[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]
THE FUTURE OF SOCIAL SECURITY FOR THIS GENERATION AND THE NEXT: CURRENT
STATE OF PUBLIC OPINION ON THE FUTURE OF SOCIAL SECURITY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SOCIAL SECURITY
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
__________
OCTOBER 23, 1997
__________
Serial 105-45
__________
Printed for the use of the Committee on Ways and Means
-----------
U.S. GOVERNMENT PRINTING OFFICE
51-568 cc WASHINGTON : 1998
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut BARBARA B. KENNELLY, Connecticut
JIM BUNNING, Kentucky WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Social Security
JIM BUNNING, Kentucky, Chairman
SAM JOHNSON, Texas BARBARA B. KENNELLY, Connecticut
MAC COLLINS, Georgia RICHARD E. NEAL, Massachusetts
ROB PORTMAN, Ohio SANDER M. LEVIN, Michigan
JON CHRISTENSEN, Nebraska JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona XAVIER BECERRA, California
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
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unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of October 2, 1997, announcing the hearing.............. 2
WITNESSES
Doble Research Associates, Inc., John Doble...................... 31
Economic Security 2000, Brian F. Keane........................... 15
National Committee to Preserve Social Security and Medicare,
Martha McSteen................................................. 11
National Issues Forums Institute, Betty Knighton................. 31
Salisbury, Dallas L., Employee Benefit Research Institute, and
American Savings Education Council............................. 23
U.S. Junior Chamber of Commerce, Eric Seidel, Tulsa, OK, and
Walter Downes, Ionia, MI....................................... 5
SUBMISSIONS FOR THE RECORD
American Association of Retired Persons, statement and
attachments.................................................... 59
Council for Government Reform, Kevin Kearns, statement........... 70
Plomis, Wilfred, Wilmington, DE, statement....................... 71
THE FUTURE OF SOCIAL SECURITY FOR THIS GENERATION AND THE NEXT: CURRENT
STATE OF PUBLIC OPINION ON THE FUTURE OF SOCIAL SECURITY
----------
THURSDAY, OCTOBER 23, 1997
House of Representatives,
Committee on Ways and Means,
Subcommittee on Social Security,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:03 a.m., in
room B-318, Rayburn House Office Building, Hon. Jim Bunning
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON SOCIAL SECURITY
Contact: (202) 225-9263
FOR IMMEDIATE RELEASE
October 2, 1997
No. SS-12
Bunning Announces Seventh Hearing in Series on
``The Future of Social Security
for this Generation and the Next''
Congressman Jim Bunning (R-KY), Chairman, Subcommittee on Social
Security of the Committee on Ways and Means, today announced that the
Subcommittee will hold the seventh in a series of hearings on ``The
Future of Social Security for this Generation and the Next.'' At this
hearing, the Subcommittee will examine the current state of public
opinion on the future of Social Security. The hearing will take place
on Thursday, October 23, 1997, in room B-318 Rayburn House Office
Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony will be from invited witnesses only. However, any individual
or organization may submit a written statement for consideration by the
Committee and for inclusion in the printed record of the hearing.
BACKGROUND:
The Subcommittee's first six hearings in the series have focused
on: the recom-mendations of the Advisory Council on Social Security;
the fundamental issues to consider when evaluating reform options; the
findings of the 1997 Social Security Board of Trustees; the experiences
of other countries; and the views of policy experts, organizations with
different generational perspectives, business and labor
representatives, and Members of Congress on Social Security reform.
Social Security affects the lives of almost every American, yet
public understanding of Social Security retirement, survivors, and
disability programs is often limited due to complex application and
eligibility requirements. Forecasts of future Social Security
insolvency and suggested remedies are being discussed more and more in
the media and at kitchen tables all across the country.
Increasingly, polls are being conducted to canvass the views of
Americans. One example is an often cited 1994 survey which found that
nearly twice as many young adults believe in UFOs than believe they
will receive Social Security benefits. Beyond polling, a number of
organizations, through forums and town meetings, are engaging the
public in open debate about Social Security now and in the future.
In announcing the hearing, Chairman Bunning stated: ``Engaging the
American public is vital as we consider possible reforms to Social
Security. Americans are well ahead of Washington when it comes to
knowing what needs to be done. I look forward to hearing the views from
the home-front on Social Security.''
FOCUS OF THE HEARING:
The Subcommittee will receive the views of public forum
facilitators and polling experts on what Americans are saying about the
future of Social Security. Specifically, Members of the Subcommittee
would like to hear from each witness regarding their findings on
Americans': (1) understanding of today's Social Security programs, (2)
understanding of Social Security's long-term financial insolvency, and
(3) views on what changes are necessary to fix Social Security.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit at least six (6)
single-space legal-size copies of their statement, along with an IBM
compatible 3.5-inch diskette in ASCII DOS Text or WordPerfect 5.1
format only, with their name, address, and hearing date noted on a
label, by the close of business, Thursday, November 6, 1997, to A.L.
Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of
Representatives, 1102 Longworth House Office Building, Washington, D.C.
20515. If those filing written statements wish to have their statements
distributed to the press and interested public at the hearing, they may
deliver 200 additional copies for this purpose to the Subcommittee on
Social Security office, room B-316 Rayburn House Office Building, at
least one hour before the hearing begins.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
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but will be maintained in the Committee files for review and use by the
Committee.
1. All statements and any accompanying exhibits for printing must
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of 10 pages including attachments. At the same time written statements
are submitted to the Committee, witnesses are now requested to submit
their statements on an IBM compatible 3.5-inch diskette in ASCII DOS
Text or WordPerfect 5.1 format. Witnesses are advised that the
Committee will rely on electronic submissions for printing the official
hearing record.
2. Copies of whole documents submitted as exhibit material will not
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3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the
name, full address, a telephone number where the witness or the
designated representative may be reached and a topical outline or
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supplemental sheet will not be included in the printed record.
The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press
and the public during the course of a public hearing may be submitted
in other forms.
Note: All Committee advisories and news releases are available on
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Chairman Bunning. The Subcommittee will come to order.
Today marks the seventh hearing in a series on the future
of Social Security for this generation and the next. During
this hearing, we will focus on the current state of public
opinion on the future of Social Security.
Social Security affects the lives of nearly every American.
Each of us has a stake in the future of this vital program. Yet
public understanding of Social Security retirement, survivors
and disability programs is often limited, due to complex
application and eligibility requirements. Increased public
understanding of the design and purpose of Social Security
today must not be lost in the debate about Social Security
tomorrow.
Forecasts of future Social Security insolvencies and
suggested fixes are gradually making their way out of the
beltway and onto kitchen tables all over the country. Real
Social Security reform cannot take place without Americans
weighing in.
Today we will hear the views of public forum facilitator
and polling experts on what Americans are saying about the
future of Social Security. The Subcommittee will examine the
results of three comprehensive surveys. These surveys have
focused on how the public views Social Security for today and
tomorrow, Social Security privatization and workers' and
retirees' attitudes, preparation and expectations regarding
retirement.
Beyond polling, a number of organizations, through forums
and town meetings are engaging the public in open debate about
Social Security now and in the future. Three of these
organizations join us today to tell us the results of their
efforts.
Many of you may have noticed the Washington Post-ABC News
poll this week which shows that 88 percent of all Americans
believe that making Social Security financially sound should be
a major goal for government to accomplish. Americans are often
well ahead of Washington--that's to say the least--[Laughter.]
When it comes to knowing what has to be done.
I look forward to hearing the views from the home front on
Social Security from our panelists today.
In the interest of time, it is our practice to dispense
with opening statements, except from the Ranking Democrat
Member. All Members are welcome to submit statements for the
record. I yield to Congresswoman Barbara Kennelly for any
statement she wishes to make.
Mrs. Kennelly. Thank you, Mr. Chairman.
I am pleased that we have here with us today a number of
organizations that have been holding forums around the country,
determining how individuals feel about Social Security, and
educating Americans about the choices that are before us.
One of the biggest lessons to be learned from today's
testimony is that the discussion about Social Security has only
just begun. Many Americans, especially young people, are not
familiar with the features of Social Security and its
financing. They appreciate the program for what it's done for
their parents and their grandparents. But they're not sure that
it will achieve the same thing for them. And this is something
that we really have to address.
Most Americans know that Social Security faces difficulties
in the future. But they are not sure about the reasons for
these difficulties. Very few Americans are familiar with the
options for change and the impact of these options on
individual retirement security.
This Subcommittee has held seven hearings this year in
furtherance of the education process, and I thank the Chairman
for doing this. We can see at this point, at the seventh
hearing, how important these hearings are, and how important it
is that we continue to educate the public about the importance
of the issue before us.
Clearly, more needs to be done before the American people
are ready to make a decision. I, for one, believe that the
earlier we make the decision, the better off we will be. That
is why I am pleased that the groups before us today are
educating the American public about the choices available and
helping us to move the debate forward.
I thank the panel for being with us today.
Chairman Bunning. Thank you, Barbara.
This morning, we'll hear from Eric Seidel, who's president
of the U.S. Junior Chamber of Commerce, from Tulsa, Oklahoma.
He's accompanied by Walter Downes, government involvement
chairman, of the U.S. Junior Chamber of Commerce, from Ionia,
Michigan.
Martha McSteen is president of the National Committee to
Preserve Social Security and Medicare. She is accompanied by
Guy Molyneux, vice president of Peter D. Hart Research
Associates.
Brian Keane is executive director of Economic Security
2000. Dallas Salisbury is president of Employee Benefit
Research Institute.
Betty Knighton is a moderator for the National Issues
Forums, from Charleston, West Virginia, and John Doble is
president of Doble Research Associates, Inc., in Englewood
Cliffs, New Jersey. They are joined today by a number of fellow
moderators from the National Issues Forums.
We are sorry to learn that Madelyn Hochstein, president of
DYG, Inc., in Danbury, Connecticut, who was scheduled to
testify this morning, became ill and is unable to join us
today.
Mr. Seidel, you may begin.
STATEMENT OF ERIC SEIDEL, PRESIDENT, U.S. JUNIOR CHAMBER OF
COMMERCE, TULSA, OKLAHOMA; ACCOMPANIED BY WALTER DOWNES,
GOVERNMENT INVOLVEMENT CHAIRMAN, U.S. JUNIOR CHAMBER OF
COMMERCE, IONIA, MICHIGAN
Mr. Seidel. Good morning, Chairman Bunning and Members of
the Subcommittee.
My name is Eric Seidel, and I'm the 78th president of the
U.S. Junior Chamber of Commerce. The Junior Chamber, or
Jaycees, as we're commonly known, is a young person's
leadership training organization made up of 115,000 members in
2,500 communities across America. Historically, the Junior
Chamber has undertaken national programs that have addressed
issues of importance to Americans.
For example, the Junior Chamber was one of the first
national organizations to call for a mandatory draft during
World War II, even though the draft decimated the ranks of our
organization. Since our beginnings, we've been involved in get
out the vote campaigns, and we've encouraged our members to get
involved in governmental issues. We are a nonpartisan
organization.
Most recently, our membership indicated to the leadership
of the U.S. Junior Chamber that they were concerned with the
future solvency of the Social Security Program. While this
issue affects all Americans, it particularly affects young
Americans who are unlikely to see a benefit available to them
upon retirement, given the current accepted projections for the
existing program.
In March 1996, the U.S. Junior Chamber adopted an external
resolution calling for the development of a responsible
solution to the future economic solvency of the Social Security
system. This resolution allowed us to formulate a national
program for our local chapters to utilize to educate and
activate grassroots America about the issue.
The program that the U.S. Junior Chamber developed is the
Social Security reform townhall meeting program. After
consulting with many different experts in the field of Social
Security reform, including the Social Security Administration,
the CATO Institute, Economic Security 2000, the AARP and
elected leadership of the U.S. House and Senate, we developed a
townhall meeting how-to guide.
That manual allows local chapters to run this program in
their communities. The format of our townhall meetings follows
a standard outline. The first part of the meeting presents
participants with information regarding the history of the
Social Security Program, how the program exists today, and what
the future holds for the program, given several different
proposed reform solutions. All information presented during
this part of the program was developed using generally agreed
upon facts gleaned from our relationships that we have built
with other interested organizations, including the Social
Security Administration.
The second part of the meeting is a panel presentation by
invited guests to assist with presenting the factual
information. At each of our townhall meetings, representatives
from the Social Security Administration have been present. We
strive to represent a nonpartisan, factual presentation with
the invited speakers.
Once the formal presentations are complete, participants in
the audience are free to ask questions to the presenter to
ensure that each individual has a complete understanding of all
the information presented. Once the question and answer period
is complete, the now educated participants are asked to
complete a survey regarding their feelings on the Social
Security Program and the proposed reform solutions.
After holding over 75 meetings in 25 States during the
period of June 1996 to June 1997, we would like to present to
you our findings from our grassroots survey of the American
people. Copies of the completed report are included for the
record, and are available for your review.
Our townhall meetings attracted a variety of Americans. Out
of the 1,485 survey respondents, 46 percent were female and 54
percent were male. Seventy-seven percent were under the age of
45, and 23 percent over the age of 45. Eighty-one percent of
those surveyed were employed, while 19 percent were either
retired or unemployed. Individuals of varying income levels
completed our survey.
Overwhelmingly, 79 percent of the survey respondents think
the Social Security Program needs radical or major change. Of
those respondents between 55 and 64, 70 percent said the
program needs radical or major change.
These are individuals who are about to enter the system.
Seventy-one percent of the survey respondents opposed or
strongly opposed raising payroll taxes.
Interestingly, even older Americans feel this way. For
example, 66 percent of those polled between the ages of 55 and
64 were against raising payroll taxes. When asked if benefits
should be reduced for seniors who earn more than $100,000 a
year, 68 percent of the respondents either strongly favored or
favored this option.
Even individuals who have reached retirement age, 60
percent of those surveyed over age 65 agree. Sixty-eight
percent of the respondents felt that the current benefit level
should be maintained for people currently in or about to enter
the system.
The most interesting finding, however, is that 67 percent
of those surveyed thought that there should be implementation
of a program that would allow individuals to place their Social
Security contributions from their current wages into their own
personal retirement account, and that account would be required
to be maintained for them for retirement purposes only. Young
and old agreed on this.
I strongly urge you to review the findings of our survey.
We feel that our findings represent the true feelings of
grassroots America. We encourage Congress to act and act soon
to strengthen and solidify the program that affects each and
every American, so that it continues well into the 21st century
and beyond.
Thank you for your invitation to testify today and for your
attention. I would welcome any questions that you might have.
[The prepared statement follows. Attachments are being
retained in the Committee files.]
Statement of Eric Seidel, President, U.S. Junior Chamber of Commerce,
Tulsa, Oklahoma
Good Morning, Chairman Bunning and members of the
subcommittee. My name is Eric Seidel, and I am the 78th
President of The United States Junior Chamber of Commerce. The
Junior Chamber of Commerce, or Jaycees, as we are known, is a
young persons' leadership training organization made up of
115,000 members in 2,500 chapters across the country.
Historically, the Junior Chamber has undertaken national
programs that have addressed issues of importance to Americans.
For example, the Junior Chamber was one of the first national
organizations to call for a mandatory draft for World War II,
even though the draft decimated the ranks of our organization.
Since our beginnings, we have involved our members in ``Get Out
the Vote'' campaigns, and have encouraged our members to be
involved in governmental issues. We are a nonpartisan
organization.
Most recently, our membership indicated to the leadership
of the U.S. Junior Chamber that they were concerned with the
future solvency of the Social Security program. While this
issue affects all Americans, it particularly affects young
Americans who are unlikely to see a benefit available to them
upon retirement given current accepted projections for the
existing program.
In March, 1996, the U.S. Junior Chamber adopted an external
resolution calling for the development of a responsible
solution to the future economic solvency of the Social Security
system. This resolution allowed us to formulate a national
program for our local chapters to utilize to educate and
activate grassroots America about this issue.
The program that the U.S. Junior Chamber developed is the
Social Security Reform Town Hall Meeting program. After
consulting with many different experts in the field of Social
Security reform, including the Social Security Administration,
the CATO Institute, Economic Security 2000, AARP, and elected
leadership of the United States House and Senate, we developed
a ``Town Hall Meeting How To'' manual that local Jaycee
chapters could utilize to run this program.
The format of our town hall meetings follows a standard
outline. The first part of the meeting presents participants
with information regarding history of the Social Security
program, how the program exists today, and what the future
holds for the program given several different proposed reform
solutions. All information presented during this part of the
program was developed using generally agreed upon facts gleaned
from our relationships that we had built with other interested
organizations including the Social Security Administration. The
second part of the meeting is a panel presentation by invited
guests to assist with presenting the factual information. At
each one of our town hall meetings, representatives from the
Social Security Administration are present. We strive to
represent a non partisan, factual presentation with invited
speakers.
Once the formal presentations are complete, participants in
the audience are free to question the presenters to ensure each
individual has a complete understanding of all information
presented. Once the question and answer period is complete, the
now educated participants are asked to complete a survey
regarding their feelings on the Social Security program and
proposed reform solutions.
After holding over 75 meetings in 25 states during the
period of June, 1996, to June, 1997, we would like to present
to you our findings from our grassroots survey of the American
people. Copies of the complete report are included for the
record and are available for your review.
Our town hall meetings attracted a variety of Americans.
Out of 1,485 survey respondents, 46 percent were female and 54
percent male. 77 percent were under the age of 45 and 23
percent over age 45. 81 percent of those surveyed were employed
while 19 percent were either retired or unemployed. Individuals
of varying income levels completed our survey.
Overwhelmingly, 79 percent of survey respondents think the
Social Security program needs radical or major change. Of those
respondents between 55 and 64, 70 percent said that the program
needs radical or major change. These are individuals who are
about to enter the system. 71 percent of survey respondents
oppose or strongly oppose raising payroll taxes. Interestingly,
even older Americans feel this way, for example, 66 percent of
those polled between the ages of 55 and 64 were against raising
payroll taxes.
When asked if benefits should be reduced for seniors who
earn more than $100,000 a year, 68 percent of respondents
either strongly favor or favor this option. Even individuals
who have reached retirement age, 60 percent of those surveyed
over age 65, agreed. 68 percent of respondents felt that
current benefit levels should be maintained for people
currently in or about to enter the system.
Of the most interest, however, is that 76 percent of those
surveyed felt that there should be implementation of a program
that would allow individuals to place their Social Security
contributions from their current wages in their own personal
retirement account and that account would be required to be
maintained for retirement only. Young and old agreed on this
item. I strongly encourage you to review our survey findings.
