Fixing Social Security: A Solvable Problem Forecasters say in about seven years, Social Security will start paying out more in benefits to retirees than it's collecting in taxes from workers. President Obama has said the problem is straightforward — and his preferred solution is to extend Social Security taxes to higher incomes.
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Fixing Social Security: A Solvable Problem

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Fixing Social Security: A Solvable Problem

Fixing Social Security: A Solvable Problem

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa block.

ROBERT SIEGEL, host:

And I'm Robert Siegel.

All this week, we've been talking about retirement, mostly how to pay for it. People already retired or soon to be retired can count on Social Security to cover at least some of their expenses. But those decades away from retirement worry that the money may run out.

NPR's Scott Horsley reports on the insecurity surrounding Social Security.

SCOTT HORSLEY: Retirement is still a long way off for Jake Gerrein. At 17, the suburban St. Louis high school student has barely started working.

Mr. JAKE GERREIN: I worked down at (unintelligible) Market. I sell produce. I'm pretty good with people, I guess.

HORSLEY: But Gerrein is already thinking ahead some 50 years and wondering if Social Security will be around when his turn comes to collect.

Mr. GERREIN: By the time I retired, it would be completely gone. I mean, with the baby boomers and everything.

HORSLEY: So Gerrein took his concern right to the top.

Mr. GERREIN: Hi, my name is Jake Gerrein and I'm the junior class vice president of Fox High School.

President BARACK OBAMA: All right.

(Soundbite of applause and cheering)

HORSLEY: When President Obama dropped by his high school for a town hall meeting this spring, Gerrein was right there with a microphone.

Mr. GERREIN: I was just curious to what policies you're going to put in place in order to protect Social Security for the upcoming generations?

Pres. OBAMA: It's a good question.

(Soundbite of applause)

HORSLEY: For years, Social Security has been a vexing question for politicians. Tip O'Neill famously called it the third rail. But Mr. Obama said compared to real problems, like health care, fixing Social Security is a comparative snap.

Pres. OBAMA: There are some problems that are really hard to solve. This is actually one that we can solve.

HORSLEY: The problem at least is straightforward: more and more baby boomers are retiring and they're living and collecting benefits longer. Forecasters say in about seven years, Social Security will start paying out more in benefits to retirees than it's collecting in taxes from workers. At that point, the system will start drawing on its trust fund.

That means the rest of the government, which has been, in effect, borrowing from the fund, will have to start paying it back. But there's enough money in the fund, at least on paper, to keep paying full benefits through about 2037, and only when that runs out will future retirees, like Gerrein, run the risk of seeing their benefits cut.

In the worst-case scenario, the cuts would average about 25 percent. A cut that size, almost 30 years in the future, might not seem like an urgent problem.

But Treasury Secretary Timothy Geithner says the longer the government waits to fix Social Security, the harder it will be.

Secretary TIMOTHY GEITHNER (U.S. Department of Treasury): There is a broad base consensus about the importance of making sure these programs are going to be available to future generations. And we have time to make sure that we come together to make the kind of changes necessary to achieve that objective. But we don't have infinite amount of time.

HORSLEY: Geithner says the Obama administration is committed to tackling Social Security, but only after it's finished revamping the health care system.

Republican Senator Lindsey Graham of South Carolina wonders, why wait?

Senator LINDSEY GRAHAM (Republican, South Carolina): I understand health care is important. I don't disagree with that. But if you could solve the Social Security problem, it would create momentum to solve other problems.

HORSLEY: Graham has been outspoken in his offers to help with Social Security. If the White House gave the go-ahead, Graham says, he's convinced a bipartisan solution could be worked out this year.

There are any number of ways to fix Social Security, but they boil down to these: charge workers a little more in taxes, pay retirees a little less in benefits, or some combination of the two.

The president's preferred solution is to extend Social Security taxes to higher incomes. As he explained during the town hall meeting, workers who make more than $107,000 a year don't pay Social Security taxes on the excess.

Pres. OBAMA: For almost everybody here, what that means is that you pay payroll tax on every dime that you earn. But if you're Bill Gates, that means you're only paying payroll tax on one-tenth of one percent of what you earn, because you earn so much more.

HORSLEY: Other proposals include reducing benefits for wealthy retirees, raising the retirement age and encouraging new forms of savings.

Republican Senator Graham says those ideas should be on the table along with President Obama's.

Sen. GRAHAM: I'm open-minded about lifting the cap. But you've got to be open-minded about it all.

HORSLEY: Graham says he's willing to meet the president more than halfway, and he thinks he could bring 10 or more fellow Republicans along with him.

As for Jake Gerrein, his conversation with the president left him more confident about his own retirement, 50 years in the future.

Mr. GERREIN: I feel a lot better now that we talked about it. Obviously, they're worried about what's going on. So anything they can do is only going to benefit it.

HORSLEY: Gerrein thought for a moment then added, well, almost anything.

Scott Horsley, NPR News, Washington.

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