This is a partial transcript of "Special Report With Brit Hume," March 15, 2005, that has been edited for clarity.

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JIM ANGLE, GUEST HOST: The Social Security debate has been relentless and rough. But one man who's survived it, going back well before the latest round started, is Republican Senator Lindsey Graham of South Carolina, who ran on this issue in 2002. He has proposed personal investment accounts and increasing the amount of wages subject to Social Security taxes to help p ay for them. Senator Graham is considered a central player in the debate over retirement security and in a search for a bipartisan solution. And he joins us now.

Senator Graham.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: I was 6`4" when I started this. I'm 5`7".

So I'm still hanging in there.

ANGLE: You've been whittled down a little bit?

GRAHAM: I've been whittled down but I'm tough.

ANGLE: Well, you might have gained an inch or two today.


ANGLE: Because the Senate voted 100 to zero to say strengthening Social Security is, quote, "A vital national priority. And that action should be taken at the earliest opportunity." I thought there were still people in the Senate who were reluctant to say this was something that needed quick action?

GRAHAM: I think the "no problem" crowd lost today. And this was a breakthrough for the Senate and I hope the country. Because we agreed 100 to nothing, and getting the Senate to agree to 100 to nothing on anything is almost impossible in this environment. But to the credit of the Republican and Democratic members of the Senate, we said today basically what the president's been saying. That the president and the Senate are now on record that to do nothing results in massive tax increases or massive benefit cuts for people in their `20s, and a permanent solution is our goal.

ANGLE: Now, one of the other debates has been over when something needs to be done. Alan Greenspan and others keep saying we have to do something before the baby boomers retire. Why? Why is that an important date?

GRAHAM: Well, the big elephant in the whole system is the baby boomer generation that marches through like a herd of elephants. And we begin to retire in 2008. I was born in `55. In 2021, I will be retirement eligible. And I'm right in the middle of the baby boom. Thirty million of us are going to come into the system. And no solution before now has ever addressed the baby boomers. And that's what we need to address. Because if you wait until we get into the system, 2042 is way too late.

ANGLE: Well, besides which, it's very hard to change benefits for people already in retirement.

GRAHAM: Absolutely.

ANGLE: Especially when you have that many of them, young retired politically active.

GRAHAM: Well, I represent that generation and I'm willing to sacrifice. Because the people who came before me, my dad was in World War II, I'm willing to make life better by giving a little bit now so that we don't have to pay a bunch later.

But when I was born in 1955, 16 workers were paying into Social Security. Today, there's three and a half. Twenty years from now, there will be two workers. And two people can't do what 16 people used to do without major problems.

ANGLE: Now, you have argued that proposing personal accounts, touting personal accounts, initially in this debate, was a sideshow because it took away attention from the solvency issue.

GRAHAM: Yes. Well, the point I'm trying make is that we have got to be honest with people about what can happen and what can't happen. To do nothing is a 27 percent benefit cut coming soon, 2042. If you're a senator from South Carolina that's just around the corner.

But the truth is, in 2018 we pay out more than we collect in taxes, then you get into a death spiral where you literally run out of money. The accounts do not generate the $3.7 trillion we agreed on today.

Here's what we agreed on in the Senate today, that the Social Security administration is $3.7 trillion short. And last year's dollars to make this thing solvent in 2020, there is no way an account will generate $3.7 trillion. And if you wanted to raise taxes to generate $3.7 trillion today, you would have a 20 percent increase in benefits. So you've got to do several things, not just one thing.

ANGLE: Now, that's one of the things that I think is widely misunderstood in this debate. When we talk about $3.7 trillion that's what's called Present Value.

GRAHAM: Present Value.

ANGLE: That means if we put 3.7 trillion into a bank account today...

GRAHAM: Today. Should have done it last year, 2004.

ANGLE: Then we have enough money?

GRAHAM: Only to 2075. So if you got $3.7 trillion from Martians, if they landed and said here's a check for $3.7 trillion...

GRAHAM: ... we put into the Social Security bank. We didn't steal any of the money. We got solvency until 2075. In 2076 you run out of money. There's a hole in this system that you can't fill with money. You've got to tie it up and reschedule benefits.

ANGLE: Now, if Martians don't land and give us the money, how much will it cost us as we to pay — if we pay it off as we go along?

GRAHAM: Well, if we pay off as we go along, it's going to be a 20 percent increase in payroll taxes. The way you save Social Security forever, like we've agreed to do today, is you take the benefit schedule that can't be paid with 12.4 percent FICA taxes. And you change the way you calculate benefits.

Today, every benefit is paid based on replacing wages. Wage growth is much more expensive than the rate of inflation. If you went from infla — wages to inflation you would wipe out the entire unfunded liability.

ANGLE: Just one quick point on that because I have question I want to ask you about the Senate today. And that is that the version of that, that you and Senator Bennett and others are working on, would actually make Social Security more progressive, would make it tilt more in favor of poor, lower income workers?

GRAHAM: You know, the debate we're been having that I've been...

ANGLE: Not much time.

GRAHAM: Well, OK. It's a safety net. Social Security is a safety net. And if you change the index to inflation, you've got to protect low- income workers. Give them wage growth. Give the rest of us inflation.

ANGLE: Very quickly, on the Senate debate on whether or not to end filibusters on judicial nominations? Where do you stand?

GRAHAM: Dark chapter in the history of the center — Senate. And it needs to end. We're going to be in Mideast politics, where Democrats pay back Republicans. Republicans pay back Democrats. You're going to run good men and women out of wanting to be judges. Fix this now so we don't pay a high price later.

ANGLE: OK. Senator Graham, thanks for joining us, sir.

GRAHAM: Thank you.

ANGLE: Thanks for giving us so much.

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