We feel our findings represent the true feelings of grassroots
America. We encourage Congress to act and act soon to
strengthen and solidify a program that affects each and every
American so that it continues well into the 21st Century and
beyond.
Thank you for your invitation to testify today, and for
your attention. I would welcome any questions you may have at
this time.
[GRAPHIC] [TIFF OMITTED] T1568.036
[GRAPHIC] [TIFF OMITTED] T1568.037
Chairman Bunning. We will hold questions until we finish
the whole panel.
Ms. McSteen.
STATEMENT OF MARTHA MCSTEEN, PRESIDENT, NATIONAL COMMITTEE TO
PRESERVE SOCIAL SECURITY AND MEDICARE; ACCOMPANIED BY GUY
MOLYNEUX, VICE PRESIDENT, PETER D. HART RESEARCH ASSOCIATES
Ms. McSteen. Mr. Chairman and Members of the Subcommittee,
I'm Martha McSteen, president of the National Committee to
Preserve Social Security and Medicare. And I'm pleased to be
here today to testify on behalf of the 5\1/2\ million National
Committee members.
The National Committee is committed to advocating for a
strong and viable Social Security Program for current and
future generations. Engaging the public in the debate over the
future of Social Security is critical. Toward this goal, the
National Committee commissioned Peter Hart Research Associates
to conduct a telephone survey on public attitudes toward Social
Security.
The survey describes a plan for partial privatization of
Social Security for future retirees, modeled on the personal
security accounts proposal put forward last year by five
members of the Social Security Advisory Council. References to
privatization or the privatization plan throughout the
discussion refer to this described plan.
For purposes of this testimony, I will focus on the results
of randomly selected members of the general public. The public
is aware of the funding shortfall of Social Security, and the
support for fixing Social Security remains strong. The polls
show that 60 percent of all nonretired Americans and 72 percent
of Generation Xers believe that they will receive no benefits
or much lower benefits when they retire than the current
structure provides.
However, the public's understanding of the projected
financial shortfall of Social Security does not translate into
widespread support for changing Social Security to a system of
partially privatized individual accounts. Indeed, by a 2 to 1
margin, every age group believes that the risk and cost of a
partially privatized system of individual accounts outweighs
the benefits.
Second, when risk and cost of partially privatized
individual accounts is explained, the public rejects the
concept. A solid two-thirds of adults believe that Congress
``should fix'' Social Security by strengthening its financial
condition, so that future retirees will be guaranteed a
reasonable level of benefits. Just 28 percent endorse the
competing view that Congress ``should replace'' Social Security
by allowing people to invest in Social Security contributions
in the stock market, so people can manage their own
investments.
While seniors are especially strong in this preference, 80
percent to 13 percent, there is at least a 2 to 1 majority for
fixing Social Security over replacing it in every age cohort.
Even Generation Xers, who worry the most that Social Security
will not be there for them, say by 65 percent to 32 percent
that strengthening the system is the right way to go.
Americans of all ages voice opposition to privatization.
Although young people, ages 18 to 34, are more supportive than
average, they nonetheless reject privatization by 53 percent to
41 percent.
Privatization faces serious hurdles, and the public will
demand significant safeguards not found in any current
privatization plan. As the debate progresses, privatization
faces serious hurdles. When presented with a list of taxes
individuals pay, the Social Security tax is chosen first by
more respondents as the tax that is most fair and the one they
are most willing to pay. Conversely, privatization presents a
scenario where the government will go beyond taxation and
mandate private savings.
A startling 84 percent say that it is essential or very
important that participation be voluntary, rather than
compulsory. A solid 75 percent polled said that it is essential
or very important that if the government requires people to
make stock investments, then the government should insure the
private accounts, as it does with bank accounts through FDIC,
so people cannot lose their savings.
Americans want to fix Social Security. Opposition to
privatization does not mean that Americans are resistant to any
change in the system. On the contrary, their concern about
future benefits leads them to support reasonable and measured
change designed to strengthen Social Security.
Social Security's funding would be strengthened through a
payroll tax increase, but a much smaller one than under the
privatization plan is looked at. Over time, benefits would also
be slightly reduced as the public receives it.
In conclusion, Mr. Chairman, Members of the Subcommittee,
Social Security is one of this country's greatest success
stories. Its great success is reflected in the overwhelming
public support for the program shown in poll after poll.
Clearly, Social Security must change to meet the challenges of
the next century. The National Committee believes that
Americans of all ages want and will support program changes
necessary to ensure the solvency of Social Security.
We look forward to working with Congress toward balanced
reform, of ensuring the solvency of the Social Security
Program. Thank you.
[The prepared statement follows:]
Statement of Martha McSteen, President, National Committee to Preserve
Social Security and Medicare
Mr. Chairman, and Members of the Subcommittee, I am Martha
McSteen, President of the National Committee to Preserve Social
Security and Medicare. I am pleased to be here today to testify
on behalf of the 5.5 million members and supporters of the
National Committee. I am accompanied by Guy Molyneux, Vice
President of Peter D. Hart Research Associates.
As the nation's second largest senior organization, the
National Committee is committed to advocating for a strong and
viable Social Security program for current and future
generations. Engaging the public in the debate over the future
of Social Security is critical. The process of gauging public
priorities related to Social Security is an essential first
step. Toward this goal, the National Committee commissioned
Peter D. Hart Research Associates to conduct a telephone survey
in May 1997 on public attitudes toward Social Security as well
as privatization of Social Security.
The survey describes a plan for partial privatization of
Social Security for future retirees, modeled on the ``Personal
Security Accounts'' proposal put forward last year by five
members of the Social Security Advisory Council. This
particular plan was selected both because it has received
widespread attention to date, including analysis by SSA
Actuaries, and because it is a less radical approach than the
full privatization advocated by the Cato Institute and some
others, and so provides the concept of privatization with its
fairest chance of demonstrating support. References to
privatization or the privatization plan throughout this
discussion refer to this described plan. For purposes of this
testimony I will focus on the results of randomly selected
members of the general public, although we results of the
survey of National Committee membership is also available
today.
The Public is Aware of Funding Shortfall of Social Security/Support for
Fixing Social Security Remains Strong
The public is well aware that Social Security faces a
funding shortfall in the next century. Our poll showed that 60%
of all non-retired Americans, and 72% of Generation Xers
believe that they will receive no benefits or much lower
benefits when they retire than the current structure provides.
While the funding difficulties may seem greater to some
Americans than they in reality are, the fact remains that the
public is aware of the difficulties.
But, as you will see from our poll results, public
understanding of the financial difficulties of Social Security
does not translate into lack of support for the Social Security
program. The Social Security system continues to enjoy public
support today that is both strong and broad. By four to one,
Americans believe that the government should spend more, rather
than less, on Social Security, and by an even greater seven to
one margin, they oppose cutting Social Security spending for
the purpose of deficit reduction. This support for Social
Security extends across all age cohorts, including Generation
X.
Further, the public's understanding of the projected
financial shortfall of Social Security does not translate into
widespread support for changing Social Security to a system of
partially privatized individual accounts. Indeed, by a 2 to 1
margin, every age group believes that the risks and costs of a
partially privatized system of individual accounts outweighs
the benefits.
The Notion of Generational Resentment of Social Security is a Myth
Our poll demonstrates that the notion of generational
resentment of Social Security is a myth. By a margin of 85% to
12%, Americans reject cutting spending on Social Security for
deficit reduction. Sixty one percent of working Americans
believe that current Social Security benefits are too low and
34% believe they are about right and only 8% of adults believe
that current benefits are too high. The 18 to 34 age group
believes current benefits are too low by a similar margin--62%
believe benefits are too low and 6% believe they are too high.
Interestingly, seniors themselves are more likely than are
working age adults to feel that current benefits are about
right, as opposed to being too low (like younger people, they
reject the view that benefits are too high.) Similarly, senior
citizens voice less support than do those in all other age
groups for increasing Social Security spending. Just as the
notion of young people's objection to seniors benefits should
be rejected as myth, so too should we abandon the image of the
``greedy geezer''--an older generation selfishly seeking
benefits with no regard for the cost to others.
When Risks and Costs of Partially Privatized Individual Accounts is
Explained, Public Rejects Concept
By now, we have all heard the expression coined by Frank Luntz that
more young people believe in UFOs than in Social Security. Those who
support privatization of Social Security use this particular survey
finding to argue that young people prefer to replace Social Security
with a privatized, or partially privatized system. However, in our
poll, a solid two-thirds of adults believe that Congress ``should fix
Social Security by strengthening its financial condition, so that
future retirees will be guaranteed a reasonable level of benefits.''
Just 28% endorse the competing view that Congress ``should replace
Social Security by allowing people to invest their Social Security
contributions in the stock market, so people can manage their own
investments.'' While seniors are especially strong in this preference
(80% to 13%) there is at least a two to one majority for fixing Social
Security over replacing it in every age cohort. Even Generation Xers,
who worry the most that Social Security will not be there for them, say
by 65% to 32% that strengthening the system is the right way to go.
In our survey, the public's initial reaction to the privatization
proposal is somewhat mixed, but decidedly more negative than positive.
While three in ten Americans initially have a favorable reaction to the
proposal half again as many react unfavorably from the outset. Current
Social Security beneficiaries reject privatization especially strongly,
but negative responses out number positive ones among non-beneficiaries
(and among all age cohorts) as well. Intensity of sentiment also lies
clearly on the negative side, as nearly three times as many people feel
very unfavorable toward the plan as feel very favorable. Upon hearing
the initial description, Social Security beneficiaries reject
privatization fairly definitively 59% unfavorable, just 24% favorable,
while non-beneficiaries are unfavorable by a more narrow 41% to 33%.
Americans are very concerned about the inherent risk involved in
individual investment accounts. When asked to weigh the advantage of
potentially higher rates of return that stocks could potentially bring
against the risk of losing money, a solid 59% say that the risk
outweighs the potential benefit (33% believe that the benefits are
greater than the risk). The risks of stock investments is the most
frequently voiced concern about privatization in an open-ended question
about the plan.
The public also believes, by an even larger margin of 62% to 23%
that the ``transition costs'' of the plan outweigh the benefits it
might bring. The survey question identified these costs as higher
payroll taxes and an increased federal deficit. While the open-ended
responses indicate that the public is probably not now aware of these
costs, the survey demonstrates that they are a very considerable
vulnerability for privatization plans. After considering the trade-
offs, Americans reject the privatization plan by a decisive 59% to 35%.
Fully 36% strongly oppose the plan, while only 11% are strongly in
favor. Those people who were initially neutral to the idea end up in
opposition by a ratio of five to three (52% to 31%.)
Americans of all ages voice opposition to privatization. Although
young people (age 18 to 34) are more supportive than average, they
nonetheless reject privatization by 53% to 41%.
Nonretired people who expect Social Security to pay them benefits
at or near current levels when they retire oppose privatization by 59%
to 35%. Those who do not believe that Social Security will pay out any
benefits when they retire are fairly divided, with 45% in favor and 50%
opposed. People who expect major reductions in future benefits--those
who make up a kind of ``swing'' audience on this issue--firmly oppose
privatization by 62% to 33%. This is an important finding as it
suggests that only those people who expect to receive no benefits
whatsoever--an alarmist view--constitute a significant audience for
privatization.
Privatization Faces Serious Hurdles and The Public Will Demand
Significant Safeguards Not Found in Any Current Privatization Plan
As the debate progresses, privatization faces serious hurdles. When
presented with a list of taxes individuals pay, the Social Security tax
is chosen first by more respondents as the tax that is the most fair
and the one they are most willing to pay. Conversely, privatization
presents a scenario where the government will go beyond taxation and
mandate private savings. A startling 84% say that it is essential or
very important that participation be voluntary rather than compulsory.
A 77% majority feel that it is essential or very important that the
government ``carefully regulate the management of the stock investment
accounts...to protect workers and retirees against fraudulent
investment schemes.''
If the government mandates private investment, a majority of the
public will demand to be insured against loss. A solid 75% polled said
that it is essential or very important that ``if the government
requires people to make the stock investments, then the government
should insure the private accounts, as it does with bank accounts
through the FDIC, so people cannot lose their savings.''
Eighty one percent of those polled said that it was essential or
very important that the guaranteed monthly Social Security benefit
should provide an income at least equal to that at the poverty line.
Privatization plans, such as the PSA plan, provide guaranteed benefits
well below the poverty line.
Americans Want to Fix Social Security
Opposition to privatization does not mean that Americans
are resistant to any change in the system. On the contrary,
their concern about future benefits leads them to support
reasonable and measured change designed to strengthen Social
Security. By 71% to 23%, the public favors a hypothetical
alternative plan described as follows: ``Social Security's
funding would be strengthened through a payroll tax increase,
but a much smaller one than under the privatization plan. Over
time, benefits would also be slightly reduced...'' While the
National Committee has not endorsed a payroll tax increase, it
is important to note the high level of support for a balanced
approach of revenue increases and benefit reductions over time,
as necessary to secure the stability of the trust funds.
Conclusion
Mr. Chairman, Members of the Subcommittee, Social Security
is one of this country's greatest success stories. Its great
success is reflected in the overwhelming public support for the
program shown in poll after poll. Clearly, Social Security must
change to meet the challenges of the next century. The National
Committee believes that Americans of all ages want and will
support program changes necessary to insure the solvency of
Social Security. We look forward to working with Congress
toward balanced reform for insuring the solvency of the Social
Security program.
Chairman Bunning. Thank you, Ms. McSteen.
Mr. Keane.
STATEMENT OF BRIAN F. KEANE, EXECUTIVE DIRECTOR, ECONOMIC
SECURITY 2000
Mr. Keane. Mr. Chairman, distinguished Members of the
Subcommittee, good morning.
I'd like to thank you for the opportunity to come before
you today to discuss and share with you the views of the
American people that we have encountered during our grassroots
efforts to save and reform Social Security. My name is Brian
Keane. I am executive director of Economic Security 2000. We
are a nationwide, nonpartisan, grassroots organization
dedicated to saving and reforming Social Security.
Our goal is to educate the American people about the
challenges currently faced by Social Security and the
opportunities we have for reform. We see reform of Social
Security not only as a means to create retirement security for
millions of Americans, but, and perhaps more importantly, as a
way to create wealth for those middle- and low-income workers
who currently have no such opportunity.
Initially, Economic Security 2000 president Sam Beard had
no intention of engaging in a discussion about Social Security
at all. In fact, in setting out to find ways to mend the
growing gap between the rich and the poor, a gap wider than in
any other industrialized nation, Mr. Beard realized that
reforming Social Security was an opportunity, a blessing of
sorts, to promote economic stability, security, and opportunity
for all Americans, to actually help close the gap between the
rich and the poor.
There's no finer example of the lessons to be learned than
that of one of our board members, Oseola McCarty. Now 88 years
old, Ms. McCarty spent her entire life laundering shirts, never
earning more than $9,000 per year. However, upon her
retirement, she became a celebrity when she donated $150,000
for a scholarship program at the University of Mississippi.
How is that possible? How can a woman living in poverty her
entire life amass such wealth? In her words, it was the magic
of compounding interest. She put away a few cents a week,
sometimes a few dollars. And compounding interest did the rest.
This is amazing. A woman who spent her entire life working
in poverty was able to retire as one of the top 1 percent of
wealthy Americans.
Ms. McCarty had no children. If she had, however, they
would today be enjoying the very wealth which she created,
breaking the cycle of poverty which had so pervaded her own
life.
The lesson here is clear. Mr. Chairman, there must be a way
to make Oseola McCarty's story work for every American. In
fact, there is. The solution rests in long-term Social Security
reform.
Economic Security 2000, ES 2000, along with our cochairs,
Senator Bob Kerry, Congressman Jim Kolbe and Congressman
Charlie Stenholm, see the need to redefine the Social Security
debate. The severe gap in income and wealth in this country
between the relative few who can save and the many who simply
cannot is what brings ES 2000 to this table today.
Economic Security 2000 has chapters in 26 States across the
country. Our thousands of activists and volunteers include
Democrats, Republicans, Independents, seniors, baby boomers and
Generation Xers. As such, we are uniquely qualified to provide
the texture of the Social Security discussion. We believe that
Social Security can no longer afford to be seen in a vacuum. It
cannot be a stand-alone program.
Indeed, Social Security can no longer be seen as just one
leg of the proverbial three-legged retirement stool. From here
on out, Social Security must be seen as a way to create savings
and wealth, to help create a higher standard of living, and at
the same time, ensure real retirement security for every
American.
Our grassroots efforts reveal that the solution rests in
reforming this vital social program for the long term, in
preserving the Roosevelt safety net, and in adding a savings
component so every American can have the opportunity to create
wealth over a working lifetime. Let me repeat that, in case
some did not hear. Preserve, keep, retain the essential safety
net against poverty and retirement, and add savings so every
American can achieve real retirement security. So every
American can walk in the footsteps of Oseola McCarty.
In closing, Mr. Chairman, and to answer the Subcommittee's
three questions first, we have found a fundamental lack of
knowledge about how Social Security works. In fact, many people
actually believe that there already is a Social Security
account with their name on it.
Second, we have found that there is little or no confidence
that Social Security will be there in the long term. And third,
we have found an overwhelming commitment to retain the vital
safety net against poverty in retirement.
To emphasize our main point, however, we have found that
American families are struggling between a need to provide for
their families today and to save for tomorrow. They are
struggling with how to balance today's realities with
tomorrow's hopes. This struggle can be overcome, Mr. Chairman,
by reforming Social Security. Through Social Security reform,
we can enable families to save for their own retirements and
their children's futures.
In short, Oseola McCarty and her struggle is where the
Social Security debate needs to be focused. This is the idea
that resonates with the American people.
Thank you for your time today, Mr. Chairman. I would be
happy to answer any questions you may have regarding my
testimony.
[The prepared statement follows:]
Statement of Brian F. Keane, Executive Director, Economic Security 2000
Mr. Chairman, distinguished Members of the Subcommittee:
Good morning. My name is Brian Keane. I am Executive
Director of Economic Security 2000. ES 2000 is the nation's
first nonpartisan, grassroots, educational organization
dedicated to saving and reforming Social Security.
First, I'd to thank you for your invitation to address the
Subcommittee about the current state of public opinion on the
future of Social Security. Clearly, any attempts to reform the
nation's most important and popular social program would be
superficial, hallow and incomplete without gauging the American
people's general understanding of both Social Security's
workings and its long-term financial insolvency. Moreover, it
is essential that the American people are educated and
informed, to the fullest extent possible, about all facets of
Social Security and the various models for its reform. Social
Security is an issue which is near and dear to all Americans.
