President Bush's push to restructure Social Security has thrust private investment accounts to the front of the political debate, but dozens of alternative approaches to Social Security's problems have been proposed -- and many of them are receiving a second look as Congress grapples with the issue.
At its heart, Social Security's future financial shortfall is a basic math problem: The benefits owed over the next 75 years are $3.7 trillion greater than what it will have collected to make those payments. But how economists propose to solve that problem has had more to do with their vision of the nation's largest social insurance system than mathematics.
Graphic: A review of some alternative proposals to reform Social Security and how the compare to President Bush's plan.
A straightforward solution could be to raise the current payroll tax by less than 2 percentage points or cut benefits by 13 percent. Either would solve the problem through 2080. Similarly, if the limit on wages taxed for Social Security, currently $90,000, were lifted altogether, the system would be kept fully solvent until 2077, according to the Social Security Administration's chief actuary.
But out of political pragmatism, those who hope to preserve a basic structure established by Franklin D. Roosevelt -- mainly Democrats -- have obscured both tax increases and benefit cuts, using a variety of mechanisms that make the proposals remarkably complex. Even with such tactics, the Democratic proposals have yet to catch fire among politicians, who fear that the most head-on approach would be the most politically treacherous.
Conservatives, meanwhile, want to fundamentally change the system from the current model, in which taxes come in and benefits go out according to set formulas, toward a "forward-funded" system, in which benefits increasingly would be a product of savings and investment returns.
"If we succeed in reforming Social Security, it will rank as one of the most significant conservative governing achievements ever," White House political aide Peter H. Wehner wrote in an e-mail to supporters last month.
In between are hybrid proposals that include modest private accounts to satisfy conservatives but maintain a basic Social Security benefit, tilted to help the poor and most vulnerable, to appeal to liberals. It is in this pragmatic center that a bipartisan solution is likely to be found, said Rep. E. Clay Shaw Jr. (R-Fla.), a former chairman of the House Ways and Means Committee's Social Security subcommittee.
"I think a compromise can be reached," Shaw said. "We need to establish our principles . . . then look at all the alternatives."
The Liberal Approach
Democrats and liberal economists have focused on bringing Social Security's finances into line without fundamentally altering the system. But their formal proposals would not simply raise taxes and reduce benefits. One prominent Democratic plan, proposed by Massachusetts Institute of Technology economist Peter A. Diamond and Brookings Institution economist Peter R. Orszag, would use a nine-stage battery of revenue-raisers and benefit reductions to produce a Social Security system that would be both in balance and more generous for poor workers, widows, the disabled and children who survive the death of their parents.
"It was designed by looking at particular sources of imbalance that seemed to us worth addressing," Diamond said.
Under the plan, all new state and local government workers would be brought into the Social Security system, effectively expanding the Social Security tax base to cover the 25 percent of government workers who now are exempt. Diamond and Orszag would also raise the cap on wages subject to payroll taxes to about $105,000 for now.
To raise more revenue, they would impose a 3 percent tax on all earnings above the cap. They would also slowly raise the current 12.4 percent Social Security tax rate to 14.2 percent in 2055.
Benefits would be cut, on a scale that starts with trims of only 0.6 percent for a worker currently 45 years old but rising to 8.6 percent for a future retiree who is now 25. And under a complex formula, cuts would hit more affluent retirees the hardest, while benefits for low-wage workers would rise.
The approach would put Social Security's finances on a sound path immediately, obviating the need for government borrowing inherent in Bush's private-accounts approach, but so far it has been politically unattractive on Capitol Hill.