Reforming the Social Security system by moving toward private accounts is at the top of President's Bush's second-term domestic agenda. But private accounts do not solve Social Security's most immediate problem — the prospect of insolvency. As NPR's John Ydstie reports, the two issues are entirely separate.
The President's Social Security commission has provided three options for reforming the system. All include private accounts. Two of them also include some cuts in benefits to move the program toward solvency.
There are a number of proposals from a variety of experts that make Social Security solvent over the next 75 years, but do not include private accounts. Here are some highlights from a proposal by economists Peter Orszag of the Brookings Institution and Peter Diamond of the Massachusetts Institute of Technology.
· Gradually raise the payroll tax by just under 1 percentage point for both workers and their employers.
· Add a 3 percent to 3.5 percent tax on high-wage workers. The tax would be levied on salary amounts above the maximum taxable level, currently $87,900.
· Make some cuts in benefits for workers currently under 55 years of age. For instance, a worker currently 35 years of age would have the benefits promised under current law reduced by 4.5 percent. But they would still be higher, in real terms, than benefits for current retirees.