Its legacy speaks to the very values we as a nation hold dear:
a democratic people coming together and using government to
provide for the common good. Social Security is a good and
necessary program. Our obligation today is to preserve it--and
perfect it--for generations to come. And, I would suggest that
this obligation entails not only saving America's safety net
against poverty in retirement, but also extending our national
commitment toward the goal of creating wealth for those
Americans currently unable to do so.
In keeping with disclosure requirements of the U.S. House
of Representatives, let me state that I appear before you
representing solely Economic Security 2000, and no other
client, person or organization. Economic Security 2000 is a
non-profit corporation and does not receive any money from the
government of any kind.
I have submitted my full statement to the Subcommittee,
which I ask be made part of the hearing record.
Based on my more than eight years of work in both public
policy here on Capitol Hill and in grassroots citizen outreach,
I believe that the hearings you are conducting on the subject
of Social Security reform could not be more timely or more
necessary. ES 2000 finds that today, most Americans are
treading water financially, are beleaguered by the very high
costs of attaining a decent retirement, and are finding
themselves stuck without the opportunities to save and invest
for a secure retirement. Moreover, far too many Americans are
finding it increasingly difficult, if not impossible, to build
a financial nest egg to pass down to their children and
grandchildren that would ensure them a higher standard of
living and greater financial independence and security.
Redefining the Social Security Debate
Concerns about the near- and long-term financial health and
sustainability of the nation's most vital social program are
very real; indeed, President Clinton on more than one occasion
has listed long-term Social Security reform as second on his
list of five major priorities before leaving office. But with
the dynamics of the Social Security program affecting the lives
of just about every American, both during their working
lifetimes and especially in retirement, it would be myopic and
inappropriate to address the future of Social Security outside
the context of overall retirement security and the American
people's economic opportunities and financial health leading up
to eventual retirement. To do so, I suggest, would be like
trying to core an apple without piercing the skin.
It is important to note that prior to founding our
organization just over two years ago, ES 2000 President Sam
Beard had no intention at all of engaging in a discussion about
Social Security. A self-styled liberal Democrat who worked for
the late Senator Robert Kennedy on economic renewal programs
for the low-income community Bedford-Stuyvesant in Brooklyn,
New York, Sam set out to find ways to mend the growing gap in
income a wealth in the United States. His goal: to expand
economic opportunity across the nation, especially for those
middle- and lower-income families who are cut out of the
American dream. It is this huge gap between the rich and the
poor in our country that motivated Sam. And so, after intensive
study and consultation with economic experts, and struggling
workers and families, it came as somewhat of an epiphany to Sam
that the way to close this gap was through long-term Social
Security reform. The financial and demographic problems of
Social Security notwithstanding, Sam realized that reforming
Social Security was an opportunity, a blessing of sorts, to
promote economic stability, security and opportunity for all
Americans.
As you are well aware, Social Security was designed as a
safety net by President Franklin Roosevelt: part three of a so-
called ``three-legged retirement stool,'' with the other two
legs being personal savings and pension income. By Roosevelt's
own design and intentions, the need to save and invest were not
only crucial elements to a secure retirement, they were to be
the primary vehicles by which American workers could build
wealth over time, and thus provide a secure retirement. Social
Security is about retirement security, and the American
people's economic opportunities--and lack thereof--to save and
create wealth during their working lifetimes are directly
related to the future of the program and how we ought to think
about reforming the system.
There's no finer example of the lessons to be learned in
this debate than that of Oseola McCarty, a retired laundry
woman who ES 2000 is proud to have on its Board of Governors.
Now 88 years old, Ms. McCarty became a celebrity two years ago
when she donated $150,000 for a scholarship program at the
University of Southern Mississippi. She accumulated this nest
egg and significantly more on earnings that never exceeded
$9,000 in any year. How? In her words, ``It was the magic of
compounding interest.'' Over her 76-year working lifetime,
starting at age 8, a woman at the local bank helped her put
away a few cents a week, sometimes a few dollars, and
compounding interest did the rest. The picture here is clear: a
woman who lived her entire working life in poverty was able to
retire not just as part of America's middle class, but as one
of the top 1% of wealthy Americans.
Mr. Chairman and members of the Subcommittee, there must be
a way to make Oseola McCarty's story work for every American.
We submit to you that there is. And so do our distinguished
Honorary Co-Chairs Senator Bob Kerrey (D-NE), Congressman Jim
Kolbe (R-AZ) and Representative Charles Stenholm (D-TX), all of
whom have been committed supporters of ES 2000's mission and
principles of reform. The solution rests in Social Security.
Yes, we can create a nation of Oseola McCarty's through Social
Security reform.
Thus, ES 2000 sees the need to redefine the Social Security
debate. The financial and demographic problems facing Social
Security notwithstanding, the gap in income and wealth in this
country--between the relative few who can save and create
wealth and the many who cannot--is a continuous and growing
source of anxiety and frustration for millions of Americans.
And this gap largely constitutes most Americans' sense of
retirement insecurity. With so many in this country treading
water financially, it is wrong, not to say dangerous to our
democracy, to keep them from owning a piece of America's
economic success, to keep them from letting their money go to
work for them.
Polling and American Public Opinion
ES 2000 is particularly pleased that the Subcommittee
requested input from public education and outreach
organizations such as ours in addition to polling
organizations. It is important to note that public opinion is
not synonymous with the results of public opinion polls, yet
far too often the two are treated as if they were identical.
Moreover, a focus solely on polling results ignores the
dynamics of opinion formation and change, and often overlooks
factors that may shape and manipulate public opinion.
Though I am familiar with the procedures, components and
interpretation of ``polls'' and ``polling,'' I offer no
pretense of expertise in this area. ES 2000 recognizes that, if
objective methodology is utilized and reasonable conclusions
are drawn from their findings, polls can give a quick and valid
insight into shades of preferences of Americans' attitudes. Or,
for reasons ranging from deliberate biases to uncontrollable
factors associated with sampling error and confidence levels,
they may not. Given polling's pervasiveness particularly in the
political realm of our society, I am sure that many of you have
had both positive and negative experiences with polling's
accuracy and effect on policy and electoral outcomes. Let me
just pose to you, Mr. Chairman and members of the Subcommittee,
that polls can, and often do, ``say'' whatever a sponsoring
party wants them to say at any point in time. For every poll
that you might show me ``saying'' that the American people
generally believe that Social Security is perfectly fine as it
is and that they do not see a need for reform, I can show you
another poll ``saying' just the opposite. And for every one of
those, I could show you a poll ``saying'' that most Americans
believe the moon is made of green cheese.
Polling can supplement attempts to gauge public opinion and
knowledge of Social Security and other issues, but it alone is
not sufficient. It alone can never replace or outweigh the
value of the far superior method of physically going out and
actually talking to working and retired Americans, engaging
them and sometimes educating them about the facts. That is what
Economic Security 2000 is all about. Having traveled to more
than 70 cities in 25 states, we contend that the people
themselves--as opposed to verbal responses to structured poll
questions--are the true barometers of what the country knows
and feels toward Social Security and many of the interrelated
economic facets that engender this vital social program. In a
sense, ES 2000 represents the ``texture'' of public opinion--we
are a national focus group of sorts.
I come before this Committee as an informed representative
of a grassroots educational network that directly interfaces
and interacts with people and groups of all ages and political
persuasions. It is especially because Social Security is an
issue that is subject to all kinds of demagoguery and political
and class warfare that ES 2000 exists.
ES 2000 is an all-inclusive, non-partisan ``truth-telling''
campaign on all aspects of Social Security and how it affects
every American. By calling our toll-free number 1-888-SS-FACTS,
all Americans can get the facts about Social Security today,
its prospects for the future, and the attitudes of what
Americans really want from a national retirement system. As an
aside, I encourage your staffs to contact us to learn about
what we are doing in your districts.
I should add that ES 2000 does not operate or organize
within rigid, predetermined paradigms or bases of support.
Rather, our efforts include a broad base of support from
Americans of every walk of life: Democrats, Republicans,
Independents, seniors, Baby Boomers, Generation X-ers, union
members, young professionals, students, minimum-wage workers,
and urban and agricultural workers all comprise ES 2000 and our
mission. As such, we bring a unique insight to the mood,
sentiments and beliefs of a large sphere of the country
regarding personal finances and retirement security. I urge the
Committee to heed the growing number of voices of the American
polity that, once armed with the unadulterated facts about
Social Security and the potential for expanded economic
opportunity for all Americans, want Social Security to be both
saved and reformed.
In short, Mr. Chairman and members of the Subcommittee, the
broad and diverse faces of America that comprise ES 2000
believe that Social Security can no longer afford to be seen in
a vacuum--as a stand-alone program--for it touches the lives of
almost every American and in a variety of social and economic
ways. Social Security's future can no longer ignore the need to
create savings and wealth, create higher standards of living
and ensure real retirement security for every American.
I am complying with the Committee's focus with my following
comments on the specific parameters of public opinion and
Social Security about which it requested:
1. Americans' understanding of today's Social Security
programs; 2. Americans' understanding of Social Security's
long-term financial insolvency; 3. Americans' views on what
changes are necessary to fix Social Security.
As nearly three quarters of Social Security recipients are
seniors and the thrust of the Social Security debate revolves
around the issue of retirement security, I ask your indulgence
in largely concentrating and confining my commentary to this,
the largest portion of the program. This is in no way a
relegation of the value or importance of Social Security's
disability side, but rather a comporting extension of ES 2000's
advocacy that this part of Social Security works well and ought
to continue in its current operation and administration.
ES 2000 finds that it very much depends on a variety of
demographic factors as to Americans' general understandings and
misunderstandings about today's Social Security system. To the
fullest extent possible, I will specify within these different
demographic groupings.
1. Understanding of Today's Social Security Programs
In general, American workers, families and seniors of all
ages and incomes have a fundamental lack of knowledge of how
Social Security and its related programs work, and what the
programs' underlying intentions and capabilities are.
Most older Americans, we have found, view Social Security
as a right of passage--a sacrosanct entitlement into which
everyone contributes during their working lifetimes and from
which they can expect a decent retirement income. We interpret
this as generally supportive of most Americans' positive view
of the program and its successes to date of lifting millions of
seniors out of poverty. But outside the senior population there
is a general unfamiliarity that Social Security is a
Depression-born program that has essentially remained unchanged
over its 62 year history. And while most Americans know that
Social Security is a program designed for retirement benefits,
very few are familiar with the disability and survivors
elements of the program.
In addition, there are plenty of misconceptions about how
Social Security is financed and what levels of income workers
can expect in retirement. Most Americans know that they pay
something into the system, but do not understand the nuances
among the Federal Insurance Contributions Act (FICA), ``payroll
taxes,'' Federal Old-Age Survivors Insurance (OASI), Federal
Disability Insurance (DI), the proportions each take out of
their paychecks and the distributions of each in financing
Social Security. For purposes of convenience, I will herein
after refer to contributions to the Social Security system as
``payroll taxes,'' as the largest portion of these taxes are
allocated to the Social Security system. I realize the
technical and legal distinction that ``payroll taxes'' also
includes a small portion allocated to the Federal Hospital
Insurance (HI) Part A Medicare program.
The major exceptions to these observations on the country's
comprehension of Social Security financing are the self-
employed and small business owners: as a sub-population, the
self-employed and small business owners are expected to meet
payrolls regularly, and as such have a more than pedestrian
understanding about the various aspects of contributions into
Social Security. Indeed, the self-employed are particularly
familiar with their contributions to Social Security as they
often are ``double taxed'' with their Self Employment
Contributions Act (SECA) payments comprising both the
``employee'' and ``employer'' portion.
In addition, a large proportion of Americans does not
comprehend that Social Security is supposed to be a self-
financed system of transfer payments from young to old--the
term ``pay-as-you-go'' is rarely understood--and that current
benefit levels are directly related to the level of payroll
taxes that younger workers are willing to pay now and in the
future. Far too often in the Social Security debate we hear
sentiments similar to those of Geraldine Malerba, a 60-year-old
teacher in New York City, New York, who thought that the
government can spend as much or as little on Social Security as
it wants--as if the system were just another government program
to be expanded or cut with the annual debate over the
allocation of general tax revenues.
While most Americans think that Social Security does not
pay enough and would like to see benefits expanded, few grasp
the notion that expanding overall benefits necessarily requires
raising aggregate payroll taxes at some point, thereby taking
more money out of the pockets of American workers.
Another very common misconception among Americans is the
view that Social Security is some sort of bank account,
complete with set-aside sums of money paid, account numbers and
benefit statements, that will pay workers back with interest.
And with relatively low payroll taxes until the 1970s, it was
just that for those Americans now retired. Almost all of the
people that we encounter, particularly those born in the 1950s
or later, become shocked when informed that the average return
on taxes paid into the system has been steadily falling since
Social Security's beginnings and is less than 2 percent today.
These same younger and middle-age people practically roll over
upon hearing they will have to live considerably beyond their
normal life expectancies in order to reclaim the amount of
payroll taxes they paid into the system. This trend only gets
worse for today's youngest Americans.
And this leads to a related topic: when we speak to
individuals and groups about reform proposals toward a two-
tiered system that ``de-politicizes'' Social Security and
enables workers to save and invest a portion of their payroll
taxes in individually owned personal savings accounts, many
people assume that they already have such an individual account
arrangement with today's Social Security system. These very
same people are completely disillusioned and unaware that
Social Security benefits are not stored in some individually
owned account in a vault somewhere in Baltimore, Maryland. They
are also unaware that Social Security benefits are in no way
guaranteed, that workers have no legal claim to future Social
Security benefits, and that Congress has the power to change
benefit levels at any time. As stated in the Supreme Court
decision in Fleming v. Nestor, U.S. 610 (1960), the taxes that
workers pay toward Social Security does not confer upon them a
legal right to receive benefits. As you can well imagine,
knowledge of this point of law is practically non-existent
across the country.
Although ES 2000 finds that overall knowledge of financial
and retirement issues is slowly increasing across the country,
far too many Americans still do not understand Social
Security's place in the retirement equation: that President
Franklin Roosevelt envisioned the system as only a safety net
``leg'' of a three-legged secure retirement stool, with the
other two legs being pension income and personal savings. And
for a large proportion of those who may understand the concept
of a three-legged secure retirement stool, a disturbing number
does not have the opportunity or ability to save or participate
in employer-provided retirement plans, both of which practices
nearly every financial planning expert would attest is
necessary to provide for a decent retirement. As you may know,
only about half of the American workforce is covered by
employer-provided pensions, and many of those that are often
lose accumulated assets when changing jobs because of vesting
and portability practices.
As testimony to the severe lack of savings and pensions
among Americans, the Social Security Administration's own
statistics show that 66 percent of retirees already rely on
Social Security for at least half of their retirement income,
and one out of four depend on it for 90 percent or more. Rather
than providing a protection against poverty in retirement,
Social Security is retirement for a growing number of
Americans--something for which it was never intended or
equipped to provide. This is the grave problem.
We find that this growing reliance on Social Security and
the very low personal savings rate among American households
stems most often from circumstance and not choice. American
households now save less than 4 percent of their disposable
income--less than half the rate at the start of the 1980s--and
the bottom 60 percent of American families have average savings
of less than $1,300. Saving at the end of each month is hard
enough as it is for millions of moderate- to lower-income
Americans--impossible for some--and a sudden emergency like
loss of job or medical expenses can often wipe-out whatever
savings have been achieved by American workers, putting the
chances for a decent retirement on hold even longer. And often,
plans to put-away savings sooner are pushed back or delayed
with intentions to save greater proportions of disposable
income later. But as many middle class Americans can attest,
after paying payroll, federal, state and local taxes, paying
bills and other basic living expenses, something else almost
inevitably arises in households that requires potential savings
and postpones the savings process further. It is not so much
that these middle class families don't want to save--they
simply don't have the disposable income to do it.
2. Understanding of Social Security's Long-Term Financial Insolvency
Mirroring the findings of many recent public opinion
surveys on the future of Social Security, ES 2000 encounters
significant doubt and anxiety among most Americans--especially
younger Americans--about Social Security's viability.
There is a pervasive feeling and thinking among Americans
born after 1960 or so that Social Security just ``won't be
there'' when they retire. This is to say, most of the people
and groups with whom we collaborate have knowledge--primarily
from official government data and media accounts--of Social
Security's looming insolvency. And there is an underlying
belief across the country--and across most demographic groups--
that major changes to the system are necessary to preserve it.
Knowledge of the causes of Social Security's near-term
financial insolvency, however, is not as wide-spread. ES 2000
tends to encounter that more-educated and higher-income
Americans realize that a combination of changing demographics
and a depleted trust fund are at the heart of Social Security's
financial problems. Among other Americans, those who voice the
most doubt about Social Security's future view the magnitude of
the government's annual deficits or national debt as the main
reason.
As to knowledge about the costs of fixing Social Security's
financial problems, we have found that the public is
sporadically aware of what is required to keep the current
system afloat for the long-term. Though the media has done a
commendable job in reporting the projections and findings of
the 1994 Bipartisan [Kerrey-Danforth] Commission on Entitlement
and Tax Reform, the President's Advisory Council on Social
Security and the annual Social Security Trustees' Reports, we
experience that many Americans are not conscious of the
substantial levels of tax increases or benefit cuts that these
official government data have indicated will be required to
fund Social Security and Medicare within 30 years: doubling
payroll taxes or cutting benefits 43 percent. Indeed, a large
proportion of moderate- to lower-income workers is too pre-
occupied with financially fending for the next week, month or
year to focus on and grasp these statistics and what they mean
for their daily lives and financial health.
We find that the knowledge of recent history about Social
Security's financial problems is also somewhat sporadic. There
is scarce realization of the fact that payroll tax rates have
been raised more than twenty times since 1937. Seniors,
however, are a major exception to this observation. Seniors
also have more recognition or recollection of both the major
payroll tax increases and benefit cuts which occurred in 1977,
1983 and 1993, and the fact that in each instance Americans
were assured by Washington that the ``fixes'' would restore the
financial soundness of Social Security through most of the 21st
Century.
