Today’s generation of college students should be very worried about the future of Social Security, according to prominent Stanford economists, Profs. John Shoven and John Cogan. They insist that the Social Security program has promised more than it can deliver under the current system of taxes and benefits.

Shoven brought attention to a speech made in 1998 by then-President Bill Clinton at Georgetown University.

“This fiscal crisis in Social Security affects every generation...if [the Social Security trust fund] gets in trouble and we don’t deal with it, ...it raises the question of whether [the baby boomers] will have enough to live on by unfairly burdening their children and, therefore, unfairly burdening their children’s ability to raise their grandchildren. That would be unconscionable,” Clinton said.

Shoven said that politicians from both parties acknowledge that the current system is problematic but differ in their proposed solutions.

According to Cogan, senior fellow at the Hoover Institution, in order to finance retirement benefits to workers who are now in their 40s, payroll taxes on today’s college students will have to be raised by 50 percent when they are in their 40s. Thus, college students have reason to worry if nothing is done.

Cogan also called Social Security “a poor financial deal for current college students.” At current tax rates, today’s typical college student will have to live to be 110- years-old just to receive enough benefits to compensate for his or her contributions to the Social Security system, adjusting for inflation.

According to estimates by the Social Security Administration, the program’s trust funds will begin to pay out more in benefits than they receive in payroll tax revenue beginning in 2018. By 2042, the trust will be empty and benefits will have to be cut for today’s college students who will then be of retirement age.

Shoven explained that these fiscal problems could be solved by either cutting benefits or raising taxes now as a new source of revenue.

One of the smaller but more noticeable parts of Bush’s plan, Shoven said, is to allow individuals to divert their payroll taxes into retirement accounts. Cogan emphasized the voluntary nature of these personal investment accounts.

“No one would be forced to put their payroll taxes in a personal investment account,” Cogan said. “Any person who wanted could continue to contribute all of their payroll taxes to the traditional Social Security system.”

Cogan also noted that the accounts would not be as risky as the media has made them out to be.

“Personal account investments would be limited to broadly-diversified, government-regulated stock and bond funds to minimize risk,” he said. “Individuals would not be able to pick individual company stocks. So no investing in Uncle Wiggly’s Worm Farm.”

Cogan and Shoven both praised Bush for attempting to solve a longstanding problem that could easily be swept under the rug again.

“Any reform of Social Security faces an uphill fight,” Cogan said. “The safest path for an elected official to follow is one of inaction. Our federally-elected officials have known for 20 years that the current system faces insolvency. Yet, they have chosen not to act. The President gets high marks in my book by pressing for reform.”

While Shoven agreed that Bush’s plan will restore the solvency of Social Security, he said that it was not the only plan that would achieve the goal. Shoven urges liberals to come up with an alternative so that “we can have a real debate.”

One such alternative, he added, could be a bigger program, with more benefits and higher taxes.

Shoven said his biggest fear is that nothing will be done and the problem will get worse until the system collapses.

“If I was worried about any outcome, it would be that we talk and talk and do nothing,” he said.

Shoven also addressed the massive $1 trillion dollar price tag of transitioning to a new Social Security system. He said that the costs are not “debilitating” because the new proposals cut benefits in the long run. Accordingly, people will be able to pay back the money that they are currently borrowing.

The reason for the extraordinary transition costs is because the plan allows young workers to keep and invest their own payroll tax contributions, instead of using the payments to provide benefits for today’s retirees, which is the current practice.