THE WHITE HOUSE
Office of the Press Secretary
SAVING SOCIAL SECURITY NOW
AND
MEETING AMERICA'S CHALLENGES
FOR THE 21st CENTURY
In His State of the Union Address, President Clinton Will Put Forward His Framework To Save Social Security Now, While Meeting America's Challenges for the 21st Century. The President and Vice President's framework strengthens Social Security by:
Transferring 62 percent of the projected budget surpluses over the
next 15 years -- more than $2.7 trillion -- to the Social Security
system.
Investing a portion of the transferred surpluses in the private
sector to achieve higher returns for Social Security -- just as any
state or local government, or private pension does -- after working
with Congress to devise a mechanism to ensure that the investments
are made independently and without political interference. We will
support using a broad-based neutral approach managed by the private
sector with minimum administrative costs.
Keeping Social Security solvent until 2055.
Calling for a bipartisan effort to make the hard-headed but
sensible and achievable choices needed to save Social Security
until at least 2075. As part of this effort, President Clinton and
Vice President Gore believe that we must:
Reduce poverty among elderly women -- particularly widows, who
have a poverty rate nearly twice the overall poverty rate for
older Americans.
Eliminate the confusing and out-dated earnings test so that we
stop discouraging work and earnings among older Americans.
After Social Security Reform Is Secured -- Consistent With the President's "Save Social Security First" Commitment -- the President Proposes To:
Strengthen Medicare for the 21st Century. The President's
framework will reserve 15 percent of the projected surpluses for
Medicare, ensuring the Medicare Trust Fund is secure for 20 years.
The President believes that these new resources should be used to
help achieve broader, bipartisan reforms -- which should include a
prescription drug benefit.
Create New Universal Savings Accounts -- USA Accounts. The
President's framework will reserve 11 percent of the projected
surpluses to create new Universal Savings Accounts (USAs) so all
working Americans can build wealth to meet their retirement needs.
To help Americans save and to strengthen our current pension
system, the government will provide an equal dollar contribution
for most Americans. In addition, the government will match a
portion of each additional dollar an individual puts voluntarily
into his/her USA account -- with larger matches going to
lower-income workers.
Prepare America for the Challenges of the Future. The President's
framework will reserve 11 percent of the projected surpluses for
military readiness and pressing national domestic priorities, such
as education and research.
SAVE SOCIAL SECURITY NOW:
STRENGTHENING SOCIAL SECURITY FOR THE 21st CENTURY
In His State of the Union Address, President Clinton Will Put Forward A Framework To Strengthen Social Security Now. Since its creation more than 60 years ago, Social Security has been a bedrock of retirement security for Americans. There are 76 million baby boomers looking ahead to retirement. By 2030, there will be twice as many elderly as there are today, putting pressure on the Social Security system. After 2032, if we do nothing, the Trust Fund will be exhausted and Social Security will have only enough resources to cover 72 cents per dollar of promised benefits. President Clinton and Vice President Gore believe we must act now to tackle this tough, long-term challenge. That is why they are proposing to:
Use the Budget Surplus To Save Social Security Now
"Saving Social Security First." Last year, in his State of the
Union Address, President Clinton promised to save the budget
surplus until century. This year, in his State of the Union
Address, President Clinton reiterated his pledge to save Social
Security first -- committing to reserve the budget surplus until
Social Security reform is secured.
62 Percent of the Projected Budget Surpluses Will Be Used to Save
Social Security. President Clinton proposes to transfer 62 percent
of the projected budget surpluses over the next 15 years -- more
than $2.7 trillion -- to Social Security.
Invest A Portion of the Surpluses To Achieve Higher Returns for Social Security
Invest Portion of Surpluses To Achieve Higher Returns, Working With
Congress to Devise A Mechanism to Ensure Independent and
Non-Political Investments. We want to work with Members of
Congress from both sides of the aisle to craft a bipartisan Social
Security plan which invests a portion of the surplus transferred to
Social Security to achieve higher returns, and includes a mechanism
to ensure that investments are made independently and without
political interference. We will support using a broad-based
neutral approach managed by the private sector with minimum
administrative costs.
To achieve higher returns for Social Security, less than
one-quarter of the transferred surpluses will be invested in
the stock market.
Save Social Security Until 2055 -- And Work Together To Save It Until At Least 2075
President's Framework Keeps Social Security Solvent Through 2055.
By transferring 62 percent of the projected surpluses for the next
15 years to Social Security and investing a portion of them in the
market -- just like any private or state or local government
pension does -- we will ensure that Social Security is on sound
footing for 55 years -- until 2055.
Must Work Together -- Across Party Lines -- To Make Hard-Headed, But Sensible and Achievable Choices To Save Social Security for 75 Years. President Clinton's goal is to save Social Security for 75 years. To do so, he believes we must work together in a bipartisan way to make the hard-headed, but sensible and achievable choices to save Social Security through at least 2075.
Publicly Held Debt Will Fall To Lowest As Share of GDP Since 1917
Turning Around America's Fiscal Position. Under Presidents Reagan
and Bush, the debt held by the public quadrupled, rising from $785
billion in 1981 to $3.2 trillion in 1993. As a share of the
economy, the publicly held debt increased from 26 percent in 1981
to 50 percent in 1993. Since President Clinton took office, the
publicly held debt as a share of GDP has dropped to about 45
percent.
Debt-to-GDP Ratio Will Fall to Lowest Level Since 1917. Under the
President's framework, current projections suggest that the
publicly held debt, as a share of GDP, will fall from about 45
percent today to less than 10 percent in 2014 -- its lowest level
since 1917.
