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Social Security faces hard decisions
WASHINGTON -- Social Security faces benefit cuts, tax increases, a higher retirement age or a combination of those steps over the long term, regardless of President Bush's idea for personal investment accounts, the head of a congressional agency said Wednesday.
The fund would need several trillion dollars -- sooner if the accounts become law, later if no changes are made to the system, said Comptroller General David Walker, head of the General Accounting Office.
"You've got to act -- you don't have a choice," he told the Senate Special Committee on Aging. "The question is when are you going to act and how you're going to act."
Bush favors letting younger workers invest a portion of their payroll taxes in the stock market as a way to secure future funds.
Sen. John Breaux, a moderate Democrat from Louisiana and a White House ally on the accounts, said he would support an overhaul, even if it meant raising the retirement age to reflect longer lifespans. But reform is not likely this year without leadership from Bush, whom Breaux urged to discuss the issue in his State of the Union speech this month.
"It could happen this Congress if the president gets four-square behind it," Breaux, outgoing chairman of the committee, said after the hearing.
"I'd do it tomorrow," he said. "I'd vote for it. We've got to do something. Otherwise we're just hamstringing future generations."
Bush already has a crowded agenda that includes a possible war with Iraq, a nuclear showdown with North Korea, the fight against terrorism, the struggling economy, Medicare's problems and re-election.
Also, the White House expects federal deficits in the $200 billion to $300 billion range over the next two years, a dramatic worsening of the budget outlook since last summer.
"There's no question we have a big hole," said Sen. Debbie Stabenow, D-Mich., questioning the White House's desire for more tax cuts at the expense of Social Security funds. "The first thing is to stop digging."
Social Security, a pay-as-you-go system, is expected to start paying out more in benefits than it collects in taxes by 2017. That is because the large baby boom generation starts retiring and the work force keeping the system afloat through payroll tax declines.
Walker said one plan proposed by the president's Social Security Commission in 2001 would cost $2.2 trillion and would reduce future promised benefits. Leaving the system alone means the bill comes due later -- and larger -- at $3.4 trillion.
A new GAO report said both options have trade-offs. Personal accounts shift the risk to future retirees, and leaving the system untouched offers no guarantee that future benefits will hold steady.
"Public education and information will be key to implementing any changes," the report said.