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Gelbman discussed Social Security and Dayton's proposal for assuring its future last week. "Social Security is one of the best government programs around," he told a dozen residents over lunch.

While Dayton agrees with Presi-dent Bush that the program needs to be fixed, and he is pleased that the president wants to do something to save it, Dayton believes that the president's proposal for privatizing part of Social Security is not the answer, Gelbman said. "There is a problem with Social Security, but it's not a crisis," he said.

Dayton has proposed removing the income cap on Social Security taxes as the answer, according to Gelbman. Currently, U.S. workers are only taxed on the first $90,000 of their income for Social Security.

If the cap, which was established in 1984, was removed, said Gelbman, income for Social Security would increase, and this would reduce any funding problems for Social Security. Raising the cap has been examined by Democrats and Republicans alike and has received support from both sides, added Gelbman.

The Paynesville group agreed enthusiastically with Gelbman that wealthy individuals should pay more in taxes for Social Security. Several different proposals have addressed how high the cap should be, Gelbman said, in response to a question from local resident Joyce Spaulding. Some proposals would place the cap at about $140,000, while others support removing the cap completely.

Gelbmann also explained the history of Social Security, which began in 1935 as a way to help the country's elderly escape poverty and paid its first benefits in 1942. It is an insurance program that provides retirement, disability, and survivor benefits to those who paid into the system during their lifetime, explained Gelbman.

Through the years, the program changed very little. In the 1960s, the Social Security Administration added a cost of living adjustment to benefits based on the Consumer Price Index, so benefits would increase with inflation. Before the 1960s, it was estimated that more than 60 percent of the nation's seniors lived in poverty, but that number has now been reduced to just over 10 percent now, Gelbman said.

Unlike a pension plan, which compensates retirees using investment income, the Social Security program uses money paid into the system by today's employees to benefit retirees, continued Gelbman. Currently, there are three U.S. employees paying into the system for every retiree drawing an income from Social Security. This means the program has more income than expenses with the excess going into a trust fund.

The problem with Social Security is one of demographics. The nation has always had more workers than retirees, and the program has always had enough income to pay benefits to retirees. But because the "baby boom" generation is getting ready to retire, the number of retirees could outnumber workers paying into the program, Gelbman explained. Then the government would be forced to dip into the trust fund to pay benefits, said Gelbman, around 2018. Under some estimates, the surplus would be used by 2042.

"If you're a senior now, your benefit will not be affected," Gelbman told the audience. "But it could hurt your children and your grandchildren."

President Bush's proposal would allow workers to invest part of their Social Security taxes in private accounts. The president's plan would not be on the honor system, Gelbman said, in response to audience questions. Instead it would be closely monitored to ensure that money is invested in appropriate accounts. "Who would do the monitoring?" asked Inez Jones, director of the Paynesville Area Center. "That would be an added administrative expense to the plan," Gelbman replied.

While Dayton applauds President Bush for addressing the Social Security problem, he fears the president's plan would actually hurt the future of Social Security, because privately invested money would not go into the trust fund, said Gelbman. This could cause the trust fund to run out sooner, or the government would have to borrow to cover the "transition" costs.

The president's plan would be especially problematic to workers from 40 to 55, a group Gelbman referred to as "tweens," those who would retire as the benefits were running low on the current plan but weren't able to invest enough in the private sector because they reached retirement age too soon.

Retirement benefits are like a three legged stool, said Gelbman. Most retirees use three sources of income for their retirement: investment income from retirement plans like 401Ks, equity from home ownership, and Social Security benefits. The first two legs - investments and home equity - are variable, he said. The third leg should not be variable, said Gelbman, though he stressed that "the sooner we address and correct the problem, the easier it will be to fix it."