RAY SUAREZ: Susan Dentzer of our health unit begins the Social Security report. The unit is a partnership with the Henry J. Kaiser Family Foundation.
SUSAN DENTZER: George W. Bush today unveiled a broad outline of key principles to reform Social Security. Among them was a provision to allow younger workers to invest a portion of their Social Security taxes in personal retirement accounts. The controversial approach is often referred to as "partial privatization."
GOV. GEORGE W. BUSH: Millions of Americans will have an asset to call their own. This is the best thing about personal accounts. They are not just a program, they are your property, and no politician can take them away.
SUSAN DENTZER: Democratic candidate Al Gore has charged for weeks that Bush's proposal put retirees' benefits at risk, and would imperiled Social Security.
AL GORE: I think that's bad for American families and bad for our economy.
SUSAN DENTZER: Vice President Gore and Governor Bush have now raised sharply different approaches, for addressing Social Security, but they do agree on the central problem.
GOV. GEORGE W. BUSH: Eight years from now, the massive Baby Boomer generation will begin drawing benefits. Their lives will be long and healthy, and within two decades, there simply will not be enough younger workers to pay the benefits earned by the old.
SUSAN DENTZER: Under current projections, around 2015, Social Security is likely to start paying out more in benefits than it takes in in payroll taxes. By around 2037, its trust funds are likely to be exhausted. Incoming payroll taxes would then cover only about 70 percent of promised benefits. Experts have long called on Social Security to put aside more money ahead of time to pay benefits due future retirees. Bush's plan aims at doing that by allowing workers voluntarily to shift a portion of their payroll taxes into private accounts.
GOV. GEORGE W. BUSH: A younger worker can take some portion of his or her payroll tax and put it into a fund that invests in stocks and bonds. Now, our government will establish basic standards of safety and soundness, so that investments are only in steady, reliable funds. In other words, there will be no fly-by-night speculators or day trading. And money in this account can only be used for retirement, or passed along as inheritance. Even if a worker chose only the safest investment in the world, an inflation-adjusted U.S. government bond, he or she would receive twice the rate of return of Social Security.
SUSAN DENTZER: Even with today's speech, Bush was vague on many details. For example, he hasn't said what portion of workers' payroll taxes would be invested in private accounts. But Social Security is largely a pay-as-you-go program, where most of the money coming in goes right out the door to retirees. So to allow workers to switch money into private accounts, Bush envisions tapping Social Security's surpluses until about 2030. After that, experts say benefits would need to be cut or other money found to keep the system going, or some combination of both. Today, the only thing Bush ruled out was a hike in the payroll tax.
GOV. GEORGE W. BUSH: The payroll tax must not raised. (Applause) We cannot tax our way to reform. (Applause)
SUSAN DENTZER: Vice President Gore's radically different approach would harness the surpluses currently building up in Social Security to help stave off insolvency. In effect, he would use the surpluses to pay down the $3.5 trillion in national debt held by the public. In turn, the interest savings from reducing the debt would be invested in the Social Security trust funds.
AL GORE: If we pay the publicly held debt down to zero, the savings are going to be enormous. I believe those interest rate savings that come from the debt pay-down attributable to the Social Security surplus ought to be put back into the Social Security fund. That will extend the life of the trust fund to the year 2054.
SUSAN DENTZER: Gore said today that his is a far sounder approach than Bush's, which would expose retirees to the vagaries of investment markets.
AL GORE: If you chose to invest part of your Social Security into the stock market and the investments somehow didn't work out, and you had sharply reduced benefits, then what would happen? Well, one possibility is that the Congress in the future would be called upon to bail out the poor choices that investors made to prevent them from falling into social insecurity.
SUSAN DENTZER: But critics note that Gore's plan could still fall well short of guaranteeing Social Security's solvency over the long haul.