The U.S. Treasury on Monday issued the first of a series of papers aimed at jump-starting debate over Social Security reform, saying the system faced a present-value deficit of $13.6 trillion.
The first of six issue brief papers aims to define the scope of the problem and said the retirement benefit program can be made permanently solvent only by reducing the benefits and/or increasing taxes.
Faster economic growth will not solve the imbalances that Social Security faces as the Baby Boom generation retires in large numbers in the next decade, reducing revenues and drawing benefits. Realistically, there is no way to grow out of the problem, the Treasury said.
Although recent efforts to reform Social Security have stalled amid disagreements over personal retirement accounts and payroll tax increases, Treasury Secretary Henry Paulson has pledged to press forward with discussion on possible solutions, even if it only lays groundwork for action by the next administration.
While differences over personal accounts and taxes dominate the public debate over this issue, in my conversations I found that there are many other things on which people agree, Paulson said in a statement accompanying the paper.
Everyone I talked with recognizes the seriousness of the problem, and most agreed on some of the principles and policies that must be part of the solution, he said.
The next paper, one of five more to come over the next three months, will offer a framework for possible solutions, said Philip Swagel, the Treasury's assistant secretary for economic policy.
Although the United States faces similar and deeper long-term fiscal challenges with Medicare, the Treasury chose to focus on Social Security because it is less complex, without the medical issues associated with the retiree health care system.
Medicare is a bigger problem, Swagel said, adding that he hoped that common ground found in addressing Social Security challenges could eventually provide a foundation for Medicare reforms as well.