Online NewsHour: Social Security Reform -- April 7, 1998

SOCIAL INSECURITY

April 7, 1998

The NewsHour with Jim Lehrer Transcript

In the first of four town hall meetings, President Clinton called on the public and policy makers to save Social Security from its financially-unstable future. Mr. Clinton said he hoped the eight-month dialogue would lead to a reform proposal Congress could adopt. Following a background report on the troubled system, Elizabeth Farnsworth discusses the future of the program with four experts.

A RealAudio version of this segment is available.
NEWSHOUR LINKS:
April 7, 1998
A panel discussion on the future of Social Security.

Online Forum
The debate surrounding the budget surplus.

February 2, 1998
The president's budget projects the first surplus in 30 years.

January 13, 1997
A bipartisan committee seeks ways to fix social security.

Browse the NewsHour's coverage of federal agencies and welfare issues and Congress
OUTSIDE LINKS
The Social Security Administration.
The Cato project on social security privatization.
The American Association of Retired Persons.

KWAME HOLMAN: Any changes in the Social Security system ultimately will be made in Washington, but today President Clinton and several members of Congress traveled to Kansas City to hear what people in the heartland had to say. At a town meeting, sponsored by the American Association of Retired Persons and the Concord Coalition the President opened a dialogue on Social Security, which he said should be followed by prompt action in Congress.
"The third rail of American politics."

PRESIDENT CLINTON: For too long politicians have called Social Security the third rail of American politics. That's Washington language for it's above serious debate. This year, we must prove them wrong. This conference--with its wide participation--is a good start.
KWAME HOLMAN: When President Franklin Roosevelt signed the Social Security legislation in 1935, he created a "pay as you go" program in which workers contributed to their own retirement through payroll deductions.
PRESIDENT FRANKLIN ROOSEVELT: We have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-stricken old age.
KWAME HOLMAN: In the six decades since then Social Security succeeded in doing that and went even further--workers contributing to the system so outnumbered retirees that Social Security ran a huge surplus. Now, however, that trend is about to reverse itself. The first major wave of the huge baby boom generation will cross over into retirement in 10 years. That begins a long period during which the number of workers contributing to social security will decrease as the number of retirees rises.
In 1950, there were 16 workers for every retiree. Currently, the ratio is slightly more than three workers per retiree. By the year 2030, there will be fewer than two workers contributing to Social Security for each retiree. Exacerbating the imbalance is the fact seniors are living longer and consequently drawing more benefits. In 1945, those who reached 65 could be expected to live another 14 years. Today seniors average another 18 years of life.
The number of Americans over 65--now some 35 million--is expected to double by the year 2030. By then the surplus in the Social Security Trust Fund will be exhausted, and benefits paid out will exceed revenue taken in. During the late 1970's and early 80's, Congress tried to make ensure solvency for the Social Security system by taxing some retirees' benefits and raising the retirement age. Now there's consensus in both political parties that more changes are needed.
Proposals for change.

Among the proposals being considered are plans to reduce automatic cost-of-living-allowance increases in benefits; raise taxes on benefits; cut benefits to higher-income retirees; raise the retirement age once again; increase Social Security payroll deductions; invest Social Security trust fund surpluses in the stock market; and privatize Social Security through individually managed accounts. House Speaker Newt Gingrich has endorsed the idea of privatizing the system. During a speech to his Republican colleagues last week Gingrich explained how such a program would work.
REP. NEWT GINGRICH: If you could take your entire Social Security at 10.3 percent, the tax that goes to Social Security, if a 20-year old could take that tax, put it into a modern personal account and have it build up interest, the power of compound interest is such that at 7 percent interest, which is what the stock market has averaged since 1920, at 7 percent interest when you retire, that 20-year old at average income--never going above average--would have over $975,000 in the bank, would withdraw, would be able to earn about $65,000 a year in retirement income while keeping their capital for a nursing home or for a medical emergency, and if they passed away without having a debilitating illness, they'd give their children almost a million dollars.
KWAME HOLMAN: At today's town meeting in Kansas City, President Clinton didn't endorse any particular plan. He did lay out principles he said should guide any Social Security reform.
PRESIDENT CLINTON: I believe, first of all, we have to reform Social Security in a way that strengthens and protects the guarantee for the 21st century. We should not abandon a basic program that has been one of the greatest successes in our country's history. Second, we should maintain universality and fairness. For half a century this has been a progressive guarantee for citizens. We have to keep it that way. Third, Social Security must provide a benefit that people can count on. Regardless of the ups and downs of the economy, or the financial markets, we have to provide a solid and dependable foundation of retirement security. Fourth, Social Security must continue to provide financial security for disabled and low-income beneficiaries. We can never forget the one in three Social Security beneficiaries who are not retirees. And, fifth, anything we do to strengthen Social Security now must maintain our hard won fiscal discipline. It is the source of much of the prosperity we enjoy today.
Voices from the heartland.

KWAME HOLMAN: This afternoon, President Clinton sat with a panel of Social Security experts as the people in the audience took their turn to speak. Most used the opportunity to express concerns about how various reform proposals could affect them.
WOMAN: Instead of putting a cap on the top level, put the cap down where it belongs, and not charge the Social Security tax on those of us that can't afford it anyway. Put the cap at $30,000 a year. We don't pay anything into it, or a very minimal amount. Go ahead and tax the ones that can clearly afford it in the first place.
WOMAN IN AUDIENCE: If we privatize Social Security, what happens to that? I don't know. I could privatize my Social Security. I don't have a problem with that. But I challenge Congress and the Senate to say what makes you think people are going to say this mother back here with three children is going to buy them tennis shoes? She's not going to save. She's going to put money away for college. She's not going to save.
MAN: Could you use your good offices, as you started here today with these national political leaders, to encourage more local political leaders, such as governors, mayors, council persons, and state representatives, that duplicate this process on the local grassroots level, because many of the grassroots people just are not aware of the nature of the crisis?
PRESIDENT CLINTON: I've got an office in part of the White House that deals with state and local officials. We'll work with the Congress and try to see how we can multiply these things. Thank you.
KWAME HOLMAN: In the meantime, three more regional town meetings are scheduled to address the problems of Social Security. The president says he hopes Congress will move ahead with reform legislation by January.

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