'm confident, will lead to historic good results. I encourage you to be involved, whether it's talking about the issue with your colleagues, with your children, or writing a letter to your Members of Congress.

Many of you in this room may want to pass your business on to your children or grandchildren. I know you'll want your business to be in top shape, financially, when that time comes.

Let's make sure we do the same with Social Security. If we act now, we can make sure that Social Security, and our economy, are on sound financial footing for our children and grandchildren.

Thanks so much for having me here today.