Social Security, the government pension program for seniors, is scheduled to run out of money in coming decades. Despite continuous hikes in the payroll tax - up to today's sky-high rate of 12.4 percent - the program is set to implode in the next forty years, due to age demographics and medical advances. The question we face, then, is how do we give younger workers new options for building wealth, without hurting current seniors, raising taxes, or cutting benefits?

First of all, the system does not face short term funding problems; it is the long term fiscal stability of Social Security where the problem arises. If we leave the situation unreformed until the crisis is upon us, however, it will be too late.

When Social Security taxes (payroll taxes) are collected, one of two things happen: (1) benefits for current retirees are paid; (2) if there is any excess this is credited to the Social Security Trust Fund. This excess flows into thousands of depository accounts maintained by the government with financial institutions across the country. Along with many other forms of revenues, these Social Security taxes become part of the government's operating cash pool, or what is more commonly referred to as the U.S. Treasury. They are accounted for separately through the issuance of interest bearing federal securities to the Social Security Trust Fund. Benefits are not paid from the Trust Fund, but from the Treasury. As the checks are paid, securities of an equivalent value are removed from the Trust Fund.

Social Security has always been a "pay as you go" system, with current workers supporting retired people and expecting the same in return from the next generation. When Congress created Social Security in 1935, there were about 37 workers for every retired person. Today, only three workers are available to support each Social Security beneficiary, and that will decline to two workers for each retiree shortly after the year 2000.

In 1935, Congress set the retirement age at 65, at a time when the average life expectancy was 61. Today, the average life expectancy is 75, with the retirement age now set at 67 (beginning in 2003 and fully phased in by 2022). So a combination of low birth rates and longer than ever life expectancies has destroyed the financial foundation upon which Social Security was formed.

Currently, the Social Security program runs an annual surplus of $65 billion and has accumulated to over one-half trillion dollars in reserves. This surplus is expected to grow to over $1 trillion before the balance sheet turns negative in 2014. But it will turn negative with a vengeance, as the baby-boomer generation starts to retire. The surplus will be wiped out in a decade and a half, and the Trust Fund will be bankrupt by 2034, according to the 1999 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.

To get the job done, we should accomplish four goals:

1. We must be fair to current and future retirees, especially women;
2. Taxes should not be increased;
3. A safety net must be in place for the needy and disabled; and
4. There should be new options for younger workers.

At my request, the non-partisan Congressional Research Service analyzed the amount of time it will take retirees this year to recover the value of their taxes paid into the Social Security program plus interest. The information demonstrates that Social Security has been a great benefit to date . . . but for baby boomers and everyone younger, Social Security is no longer a fair deal.

For average earners who retired in 1980, they received the retirement portion of their Social Security taxes and their employer's share of the taxes, plus interest, in just three years, when they turned sixty-eight. That's a good deal.

The same average earner who today is 65-years old, making $25,000 a year, will have to live to 80 before they get their money back. For most people, that's also a pretty good deal.

But I'm afraid the good deal ends right around this year. For tens of millions of working people younger than sixty-five, Social Security's problems have already begun. Average earning 48-year-olds will have to live to 89 to get their money back. Average 38-year-olds will have to make it to 91.

If you're younger than that, Social Security's message seems to be eat well and get plenty of exercise, because you'll have to live into the hundreds to get a fair return on the Social Security money that's taken out of your paycheck.

We can't raise taxes to solve this problem because someone making more than $72,600 a year can really forget about a fair return. Forty-eight-year-olds making $72,600, the maximum taxable wage base, will have to reach 104 years old to get their money back and thirty-eight-year- olds will have to live to 117.

For the first time, the President of the United States has advocated putting money in the stock market. While I strongly differ with Mr. Clinton on whether control over investment decisions should be in the hands of individuals or the federal government, the President is moving in the right direction by acknowledging that the stock market can be a part of the Social Security solution. It's important, however, that we don't shortchange people's Social Security returns by relying on government investment decisions that are subject to political pressures. I believe we can save Social Security without making the government an owner of private markets. The federal government's ownership of private markets will lead to mischief, political favoritism, and less money for Social Security recipients.

In testimony before my Committee, Federal Reserve Chairman Alan Greenspan said he opposed government investment of Social Security money in private markets. "I do not believe that it is politically feasible to insulate such huge funds from governmental direction," Greenspan said. "I'm fearful that we will use those assets in a way which, one will create a lower rate of return for Social Security recipients, but even a greater concern that it will create sub-optimal use of our capital resources and those assets which create our standard of living."

Greenspan cited studies showing that the rate of return on state and local pensions funds is usually two to three percentage points lower than private pension funds. "There are also studies which suggest that the greater the proportion of trustees who are political appointees on those pension funds, the lower the rate of return," the Federal Reserve Chairman stated.

Working together, we can be successful. As Chairman of the Ways and Means Committee, I am committed to doing everything necessary to strengthen and save Social Security, working in a bipartisan way to get the job done. I would like to leave the Congress in 2000 with one of my legacies as having saved Social Security for my grandchildren. I hope that the President will join me.