When we provide people across the country with the facts of
the past tax increases and benefit cuts to ``fix'' Social
Security and of the steep projections of more needed to keep
the system afloat, most Americans become indignant. This
indignation only increases when informed that three out of four
wage earners in the country are paying more in payroll taxes
than in federal income taxes. ``Why should we expect to believe
again that one more patchwork of tax increases or benefit cuts
will suffice?'' said Michael Hartley, an ES 2000 volunteer in
Durham, North Carolina. ``This just to get back some $800 per
month when and if I'm able to retire? Were the last three
rounds of tax hikes and benefit cuts just rearranging deck
chairs on the Titanic?... How can we save when they keep taking
more money out of our pockets?
We find that Americans' opinions are nearly unanimous on
the notion that even if we do simply raise taxes or cut
benefits again to ``save'' Social Security as it is now, these
devices do nothing to address the severe lack of savings and
wealth creating opportunities for most Americans.
We have also found that there is almost no understanding of
the unfunded liability--some $10 trillion--that represents the
difference between what we have promised to pay each eligible
recipient in benefits and what we have the ability to pay under
current law. There is no realization that this figure keeps
increasing each year under the current system, but would be a
one-time cost with a definite end-point in transitioning to a
funded system.
3. Views on What Changes are Necessary to Fix Social Security
Though views are somewhat disparate about exactly what
should be done to fix Social Security, Americans overwhelmingly
believe in retaining Social Security's role in providing a
safety net against poverty in retirement. At the same time,
many believe that they need more and better options for
building financial and retirement security.
ES 2000 finds that Americans' views on needed changes to
the Social Security system are very much related to their
overall knowledge and understanding of how the program works
and what its capabilities are. When informed with the facts
about these aspects of the system, we generally find that the
American public would like to have some sort of savings
component added to the safety net. Most respond favorably to
the concept of allowing American workers to put some of their
hard-earned payroll taxes toward more productive resources,
toward real economic savings, and let their money work for
them.
There are, however, still some who would accept higher
payroll taxes or benefit reductions, but only in the context
that they could have an iron-clad guarantee that they would be
sufficient to preserve, once and for all, the solvency of
Social Security over throughout the next century and to provide
higher benefits to the most needy. These Americans resents and
rejects the continuous reliance on tax increases or benefit
cuts as short-term ``fixes'' for the long-term problems of
changing demographics and actuarial imbalance. But when
reminded of the assurances sold to the American public in 1977,
1983 and 1993, support for this position wanes dramatically.
Conclusion
In closing, Mr. Chairman, ES 2000 finds that most Americans
think that Social Security should retain its role in providing
a safety net protection against poverty in retirement. What
they are really saying however, is that the government should
have a role in providing a secure retirement for all,
regardless of the state of personal savings or pensions.
This thinking necessitates a new way of approaching Social
Security. Social Security is no longer the ``third leg'' of the
retirement stool. It is rapidly becoming the only leg of the
retirement stool.
In order to make that leg work, we are finding that people
overwhelmingly support moving to some type of public-private
partnership in creating a savings and wealth creating system
for the American people. We can allow the American people to
save part of their payroll taxes--money they are already
paying--in an account with their name on it; we can allow a
portion of their payroll tax to continue to go into the Trust
Fund to keep a strong safety net against poverty in retirement
and to pay for disability and survivors benefits--the same
manner in which Social Security operates now.
In instituting such reforms, we add the benefit of creating
wealth where currently none exists. We can, for the first time
in a generation, allow the moderate- to low-income workers of
this country to save money for their own retirements and for a
financial nest egg for their children and grandchildren. By
creating and building savings, we are giving the Oseola
McCarty's of America, perhaps, the half leg up that they need
to break their recurrent cycles of poverty and to take part in
the American dream and own a piece of America's economic
success.
In the words of President Franklin D. Roosevelt himself:
``We stand committed to the proposition that freedom is no
half-and-half affair. If the average citizen is guaranteed
equal opportunity in the polling place, he must have equal
opportunity in the market place.'' The American people want and
deserve a national retirement system that has the ability to
recognize a lifetime of hard work and the decency to respect
and reward it.
Thank you, again, for this opportunity to appear before you
today, Mr. Chairman and members of the Subcommittee. I will be
happy to answer any questions you may have regarding my
testimony.
Chairman Bunning. Thank you, Mr. Keane.
Mr. Salisbury.
STATEMENT OF DALLAS L. SALISBURY, PRESIDENT, EMPLOYEE BENEFIT
RESEARCH INSTITUTE; AND CHAIRMAN, AMERICAN SAVINGS EDUCATION
COUNCIL
Mr. Salisbury. Mr. Chairman and Members of the
Subcommittee, it's a pleasure to be here today.
I serve in dual capacities that have me in here today as
president of the Employee Benefit Research Institute, a
nonprofit research and educational group that started here in
Washington in 1978; and the American Savings Education Council,
which we founded in 1995, to take the message of the need for
savings and retirement planning more broadly to the American
people.
This morning, since we've heard from a number of others at
will, and much of our research and public opinion that began in
1990 with the Gallup organization, and since 1994 with Matthew
Greenwald and Associates, essentially reinforces the key points
of the other witnesses. First, that knowledge is low; second,
that confidence is relatively low. I will note in both cases,
very much on an age specific basis. And third that the public
strongly, at all ages, including the Generation Xers, wants the
Social Security system maintained.
Instead, I'll focus on two points that relate to that
confidence issue. First is an issue referred to by the last
point of the prior witness, the issue of a trust fund. And in
our most recent survey, we asked the following question: What
do individuals believe trust fund exhaustion means. They were
given two choices. The system will be completely broke and
unable to pay any benefits, or, the system will have fewer
assets and will have to pay out benefits at a reduced level.
Thirty percent incorrectly believe that it means the system
will be completely broke and unable to pay any benefits.
Significantly, 48 percent of Generation Xers believe that it
means there will be no money for any benefits. This is to
underline the necessity of a broad-based national education
campaign for the American public, so that on simple issues of
the structure of the Social Security Program, they understand
the trust fund insolvency simply means that there is not enough
cash to pay 100 percent. There is in fact, by the Social
Security actuaries numbers, broadly accepted, at least enough
money to pay 75 percent of the promised benefits.
We believe that what is ironic is that in spite of this 48
percent of Generation Xers saying that they think nothing will
be there, that they overwhelmingly support continuation of the
program and overwhelmingly join all other Americans in our
surveys, in contradiction of some of the earlier comments, in
saying that, given the choice between paying higher payroll
taxes or having benefits cut, that they would favor paying
higher payroll taxes. This includes nearly 60 percent of
Generation Xers when faced with that precise choice.
As a final point of reference, last year in terms of this
issue of public perception, Luntz Associates did a survey for
Third Millennium that gained very wide public recognition. It
gained recognition based on a headline which was a, should we
say, very poor use of survey results.
It took the answer to the first question, do you believe in
Social Security being there, and compared it to the response to
the 14th question, do you believe in UFOs. And it implied in
all of its coverage that the people had been asked, do you have
greater confidence in Social Security or in UFOs, which is not
what any survey researcher would tell you is a legitimate use
of survey results.
We just got back a survey last week. We found that 58
percent of the public believes they will receive some benefit
from Social Security. This ranges from 83 percent of those
about to retire down to 44 percent of those younger than the
baby boomers. This finding is consistent with the Luntz
Generation X survey. Their number, instead of 44 percent, was
41 percent, but within the ball park of their plus or minus 4
percent of error.
Second, we asked, do you believe that living beings from
other planets have piloted spacecraft to or near Earth. We
asked this question, for those who laugh, because one Member of
Congress, a member of the Ways and Means Committee, in many
speeches around the country, has cited the Luntz Survey as
showing that the public has more confidence in little green men
from Mars than they do in Social Security, and cites the Third
Millennium survey. We decided to test the theory.
Thirty percent of the American public believes that these
aliens exist. Sixty percent does not. Third, because of the
attention to that survey, we asked, which definition of UFO
comes closer to your belief structure. Seventy-seven percent
said, an object in the sky that cannot be identified. And 19
percent said a spacecraft that is controlled by an alien.
Fourth, we asked people, which do you have greater
confidence in. Seventy-one percent said receiving Social
Security benefits after retirement, as opposed to 26 percent
that said alien life from outer space exists.
For Generation Xers, these responses are slightly
different. But even for Generation Xers, 63 percent have
greater confidence in receiving Social Security than in the
existence and the life of alien beings.
I only underline this to underline the degree to which, as
this debate goes forward, the U.S. Congress and the U.S. public
must review all public opinion surveys with healthy skepticism
and take great care in looking at what has been found, what has
been presented, and what it means. Careful selection of
questions can lead to very misleading results, as we move
forward with this reform of a most important and vital American
program.
Thank you.
[The prepared statement follows:]
Statement of Dallas L. Salisbury, President, Employee Benefit Research
Institute; and Chairman, American Savings Education Council
The views expressed in this statement are solely those of
the author and should not be attributed to the Employee Benefit
research Instatite, or the EBRI Education and Research Fund,
its officers, trustees, sponsors, or other staff, or to the
EBRI-ERF Amercian Savings Education Council. The employee
Benefit Research Insttiute is a nonprofit, nonpartisan, public
policy research organization which does not lobby or take
positions on legislative proposals.
Mr. Chairman and members of the committee: I am Dallas L.
Salisbury, President of the Employee Benefit Research Institute
(EBRI) and Chairman of the American Savings Education Council
(ASEC), both located in Washington, DC. I take full
responsibility for my statement today, and my thoughts should
not be attributed to the organizations for which I work.
Our Survey Work
EBRI began doing public opinion research on Social Security
in 1990. This research has been conducted by two different
organizations in different years: the Gallup Organization from
1990 to 1996, and Matthew Greenwald and Associates with an
annual Retirement Confidence Survey (RCS) from 1990 to 1997.
These surveys have explored a wide range of economic security
topics. In 1998, EBRI will initiate an annual Health Confidence
Survey.
I have made extensive material available to the Committee,
which has been submitted as part of the full statement. This
morning, I want to highlight findings that relate to the debate
over Social Security reform.
Social Security, UFOs, and Aliens
EBRI recently completed a new survey with Matthew Greenwald
and Associates that looks at Social Security, UFOs, and aliens.
First, 58 percent of the public believes that they will
receive some benefits from Social Security. This ranges from 83
percent of those about to retire down to 44 percent of those
younger than the baby boomers. This is consistent with a 1995
Luntz survey of generation X.
Second, we asked, ``Do you believe that living beings from
other planets have piloted space craft to or near earth, which
have been seen by human beings?''
30 percent said yes
60 percent said no
Third, because of the attention given to the 1995 Luntz
survey for Third Millenium that was publicized as comparing
faith in Social Security to belief in UFOs, we asked the
public: ``Which one comes closest to your definition of UFO?''
77 percent said an ``object in the sky that cannot
be identified,'' and
19 percent said a ``spacecraft that is controlled
by an alien.''
Fourth, we asked people, ``Which do you have greater
confidence in?
71 percent said ``receiving Social Security
benefits after retirement,'' and
26 percent said that ``alien life from outer space
exists.''
For generation X'ers, these responses were 63 percent and
33 percent.
The Gallup organization has undertaken surveys since the
1950s that have found that a consistent 40 plus percent of the
population thinks that UFOs exist. The 1995 Luntz survey found
that 46 percent of those ages 18-34 believed that there were
UFOs. Separate from that question, Luntz found that 63 percent
(4.4 percent) of those ages 18-34 ``did not think
Social Security will still exist by the time you retire.''
Fifty-six percent (4.4 percent) favored being
allowed to put part of their payroll taxes into an individual
retirement account (IRA) while taking a lower Social Security
benefit. Seventy percent opposed raising the retirement age to
70; 51 percent favored means testing the benefits; 51 percent
favored taxing 100 percent of the benefits paid to upper middle
income taxpayers.
The Public and Social Security
First, our surveys have consistently found that the public
views Social Security as one of the most important programs
maintained by the nation--68 percent view it as second only to
Medicare.
Second, two-thirds of the public believe that people now
receiving Social Security really need the assistance it
provides.
Third, over 80 percent of the public has lost some faith in
the future of the program. This number has risen over time as
media and public attention has focused on the program.
Fourth, in terms of reform, over 63 percent of workers and
retirees favor payroll tax increases over benefit reductions,
including 57 percent of generation X'ers and 67 percent of
women.
Fifth, generation X'ers look to Social Security as a
secondary source of retirement income, with their own savings
and continued work as primary sources. This represents a
substantial change from the past, but given the relatively
small benefits paid by Social Security, it says that the young
are more realistic about what it will take to have an adequate
income in retirement.
Sixth, the public does not have a good understanding of the
Social Security program. Asked what trust fund exhaustion meant
to them:
68 percent said the system will have fewer assets
and will have to pay out benefits at a lower level,
42 percent either said the system would be
completely broke and unable to pay any benefits (30 percent) or
did not know (12 percent), and
48 percent among generation X'ers thought there
would be no money to pay any benefits, compared with 18 percent
of pre-boomers.
This exceedingly low level of accurate understanding may
help explain why the young have such low confidence in
receiving any Social Security benefits. At the same time, it
underlines the need for public officials to undertake a
campaign to assure that the public has the facts on Social
Security.
Conclusion
A full review of public opinion on Social Security
underlines workers' and retirees' hope that the program will
continue to exist and the fact that they do not have a good
understanding of the program. This suggests that the first step
for policymakers is to educate the public on this ``pay-as-you-
go program,'' and then move to a discussion of reform. Today,
the public does not have a clear enough understanding of the
program to make informed judgments on reform alternatives.
Public Attitudes on Social Security Reform
Surveys conducted by the Employee Benefit Research
Institute and the Gallup Organization, Inc. from February 1990
to March 1995 examined public attitudes on Social Security.\1\
Time trends and direct comparison among the surveys are
problematic due to changes in question wording or response
options. However, the survey results do provide some insights
into attitudes toward Social Security and how these attitudes
have shifted over the years.
---------------------------------------------------------------------------
\1\ See Employee Benefit Research Institute/The Gallup Organization
Inc., ``Public Attitudes on Social Security 1990,'' EBRI Report G-7
(Washington, DC: Employee Benefit Research Institute, 1990; ``Public
Attitidues on Social Security Benefits 1991,'' EBRI Report G-23
(Washington, DC: Employee Benefit Research Institute, 1991); ``Public
Attitudes on Social Security, Part I,'' EBRI Report G-56 (Washington,
DC: Employee Benefit Research Institute, 1993); ``Public Attitudes on
Social Security, Part II,'' EBRI Report G-57 (Washington, DC: Employee
Benefit Research Institute, 1994); and ``Public Attitudes on Social
Security, 1995,'' EBRI Report G-62 (Washington, DC: Employee Benefit
Research Institute, 1995).
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The Current System
In the early 1990s, Americans were evenly split in their
beliefs about the likelihood that the Social Security system
will be able to pay benefits to them when they retire; in 1990
and 1991, 49 percent believed they would receive benefits.
However, in 1990, 92 percent of survey respondents did not
believe that the Social Security benefits alone would allow
them to meet all of their financial needs during retirement. In
recent years, most Americans have become aware of the financing
issues facing today's Social Security system. By 1995, 82
percent agreed or strongly agreed with the statement that
working Americans are beginning to lose faith concerning
whether Social Security benefits will be available when they
retire (chart 1).
[GRAPHIC] [TIFF OMITTED] T1568.001
Is the current Social Security system a good program for
today's younger workers? Only one-third of respondents in 1995
either agreed or strongly agreed that it is, while nearly one-
half (47 percent) disagreed or disagreed strongly that this is
a good program for today's younger workers.
Reform Proposals
Several of the reform proposals put forth today advocate
contributions to individual retirement accounts. In 1991, when
asked if Social Security taxes, or a portion of these taxes,
should go to individual retirement accounts in the worker's own
name, or if the system should remain as it is, 61 percent
thought the money should go to individual accounts, while 32
percent believed the system should stay as it is. The March
1995 survey found that 53 percent agreed or strongly agreed
that most people could make more money by investing their
retirement funds in the private sector than they could from
Social Security. This has been a hot topic recently, with
regard to individuals' ability to invest wisely and at an
appropriate risk level. These concerns translate into a concern
for overall retirement income adequacy.
The idea of a voluntary Social Security system has also
arisen in the reform proposals. In 1990 and 1991, among survey
respondents, 45 percent and 50 percent, respectively, were in
favor of voluntary participation. While some advocates of
reform favor a voluntary program, this idea has raised concern
among others regarding the adequacy of individuals' incomes in
retirement.
When respondents were asked in the 1991 survey if they
thought higher taxes would be required in order for Social
Security benefits to be paid in the next century, 73 percent
responded affirmatively. Forty-two percent of individuals
surveyed in 1995 disagreed or strongly disagreed with the
statement that taxes will have to be raised dramatically to pay
for Social Security benefits in the future. In comparison, one-
third agreed or strongly agreed with the preceding statement.
Contrary to the notion that individuals do not welcome
immediate change, in the March 1995 survey, Americans indicated
a preference for some immediate tax increases in order to
lessen the tax burden on future workers (62 percent in favor)
(chart 2). Interviewees were informed that, in order to
maintain present levels of Social Security benefits for baby
boomers, the Social Security payroll tax would have to increase
approximately 27 percent to 33 percent for both employers and
employees by 2030. Twenty-eight percent said they preferred to
postpone taxes until after 2010.
[GRAPHIC] [TIFF OMITTED] T1568.002
Changes in the Level of Benefits Received
Twenty-four percent of surveyed individuals in April 1994
expected the level of Social Security benefits to increase in
the future, while 40 percent expected benefits to decrease and
31 percent believed they would be eliminated. Benefits would
remain the same, according to 4 percent of respondents. A
similar question was asked in March 1995; however, direct
comparison of the responses is not possible because the
questions were phrased differently \2\ and the response options
differed as well. In March 1995, 21 percent of respondents
expected that benefits would be reduced for all people, whereas
25 percent expected they would be reduced at a greater rate for
higher income people than for lower income people.
Additionally, 26 percent thought the benefits would stay the
same, and one-fifth thought they would be eliminated.
---------------------------------------------------------------------------
\2\ The April 1994 question read, ``Do you expect the level of
Social Security benefits to increase, decrease, or be elimiated in the
future?'' while the March 1995 question read, ``In the future, do you
expect that Social Security benefits will: (a) be reduced for all
people, (b) be reduced at a greater rate for high income people than
for low income people, (c) stay the same, (d) be eliminated, or (e)
don't know.
---------------------------------------------------------------------------
Interestingly, when individuals were asked what they
believed should happen to the level of benefits (as opposed to
what they expect to happen), their responses were quite
different. Not surprisingly, a greater percentage would prefer
to see only some people affected by reform. Five percent
believed that Social Security benefits should be reduced for
everyone, but 45 percent believed that benefits should be
reduced more for higher income people than for lower income
people. Another 40 percent thought benefits should stay the
same, and 4 percent thought the benefits should be eliminated.
