Good morning. I'm Senator Chuck Schumer from New York State. I want to take a few moments this morning to talk to you about Social Security.
I was born in 1950. Back then, half of all Americans over 65 lived in poverty. Today, that number is less than one in ten. Social Security is the biggest reason for this dramatic turnaround. I think we can all agree that the program has been a great success. Our goal, as Democrats, is to keep Social Security the way it is with as few changes as possible, while still making sure it is there for future generations.
For this to happen, some changes will need to be made. The question is, what sort of changes? Does Social Security need fine-tuning, as most Democrats believe, or does it need to be replaced with something completely different, as the President wants to do?
Unfortunately, the President's plan to privatize the system is not the answer. In fact, members of both parties — most Democrats and many Republicans — think it's a bad idea from the start. It actually makes the underlying problems of Social Security more difficult to solve, and it will add trillions to the national debt, which will slow our economy and put future generations in a bigger financial hole.
I want to explain a few of the reasons why we believe the President's plan is the wrong approach.
First, the President's private accounts do nothing to solve Social Security's long-term financial problems. Even Administration officials concede this point.
Let me explain why this is the case. According to the Social Security Administration, Social Security will be able to pay full benefits until at least the year 2042. With the President's private accounts, it would only be able to pay full benefits through 2031. In other words, private accounts shorten the life of the Social Security Trust Fund by 11 years. This is because current payroll taxes that would otherwise go to pay benefits are instead diverted to private accounts. It's simple math - you can't use the same dollars for two different things.
The second reason that the President's plan is misguided is that he wants to slash your benefits in two major ways.
The first benefit cut involves something called "price indexing." The way it works is that the younger you are today, the more this will slash your initial Social Security benefit. That's bad news — especially for young Americans who are just entering the workforce.
The second benefit cut is far more insidious because it's more hidden. We call it the "privatization tax." It's the additional amount of your promised Social Security benefit that you lose as a result of having set up your private account.
Now you might say, "What do you mean? I thought the private account was mine to keep?" And it's true; you DO get to keep what's in your account, minus the administrative fees. But what the President doesn't tell you is this: Your guaranteed Social Security benefit will be reduced by whatever amount you have contributed to your account plus some interest.
Another way of saying this is that the private account only helps you if you earn an annual rate of return on your investments that exceeds the rate of inflation plus three percent. If you invest poorly, or the market drops right before you retire — you'll be far worse off than under the current system.
To make up for both benefit cuts, and get as much as you would under current law, you would have to earn a very significant return - which also means taking on more investment risk - and that is a risky proposition.
And there's one more important reason that we're opposed to the President's plan. It increases your birth tax - the amount of debt that is laid on the shoulders of each newborn child. The birth tax is already high enough, but the President's plan adds almost $17,000 to every child's birth tax, because it adds nearly $5 trillion in new debt over the first 20 years.
It is morally irresponsible to be passing such a huge birth tax to future generations. All of this borrowing will eventually have to be repaid with interest, just like a home mortgage or a personal credit card.
Democrats are eager to work with President Bush to solve the Social Security problem. We share his goal to make the program financially sound, but the way to do it is not by creating a new privatization tax and increasing the birth tax for every American.
If the President wants our support and the support of the country, he should stop advocating change based on ideology. He should scrap his privatization proposal and start working in bipartisan way towards a common-sense solution.
If he does that, Democrats in Congress will work with him, he'll be able to pass a reform bill with big bipartisan majorities. And most importantly, Social Security will still be there not only for us, but for our children and grandchildren and future generations.
This has been New York Senator Chuck Schumer. Thank you for listening and have a good day.