FROM THE OFFICE OF PUBLIC AFFAIRS
March 24, 2005
JS-2334
Secretary John W. Snow
Prepared Remarks
Chester County Chamber of Business and Industry
at Exelon Corporation
Kennett Square, PA
Thank you so much for having me here; it's great to be in
I appreciate the chance to talk with you about strengthening the nation's Social Security system. The President's leadership on this issue is providing our country with a tremendous opportunity to save Social Security for current and near retirees and improve it for younger generations. Conversations like this are an important part of reaching decisions as to what, exactly, should be done.
Since March 3rd, Administration officials – from President Bush and Vice President Cheney to Cabinet members like me and policy experts – have been traveling throughout the country as part of a coordinated 60-day tour of at least 60 stops to discuss the President's message of strengthening Social Security with the American people.
We passed the 20 day mark of this tour this week, and I'm proud to announce that this stop, here at Exelon, is number 60! We've hit this mark after less than 30 days on the road – and the final number of stops will be much higher than anticipated.
We were reminded of the serious nature of the Social Security problem yesterday, back in Washington, DC, when the Social Security and Medicare Trustees – for whom I serve as Board Chairman – issued our annual report on the financial health if the programs' trust funds. The numbers contained in the Social Security report leave little doubt that the system is financially unsustainable, and in need of expeditious and lasting change.
The Trustees' report showed that Social Security cash flows peak in 2008 and turn negative in 2017, and the trust fund itself will be exhausted in 2041. The unfunded obligation, that is, the difference between the present values of Social Security inflows (plus the trust fund) and outflows, is $11.1 trillion on a permanent basis, and $4.0 trillion over the next 75 years.
Now, the President doesn't believe that we should make up that shortfall with tax increases. The report showed just how much we would have to raise taxes to achieve long-term balance: the payroll tax rate would have to be raised immediately by 3.5 percentage points to make the system whole on a permanent basis. In other words, the payroll tax would have to be increased by nearly 30 percent.
That kind of tax increase would have significant, negative economic repercussions. Americans would start taking home less pay, and that's bad for countless facets of our economy. I imagine that, as business owners, you appreciate what I'm saying. After all, you would shoulder half of that tax increase – because you pay that tax on all of your employees. For the smallest of employers I fear that much of a tax increase would force you to make terrible choices, from lay-offs to health benefit cuts. And it would make hiring new people even more difficult. Am I right?
Increasing payroll taxes hurts the economy and it hurts job creation, period. We know this from talking to business leaders like you, and that's why the President is against it.
It is also worth noting that payroll tax increases have been the standard "solution" to Social Security's problems, and they have never solved the problem! Payroll taxes have been raised some 20 times since Social Security was established – and it has failed to make the system solvent.
Tax increases aren't the answer, so the President has encouraged the Congress to propose a variety of ideas that might be, and he has put a number of ideas on the table as well.
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.
Today, people are talking about the issue from the halls of Congress to the halls of local shopping malls! The President's leadership has drawn critical attention to the problem and is creating movement. Progress, real progress, is being made.
Over lunch counters, over breakfast and dinner tables all over
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.
I know that you understand that if you are 55 or older your Social Security benefits are solid. They will not change. You know that 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? 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.
The issue of Social Security is really a matter of basic arithmetic, and 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. According to the new Trustees' report, the government will begin to pay out more in Social Security benefits than it collects in payroll taxes in 2017 – that's just 12 years from now. By 2041, when younger workers begin to retire, the system will be bankrupt.
We must make Social Security better for those younger workers.
Raising their payroll taxes won't make it better. What the President would 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 give workers the prospect of a retirement that is 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 it's hard to figure out why anybody would oppose it.
Additionally, as former Democratic Congressmen Tim Penny and Charlie Stenholm wrote in an op-ed recently, "opposing personal accounts is not a substitute for offering a positive solution for dealing with the challenges that face Social Security." They went on to say, astutely, that they "believe that if Social Security were being created from scratch today, Americans would want to include a way to help everyone build up a nest egg." The President and I couldn't agree more.
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 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.