Security breach

Members of Congress have probably never heard of Steve Jamieson, a single 26-year-old graduate of Covenant Theological Seminary in St. Louis who currently works at the seminary's library. But that doesn't mean he's not on their minds.

Right now, Mr. Jamieson and millions like him are the focus of intense debate in Washington, as President Bush campaigns for politically difficult Social Security reforms. How Congress responds likely will determine both the future of America's most popular government program, which is facing a multitrillion-dollar shortfall, and the outcome of the 2006 and 2008 elections.

Here, then, are some possible scenarios for how Social Security reform will develop, and what they likely mean for Mr. Jamieson and his contemporaries:

Option 1: A do-nothing Congress

One way the Social Security debate could play out would be for Congress simply to follow the path of least political resistance and do nothing. This seems to be the plan of Rep. Rob Simmons (R-Conn.), who last month bluntly told The Washington Post: "When does the program go belly up? 2042. I will be dead by then."

Experts say the downside to this approach is two-fold: Mr. Jamieson and any children he may have will still be very much alive, Lord willing, and the problems with Social Security will begin much sooner than 2042 (see "Crisis proportions").

If Congress does nothing, then Mr. Jamieson, his children, and their contemporaries will receive either sharply lower benefits or a tax bill for Social Security's estimated $11 trillion shortfall that will begin building in 2018. And that will be on top of a Medicare shortfall that is at least five times as large. (The president is tackling Social Security first because its problems are more manageable, but changes to Medicare will have to come soon.) Simply leaving the program alone is probably "not a good idea," says Mr. Jamieson.

Option 2: Feed the beast

A proposal gaining momentum in Congress would raise payroll tax revenue to cover the cost of personal accounts (see option 4) or otherwise shore up Social Security. Workers currently pay 6.2 percent of their first $90,000 in annual income into the Social Security system, and their employers match that amount. Sen. Lindsey Graham (R-S.C.) is trying to bring Democrats on board for other reforms by making that tax apply to higher incomes, perhaps the first $150,000 in annual income. Others want to scrap the "wage cap" altogether.

This would work-on paper. But it might also cost Mr. Jamieson his job, or at least his next raise. Sen. Jon Kyl (R-Ariz.) predicts that increasing the wage cap would lead to "fewer of the good-paying jobs that everyone wants to encourage, because it will be more expensive to create those jobs, with a ripple effect down the wage scale."

Option 3: Work it out

With seniors living longer and healthier lives, Congress could also raise the eligibility age for Social Security. The eligibility age is already slated to rise to 67 for those, like Mr. Jamieson, who were born during or after 1960. Rep. Jim Kolbe (R-Ariz.) and former Rep. Charles Stenholm (D-Texas) proposed phasing in that change sooner, for Americans born during or after 1949. Economists estimate that to cover the entire shortfall, the eligibility age would have to rise to 73 or 74.

The advantage of this option is that it would keep taxes from rising on Mr. Jamieson and his children, and it would keep seniors active and productive. The disadvantage is that it may be the single most unpopular reform idea in the history of reform ideas. A national survey by John McLaughlin for the advocacy group USA Next found that 75 percent of Americans oppose raising the retirement age to 70.

Option 4: The index card

Right now Social Security benefits rise with increases in overall wages. One idea would have Congress link (or "index") benefit increases to inflation, which in the past has tended to rise slower than wages.

This would come very close to covering the Social Security shortfall and would allow future seniors like Mr. Jamieson to retire at the same standard of living as today's seniors enjoy. The downside is that unlike today's seniors, they would have less income than their working neighbors, and opponents of reform could easily portray this smaller spending increase as the dreaded c-word: cut.

Option 5: Buy low, sell high

This is the option on which President Bush seems willing to stake the future of the Republican Party. He argues that, in addition to one of the options above, Congress should allow workers to invest about one-third of their overall payroll taxes in a choice of personal accounts that likely would be mixtures of stocks and bonds. Workers who choose personal accounts would then receive a lower guaranteed benefit later in life, but would come out ahead if the stock market performs as well as it has in the past.

The advantages to this idea are large: (1) A worker like Mr. Jamieson could potentially gain a much higher rate of return on his payroll tax than the 1 percent to 2 percent he would receive through an unreformed Social Security. (2) An influx of money into capital markets could lead to an investment boom that creates new wealth and propels the economy forward (see p. 4).

The potential downside is that nobody really knows whether the stocks of the future will perform as well as the stocks of the past. An investment boom spurred by personal accounts could lift the market for decades. Or the same demographic forces that threaten Social Security (see "Fertility trouble") could also exert downward pressure on stock prices. (Some economists worry that baby boomer retirement could hurt the economy and the stock market.)

The other downside is that personal accounts would divert payroll tax money currently slated to go to today's retirees. No one in Washington dares to cut benefits for current or near retirees, so money to cover their benefits would have to come from somewhere else. Right now it looks like debt is the favored source. "We're going to borrow $758 billion over the next 10 years to set up the personal retirement accounts," said Vice President Dick Cheney on Fox News. "We think that's a manageable amount. . . . Trillions more after that."

Mr. Jamieson says he wants to hear more about how the program would work and he worries a little about stock market volatility, but he likes the idea of being able to manage his Social Security contributions as he would other retirement plans: "I'd probably be pretty conservative."

With President Bush's plan, he would at least have that choice. But he and others his age might also find that life will have three certainties instead of just the famous two: death, debt, and taxes.