Expected Returns
In the March 1995 survey, 60 percent of respondents
supported the fact that a part of every working person's income
goes to support the Social Security program, which is the basic
premise of a social insurance program. However, 17 percent of
individuals were opposed to this arrangement. Although a
majority believe that everyone should pay into Social Security,
some believe that not everyone should receive benefits from the
program. Thirty-two percent agreed or strongly agreed that
retirees with earnings over $100,000 should not get Social
Security, even if they paid into the system. However, nearly
one-half (47 percent) either disagreed or strongly disagreed
with the previous statement.
Sixty percent of those surveyed in 1995 expected to receive
less money from Social Security than they contributed.
Interestingly, age differences existed for this question. Among
those ages 18-34 and 35-54, 72 percent and 67 percent,
respectively, expected to contribute more money than they would
receive from Social Security. In comparison, 34 percent of
those ages 55 and older expected to receive less money than
they contributed.
In general, Americans believe Social Security to be a good
program and, in 1995, 67 percent of survey respondents agreed
or strongly agreed that most people receiving Social Security
really need the assistance it provides. Most people are now
aware of the upcoming issues facing the program and are
conscious of the need for some type of reform.
Social Security Finances
It is apparent that many Americans do not understand the
debate over the Social Security's long-term financial
condition. Thirty-six percent reported in the RCS that they are
not confident that they have a good understanding of how the
Social Security system works (chart 3). While this number is at
its lowest point since the question was first asked in 1992, it
is still only slightly below the 38 percent figure reported in
1992. Respondents were asked what they believe the term ``trust
fund exhaustion'' means and were given two choices--(1) the
system will be completely broke and unable to pay any benefits
or (2) the system will have fewer assets and will have to pay
out benefits at a reduced level. Thirty percent incorrectly
believe that it means the system will be completely broke and
unable to pay any benefits (in addition, 12 percent responded
that they do not know) (chart 4). The younger the individual,
the more likely this response. Nearly one-half (48 percent) of
generation X'ers believe trust fund exhaustion means system
bankruptcy, compared with 18 percent of pre-boomers. This is
not surprising, given that 52 percent of generation X'ers are
not confident in their understanding of how the system works,
compared with 23 percent of pre-boomers.
[GRAPHIC] [TIFF OMITTED] T1568.003
[GRAPHIC] [TIFF OMITTED] T1568.004
Sixty-eight percent of Americans are not confident that
Social Security will continue to provide benefits of equal
value to the benefits received by retirees today (chart 3).
This figure is down from its peak of 73 percent in 1995, but is
still higher than the 65 percent first reported in 1992. Among
workers, only 12 percent expect it to be their most important
source of retirement income, while 22 percent do not expect it
to be an income source at all in retirement.
Other Surveys Find: The Public Agenda/Fidelity study found
that 22 percent expect to get nothing from Social Security.
Assuming that adjustments or changes must be made to the
Social Security system to ensure its financial viability in the
future, RCS survey respondents were forced to express a
preference between increased payroll taxes on workers or
reduced benefit levels for retirees. When forced to choose, 63
percent chose increased payroll taxes and 32 percent chose
decreased benefit levels (chart 5). The majority of each
generation chose increased payroll taxes, although generation
X'ers were the least likely to favor it (57 percent). Sixty-
seven percent of women chose increased payroll taxes, compared
with 58 percent of men. Among those favoring benefit cuts,
there was a fairly even split when forced to express a
preference for how to make the cut. Thirty-three percent
favored raising the age for retirement with full benefits to
70, 37 percent favored decreasing cost-of-living-adjustments
(COLAs) that occur with inflation, and 26 percent favored
cutting benefits for all recipients.
[GRAPHIC] [TIFF OMITTED] T1568.005
As regards Medicare, 67 percent of Americans are not
confident that the system will continue to provide benefits of
equal value to the benefits received by retirees today (chart
3). In fact, 46 percent of workers do not believe that the
Medicare program will still be providing health insurance when
they retire (chart 6). Women are more likely to feel this way
than men (51 percent, compared with 41 percent). Sixty-four
percent of generation X'ers feel this way, compared with 55
percent of late boomers, 42 percent of early boomers, and 21
percent of pre-boomers. This may help explain why 36 percent of
workers are not confident that they will have enough money to
take care of medical expenses when they retire.
[GRAPHIC] [TIFF OMITTED] T1568.006
Chairman Bunning. Thank you.
Ms. Knighton.
STATEMENT OF BETTY KNIGHTON, MODERATOR, NATIONAL ISSUES FORUMS
INSTITUTE, CHARLESTON, WEST VIRGINIA; ACCOMPANIED BY JOHN
DOBLE, PRESIDENT, DOBLE RESEARCH ASSOCIATES, INC., ENGLEWOOD
CLIFFS, NEW JERSEY; JULE ZIMMET, MODERATOR, NATIONAL ISSUES
FORUMS INSTITUTE, EL PASO, TEXAS; BOB KINGSTON, ASSOCIATE,
KETTERING FOUNDATION
Ms. Knighton. Good morning. My name is Betty Knighton, and
I'm a National Issues Forums moderator from Charleston, West
Virginia.
National Issues Forums is a network of thousands of civic
and educational organizations around the country that convenes
citizens forums. We're in our 16th year. And the organizations
that hold forums now range from libraries to literacy groups,
from community colleges to churches, from high schools to
senior citizen groups to agricultural co-ops.
I would like to emphasize that National Issues Forums is
nonpartisan and nonprofit. Forums are always locally financed,
locally organized and locally determined. They champion no
political cause.
National Issues Forums differ significantly from polling
and from political debates. In the forums, citizens deliberate
on the benefits, the costs and the consequences of a range of
options on an important issue. The issues are not framed in
technical, expert terms nor in partisan political terms.
It's been my experience in 6 years of convening and
moderating National Issues Forums that citizens are willing and
able to bring their personal concerns to bear on a discussion
of public needs and national policy when issues are framed in
this way. The National Issues Forums discussion guide we use in
our forums on Social Security, the report analyzing the results
of the forums, and a copy of ``A Public Voice,'' a PBS
television special based on these forums, are all in your
materials.
[The material is being retained in the Committee files.]
You'll also find a letter from Governor William Winter,
Chairman of the National Issues Forums Institute Board. He
regrets that he couldn't be here today, but he did want to
convey his enthusiasm to you for this way that citizens are
doing their part in helping to set directions on important
national issues. Jule Zimet, a National Issues Forums moderator
from El Paso, Texas, and Bob Kingston, an associate with the
Kettering Foundation, are with us and also available for your
questions.
I would like now to introduce John Doble, of Doble Research
Associates, who with his colleagues independently analyzed the
results of our forums.
Chairman Bunning. Mr. Doble, go right ahead.
Mr. Doble. Thank you, Mr. Chairman.
Thank you, Betty.
Each year, National Issues Forums are held in hundreds of
communities across the country. Our findings come from
analyzing questionnaires people filled out before and after the
forums, conducting interviews with moderators across the
country about what happened in their forums, listening to what
people said in forums that we monitored directly or reviewed on
video tape, and conducting focus groups ourselves. We believe
this procedure enables us to reach a deep understanding about
how Americans are thinking about this issue.
Here are our seven major findings. First, the issue of
entitlement for seniors was in participants' minds not one
issue, but two, Social Security and Medicare. Medicare was seen
as part of a larger issue of health care. To forum
participants, Social Security was the more urgent issue, with
concern centered on what they saw as its possible insolvency.
Two, no matter what changes we make to Social Security,
participants concluded that we as a people had an obligation to
provide adequate health care and enough income to keep all
elderly Americans out of poverty. As well as being a moral
imperative, a universal retirement system was seen to be vital
for practical reasons.
These programs have worked, said a woman from Lake Worth,
Florida. While there were differences of opinion between young
and old, sometimes marked differences, we saw in the forums no
sign of an intergenerational war. But young and old felt this
was a common problem, something we must solve together.
Three, participants opposed making Social Security a means-
tested program, both before and after they deliberated.
However, while they oppose the concept of means testing, many
favored some incremental changes, some of which would have a
disproportionate effect on those in upper income brackets.
Majorities found three changes worth considering.
First, raising the ceiling on the Social Security tax.
Indeed, many did not realize that Social Security taxes are
paid on only about the first 60-odd thousand earned each year.
Second, they favored taxing Social Security benefits like other
retirement income. And third, there was support for adjusting
the Social Security, COLA, cost of living adjustment.
Our fourth finding is that younger participants in
particular fear that Social Security will not be there when
it's time for them to retire. Again and again, in the forums,
younger participants said that if nothing is done, Social
Security would bankrupt before they could retire. An
irresistible force, they said, is the large number of baby
boomers who will soon become eligible for benefits.
Among those under 30, 73 percent were very concerned that
Social Security and Medicare will run out of funds before long.
Seventy-three percent very concerned. Fears based on
demographics and the deficit played into a broader cynicism
about government competence and trustworthiness.
Five, there was great interest in exploring the idea of
mandatory private retirement accounts, especially among younger
respondents. Participants considered whether to replace Social
Security with a Chilean-type system, a mandatory private
retirement account in which people would have to save for
retirement, but could control the money themselves. Large
numbers, especially those under 30, wanted to talk about this
concept.
Participants said private retirement accounts would give
them more control over their savings. And 67 percent said it's
very important that people take more responsibility for their
own retirement. But the key reason why so many young people
were attracted to the idea was their belief that this was the
only possible option that might be there for them when they
reach retirement age.
At the same time, as people deliberated about this issue,
serious questions arose. Would everyone invest wisely? Would
some end up with too little to live on? Would the transition
costs be enormous? Wouldn't switching to a private system cut
some of the bonds that hold society together? Should peoples'
choices be limited or insured?
But these questions notwithstanding, interest in the idea
remained high after the forums.
Six, as people deliberated, one effect was crystal clear.
They moved from thinking of Social Security as a senior's only
source of income to seeing it as one leg of a three-legged
stool. At the start of the forums, many participants spoke of
Social Security as something designed to support retirees. It
can be their main or only source of income. But as they
deliberated, and heard from others, they increasingly came to
see it as one source of a retiree's income.
Seventh and last, in these forums, participants said our
retirement system faces a crisis, and agreed that something
must be done. Their thinking about retirement was markedly
different from 15 years ago when NIF first took up this issue.
While leaders saw a crisis, the public then was just learning
about the issue. Now, there is a general sense among
participants that this issue must be dealt with, with 59
percent saying they are very concerned that Social Security and
Medicare will run out of funds before long.
In sum, while the conventional wisdom is that this is a
third rail issue, the forums show that the American people are
ready to talk seriously and responsibly about the future of
Social Security.
Thank you.
[The prepared statements and attachment follow:]
Statement of Betty Knighton, Moderator, National Issues Forums
Institute, Charleston, West Virginia
Good morning. My name is Betty Knighton. I'm a National
Issues Forums moderator from Charleston, West Virginia. On
behalf of NIF, thank you for the opportunity to tell about what
we've learned from listening to citizens deliberate about
Social Security and retirement.
National Issues Forums differ from polling and from most
public discussions. NIF is a network of thousands of civic and
educational organizations around the country that hold citizen
forums. It is in its 16th year, and the organizations that hold
NIF forums range from libraries to literacy groups, from
community colleges to churches, from high schools to prisons,
from leadership groups to agricultural co-ops.
I want to emphasize that NIF is nonpartisan and nonprofit;
forums are locally financed and locally determined and champion
no political cause. NIF moderators do their utmost to remain
neutral, and the discussion guides present a range of options
to important issues. In the forums, citizens deliberate on the
benefits, costs and consequences of each option. The issue is
NOT framed in technical, expert terms; NOR in partisan
political terms. Instead, each option reflects what a
significant percentage of people say are their concerns--what
they hold most valuable. In the case of the discussion guide on
Social Security, views reflected such deeply held convictions
as honoring our promises, the responsibility to future
generations that modifications might allow, the importance of
maintaining a universal system, and the value of individual
choice and personal savings.
It has been my experience in six years of convening and
moderating National Issues Forums, that when issues are framed
this way, citizens are able to bring their personal concerns to
bear on a discussion of public needs and national policy. The
NIF issue book on Social Security, the ensuing report analyzing
the results of the forums, and a copy of ``A Public Voice,'' a
PBS television presentation, based on the forums and broadcast
on more than 200 stations--these are all in your materials.
Also, you'll find a letter from Governor William Winter,
chairman of the National Issues Forums Institute board. He
regrets that he could not be with us today but wanted to convey
his enthusiasm for this way of citizens doing their part to
help set directions on important issues.
Now, I would like to turn it over to John Doble, of Doble
Research Associates, of Englewood, N.J., who with his
colleagues independently analyzed the results of the forums and
produced the report.
[GRAPHIC] [TIFF OMITTED] T1568.035
Statement of John Doble, President, Doble Research Associates, Inc.,
Englewood Cliffs, New Jersey
Each year, hundreds of National Issues Forums are held in
communities across the country--this year in at least 23
states. Our findings come from analyzing over 700
questionnaires people filled out before and after the forums,
conducting interviews with five moderators across the country
about what happened in their forums, listening to what people
said in three forums we monitored directly, and six we reviewed
on video tape, and conducting three forum-like focus groups
ourselves. We believe this procedure enables us to reach a deep
understanding of how Americans are thinking about this issue.
Here are our findings.
1. The issue of ``entitlements for seniors'' was, in
participants' minds, not one issue, but two: Social Security,
and Medicare, which they saw as part of a larger issue, health
care. People in the forums considered ``retirement programs''
as synonymous with Social Security, while Medicare was seen as
part of a larger and more formidable problem--the cost and
availability of health care. Although experts see Medicare as a
pressing problem but feel that Social Security is a problem the
U.S. will not fully encounter until the year 2020, to forum
participants, Social Security was the more urgent issue, with
concern centered on what they saw as its possible insolvency.
2. No matter what changes we make to Social Security,
participants concluded that we, as a people, have an obligation
to provide adequate health care and enough income to keep
elderly Americans out of poverty. As well as being a moral
imperative, a universal retirement system is vital for
practical reasons. A theme sounded by both younger and older
respondents was that no matter how we change Social Security or
Medicare, we, as a society, have an obligation to make sure
elderly Americans receive the health care they need along with
an income that keeps them out of poverty. ``These programs have
worked,'' said a woman from Lake Worth, Florida. ``Not long
ago, the number of seniors living in poverty was much higher
than it is now.'' While there were differences of opinion
between young and old, sometimes marked differences, we saw in
the forums no signs of an ``intergenerational war.'' But young
and old felt that this is a common problem, something we must
solve together.
3. Participants generally opposed making Social Security a
means-tested program both before and after they deliberated.
However, while opposing the concept of means-testing, many
favored some incremental change that would have a
disproportionate effect on those in upper-income brackets.
Turning Social Security into a means-tested program could,
apparently, threaten the program's political base of support.
But majorities favored three changes worth considering: first,
raising the ceiling on the Social Security tax (indeed, many
did not realize Social Security taxes are paid on only about
the first $61,000 earned each year); second, treating Social
Security benefits like other retirement income; and third,
adjusting the Social Security COLA.
4. Younger participants, in particular, feared that because
of pressure from the deficit and demographics, Social Security
will not be there when it is time for them to retire. A sense
that, to save Social Security, change is inevitable was
especially pronounced among those under 30. Again and again,
younger participants said if nothing is done, Social Security
will be bankrupt before they retire. An irresistible force,
they felt, is the large number of baby boomers who will soon
become eligible for benefits. Among those under 30, 73 percent
were very concerned that ``Social Security and Medicare funds
will run out before long.'' A grandmother from New Jersey said,
``Social Security is there for us. But when our children are
ready [to collect], it won't be there, Social Security will run
out of money by then.'' Fears based on demographics and the
deficit played into a broader cynicism about government
competence and trustworthiness.
5. There was great interest in exploring the idea of
mandatory private retirement accounts, especially among younger
respondents. While they raised serious questions as they
discussed the idea, participants' comments suggest this is an
idea whose time may be coming. Participants considered whether
to replace Social Security with a Chilean-style system of
mandatory private retirement accounts in which people would
have to save for retirement but could control their money
themselves. Large numbers, especially those under 30, wanted to
talk about this concept.
Participants said private retirement accounts would give
them more control over their savings, and 67 percent said it is
very important that people take more responsibility for their
own retirement. But the key reason why so many were attracted
to the idea was, explained a moderator from Alexandria, ``It
eliminates the fear.'' Her high school students, she said,
believed this was the only possible option that might be there
when they reached retirement age. After the forum, she said,
students ``were optimistic because they had seen something to
give them an answer'' to what will happen to them if Social
Security collapses.
As people deliberated, serious questions arose. Would
everyone invest wisely or would some end up with too little to
live on? Wouldn't transition costs be enormous? Would switching
to a private system cut some of the bonds that hold society
together. Should people's choices be limited? But these
questions notwithstanding, interest in this idea remained high
after the forums.
6. As people deliberated, one effect was crystal clear:
they moved from thinking of Social Security as a senior's only
source of income to seeing it as one leg of a three-legged
stool. At the start of the forums, many participants spoke of
Social Security as something designed to support retirees, to
be their main, or even sole source of income. But as they
deliberated and heard from others, participants increasingly
came to see it as one source of a retiree's income.
7. In these forums, participants said our retirement system
faces a crisis and agreed something must be done. People's
thinking about retirement was markedly different from 15 years
ago, when NIF first took up this issue. While leaders saw a
crisis, the public was then just learning about the issue and
the forums did little more than raise consciousness. But now,
when many leaders see the problem as less urgent, there was a
general sense among participants that the issue must be dealt
with, with 59 percent saying they are very concerned that
``Social Security and Medicare funds will run out before
long.''
Chairman Bunning. I thank the panel for their input. And I
would like to start the questioning.
Mr. Seidel, you mentioned that representatives from the
Social Security Administration were at your forum when you
talked about the changes.
Mr. Seidel. That's correct.
Chairman Bunning. Did any of them participate, or did any
of them offer suggestions on solutions for long-term solvency?
Mr. Seidel. I'm going to have Walt Downes answer that.
Mr. Downes. Mr. Chairman, my name is Walter Downes, and I
serve as governmental involvement chairman for the U.S. Junior
Chamber this year.
