The Deseret News (Salt Lake City, UT)

November 30, 2001, Friday

SECTION: BUSINESS; Pg. B12

Social Security going broke?

By Dave Anderton Deseret News business writer

Unless the federal government is willing to raise taxes or lower benefits, Social Security is on a collision course with insolvency by the year 2037, according to Richard Burkhauser, a leading authority on retirement and Social Security policies.

Burkhauser, who is chairman of the Department of Policy Analysis and Management at Cornell University, addressed students at the University of Utah on Thursday, saying that the current crisis largely stems from increasing life expectancy.

"There's actually a very simple solution to the Social Security crisis. We wouldn't have to do anything if the baby boomers would simply agree that they will die at the same age as their parents," joked Burkhauser. In 1936, average life expectancy was roughly 65. However, the current system faces payments to retirees who will live into their 80s.

"As a matter of fact, some people predict that female children born this year will live into the 22nd century," he said.

The solution to the problem will be one that recognizes the nation's changing demographics. Ultimately, the success of the system will depend on the success of the U.S. economy, Burkhauser said.

"Older Americans have been doing very well in the last two decades in large part because of a fairly effective Social Security system," he said.

In addition, poverty rates for those older than 65 years have dropped from 34 percent in 1960 to less than 10 percent today. "Thanks in large part to the Social Security system and improved employer pensions, the poverty rate for older people is actually lower than the poverty rate for younger people."

And Burkhauser said every person receiving benefits over the past 50 years received a greater benefit than total taxes paid into the system on an individual basis.

"I have some very bad news for you. Those times are over. . . . Even if you don't increase benefits, you've got to raise taxes," Burkhauser said.

With roughly 92 percent of the U.S. population eligible for Social Security benefits, Burkhauser said the system's past success resulted from a growing work force, substantial economic expansion and fewer older Americans.

That will change as baby boomers hit retirement age and live longer lives, while the work force shrinks at the same time.

The President's Commission to Strengthen Social Security, a 16-member panel formed by President Bush last May, is expected to release recommendations by Dec. 21 on how to address the system's problems.

On Thursday, the commission met to finalize its proposals, which are anticipated to include a reduction in future retirees' benefits and a provision that would allow them to invest a small portion of their payroll taxes in the stock market.

"If they do allow families to invest a portion, this could be a boon for financial planners," said Cathleen Zick, chair of the U.'s Department of Family and Consumer Studies.

The key to modernizing Social Security, Burkhauser said, is early implementation. "The longer you delay, the greater the burden to future generations."

In 1999, Social Security's trust fund, the difference between payroll tax revenues and benefits paid out, rose by $134 billion, adding to a record high of $896 billion. Those reserves are projected to begin depleting by 2024 due to increased retirement payouts.

Burkhauser recommends that raising the retirement age to 67 -- and the minimum retirement age to 65 - - while increasing taxes by 2 percent to 4 percent, would keep Social Security intact.

"I don't think we want to lower the benefit," he said.

Contributing: Associated Press

E-MAIL: danderton@desnews.com