A key figure in the Bush administration’s push to reform Social Security visited Medford Thursday, delivering the president’s overhaul pitch and fielding questions.

Deputy Social Security Commissioner James B. Lockhart told a chamber of commerce gathering at the Rogue Valley Country Club that Social Security funds will be exhausted by 2041 and payroll taxes will cover only 74 percent of the scheduled benefits.

As a result, President Bush has made private retirement accounts, using a portion of a wage earner’s Social Security contribution, a central element in reforming the system, he said.

"Yes there is volatility in the markets and that’s why this is a voluntary system," Lockhart said.

Lockhart has crisscrossed the nation making 60 such presentations in recent months. He said there is growing recognition of the seriousness of the problem, especially among those 40 and younger.

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"They are in favor of changing Social Security and having personal retirement accounts," Lockhart said. "Less inclined is the AARP generation."

He said there is movement in Congress to keep Social Security revenue in the system rather than using it to patch holes in the general budget.

"That’s a common theme I’m hearing more and more," he said.

Fifty years ago, 16.5 workers contributed to each beneficiary; today, that number is 3.3 workers. That trend will continue into the future, Lockhart said, when 1.9 workers will be contributing for each beneficiary by 2070. At current tax rates, the system requires 2.8 workers per beneficiary to remain solvent, he said.

Lockhart served as executive director of the Pension Benefit Guaranty Corp. from 1989 until 1993.

The audience questioned Lockhart on under-funded private pension funds such as United Airlines’ and what would happen to people whose private retirement accounts failed to produce necessary income during their careers.

United Airlines’ pension woes were obvious 15 years ago, Lockhart said. Congress passed laws a decade ago designed to shore up private pensions, he said. "But they blinked on some of the hard issues and that’s why we’re back in the mess we’re in today. What has happened here is that government has not really tried to find any permanent solutions."

The deputy commissioner said under Bush’s plan, beneficiaries’ retirement accounts wouldn’t be completely privatized but would include a combination of private and Social Security funding.

"Especially for low-income people, it would be mainly a Social Security benefit with a voluntary personal account," he said. "But people don’t have to take a personal account if they don’t want to."

However, Lockhart added, benefits will be reduced to the level the system can pay. The types of investments approved for private accounts would be similar to those used by the Federal Thrift Savings Plan serving government employees, including Congress. Participants could choose Treasury Bonds and lifecycle funds.

"Most people would say over a 40-year career your investment return will be well above what Social Security can give," he said.

One audience member said his parents would’ve starved to death without Social Security; another suggested that the 6 percent of the nation’s wage earners making more than $90,000 should pay more into the system.

Reach reporter Greg Stiles at 776-4463 or e-mail business@mailtribune.com.