President Clinton and Republican congressional leaders joined in a rare show of amity Thursday to proclaim their determination to preserve Social Security for the baby boom generation and to scold Americans for not saving more for their own retirement.
Their willingness to cooperate, combined with the robust economy and the growing federal budget surplus, suggests a real possibility that political leaders will act in the next year or two to head off the financial crisis that faces Social Security when all the baby boomers have reached retirement age in about 30 years.
But Social Security alone, Clinton told a forum mandated by Congress to address Americans' retirement prospects, is not enough to protect elderly Americans from the ravages of poverty. "Very few people are doing any savings above Social Security and whatever pension they have or don't have for their own retirement," he said.
Emboldened by today's prosperity, Americans have a unique opportunity to assure their future, the president said. "People have the emotional space to think about the long term," he said.
By contrast, he warned, failure to fix Social Security and increase private savings "will undermine the self-confidence we're now enjoying, and it will make some people very shortsighted again."
Clinton, 51, and Vice President Al Gore, 50, who introduced his boss as "one of the greatest older Americans I have had the privilege to know," are two of the senior members of the biggest generation in American history, the 76 million people born in the years 1946 through 1964.
As the baby boom generation has aged, it triggered a burst of public school construction, strained the nation's higher education system and drove housing prices to new heights.
But they are saving less for retirement than previous generations, and their sheer numbers will create great strains on Social Security, the prime source of income for most retirees, and on Medicare, which helps pay doctor and hospital bills for those 65 and older. Americans saved less than 4% of their income last year, half the rate of savings in the 1960s and 1970s.
There are 34 million people 65 and older, about 13% of the nation's population. This group will double to about 70 million by 2030, about 20% of the projected population.
Social Security, which depends on payroll taxes collected from workers to finance the benefits going to retirees and the disabled, is estimated to hit a wall in 2032. That's when the program will exhaust the surpluses that are even now accumulating, and annual payroll tax collections will provide enough money to pay only 75% of the benefits promised under current law.
Modest changes enacted now could avert the threat of big benefit cuts or tax increases later, the president and other political leaders argue. Because the nation is enjoying low unemployment and negligible inflation, it has a sense of confidence that should make compromise easy, the president told the 200 delegates to the "savings summit."
"If we can't deal with this issue now, when will we ever deal with it?" the president asked.
To help increase savings, Clinton announced a step that he said would encourage more workers to sign up for the salary set-aside programs called 401(k) plans. Under the change, workers will automatically be enrolled in their companies' 401(k) plan unless they explicitly opt out.
Appearing with him was an aggregation of political heavyweights rarely seen outside the floor of Congress during a State of the Union address. While offering differing views on Social Security, they emphasized cooperation rather than confrontation.
Senate Majority Leader Trent Lott (R-Miss.) spoke of the pain of selling the house he grew up in to pay the bills for his mother, who is in an assisted-living facility. And now, Lott said, he worries about how he and his wife will deal with the costs of growing old.
"I see this in a different way," Lott said. "This is really important stuff."
House Speaker Newt Gingrich (R-Ga.) warned that "none of us have saved for a world" where people can live 30 years after retiring. "Having us up here together is more than just symbolic," he said. "When we work together, good things happen."
And House Minority Leader Richard A. Gephardt (D-Mo.) pledged to "meld a compromise" on the normally contentious issues surrounding Social Security.
The president reiterated his proposal that the new budget surplus not be used for spending increases or tax cuts until the nation agrees on a plan for Social Security solvency.
Republicans want to take the first steps toward privatizing Social Security by allowing workers to keep some of their payroll taxes and invest them in stocks and bonds in individual accounts.
Gephardt is a strong defender of the traditional system and a staunch opponent of privatization. He stressed the origins of Social Security as a safety net, a form of income protection for workers and families against the unforeseen hazards of disability and death as well as a source of guaranteed retirement income.
Significantly, the speakers sat patiently and listened to one another's 10-minute speeches. Usually, Lott said, "there is nothing that grates on a politician's ear more than another politician's voice."
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Despite a robust economy, the savings rate in the U.S. continues a downward trend. And U.S. households already save far less than those in most other industrialized countries. Savings as a percentage of disposable household income in selected countries and in the United States since 1970:
The U.S. Savings Rate Is Low. . .
South Korea: 18.00%
United States: 3.8%
Note: Figures are estimates for 1997 for all countries except the United States.
. . .and Is Still Falling
Sources: Commerce Department, Organization for Economic Co-operation and Development