Problem: By 2015, more money will be leaving the Social Security system than going into it. By 2037, the program won't be able to afford its payouts. Solution: Depends on who you ask — or for whom you want to vote.

        In years past, it's been called the third rail of politics — touch it and you die. But heading into November, the future of Social Security is among the top issues facing voters.

        “The Social Security system faces projected long-term deficits,” said Henry J. Aaron, chairman of the National Academy of Social Insurance. “It's wise to deal with this sooner rather than later, and we have two radically different visions from the candidates.”

        Democrat Al Gore wants to keep the system mostly the way it is, a guaranteed payment to retirees funded by younger workers' payroll taxes, with greater incentives for additional personal savings.

        Republican George W. Bush wants to allow people to fund similar individual accounts directly from existing payroll taxes — representing a fundamental shift away from the intergenerational transfer to bona fide savings.

        “The two plans have enunciated very different visions of how the system should evolve in the future, but neither gives a full description of how to achieve that vision,” Mr. Aaron said.

        C. Eugene Steuerle, senior fellow at the Urban Institute, said that not having full details of the plans makes analysis difficult.

        Still, both candidates acknowledge that the system is headed for trouble. And no matter what the political leanings or party affiliation, everyone agrees that the Social Security system needs some changes. The reasons are found in the history of the program and its current mechanics.
       

Roots in the Depression
               Social Security was founded in 1935 — in the midst of the Great Depression — when more than half of seniors lived in poverty.

        “This law represents a cornerstone in a structure which is being built but is by no means completed — a structure intended to lessen the force of possible future Depressions,” President Franklin D. Roosevelt said when signing the Social Security Act.

        The program has changed some in its 65-year history, first with the addition of survivors and disability benefits and most recently with the elimination of the retirement earnings test.

        The tax rates currently are: 5.35 percent for Old Age and Survivors Insurance, 0.85 percent for Disability Insurance and 1.45 percent for Medicare. Employers match those payroll taxes, for a total of 15.3 percent of workers' earnings.

        The bulk of the money paid in gets immediately paid back out to current recipients. It's a redistribution system, not a savings system. Three workers' Social Security taxes go to pay one recipient's benefits.

        But take demographics into account, and you'll see where the system stands to get into trouble. Baby boomers are still working now, paying into the system. Workers now pay more than enough taxes to pay current recipients' benefits, creating a surplus.

        The 76 million boomers will begin retiring in 2010, and in about 30 years, there will be almost twice as many older Americans as there are today.

        And the ratio of paying workers to a Social Security beneficiary will drop from 3.3-to-1 to 2-to-1.

        Congress saw this coming and in 1983 started putting money in reserve. Today, the Social Security Trust Fund reserves total more than $896 billion.

        By about 2015, however, more money will be leaving Social Security than going in, and so the reserves will begin to be used. Estimates say those reserves will be exhausted by 2037, with income paying only about 75 percent of expected payouts.

        Two basic choices are at hand: Increase money going into Social Security or limit the benefits.

        Messrs. Bush and Gore have each taken one of those sides.
       

Gore's plan
               Vice President Al Gore's plan essentially is to leave Social Security alone, but add money from other government budgets to take up the slack. His plan is largely dependent on a continued strong economy creating general revenue surpluses for years to come.

        Mr. Aaron, who also is a senior fellow at the Brookings Institution, says that his analysis shows Mr. Gore's plan would extend Social Security's solvency from 2037 to 2054. He said it will close half of the projected deficit.

        Other elements of Mr. Gore's plan include:

        • Keeping intact the intergenerational transfer philosophy.

        • Opposing benefit reductions or retirement age increases.

        • Opposing a tax cut.

        • Encouraging more personal saving through more IRA-type accounts.

        Mr. Aaron is one the country's leading Social Security academics, but he's also admittedly a Democrat who supports Mr. Gore.

        “I think Gore is moving in the right direction, and Bush in the wrong direction,” he said.

        Mr. Steuerle, an economist who was formerly deputy assistant secretary for tax analysis at the U.S. Department of the Treasury and director of finance and taxation projects and resident fellow at the American Enterprise Institute, said Mr. Gore's plan falls short by not addressing the demographic shift enough.

        While Mr. Gore opposes any further increases in the age at which retirees can receive full Social Security, Mr. Steuerle said an aging population should consider working longer.
       

Bush's plan
               Texas Gov. George W. Bush's plan involves a more radical philosophical shift for Social Security. He would change a portion of it from a straightforward “pipeline” approach — where money enters at one end and leaves at the other — to a savings plan. You pay in, watch it grow, and get it back again.

        Mr. Bush hasn't specified how much of taxes could be earmarked for the personal accounts. Aca demics such as Mr. Steuerle, under guidance from Bush advisers, have been assuming about 2 percentage points, or almost half, of the existing 5.35 percent Social Security payroll tax.

        Mr. Bush's plan is largely dependent on continued strong stock market returns making up the projected shortfall. It also includes:

        • No change in existing benefits for retirees or near-retirees.

        • No increase in payroll taxes.

        • Preserving disability and survivors components.

        • Voluntary personal retirement accounts. Their own accounts would be bolstered, but less money would be sent to the pipeline for current retirees.

        Mr. Steuerle said personal accounts are a desirable way to protect the future, largely because private pension plans haven't filled the need.

        Mr. Aaron's criticism is that Mr. Bush's plan could increase the projected deficit, while exposing taxpayers to too much risk in the stock market. He's said that low earners will see a larger benefit cut while high earners will see a lower benefit cut.

        “And all would face increased market risk,” he said.

        He calculated that workers 30 and younger could see 54 percent less Social Security.

        But that's OK with Shannon and Ron Sweeney. The Deerfield Township couple hardly considered Social Security when planning for their retirement.

        Landing squarely in the middle of Generation X, they've started their retirement planning, confident that Social Security would mean little to their income in 37 years.

        Ms. Sweeney will turn 67 — the age at which she can claim full benefits — in 2037, the same year the reserves are estimated to run out. Her 31-year-old husband will turn 67 in 2036.

        “I don't worry about it because my husband I are saving for retirement,” the 29-year-old said. “We never thought we would rely on Social Security income.”

        Therefore, she's comfortable with market risk — and with the philosophical shift from all-out social insurance to partial private savings plans.

        Mr. Aaron said that is the basic difference between the two plans — and the decision that voters will make on Nov. 7.

        “The American public has two visions that are sufficiently different,” he said. “They can make a choice.”

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