(MONEY Magazine) – As chairman of the Senate Finance Subcommittee on Deficits, Debt Management and Long-Term Economic Growth, Sen. Bill Bradley (D-N.J.) plans to make retirement savings a top priority in the 104th Congress that starts next year. He recently discussed the issue with MONEY's Washington, D.C. bureau chief, Teresa Tritch. Is there a retirement savings crisis? There will be one, if we as individuals and a nation don't increase our savings rate. When Social Security started in 1935, life expectancy was 62; now it's 75, and for baby boomers it may be 79. Yet the baby boomers can't count on a safety net of support from younger generations, not when there will be fewer than two workers for every retiree after the boomers retire.

How can the government increase savings? The only silver bullet is deficit reduction. Let me explain: Savings by individuals and businesses, now about 5% of gross domestic product, are eaten up by government deficits, now about 3% of GDP. ((Because of the deficit, savings that would otherwise be invested in the private sector to promote economic growth are instead absorbed by borrowing to finance government activity, most of which is consumption. -- editor)) The result is a net national savings rate of just about 2%, compared with about 20% in Japan. Low national savings means slow economic growth. The General Accounting Office ((Congress' watchdog agency -- ed.)) has said that if we don't do anything aboutthe deficit, the economy will slow to such an extent that by the year 2020, per capita GNP will be 27% lower than if we had a balanced budget. What does reducing the deficit mean specifically? It probably means that you'll get less in entitlements -- if you're a senior citizen, a veteran, a farmer, a student. It may mean a shift to a consumption tax, which could raise revenue and at the same time favor savings over spending. ((Consumption taxes employed by dozens of other countries include national sales taxes and value- added taxes. -- ed.)) What about giving people incentives to save, such as expanding the deductibility of IRAs? It's a Hobson's choice. The more tax incentives you give, the higher the deficit goes. You get some incremental savings, but not nearly as much as you lose in revenue. What happens if we don't confront the retirement crisis? We're going to wake up one day and see that the S&L crisis was small by comparison.