The finding sets the stage for President Bush to pursue his professed goal of radically overhauling the retirement program, according to the Boston Globe. Among other things, the president wants to let individuals privately invest part of their retirement accounts.
The 30-page draft, which will be reviewed by the full commission next week, outlined a case for restructuring Social Security.
It says "workers have little sense of proprietorship," leading to a dangerous loss of confidence in the system.
Among the more disputed elements of the report is the conclusion that women and minorities are treated unfairly by the current system, and thus will suffer disproportionately in the future, the Globe reports.
Critics, the newspaper adds, contend the finding is merely a ploy to generate public support for restructuring one of the most popular federal programs.
Members of the bipartisan commission stood by their mission as "nonpartisan and nonpolitical." Their report laid out what it said were problems with the system. It did not recommend specific solutions, which will be made in a report this fall.
"The system is broken," former New York senator Daniel Patrick Moynihan and the AOL Time Warner chief operating officer, Richard D. Parsons, the commission's cochairmen, wrote in the draft's preface.
"Unless we move boldly and quickly," they added, "he promise of Social Security to future retirees cannot be met without eventual resort to benefit cuts, tax increases, or massive borrowing. The time to act is now."
According to the draft, the system's obligations to retirees and the disabled will exceed its annual tax revenue by the year 2016, and its resources will dry up by 2038.
The document also paints a gloomy picture of solutions at the federal level: If the government were to raise taxes to pay for Social Security shortfalls, by the year 2020 it would cost a couple making $50,000 per year an additional $860 in taxes, in today's money.
If, on the other hand, the government decided to cut benefits to account for the shortfalls that year, it would mean a $2,227 annual reduction in benefits for the typical retiree and spouse, the panel's draft said.
The commission went on to warn that taking money from elsewhere in the government would take a $99 billion bite out of the budget - the equivalent of the budgets of Head Start, the Women and Infant Children plan, the Environmental Protection Agency and the departments of Commerce, Education and the Interior.
To view the Boston Globe story, click here.
Social Security system is "broken," and the government must face the probability that it will have to slash benefits or raise taxes within 15 years, according to a preliminary report from a recently appointed White House commission.