Reduce Poverty Among Elderly Women -- Particularly Widows
Poverty Rates Among Elderly Women -- Particularly Widows -- Remain
High. The poverty rate for all elderly women was 13.1 percent in
1997. For widowed women, poverty rates are especially high: the
poverty rate is 18.0 percent for widowed women -- nearly four times
the poverty rate of married women (4.6 percent) and much higher
than the poverty rate of widowed men (11.4 percent).
President's Framework Would Lower Poverty Rates Among Elderly
Women -- Especially Widows. Currently, widow benefits vary from 50
to 67 percent of benefits for a married couple when both members
were alive. The official poverty thresholds imply that a widow
needs over 75 percent of a couple's income to maintain her
pre-widowhood consumption. This is a key reason why widow poverty
is so much higher than overall elderly poverty. The President is
committed to reducing the loss of Social Security income at
widowhood.
Eliminate the Out-Dated and Confusing Earnings Test
President Clinton Believes We Should Eliminate The Earnings Test.
President Clinton believes that the earnings test has outlived its
use. Today, it primarily serves to confuse people, and to
discourage them from working. We want to work with Members of
Congress to eliminate the earnings test as part of a comprehensive
package to strengthen Social Security for the 21st century.
Earnings Test Should Be Eliminated Because It Is Out-Dated And
Confusing -- And It Discourages Work and Earnings Among the
Elderly. The Social Security earnings test is a confusing relic of
a past era. It discourages the elderly from working. It is
administratively complicated; administering the earnings test
imposes significant administrative burden on the Social Security
Administration. Finally, eliminating the earnings limit would have
almost no effect on the long-run actuarial balance of the Social
Security system.
MEETING AMERICA'S CHALLENGES
FOR THE 21st CENTURY
After Social Security Reform Is Secured -- Consistent With the President's "Save Social Security First" Commitment -- The President Proposes To Meet The Following Three Challenges:
STRENGTHENING MEDICARE FOR THE 21st CENTURY
RESERVE 15 PERCENT OF THE PROJECTED SURPLUSES FOR MEDICARE, EXTENDING THE LIFE OF THE MEDICARE TRUST FUND UNTIL 2020.
We Must Prepare for the Health Care Challenges of the Next Century.
In its 30-year history, Medicare has contributed to longer lives
and better lives for America's elderly and disabled. However,
Medicare -- like Social Security -- will be impacted by the tidal
wave of the "Senior Boom." Its enrollment is expected to double by
2030. In addition, Medicare -- as well as the private sector --
faces escalating health care costs. As a result, the Medicare
Trust Fund is expected to run out in 2008, if no actions are taken.
Reserving Nearly One in Six Dollars of Surplus to Help Keep
Medicare Safe Until 2020. The President's framework would reserve
15 percent of the projected surpluses -- $650-$700 billion -- over
the next 15 years for the Medicare Trust Fund. These funds would
be prohibited from being used for any other purpose, ensuring that
the money will go to help the health care needs of older and
disabled Americans. Even in the absence of broader reforms, the
President's framework would guarantee that Medicare can continue to
provide its critical health services until 2020 -- doubling the
life of the Medicare Trust Fund and providing the strongest outlook
in the last 25 years.
New Funds Should Be Used To Help Achieve Broader, Bipartisan
Reform. The President believes that the Medicare Commission and
Congress should utilize these new dedicated dollars as part of
broader, bipartisan reforms. Such reforms, including the
development of a long-overdue prescription drug benefit, are
essential to provide efficient health care to the elderly and
people with disabilities in the 21st century.
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UNIVERSAL SAVINGS ACCOUNTS (USAs)
RESERVE 11 PERCENT OF THE PROJECTED SURPLUSES TO CREATE NEW UNIVERSAL SAVINGS ACCOUNTS (USAs) SO EVERY WORKING AMERICAN CAN BUILD WEALTH AND A NEST EGG TO MEET THEIR RETIREMENT NEEDS.
USA Accounts Will Help Americans Build Wealth for Their Retirement
-- Strengthening Personal Savings and Pensions. To help supplement
Social Security, the President proposes to create USA accounts to
help strengthen two legs of retirement security: personal savings
and pensions. Under the President's framework, we will reserve 11
percent of the projected surpluses over the next 15 years --
averaging about $33 billion per year -- to create Universal Savings
Accounts (USAs), so that every working American can build wealth
and a nest egg for retirement.
We Want to Work With Congress And Experts To Determine Precisely
How USA Accounts Will Be Structured So That They Are Progressive
And Help Working Americans Save for Retirement. President Clinton
believes the government should provide most Americans with a flat
contribution. In addition, the government will match a portion of
each dollar an individual puts into the account -- with larger
percentage matches going to lower-income workers. However, we want
to work with Members of Congress and pension and personal savings
experts, to ensure that USA accounts build on the current
private-sector pension system, are progressive, and help working
Americans save for their futures. Therefore, the exact size of the
contributions, match rates, and income limits will be determined
later.
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MILITARY READINESS AND
OTHER CRITICAL INVESTMENTS IN AMERICA'S FUTURE
RESERVE 11 PERCENT OF THE PROJECTED SURPLUSES FOR MILITARY READINESS AND PRESSING NATIONAL DOMESTIC PRIORITIES, SUCH AS EDUCATION AND RESEARCH.
Ensuring That America's Military Continues to be Ready for the
Challenges of the 21st Century. Early in January, President
Clinton proposed a bold, new strategy to ensure that America's
military continues to be fully prepared to protect our national
interests as the world's most powerful fighting force. President
Clinton believes this approach will provide the resources to meet
his proposed detailed blueprint for military readiness. Ensuring We
Meet Other Critical Investments In America's Future. In addition
to military readiness, the setting aside of 11 percent of the
projected surpluses -- nearly $500 billion -- will allow America to
meet its other critical investment needs, such as education and
research.