All these proposals are essential to expand this economy and add new jobs, but they are just the beginning of our duty. To build the prosperity of future generations, we must update institutions that were created to meet the needs of an earlier time. Year after year, Americans are burdened by an archaic, incoherent federal tax code. I've appointed a bipartisan panel to examine the tax code from top to bottom. And when their recommendations are delivered, you and I will work together to give this nation a tax code that is pro-growth, easy to understand and fair to all.
America's immigration system is also outdated -- unsuited to the needs of our economy and to the values of our country. We should not be content with laws that punish hardworking people who want only to provide for their families, and deny businesses willing workers, and invite chaos at our border. It is time for an immigration policy that permits temporary guest workers to fill jobs Americans will not take, that rejects amnesty, that tells us who is entering and leaving our country and that closes the border to drug dealers and terrorists.
Vice President Cheney, left, and House Speaker L. Dennis Hastert, center, applaud as President Bush prepares to deliver his State of the Union address at the Capitol.
(Rich Lipsk -- The Washington Post)
One of America's most important institutions -- a symbol of the trust between generations -- is also in need of wise and effective reform. Social Security was a great moral success of the 20th century, and we must honor its great purposes in this new century. The system, however, on its current path, is headed toward bankruptcy. And so we must join together to strengthen and save Social Security.
Today, more than 45 million Americans receive Social Security benefits, and millions more are nearing retirement. And for them, the system is sound and fiscally strong. I have a message for every American who is 55 or older: Do not let anyone mislead you. For you, the Social Security system will not change in any way.
For younger workers, the Social Security system has serious problems that will grow worse with time. Social Security was created decades ago, for a very different era. In those days, people did not live as long, benefits were much lower than they are today, and a half century ago, about 16 workers paid into the system for each person drawing benefits. Our society has changed in ways the founders of Social Security could not have foreseen. In today's world, people are living longer and therefore drawing benefits longer. And those benefits are scheduled to rise dramatically over the next few decades. And instead of 16 workers paying in for every beneficiary, right now it's only about three workers. And over the next few decades, that number will fall to just two workers per beneficiary.
With each passing year, fewer workers are paying ever-higher benefits to an ever-larger number of retirees.
So here is the result: Thirteen years from now, in 2018, Social Security will be paying out more than it takes in. And every year afterward will bring a new shortfall, bigger than the year before. For example, in the year 2027, the government will somehow have to come up with an extra $200 billion to keep the system afloat. And by 2033, the annual shortfall would be more than $300 billion. By the year 2042, the entire system would be exhausted and bankrupt. If steps are not taken to avert that outcome, the only solutions would be dramatically higher taxes, massive new borrowing or sudden and severe cuts in Social Security benefits or other government programs.
I recognize that 2018 and 2042 may seem a long way off. But those dates aren't so distant, as any parent will tell you. If you have a 5-year-old, you're already concerned about how you'll pay for college tuition 13 years down the road. If you've got children in their twenties, as some of us do, the idea of Social Security collapsing before they retire does not seem like a small matter. And it should not be a small matter to the United States Congress.
You and I share a responsibility. We must pass reforms that solve the financial problems of Social Security once and for all.
Fixing Social Security permanently will require an open, candid review of the options. Some have suggested limiting benefits for wealthy retirees. Former congressman Tim Penny has raised the possibility of indexing benefits to prices rather than wages. During the 1990s, my predecessor, President Clinton, spoke of increasing the retirement age. Former senator John Breaux suggested discouraging early collection of Social Security benefits. The late senator Daniel Patrick Moynihan recommended changing the way benefits are calculated.
All these ideas are on the table. I know that none of these reforms would be easy. But we have to move ahead with courage and honesty, because our children's retirement security is more important than partisan politics.
I will work with members of Congress to find the most effective combination of reforms. I will listen to anyone who has a good idea to offer. We must, however, be guided by some basic principles: We must make Social Security permanently sound, not leave that task for another day. We must not jeopardize our economic strength by increasing payroll taxes. We must ensure that lower-income Americans get the help they need to have dignity and peace of mind in their retirement. We must guarantee that there is no change for those now retired or nearing retirement. And we must take care that any changes in the system are gradual, so younger workers have years to prepare and plan for their future.
As we fix Social Security, we also have the responsibility to make the system a better deal for younger workers. And the best way to reach that goal is through voluntary personal retirement accounts. Here is how the idea works: Right now, a set portion of the money you earn is taken out of your paycheck to pay for the Social Security benefits of today's retirees. If you're a younger worker, I believe you should be able to set aside part of that money in your own retirement account, so you can build a nest egg for your own future.
Here is why the personal accounts are a better deal: Your money will grow, over time, at a greater rate than anything the current system can deliver. And your account will provide money for retirement over and above the check you will receive from Social Security. In addition, you'll be able to pass along the money that accumulates in your personal account, if you wish, to your children and/or grandchildren. And best of all, the money in the account is yours, and the government can never take it away.