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Report: Social Security needs reform to remain solvent

By CNN White House Correspondent Major Garrett

WASHINGTON (CNN) -- Americans will pay higher taxes or see their benefits cut drastically if Social Security is not reformed, according to a draft report from a Bush administration commission.

The draft report, to be delivered Thursday to the 16-member bipartisan panel dubbed the President's Commission to Strengthen Social Security, warns the federal retirement system will begin paying out more in benefits than it receives in taxes in 2016. The system will move toward insolvency unless Social Security benefits are reduced or payroll taxes are increased, the report says.

The report makes no recommendations on how to reform the system.

INTERACTIVE: Social Security commission members  
MESSAGE BOARD: Taxing and spending  

The commission, led by former Sen. Daniel Patrick Moynihan, a New York Democrat and Richard Parsons, chief operating officer of CNN's parent company AOL Time Warner, will meet in Washington Tuesday to review the findings and amend it as members see fit.

"There will be some adding and some subtracting and some rewriting," said commission spokesman Randy Clerihue.

Bush appointed the commission to find a way to reform Social Security, including examining his proposal to provide voluntary private accounts for beneficiaries to invest in the stock market. The president has asked the commission to make sure current and near-term beneficiaries are not affected by any changes in the system.

According to Bush's investment plan, a percentage of payroll tax revenue would have to be taken out of the system to allow for private accounts. Bush has favored giving younger workers 2 percent of their payroll taxes to invest.

Forrmer Sen. Daniel Patrick Moynihan, a New York Democrat, and AOL Time Warner executive Richard Parsons head the commission  

In order to keep the status quo, the commission's report says payroll taxes must increase $860 (in 2001 dollars) to maintain current benefits in 2020. To keep the same level of benefits and maintain solvency a decade later, in 2030, taxes must rise $2,100.

The other option to ensure the Social Security system's solvency, the report says, is to reduce benefits. Without payroll tax increases, the report says benefits would have to be cut by $2,227 in 2020 and by $4,605 in 2030.

The report says these changes are necessary because the ratio of workers to beneficiaries is falling steadily -- soon working out to two workers for every one beneficiary.

• President's Commission to Strengthen Social Security
• Social Security Online
• The White House

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