Our townhall meetings are an ongoing process, and the
findings that we presented to the Subcommittee this morning
were solely from that 1 year period. The townhall meeting
process is still going on. The Social Security Administration
is very much an active participant.
Chairman Bunning. What does that mean?
Mr. Downes. We have a panel of invited guests. So there
could be a representative from that State who would come to the
townhall meeting, whether yourself or somebody else on the
Subcommittee. We've had others, Jerry Weller from this
Subcommittee in fact sat as a panelist in one of our townhall
meetings. We would invite people from that local district to
come and participate, whether it's a representative from the
Social Security Administration, a representative from the House
or Senate, to sit and be able to answer the questions of people
from that town or community.
Chairman Bunning. Then they weren't asked to offer
solutions?
Mr. Downes. No.
Chairman Bunning. All you were doing is throwing out the
number of solutions that might be available?
Mr. Downes. Primarily, our purpose is to educate people.
And obviously, our membership of 21 to 39 is Generation X, as
well as part of the baby boomer generation. What we're looking
at is trying to educate people. Because what we're finding is
that people aren't aware of the severity of the problem. So
we're out there educating across the country, saying here's the
problems and possible solutions that are being offered. We as
an organization don't support specifically, but we know there's
a need for a solution and a need for action soon.
Chairman Bunning. Mr. Seidel, you had mentioned the fact
that in your forums, the people there suggested that those
that, there would be a $100,000 cutoff. In other words, that
there would be a means-tested benefit for Social Security. How
many people in your forums made over $100,000?
Mr. Seidel. That's not one of the questions that we asked
in the survey, what their income was.
Chairman Bunning. That was not one of the questions?
Mr. Seidel. I'm sorry, 14.27 percent made over $80,000.
That was the family income.
Chairman Bunning. And how many of those think that means
testing should be done? The reason I ask that is it seems
unfair to ask those that would benefit, have a personal
interest in benefiting from those who pay more or get less
because they pay more. It's like somebody saying that the
Social Security tax should go up from $65,000 to $125,000 or be
uncapped. Sure, that's another way to raise money.
But the fact of the matter is, there's no extra benefits.
If you pay the maximum now, you get the replacement income up
to a certain percentage. If you uncap the Social Security tax
on Social Security taxes, past the $65,000 plus that you have
now, what extra benefits would those people get? There would be
a transfer of money from one group of people to another.
Do you want to make it a social insurance program, or do
you want to make it a welfare program? That's the big debate on
that.
Mr. Seidel. Well, Mr. Chairman, what we could do, we do not
have the 14 percent, their response to that question broken
down separately. However, we would, for the benefit of the
Subcommittee, we could have that broken down and send it back
to you.
Chairman Bunning. I'd like to hear whether any of the other
panelists involved Social Security employees in the forums
regarding this role of Social Security, and what should the
role of the Social Security Administration be in this debate.
We've been trying to get them to come forward with
solutions, and they seem to be reluctant. In other words, they
are the administrators of the system. But we think that with
all the expertise and experience they have, they ought to be
speaking out and offering their own remedies for solvency.
Mr. Seidel. Mr. Chairman, you asked the question earlier,
and I don't know if you got the direct response you were
looking for, as it relates to what role had they played in the
townhall meetings that we hosted.
Chairman Bunning. I'm asking you what your opinion would
be.
Mr. Seidel. Well, the opinion is, we like the role they
play of being a factual type speaker. We don't look for, at
least in the forums that we're presenting, we don't look for
them to drive the debate, but rather to ensure that the
information that's being laid out is in fact correct, it's
factual, and that they can speak on different questions with
the background and the information there to do it.
And we feel that the debate and the solutions should come
from the American people, should come from those at the
grassroots level, as well as, to ensure that there are less
potential agendas of any administrations, to ensure their
future employment or anything along those lines.
The debate that we host, and we think is healthy to host,
is that, let the different organizations that have opposing
points of views on the solutions, those are who we invite to
our town meetings, so that every side of the coin is able to be
shown and from that, then you have someone who is well educated
on factual information, because you have the administration
there to confirm numbers. You have the different organizations
who maybe have some different solutions there to present their
facts with great passion, and it allows the American people to
make decisions for themselves.
Chairman Bunning. On your survey, you showed about an equal
number of split on people that would like to see the retirement
age raised. Forty-seven percent wanted to raise it, and 41
percent opposed to raising it. Did the Social Security
Administration weigh in at any time on any of that debate at
all?
Mr. Downes. No. Again, they were there solely to answer
factual questions.
Chairman Bunning. In other words, they just told you that
eventually it will go to 67?
Mr. Downes. Right.
Chairman Bunning. Would anybody on the panel like to
comment about the split? We've got a journal vote that we're
going to have to run, and we're going to have to recess. But
we're going to come back.
Mr. Seidel. This is which split, Mr. Chairman? The split,
you said? Which split?
Chairman Bunning. In other words, well, it's about 50-50 on
this one survey. But the fact of the matter is, that is one of
the many solutions offered in a lot of programs, is to raise
the retirement age past 67. In other words, take it to age 70
over a period of time, in over a 30-year period.
Ms. McSteen. Mr. Chairman, certainly I think if age is
considered and an increase in age before retirement, that the
corporate world and the marketplace has to enter into this
decision. Because as people are living longer and will be
required to work longer, then they must have an ability and an
opportunity to continue working. Maybe not the same job they
had throughout their younger life, but at least to participate
and contribute to establish a better retirement.
Chairman Bunning. Then you like our earnings limit that
allowed them to earn up to $30,000 without being penalized?
Ms. McSteen. Yes.
Mr. Doble. Mr. Chairman, I'd like to briefly comment on the
first part of your question, on turning Social Security into a
means-tested program or a welfare type program. People in the
National Issues Forums were totally opposed to that idea. They
see Social Security as something they pay into and that
everyone gets back. They see it as a public program, and they
don't want to turn it into a welfare program.
There was support for some kind of measures that might have
a disproportionate effect on people in upper income groups. But
the principle that underlay people's views about this issue was
that Social Security should not be turned into a welfare
program. That was very strong, loud and clear in forums across
the country.
Chairman Bunning. We'll stand in recess, and Barb, you can
start when we come right back.
[Recess.]
Chairman Bunning. The Subcommittee will come back to order.
I'd like to resume questioning. Ms. McSteen, how do you
account for the fact that the findings of your poll, which with
respect to private accounts, are so different from the findings
of others who testified today? Are the questions asked in your
poll phrased differently, or how do you account for the
difference?
Ms. McSteen. We made every effort to make this a fair and
open poll, and I would like to ask our pollster, Guy Molyneux,
to answer your question.
Mr. Molyneux. What we described in the survey to people,
without any prior questions to sort of try to put them in one
direction or the other, was to describe the personal security
accounts proposal out of the commission, describe that in a
very neutral way. We found 35 percent of Americans having a
favorable response to that.
The Washington Post did a survey earlier this year where
they asked people their response to privatization. They also
got 35 percent support for privatization of the system. And I
didn't hear any testimony today that I consider inconsistent
with our findings. The forums suggested there is some
attraction to this idea, especially among the youngest cohort
of American workers.
We do find some young workers are attracted to the idea of
some elements of privatization. What our survey did, and I
don't know of any other that has done that, is to lay out a
very specific privatization plan and get reactions to that.
That's different than testing the very idea of private
accounts, which does have some appeal. Because every real plan
has to make some real tradeoffs here. It has to either reduce
benefits for current retirees or raise taxes and so on. And
there's no support for that.
Chairman Bunning. Let me read the polling question that was
in your poll. In your poll, the question is asked, ``do you
favor or oppose cutting spending on Social Security to reduce
the Federal deficit.'' By May 1997, when this poll was
conducted, both the Congress and the White House had worked out
a budget deal. It was clear to everyone that Social Security
cuts were not being contemplated to balance the Federal budget.
Why, other than to stir up politically driven anxiety,
would a question like this be asked in your poll? And at that
juncture, a question like this did nothing but distort the real
issues confronting the President and the Congress regarding the
budget agreement.
Mr. Molyneux. This survey was conducted really just to
explore attitudes fundamentally about Social Security. We asked
prior to that if people wanted to spend more or less or the
same on the program. Most Americans, including most young
Americans, wanted to spend more. One other measure----
Chairman Bunning. But I want an answer to my question.
Mr. Molyneux. First, we found out, do you want to spend
more or less or the same. We immediately followed by taking a
tougher test, what if we were going to cut, for the value of
reducing the Federal budget deficit, we know from our polls
that most Americans want that deficit brought down. So if it
was for that valuable social purpose, would you then support
cutting.
Chairman Bunning. But you knew at the time that there was
no, there never was ever a suggestion in the budget agreement
between the President of the United States and the Congress,
any, any contemplation of cutting Social Security benefits or
dealing with the Social Security Trust Fund money.
Mr. Molyneux. Right. This was simply a measure, we were
just trying to find out how strongly the public support of
Social Security, when they say they've heard it so much, they
would oppose cuts even for the valuable purpose of cutting the
deficit, nothing more or less. It wasn't asked for any purpose
to try to play a role in the debate over the budget agreement.
And this was a question you'll find in polls for NBC News, CBS,
it's a standard polling question asked by many news
organizations with no stake in this.
Chairman Bunning. I don't think it has ever been asked in
this respect, in this regard.
Mr. Molyneux. We also asked, you'll see right below that,
would you support cutting Medicare for that purpose. Eighty-
five percent of the public disagree with that, even though in
fact I think you'd agree the budget deal did do that.
Chairman Bunning. Did what?
Mr. Molyneux. Cut Medicare for the purpose of reducing the
budget.
Chairman Bunning. It cut Medicare? That's an interesting
approach, since it raised the spending in Medicare almost 6
percent annually. Where did you come up with the cut?
Mr. Molyneux. That's a debate for another day, I think.
Chairman Bunning. Well, if you're going to make a
statement, you'd better be ready to back it up in here.
I yield to Barb.
Mrs. Kennelly. Thank you, Mr. Chairman.
Mr. Seidel, according to the Social Security Administration
data, about 45 percent of workers have Social Security taxable
earnings under $13,200 a year. Thus, the monthly contributions
to a privatized system, of 1.6 percent of their wages, would
mean they would be contributing about $17.60 a month, or $211 a
year.
Have you thought about how employers would handle
collecting and investing these small amounts? How would you
collect it? Would you collect it once a year? And who would
collect it?
Mr. Seidel. To answer your question, no, I have not
contemplated how the money would be collected and who would be
responsible for it. I think the role that we play as an
organization and what we bring to the table and the benefit of
being here is to be able to create forums back in your hometown
and other hometowns around the country where our Jaycee
chapters are building ball parks, where they're putting on the
Fourth of July parade.
But to create a forum in which those who have different
specific plans, both pro and con, are able to sit down and
debate them and then allow a participant to ask questions just
like that of them. And then survey them after they've gone
through that process.
So I may not be the right person to ask that question.
Mrs. Kennelly. Well, I'm very familiar with it. I come from
Hartford, Connecticut, and we have a wonderful Junior Chamber
of Commerce, and they do fantastic work and raising funds for
wonderful causes. But we're in a pretty serious subject that
we're talking about. This is a national forum here, because we
represent the people of the United States of America.
We could have all the debate in the world on the future of
Social Security, but one of the things about the Social
Security Administration that we all can look to with great
regard is that the administrative costs for Social Security is
just 1 percent of its total, which is absolutely remarkable,
and a wonderful record.
So there are many of us that are concerned that when you're
talking about going into privatization, and you're talking
about going into a whole new way of doing this, with these
billions of dollars, that you've got to account for the fact
that if you go into privatization, there will be huge
administrative costs. And I think this is something maybe at
your forums you have to consider.
Mr. Seidel. OK.
Mr. Keane. Could I touch base on that for a moment?
Mrs. Kennelly. Sure.
Mr. Keane. Part of the thing we talked about, we're talking
about creating a two-tiered system, basically, so basically to
simplify it, a person making $10,000, between the employer and
the employee, that person is paying $1,200 a year to Social
Security.
Let's have $1,000 of that go into an account with their
name on it. The other part would go into the general trust
fund. We still maintain. This would be collected through Social
Security, Social Security administrators. The money would be
handled by a professional money manager, in the account.
Mrs. Kennelly. But that would cost money.
Mr. Keane. Such as a 401(k). And I'll get there.
Currently, the administrative costs of the Social Security
now are very low. But a generational tax transfer should be
very low. There shouldn't be a lot of cost with that.
What we're talking about though, is actually creating
money. So there will be increased costs. Not dramatically
increased costs. But some increased costs, but with
dramatically increased return. So it's a cost worth incurring.
Mrs. Kennelly. I heard you say that, Mr. Keane, and you
said one of your goals is creating wealth for these Americans
currently unable to do so.
Mr. Keane. That's correct.
Mrs. Kennelly. You implied from your statement you think
diverting a portion of the current payroll tax into individual
accounts would create wealth, is that correct?
Mr. Keane. That's correct.
Mrs. Kennelly. Well, I want to put on the record a
statement by Herbert Stein, an economist. I got this from the
Wall Street Journal February 1997, where he says, two important
points are commonly missed in the current discussion of Social
Security reform.
First, privatizing the Social Security funds would not add
to national savings, private investment or the national income.
It would not allow the system to earn more income without
anyone else earning less. And second, if the purpose of Social
Security is to provide a certain benefit upon retirement, then
an investment policy that yields a probable, even though
possible higher benefit, is not appropriate.
[The following was subsequently received:]
So what Mr. Stein is saying, there is no new wealth created
by simply diverting Social Security money into individual
accounts. Now, are you arguing with that statement?
Mr. Keane. I'm arguing that there's no denying that if you
give a person a chance to save money, and if that is able to
grow through compound interest, that person who had no wealth
will have wealth. A person making $10,000, he or she does not
save a penny today. They simply can't. A person making $50,000,
a family making $50,000, has a very tough time saving. You're
paying rent, you're paying college loan, you're paying car
loans. At the end of the day, you're not really saving
anything.
What we're doing though is saying, let's take some of the
money that they currently are paying, and let's let that grow.
That individual, that family, will have more wealth.
Mrs. Kennelly. I hear you, and I heard you in your
statement, also. And you can't have it all ways. When you
talked about Ms. McCarty, a dignified, wonderful woman who
chose her way of living, and lived very simply, was able to
save by compound interest $150,000.
I think you then went on to say that Ms. McCarty, if she
had had children, could have left that money to her children.
I'm a mother of four children. And she would not have been able
to save that money if she had had children. [Laughter.]
Mrs. Kennelly. You have to feed and clothe those children.
Chairman Bunning. Would you yield, Barbara?
Mrs. Kennelly. Of course, I'll yield.
Mr. Keane. That's the point exactly, though. That woman
cannot save with a family of four. It's very difficult.
But what we're suggesting is to take the taxes she is
currently paying and allow that to grow. She was very
fortunate, because she was very smart. She grew up in a society
where it was a saving society. We are now a consuming society.
We need to adjust for this reality.
Mrs. Kennelly. And that is exactly what Mr. Stein was
saying, that you have to either consume less or save more. You
can't just transfer funds.
Mr. Salisbury. Could I add one brief comment on that?
Chairman Bunning. Go right ahead.
Mr. Salisbury. We have developed at EBRI an economic
forecasting model that supports both contentions in essence.
The real issue is whether or not you deal with the transition
costs. If $1,000 of my current taxes goes into an individual
account, $1,000 in taxes has to be raised some place else,
unless my mother and father's benefit is going to be reduced.
In the Stein notion, if you include the transition cost,
you essentially don't end up with the addition to savings. If
you get to the end result by increasing, essentially my example
would be you increase payroll taxes to 17.4 percent from the
current 12.4 percent, in order to finance the individual
accounts, then you can get the result of additional real
savings.
Why? Because you have dramatically----
Chairman Bunning. Mr. Salisbury, I want you to come up here
and advocate that. [Laughter.]
We'll see how popular you will be if you ever get elected.
[Laughter.]
Mr. Salisbury. Mr. Chairman, I was not advocating it, no.
Mrs. Kennelly. Mr. Chairman, may I end my line of
questioning by just saying, let's none of us forget that
present day workers are working for present day retirees. And
when we're talking about all these savings accounts, somehow
that translation has to always be remembered.
Chairman Bunning. Mr. Johnson.
Mr. Johnson. Thank you.
Are you through, Barbara?
Mrs. Kennelly. I am, yes. He says I am. [Laughter.]
Mr. Johnson. Thank you.
Mr. Keane, you know, you talk about knowledge and how
you're trying to educate the public and engaging them in the
debate. I agree with you. But based on your experience, what's
the best way you think we can do that? And I'd like comments
from the rest of you, if you differ.
Mr. Keane. Sure. And I would suggest that we're only
touching the tip of the iceberg. The way we work is, we go into
communities, we go to the Chambers of Commerce, we go to the
rotary clubs, the schools, colleges, churches, we even go so
far as to go door to door talking to people.
Right now, we do about 60 events per month. This month of
October alone, we're doing 60 events across the country. As we
speak now, we have four events going on across the country, at
this moment right now. And that is only the tip of the iceberg.
We are going to people and talking to them like this, telling
them about the real problems of retirement security and about
creating wealth for those who have none.
They always say the best way is to go on the television.
You go on television and you spend $25 million on television,
you get to everybody. But under that, we have to get people to
have a real understanding of why we need to retain a safety
net, why we need to close this gap between the rich and the
poor, and why we need to secure retirement.
If you go to people today and ask them, how much are you
going to have when you retire, most of them don't know. I hope
I get Social Security. How much will you take home from Social
Security? I don't know. OK, you'll probably get around $750.
Oh. How much do you take home right now? Well, significantly
more than that. So what else are you going to supplement that
with?
They don't have savings, they don't have pensions. The vast
majority of American people are going to be relying on Social
Security as their sole source of retirement income.
Mr. Johnson. Yes, but when you ask them if they want to
raise the withdrawal amount or increase the tax, are they aware
what they're paying in taxes overall?
Mr. Keane. Dramatically no, I'd say. I mean, one of the fun
things is to go to people just out of college who have actually
just gotten their first paycheck, and ask them what all these
line items, what is FICA, what does that mean. It's a
dramatically huge tax, and they don't know what it is.
Mr. Johnson. But that's not the only tax. You put them all
together, and the people in the United States are paying upward
of 50 plus percent of their income on taxes.
Mr. Keane. I agree.
Mr. Johnson. So when you talk about raising the FICA tax,
I'm talking about increasing the overall burden.
Mr. Keane. Excuse me, no, I'm not talking about raising it.
