WASHINGTON – Social Security (search) taxes will have to rise by half if lawmakers don't revamp the giant program, President Bush's budget chief said Friday as the administration sought support for its overhaul plans.
The White House has talked about letting workers voluntarily divert part of their payroll taxes (search) to investment accounts (search) they would control but has provided no detail. Democrats say the model most often described would cost more than $2 trillion over the first decade alone and hasten the program's fiscal problems.
"Rather than averting the so-called 'crisis' it decries, the administration's plan will create a crisis where currently only a challenge exists," said Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee.
In remarks Friday to members of the U.S. Chamber of Commerce, Bolten said the 70-year-old program has failed to change with the times. The number of workers paying Social Security taxes has shrunk compared to the number of retirees whose benefits they are supporting, yet more than 20 tax increases in recent decades have not fixed the imbalance, he said.
"All these tax increases did was push those problems out to be solved another day," Bolten said. "That day has arrived."
Bolten revealed no new information about what Bush will propose. Trustees who oversee Social Security say the program will fall $3.7 trillion short of its obligations over the next 75 years, and Bolten said the problem will grow by $600 billion each year it is not addressed.
"If we do nothing to fix Social Security, we will eventually need to raise Social Security payroll taxes on Americans by about 50 percent," he said.
Such an increase would stifle job creation and prompt employers to lower wages, Bolten said.
"Delay and inaction are not an option," he said, adding later, "This is a crisis."
The White House is considering letting workers divert up to two-thirds of the 6.2 percent paid in payroll taxes into investment accounts, up to perhaps $1,000 to $1,300 a year, administration officials have said.
Bush has said retirees and people about to retire will not see their benefits reduced.
To help make up for lost revenue, the administration is considering reducing the benefits of future retirees, but it has not specified for whom or by how much. That has left an opening for attacks by Democrats.
"We have seen this administration use exaggeration and distortion before in order to advance its ideological agenda, with painful results," said Sen. Jack Reed, D-R.I. "The kind of plan the president supports only achieves solvency for Social Security through massive cuts in guaranteed benefits. Private accounts actually weaken the solvency of the program."
Social Security is expected to be a major issue for lawmakers this year, but the timing remains unclear. Bolten said Bush would work with Capitol Hill leaders to bring a Social Security overhaul "rapidly before the Congress."
Bush's plan won't be included in the 2006 budget the president proposes on Feb. 7. Bolten said he expects more details about the Social Security proposal to be revealed by then.