FROM THE OFFICE OF PUBLIC AFFAIRS

May 19, 2005
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Secretary Snow's Remarks at Treasury's Social Security Economic Roundtable

Treasury Department Hosts Economic Roundtable, "The Need to Strengthen Social Security" Leading Economists Gather To Discuss The Need For A Permanent Solution

Secretary John W. Snow today welcomed leading economists and policy experts to the Treasury Department for a roundtable event, "The Need to Strengthen Social Security."

The roundtable, which took place this morning in Treasury's historic Cash Room, was a productive discussion of the problems facing Social Security and the best way to structure a permanent solution. The program featured a panel, "Yesterday's Promises + Tomorrow's Demographics = Today's Challenge," followed by remarks from some of the leading voices in the Social Security debate.

Roundtable participants included Harvey S. Rosen, Chairman of the President's Council of Economic Advisers; Robert C. Pozen, Chairman, MFS Investment Management; Ben Stein, renowned author, economist, lawyer, and entertainer; Mark J. Warshawsky, Treasury Assistant Secretary for Economic Policy; Carolyn L. Weaver, former Director of Social Security & Pension Studies at the American Enterprise Institute; Sylvester J. Schieber, Vice President and Director of U.S. Benefits Consulting at Watson Wyatt Worldwide; Dr. June O'Neill, former Director of the Congressional Budget Office; and Charles P. Blahous, Special Assistant to the President for Economic Policy.

Secretary Snow's Remarks:

The Honorable John W. Snow
Prepared Remarks: Economic Roundtable on Social Security Reform
Treasury Department Cash Room

Good morning; thank you all for coming. It is always a pleasure to welcome guests to this stunning and historic room in the Treasury.

I believe that our speakers, and our program today, will do this impressive room justice. Some of the sharpest economic minds in the country are here to discuss the most pressing and exciting economic issue of the day: saving and strengthening our nation's Social Security system.

The system is financial unsustainable, and America knows it. The question is no longer whether to fix Social Security… the question today is how are we going to fix it.

The Social Security trustees report, after all, cannot be denied. The work of non-partisan actuaries shows that Social Security cash flows peak in 2008 and turn negative in 2017. The trust fund itself will be exhausted in 2041. The unfunded obligation is a staggering $11.1 trillion on a permanent basis, and $4.0 trillion over the next 75 years.

No one knows these facts, this reality, better than today's speakers and panelists. Today's discussion will therefore be a significant part of the terrific national dialogue that has been in full-swing since the President talked about saving Social Security in his State of the Union Address. I've traveled all over the country to engage Americans in a conversation about the issue, and it's been wonderful to see the discussions that are taking place, from lunch counters to kitchen tables, from college dining halls to the halls of Congress – where specific proposals and ideas are emerging, and the President and I are delighted to see that progression.

As all of you know, the President is leading the national dialogue on this issue by voicing his commitment to some key principles – his is not an overly prescriptive approach – and by maintaining openness to ideas and solutions from everyone who comes forward with them.

One of the most important things that the President talks about is the need for any solution to be a permanent one. We need to make the system solvent on a permanent basis. Too many times now Social Security has been patched up with tax increases and other band-aids that get us through a few more years, but don't offer a lasting answer. Waiting to act would invite the next band-aid solution… for without action, younger workers face massive, economically damaging tax increases (payroll taxes would have to be raised immediately by 3.5 percentage points – that's about a 30 percent increase – to make the system whole on a permanent basis) or steep benefit cuts to keep the program solvent.

Because of our changing demographics, the structure of the program simply isn't going to work for future generations the way it did for retirees of the 20th century. It is time to modernize the program, and the sooner we do so, the better. The future of our children and grandchildren, and future of our great economy, absolutely depend on it.

Let me be clear that the promises of the system do not have to change. We can keep the promises – more accurately, we can improve the system to deliver on the promises – but to do so we must thoughtfully re-configure how they are delivered.

For example, the President has proposed a form of progressive indexing of benefits. By slowing the rate of growth of benefits for wealthier Americans, we can protect the future benefit levels for lower income people. Under this approach, those most in need will retire with benefits which are greater than the current system can deliver while higher income people will see their benefits rise over current levels, but at a slower rate.

The President's indexing proposal is an approach that is socially just while also being financially responsible, bringing the program about 70 percent of the way toward solvency. I know he is looking forward to working with Congress to bring the program all the way to 100 percent, permanent solvency.

I'm looking forward to hearing the excellent discussion of ideas on solvency, personal accounts, permanent solutions and more today at this roundtable, so I won't delay us any longer; let's get started. Thank you.

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