Mr. Johnson. No, I know you're not, but some of these guys
are.
Mr. Keane. Our point, though, Congressman, our point is
actually that the American people can't afford to have a tax
put on them. There are those who would suggest Oseola McCarty
is an amazing woman. And let's put a savings tax onto
everybody. We won't touch Social Security. We'll put a savings
tax.
The real point is, it's not that people don't want to save.
They just don't have the money to. If you put a savings tax on
top of what they're already being taxed, you're not doing them
any favors. The money is gone.
So we've got to find a way to take the money they have, the
money that they're already spending, and turn that into a
savings plan. We can do that through Social Security.
Mr. Johnson. Well, we need to take part of the Social
Security fund, but let me ask another question. Are you
federally funded at all?
Mr. Keane. No, we're not.
Mr. Johnson. Ms. Knighton said she wasn't. Is anyone here
at this table federally funded?
[No response.]
Mr. Johnson. Privately funded, all of you? Every amount
that you spend?
[No response.]
Mr. Johnson. That is encouraging.
Ms. Knighton. I'd like to respond to your question about
how best to engage the American public. Through my experience,
I've come to firmly believe that the best way to do that is to
allow the American public to have an opportunity to engage with
each other.
Because in addition to facts and information and expert
information and dissemination of information that's been
gathered in other sources, it's incredible what you can see
happen before your eyes when people have a chance to come
together and talk about these competing convictions that they
have, and to weigh them with the sense of fairness that most
American people really bring into this discussion. They do have
a sense that we're in this together when they have a chance to
talk to each other about it.
That's one of the things that I've been able to see in
National Issues Forums, when we really do work through a range
of different policy options. Obviously, people have different
views about each one. But when they come down to it, they want
a chance to find out, ``How would what I advocate affect you?
How would what you advocate affect me? What can we find as a
way to work together on this, so that we can be fair to the
greatest number of people?'' More opportunities like that, I
think, would help people come to an informed decision about
what they'd like to do.
Mr. Keane. I think that's a very good point. We find that
as well. There is a discussion about the values of what Social
Security is all about. It is about making sure that nobody
lives in poverty, that everybody has some source, some sense of
being able to live an American dream.
Mr. Johnson. Mr. Doble.
Mr. Doble. Just very quickly, Mr. Congressman. There's a
great deal of cynicism in the country. So when information is
presented to people, people have a tendency to discount it. In
the forums people listen to each other, as Betty Knighton was
saying. And the attempt to talk in bipartisan or nonpartisan
terms has a great impact on people.
I'd also just like to comment quickly on one of
Congresswoman Kennelly's questions. There's a great deal of
confusion about what to do about Social Security, and about the
details of what we're going to do, and about how that would be
fair to people. But there's a great receptiveness to talking
about this issue, and discussing it and trying to arrive at
some kind of common ground for action that would be equitable
for all of us.
Mr. Johnson. We're having a little trouble getting common
ground.
Mr. Doble. Yes, sir, I understand that.
Mr. Johnson. Mr. Salisbury, your testimony includes a
finding that 68 percent of Americans are not confident that
Social Security will continue to provide benefits of equal
value to the benefits received by retirees today. What does
that statement really mean, in your view?
Mr. Salisbury. It means that they have been inundated by
public attention with the words bankruptcy and insolvency. And
in real life, when somebody has gone bankrupt, it means they
have nothing. And essentially, they've been talked to about the
trust fund as if that is the difference in Social Security,
rather than its being an income transfer, Ponzi scheme,
whatever word you want.
But 12.4 percent is going to keep coming in and keep going
out. So the overwhelming amount of what they've been told
through the public process of the media and all is Social
Security is in serious trouble. So it is very natural and
realistic for them to have a response that says, I am worried
that I will not get a full Social Security benefit.
Mr. Johnson. But with trust fund and debt related
instruments, do they understand that? It is in trouble, isn't
it?
Mr. Salisbury. Well, I guess the issue is, their statement
is very realistic. But if you put it in the context of cash
flow, if you simply keep the tax at 12.4 percent, the Social
Security actuarial numbers, even under pessimistic assumptions,
say that hundreds of billions of dollars a year will come to
the government in revenue in the way of Social Security taxes,
even if the trust fund is zero. And that will then flow out in
benefit payments, unless it is moved into individual accounts,
in which case somebody will have to make up that difference.
And Mr. Keane says he's not advocating increasing taxes,
then he must be increasing taking the benefits away from
current retirees. Because the money has to come from some
place. And the public ends up in the midst of that discussion,
as all of us have stated, becoming very, very confused.
And their confusion leads to anxiety, that leads to
uncertainty, that leads to angst which says, I'm not sure what
all this means, except I should be worried. Therefore, worry
must mean, I may not get my full benefit.
Mr. Johnson. Thank you. Our time's up.
Chairman Bunning. Mr. Hulshof.
Mr. Hulshof. Thank you, Mr. Chairman.
Thank you all for being here. Mr. Keane, you're exactly
right, as far as this whole process of education. As you know,
we've begun to commence a national dialog on fundamental tax
reform, and we're trying to have that dialog with the American
people. Ms. Knighton, also Mr. Doble, thanks. I assume you're
responsible for this very good publication.
And also Mr. Seidel, we're getting ready to participate in
a town forum or a town meeting working with the Junior Chamber.
So I applaud everyone's efforts. Because I think we need to
have this, a nonemotional discussion.
That having been said, I know the Chairman asked you, Ms.
McSteen, about the polling that was done. Let me give you an
example. When the U.S. Senate was discussing and debating
whether or not to enact a constitutional amendment that would
require a balanced budget, our office was flooded with
postcards, some 700 postcards, from your organization. So I
applaud your grassroots efforts on getting the word out.
And yet, people were urging us in the House to defeat the
Senate's amendment, or their discussion. Of course, we weren't
contemplating that or discussing it. But because they were
afraid, in these postcards, that we were going to do something
with Social Security. And clearly, the debate was not going in
that direction at all. The public statements had been made by
everyone that we want to be fiscally responsible, we do not
want to compromise Social Security.
So I guess I'm at odds. If we need to have a dispassionate
argument or dialog about what we should do, isn't this a
politically motivated effort to continue to make Social
Security the third rail of politics. I applaud the Chairman
even for us discussing the future of Social Security. It used
to be taboo, I take it, around here. I was addressing a group
this morning of interns here on Capitol Hill. That was their
first question, what are we going to do about the future of
Social Security.
So the fact that we're getting to discuss it at all is
good. But isn't this counterproductive? Ms. McSteen.
Ms. McSteen. I think it's extremely important that we do
try to communicate what's going on, and what's going on in the
Congress as well as what's going on with Social Security in
this case. Certainly, there is so much material that goes out,
and so many clips and sound bites, Social Security going broke.
In the same breath, talk about balancing the budget, and how
we're going to do it. And Social Security is said to be a drain
on the budget.
All of that becomes very complicated for an individual. I
think we have to continue to work together to get factual
information. I think that's what all of us are saying, that the
public understand, and certainly Social Security, is an
intergenerational program. We don't talk about that very much,
but about 38 percent of Social Security benefits go to
beneficiaries other than retirees.
So we must look at Social Security as a program that
benefits young workers and their families in the event of
disability and/or death. And it's difficult to do. It can
easily, any word can be misinterpreted, depending on what one
wants to hear, for one thing, as well as what the facts really
show.
Mr. Hulshof. I absolutely agree. And I think, and Mr.
Salisbury, the reason that some of us were late getting back
from the vote was, we were discussing who was it that was
misspeaking about the little green men from Mars out on the
stump, and which one of us was out there talking about this.
I'm just concerned that as we have these discussions, and I
think they're very fruitful, that stirring up anxiety through
politically driven agendas I think puts us at cross purposes.
So I would hope that we could continue to have these
discussions.
Town meetings, I find, are the truest sense because I try
to engage and act as a moderator, and get discussion among the
group when we talk about personal accounts or other options or
alternatives. So I really learn from my constituents in that
way.
I appreciate the fact that you all are here. Quickly, Mr.
Keane, I did have one question. Discussing the option of
private savings accounts, people assume they have these
individual accounts, and you've found that not to be the case?
Mr. Keane. Yes.
Mr. Hulshof. Can you help give me some ammunition when
folks at home ask this question. What should I tell them?
Mr. Keane. You have to tell them the truth. That's
absolutely not the way it works. It is an intergenerational tax
transfer. You're paying today to support your father in
retirement.
Incidentally, when my father was working, he thought he had
a personal savings account. And then he retires, he realizes,
oh, it's his children that are paying for his retirement.
That's just the truth. It's the way the system was set up.
It has worked. There are dramatic problems with it continuing
to work, just simply of demographics. But that's the way it is.
And when you tell it to them, people think, there's got to
be some better way. It just sounds unsustainable. To tax a
worker to support a retiree, we can't do that.
Mr. Doble. Could I just comment on the first part of your
question, Congressman? Mr. Chairman.
Mr. Hulshof. Go right ahead.
Mr. Doble. Thank you.
What we found in the National Issues Forums is that
information is not enough. You cannot expect to give people
facts and figures and have them make a decision in a public
way, as a citizen. They need to have choices. They need to
believe the choices are credible. They need to see the
tradeoffs, the consequences, the costs. They need to have time
to weigh that, to deliberate, to hear how it would affect
others, other than themselves.
And only after all of that takes place, which can sometimes
take quite a long time, can the public really do what it's
supposed to do as a public, which is not so much answer the
technical issues of what do we do with $200 worth of savings,
but provide the broad principles or guidelines within which
they would like to see policy made and carried out.
Chairman Bunning. Mr. Portman, the champion of the IRS.
[Laughter.]
Mr. Portman. We thought the IRS was difficult. This is a
lot more vexing. [Laughter.]
It is, and I appreciate all of you coming here today to
give us your reports from your polls and from your town
meetings, your findings and so on. This is very helpful.
I would say to Ms. McSteen, having been the recipient of
many of those postcards, that I agree with your analysis, which
is that there are a lot of sound bites here in Washington, it's
all very complicated, particularly for older Americans.
Therefore you and other groups have the responsibility for
providing information in a clearer way that is not only
accurate but portrayed in a way people can understand.
I didn't think, as one example, those postcards about the
balanced budget was fair. And I think that is a challenge that
all of you have, if you are interested in responsible public
policy, to help us through this process. Because it is
complicated. Most people don't understand Social Security. Most
Members of this Subcommittee probably are getting up to speed,
I certainly am, on how it precisely works and affects not just
older Americans, as you indicated, but many other Americans.
Let me ask a couple of quick questions, if I could. First
of all, Mr. Salisbury, your notion that folks are worried. I'm
concerned that people aren't worried enough. This is one of the
things I think we need to talk about here. There are three legs
to the stool. One is Social Security. One is the employer-
sponsored pension accounts that are out there, and the other is
private savings through other means.
My concern is that many people are not saving for their
retirement outside of the Social Security system, particularly
with the 401(k) plans that are out there now. The simple plan,
which I've been trying to champion, is a fantastic idea to get
small businesses to offer retirement savings. Still, in the
anecdotal evidence I'm getting from back home and around the
country on the simple plan that we passed over a year ago,
there are many employees who are not stepping up to the plate
and taking advantage of this wonderful opportunity to get their
employer to make contributions on their behalf and save.
So my only comment, not really a question, is that we all
need to do more not to create unnecessary anxiety out there,
but to convince people that they do need to save for
themselves, for their own retirement. Social Security was not
meant to be the sole source of retirement income. It is for
many people. And, people need to take advantage of these
private plans. Small business, particularly, needs to do more
in offering them, and we've now offered a simplified plan for
it.
I was interested, in your poll, from the Junior Chamber of
Commerce, about this notion of radical change versus major
change, 27 percent said radical change, 52 percent said major
changes. What is radical versus major? We have to come up,
unfortunately, with public policy. What does that mean? How
does that relate, as an example, to the private savings
accounts?
Mr. Seidel. It's the Junior Chamber's poll. Let me clarify
that.
Mr. Portman. It's a good poll.
Mr. Seidel. I think it's difficult for me to answer that
question, to be honest with you. Part of the reason is because
I think when you put a question forth like that, what I may
believe is radical change may be different from the person
sitting next to me.
So perhaps if the suggestion of this Subcommittee is that
we further define that question, we'd be happy to do that. We
look to be used as an instrument in this debate.
However, I will tell you that in our townhall meetings, and
I will applaud the National Issues Forums for the work that
they're doing as well, because we agree. We do think that the
added benefit of having the different organizations who support
a radical change of going to a privatized system or partially
privatized system or increasing these different proposals that
are floating around, we think it's important to have somebody
there who's able to talk about them factually.
But most definitely, the ability for the general public to
debate it, in that forum, is really where people start to mold
some educated opinions. Because they do take into account,
then, my grandparents, your grandparents. They also take into
account when the issue gets brought up that it's not just
retirees who are receiving benefits from Social Security.
But to answer your final one, I don't think I can honestly
answer that question. Because I think radical to me is perhaps
not radical to the person sitting next to me.
So I will tell this Subcommittee that we will make an
attempt to further define that question.
Mr. Portman. That would be helpful, I'm sure.
Ms. Knighton, Mr. Doble, there are a number of questions
I'd like to ask. Let me just address the most controversial
one.
Within Social Security's controversial means testing, your
poll indicates that people generally oppose making Social
Security means tested. But then you say they favor some
incremental change, like a disproportionate impact on upper
income brackets by raising the ceiling on Social Security,
treating benefits like other retirement income, adjusting the
COLA income levels, which in essence would be some sort of
means testing.
How do you differentiate the general opposition to means
testing with this specific interest in doing some things that
might lead to that?
Ms. Knighton. I can speak about the forums I've personally
moderated in West Virginia, then perhaps John can add the
national view on that, which I think was very similar. When
people talked about means testing, and there were some who
favored it, especially at the beginning of the forums.
(Actually, our results are not from a poll, they are the result
of some thought people put into this issue after at least a
couple of hours deliberation.)
Most participants thought that was not the way the promise
was originally set up, that this was not meant to be and, ``I
pay into it and I get it back if I need the system.'' It will
be, ``I pay into it and I get it back.'' That was the idea
behind most of their concerns.
When somebody in the forum would say, ``Well, look, if they
don't need the money, and we're running short of it, let's just
not give it to them.'' And then somebody would say, ``Hey, wait
a minute. That's not what they told me when I paid this money
all those years ago.''
Then the overriding concern there was, ``Well, OK, we do
have to be fair about that. And so I really think it was a
general, deep concern about being fair and keeping a promise
that was made to taxpayers when they paid these funds, that was
a primary reason why most people didn't support the idea of
means testing.
Now, some of these others, which most people considered
much more minor adjustments, like looking at how the COLA is
figured, or perhaps taxing Social Security benefits a little
differently than they are now, they saw those as adjustments to
the system that didn't basically change the underlying promise,
which is that this is an insurance program, not a welfare
program.
Mr. Doble. Congressman, if I just might add quickly.
Mr. Portman. You'll have to ask the Chairman. He's in a
generous mood today. [Laughter.]
Chairman Bunning. Mr. Portman, I wasn't watching the light.
Go ahead.
Mr. Doble. Thank you. Just very quickly. The American
people are very pragmatic people. When we presented them with
this problem in the forums, they tried to wrestle with a
pragmatic answer. And they saw some incremental steps, like
adjusting the COLA and raising the income tax level on taxes,
as reasonable incremental steps that could be taken.
There was no overwhelming sentiment to soak the rich. No
overwhelming sentiment to transform the system, as Betty said.
A very strong conviction that this is an insurance system, and
it should remain an insurance system. I pay in, I should get
out. It should be for everyone. It's this pragmatism that seems
to be kind of in conflict with their sense that we shouldn't
means test the program that I think explains what appears to be
a contradiction.
Chairman Bunning. Let me follow up on some questions. You
saw no signs of intergenerational war? I have a problem with
that, for the simple reason that my mail and my constituents
don't seem to agree with you at all, particularly those that
are 40 and under. The 40 and under, think there ought to be
some other solution than the one that's being offered, that the
continuation of Social Security and guaranteeing the benefits
at age 65, 66, 67, depending on how old they are.
Ms. Knighton. That was the finding from the National Issues
Forums. I would certainly agree with that finding, in terms of
the forums that I convened where we had people who were 18
years old, 25 years old, 80 years old, together in the same
room talking about that.
It is true that younger people were much more interested in
exploring the idea of private savings plans. In general, I
think, because they have this fear that the system as it exists
now may not be there when it's time for them to receive
benefits. So if this is a way that we can explore financing a
system more effectively, that will be there when we need it,
then they were willing to explore that.
However, they don't see the older people as ones who are
soaking their money or taking things away from them. Those
older people are their parents and their grandparents. And the
older people talking about Social Security said ``This is fine
for me now.'' As a matter of fact, many of the older people in
our forum said, ``We're getting more from Social Security than
we expected. This has been good for us.''
But even as they said that, they also said, ``But we're
worried that our grandchildren won't experience the same level
of financial security that we have through the system.'' So
what I sensed in every forum that I moderated was a real
concern generation to generation.
Chairman Bunning. Let me ask the question to all the
panelists. We up here know that there is an immediacy. In
talking to the public, do you feel any immediacy in fixing what
is considered a real problem in solvency? And whether you will
admit to that or whether you won't, we know that there is a
problem. And the sooner we can address it here, bipartisanly,
with the leadership of the administration, because it's going
to take that kind of leadership if we're going to do it and not
have one side beating up on the other side.
Do you feel that in your discussions?
Mr. Salisbury. Mr. Chairman, in our work, in both polling
and public discussions, there's a clear understanding that
either taxes have to go up or benefits have to be cut. But
there is a long term, if you will, a balance problem. Second,
these are the intergenerational conflict, where you have a
political problem and where the public is, is that the young,
much more strongly than older people, want for themselves an
individual account alternative.
But, and this is where your political problem arises, they
do not want the benefits of those retired today to be cut.
Chairman Bunning. What if we come up with a solution that
says, over the next 30 years, we will allow a transition and
guarantee the benefits for those that are 40 and over, up to
age 70. We will guarantee the benefit as it accrues, including
the COLA and everything else that might happen.
But for those under 40, we will give them an option. And
every year we have a balanced budget, and we have a surplus, we
will use that surplus to allow what we call required retirement
accounts, and allow a portion of that to be invested for those
40 and under into privatization accounts that we would control
to the extent we control 401(k) for Federal employees, with
more than three options.
Mr. Salisbury. We asked those types of questions beginning
in 1991. We most recently asked it in 1995. These were all
through Gallup surveys. And in those surveys, the concept of
adding that voluntary type of element is supported across the
age spectrum by a majority of the population.
Mr. Seidel. Mr. Chairman, if I could, representing the
largest young persons' organization in the country----
Chairman Bunning. My family is larger than that.
[Laughter.]
Go ahead.
Mr. Seidel. The question you asked earlier regarding the
debate between the young and the old on the issue, I will say
this, that overwhelmingly, our membership, and I speak from a
little bit different perspective beyond our townhall meetings,
I can speak from our membership standpoint. Our membership
wants to see the problem fixed.
There are many who feel that, when we start talking about
means testing and, that wasn't the deal we made. There are many
who feel like, there are some who, years ago, they made a bad
deal, to be honest with you. That tends to be some of the
thought process.
However, there is no one----
Mrs. Kennelly. Who made a bad deal?
Mr. Seidel. Well, when you start to ask the question of
today's people who are recipients of Social Security, sometimes
when the question gets raised of means testing, and the
individual who would be put through that test who is making x
amount of dollars, who would not benefit from a means-testing
program, they say, wait, we're retired now, we made that kind
of money, that's not fair, that's not the deal we made. There
are many who feel like, as it relates to us in the younger
generation who are paying into the system, is that perhaps you
made a bad deal.
Now, whether that's true or not, I don't know. The fact of
the matter is that there's problems. Otherwise, we wouldn't all
be sitting here right now.
But even with that, overwhelmingly, I can tell you that----
Mrs. Kennelly. The problem is the demographics.
Mr. Seidel. That's fine. But regardless of that, I can tell
you overwhelmingly that the younger generation, they don't want
to leave anyone hanging out to dry. Because it is their
grandparents. It is their parents. And as a result of that, I
don't think there is an intergenerational war going on. I
really don't.
I think that there is a great deal of concern about, will
the benefits that this younger generation will ultimately
receive, what will the value of it be.
Chairman Bunning. We understand that the dollars are not
constant, and there is a fluctuation. I think all people who
receive Social Security benefits understand that. When the COLA
was added, that was supposed to offset. Whether it did or
whether it doesn't is another question.
But I believe that without any question, the deal that was
made turned out to be a heck of a lot better deal than they
thought it was going to be when they made it. Not the opposite.
However, that changes when you apply means testing.
Mr. Seidel. I don't know that I disagree with that, Mr.
Chairman.
Chairman Bunning. I can give you chapter and verse on
individuals, but Barb, it's your turn to question. Go ahead.
Mrs. Kennelly. We go along this, and we talk about the
third rail and the hearings and all the rest. The point is
that, as I said, the demographics don't lie, and we've got to
do something about this.
But I was fascinated when I read an article months ago in
Public Agenda. It talked about how half the people say they
don't think Social Security is going to be there. And yet they
have less than $10,000 in savings.
Have you all found that?
Mr. Seidel. Yes, absolutely.
Mrs. Kennelly. So it's fascinating to me that we've got
these grand ideas, and yet going back to the comments and the
statements, why do we have Social Security, it's because people
got old and they didn't have any savings. So I don't think
we've made a heck of a lot of progress at this point, we just
have more people coming into the system.
But can you help me a little bit on this? If you have all
these people saying it's not going to be there, why aren't they
saving?
Mr. Keane. Can I address that? That's exactly----
Mrs. Kennelly. I mean, I know why they're not saving. Why
do you think they're not saving?
Mr. Keane. The majority of people are saying, Social
Security won't be there. They have no savings. If they get
Social Security, they are going to wind up with $750 a month,
average. That means, we are committing them to living in
retirement in poverty. We're going right back to where we were
in 1934.
That's why we can't just simply raise taxes or cut benefits
and save the system as it is right now. If we do that, we still
give them just $750 a month, no savings, no pension. An entire
generation will be right again, living in poverty. That's why
this has to be changed much more than that. That's why this has
to be turned into a savings plan.
The three legs of the retirement stool just aren't there.
There is now just one leg. And that's going to be through
Social Security, to make it a savings stool. Let's give
everyone a chance to actually earn for their own retirement.
Mrs. Kennelly. But it was never meant to be that kind of
system. It had to have the three things to work.
Mr. Keane. I agree completely. That's what's happened in
the past 20, 40, 50 years, is that savings have gone down,
pensions have gone down. And now everyone is just relying on
Social Security. The stool has broken.
Mrs. Kennelly. Don't you think we could talk about charge
cards and other things to fix some of this, rather than just
talk about----
Mr. Salisbury. Mrs. Kennelly, if I could momentarily,
because----
Chairman Bunning. But I want you to know that 40 percent of
all retirees depend upon Social Security as their principal
retirement program.
Mr. Keane. Correct.
Chairman Bunning. So we can't get away from that. You may
have 17 different reasons why it's occurred.
Mrs. Kennelly. That was my point, Mr. Chairman.
Mr. Salisbury. Could I respond one step, and it goes to Mr.
Portman's comment as well. We released our seventh retirement
confidence survey last year. The sixth was part of a Public
Agenda joint project called Promises to Keep, which was the
report before Miles to Go.
Mrs. Kennelly. It's an excellent report.
Mr. Salisbury. What they indicate very, very clearly is the
public understands the need to save. The most common reason
they don't is because they say they do not have the financial
wherewithal to do so, given all other expenses.
What does come through is key differences, for Generation
X, particularly. They do not anticipate getting any substantial
portion of their income from Social Security. This is a key
change of the last 5 years. That recognition is beginning to
show up in Generation X saving at higher rates than any
previous generation at early ages, and accumulating at greater
rates.
Second, there's another key point of recognition of
Generation Xers. Nearly three quarters of them believe that
even at the point of ``retiring,'' they will have to continue
working part time. That compares to 12 percent of those within
5 years of retirement.
So in terms of the recognition of what life may be, and
frankly of current retirees, we're seeing the rate of part-time
work go up fairly radically, you're beginning to see
recognition set in that if Social Security's there, it's going
to be a basement, or at best a floor. What was always frankly
intended, from public opinion polls, wasn't always understood.
And the young are beginning to move in that direction.
With reference to two statements just made, and the facts
speak for themselves, they can be presented to the Subcommittee
in volume, the number of Americans with pension plans, 401(k)
savings, and so forth, is higher than at any time in the
Nation's history. The number of retirees reporting income from
the other two legs of the stool today is higher than at any
point in history. And based on actions taken by the Congress
over the last 15 and 20 years, all of those numbers are going
up, simply as part of that.
That is not going to deal, to take your point, sir, with
the 40 to 60 percent of the population today that depends
almost totally on Social Security. That number is coming down a
little bit. But the prospect, even for the Generation Xers, is
that 40 to 50 percent of them will primarily rely on Social
Security. Part of that is a number that is in the statistics of
the current Social Security population.
Your number of the 43 percent that earn less than about
$12,000 per year is, there's 36 million that don't have any
attachment to the work force beyond about 800 hours per year.
No defined contribution program, no program that provides
insurance, and some level of cross support is going to allow
them under any plan to create wealth or adequate buildup.
Mr. Doble. Mr. Chairman, could I just briefly comment?
Chairman Bunning. Go right ahead.
Mr. Doble. Thank you, sir.
With most issues, we find that the more people understand
about the issue, the less cynical they become. With this issue,
we find that the more people understand, the more cynical they
become. They feel, as someone said, people are in effect ahead
of the government on this issue. The government is doing
nothing about an impending crisis. We are driving toward a
cliff, and if we keep driving down this road at this speed, we
are going to fall off.
Mrs. Kennelly. Could I ask a question?
Mr. Doble. Just one other comment, please, if I may. It is
a comment that someone made in the forum about the Social
Security Trust Fund. It was no darn trust, no darn fund.
Mrs. Kennelly. I was going to ask, Mr. Doble, when you were
taking your information, what was the reaction when you told
people that if we went into the privatization system that it
could well raise the deficit or increase taxes?
Mr. Doble. Congresswoman, when people considered the issue
of privatization in the forums, they were very interested in
them for the reasons that I outlined. But they had some very
serious questions about it. It was clearly something that they
wanted to talk about, especially the younger people. But
clearly something that they had very, very serious reservations
about, especially the transition costs, especially what it
might do to the deficit, how do we get there. It was a subject
that they wanted to deliberate about, to talk about, but not
something they were ready to decide about.
But the interest, at the end of the forum, after they
deliberated, was still very, very high in this idea.
Ms. McSteen. We have not talked about risk. And risk has to
enter into this picture when we talk about privatization.
Certainly, I know that many young people invest and invest
wisely, and indeed can be millionaires. But not all. And we
absolutely must consider, just as you have indicated, that
without Social Security, or some assurance of a minimum
benefit, many in this country would be living in poverty.
Women, particularly, who have not been in the work force
for many years, these are middle age and older women, will have
a very difficult time making it. Because what investment money
do they have now to make a fortune for the future? So risk is
something that has to be addressed.
Chairman Bunning. It would be addressed in any kind of
program that we would bring forward.
Mr. Portman has another question. Go ahead.
Mr. Portman. Thank you.
I want to start by just thanking the Chairman for doing
this. Because these hearings have been extremely informative. I
wish more Members were here, and I wish I could have gotten
here earlier. This is what's going to be necessary if we're
going to come up with a responsible policy in the end.
We've done seven of these, right? Seven hearings?
Chairman Bunning. This is our seventh.
Mr. Portman. This is just great. I was with a group this
morning, and they said, why isn't Congress doing something
about Social Security. And I said, I'm late for a hearing,
actually, that's doing it. [Laughter.]
Mr. Portman. Jim Bunning has been doing a hell of a lot,
and people don't realize it. But this is all getting into the
record, and this will all be available not just to us, but to
the staff, who do all the work around here.
Just on this savings issue, it's very interesting to me. I
think part of the answer to this conundrum we find ourselves in
is to improve private savings, both through company offered
plans and through IRAs and other private savings plans. My
focus has been more in the simple plan, that approach.
I was very encouraged by what Mr. Salisbury just said. It
runs counter to what I thought was true. Is our National
savings rate, in the aggregate, going up or down at this point?
Mr. Salisbury. The national savings rate in the aggregate
had been going up for 3 years. It's down a little bit now, but
I'd have to add a footnote on the problem of that savings rate,
vis-a-vis pensions, for example. No unrealized capital gain
that exists is treated as savings. So if we look at the equity
markets today, many people have 401(k) plans, and there's
trillions of dollars now in defined benefit pension plans.
And by our estimate right now, there's about $2.6 trillion
that is unrealized capital gain. By the way the statisticians
report the numbers, that does not exist. Yet to the individual
who gets their 401(k) statement, and their statement says,
you've been in the market, their Federal Employee Thrift
Statement, you've been in that index fund, and you have twice
as much money as you started with, they look at that and say,
I've saved money.
The Commerce Department would look at you and say, there is
no savings there, because they've not yet sold that account.
Mr. Portman. Because of the possibility that it will go
down, and the fact that some tax will be taken from that.
Mr. Salisbury. Right.
Mr. Portman. That's interesting. That seems to me to be a
methodology problem you need to resolve.
But our savings rate is still relatively low, compared to
the other industrialized countries.
Mr. Salisbury. Absolutely.
Mr. Portman. And we do have an overall focus on the----
Mr. Salisbury. Should we be saving more? Absolutely.
Mr. Portman [continuing]. The statistic that I've been
repeating that I heard a couple of years ago that got me
involved in this was that fewer than 20 percent, roughly 19
percent of small businesses now are offering any kind of
pension plan at all. Small business is defined as companies
with 25 or fewer employees.
That to me is totally unacceptable. And our responsibility
I think as a Congress is to simply these darned pension plans
so that they're less costly and less burdensome for people to
put together.
What else would you recommend? Again, this is about Social
Security and I know that's the core here. But what can we do as
a Congress to get more people into private savings, short of
what Mr. Keane is suggesting, which may be necessary, even with
our existing system. What should we be doing?
Mr. Salisbury. Congressman, with two things that the
Congress has recently done, you're ``moving on track.'' One was
the creation of simple, which starts to get something down to a
level where entities can begin to do it at very low
administrative costs. That is crucial, and with very little
paperwork.
The House of Representatives passed and sent to the Senate
the Saver Act, which many of you were cosponsors on. That is
the type of effort that if the Senate goes along with it and
the President signs it, begins to take messages to the American
people, it begins to get them moving.
And if one takes the third step of some of the proposals
now before Congress, that would increasingly simplify. I'll use
an IRA example. Instead of passing tax bills that create more
types of IRAs with more complexity, with our recent survey
people have even less understanding of, when they don't
understand it, they don't use it, is instead say, let's have
one IRA again, I don't care if the number is 500, 1,000,
whatever, one simple thing that everybody can do without
confusion.
I think the greatest thing Congress could do is try to
remove all the confusion from this, so that something is
available to individuals on a universal basis.
Mr. Seidel. I would also like to respond to that. I think
one of the things that will help move along the solution
processes is expanding the debate on addressing the concerns
with Social Security. More of the forums, more of the townhall
meetings, more of this type of thing.
Congressman Johnson asked a question earlier, what can we
do to further educate the American people on some of the
challenges that exist. If they know and they start to
understand and clearly accept what those challenges are, I
think we will see more people start to look out for themselves
and save and do some of the things that they haven't been
doing.
I will ask this of the Subcommittee, and I'm speaking from
a nonprofit standpoint. That is that you could be helping this
process a great deal by encouraging corporate America to
sponsor some of these townhall meetings, to get involved in the
financial end of running them. It is very, for our
organization, it has become quite costly.
We will continue to run the programs, it's just, we're a
true not for profit, sometimes we take that too literally.
Anyhow, that would be of help to us.
Thank you, sir.
Chairman Bunning. Thank you. Often, it is impossible for
this Subcommittee to cover every issue we are interested in
during a hearing. Therefore, I may be submitting additional
questions in writing for you to answer for the record.
I would like to thank each of your for your testimony
today. I appreciate all the hard work you and your
organizations are doing to engage and educate the public
regarding this country's most important Social Security
Program.
The Subcommittee stands adjourned.
[Whereupon, at 12:04 p.m., the hearing was adjourned, to
reconvene at the call of the Chair.]
Statement of the American Association of Retired Persons
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Statement of Kevin Kearns, President, Council for Government Reform
Mr. Chairman, I'd like to join this important debate about
the future of Social Security by giving you the results of our
nationwide surveys of seniors on Social Security issues.
The Council is constantly engaged in surveying the views of
our 350,000 members and we also conduct many informational
mailings to other interested seniors to gauge their opinions on
Social Security.
I'd like to report that seniors have great confidence in
the current system but that is not the case.
With over 225,000 responses, our regular yearly survey
shows that 83% of respondents said that they were ``Very
Concerned'' about the safety of the Social Security Trust Fund.
They are aware of the practice by Congress of borrowing the
Social Security surplus and using it to mask the true size of
the deficit.
In fact, 78% of these respondents said that they ``Agreed''
that monies paid into the S.S. Trust Fund are for payment of
future S.S. checks and NOT to fund current federal spending.
These seniors also believe that Congress should be
prohibited by law from using Social Security monies in this
way. In a separate survey of nearly 300,000 seniors, over 96%
agreed that Congress should enact a law to prevent Congress
from borrowing the Social Security Trust Fund surplus.
We have also found that seniors believe that significant
waste and mismanagement at the Social Security Administration
contribute to the woeful shape of the Trust Fund. After your
Committee's hearings about union abuses at the Social Security
Administration, we began polling citizens about their views on
this practice.
Not surprisingly, of the 20,000 citizens we polled, over
88% said that union officials should not be paid from the
Social Security Trust Fund. And 96% of these respondents said
they were ``Very Concerned'' about the growing debt in the
Trust Fund.
The pattern is clear, Mr. Chairman. Seniors are very
worried about the future of the Social Security system and
deeply distrustful of another political solution.
We are all aware of the looming demographic crisis that
confronts the Social Security system. So far, Congress has
chosen to approach this crisis like an ostrich--with its
collective head buried in the sand. The general (but unstated)
consensus around Washington is that anyone who mentions Social
Security reform will be electorally roasted.
However, we are reaching a point where inaction is more
damaging to today's seniors than action. The longer we postpone
a solution to this crisis, the more painful that solution will
be to both current workers and retirees. I'm here to report
that this message is being understood by those so-called
``greedy geezers,'' who in fact are willing to sacrifice if
that sacrifice is shared.
Finally, in our most recent survey of over 50,000 seniors,
``Based on what you know, do you approve or disapprove of
placing part of the Social Security Trust Fund reserves in
conservative investments such as blue chip stocks or long term
bonds? According to the ``experts,'' the answer to this
question should be a responding ``NO.'' However, 46% of our
respondents approved of such a plan. Only 15% disapproved and
39% either had no answer or weren't sure.
Clearly, the tide is turning in public opinion of Social
Security reform. I urge the Committee to do all it can to bring
this critical item to the top of the national agenda and move
this important national debate forward. Whatever the solution,
its imperative for the protection of today's seniors and
tomorrow's to get Social Security back on its feet. Thank you.
Statement of Wilfred Plomis, Wilmington, DE
We hold these truths to be self evident, that all men are
created equal. With this provision in the Declaration of
Independence we must address the dilemma of Social Security,
preserving it for the seniors while being certain it's
available for those still to come aboard. It's one of the
Solomonized problems complicated by politics. But being a
senior who recognizes a need for solution, I would like to
offer some suggestions that would be fair to everyone
concerned. Social Security should entail a two prong
objective--provide for seniors in need and incentives to those
who work up to 65 and beyond. Provisions are as follows:
No change for current recipients.
Each provided a $4,000 life insurance policy using
present excess funds and private carriers.
Half to two-thirds of present excess should be
invested in private mutual funds invested only in large blue
chip companies with the rest invested as before.
About 10-20 large mutual funds with blue chip
companies should be established for investment as heretofore
mentioned to prevent loss by investors in individual companies.
Part of privateer's monies should be used to
purchase a $4,000 life insurance policy along with a companion
disability policy, both with a private carrier.
Penalize early recipients 20% and 10% at ages 63
and 64 respectfully.
All members should be reviewed for eligibility.
Provide for those under 65 as follows:
--Employee contribute, along with employer 7\1/2\% (Total
15%).
--Of this 7% should provide for existing recipients, 5-6%
invested and 2-3% used for aforesaid $4,000 life insurance
policy and disability benefits (not to exceed $12,000
annually.)
--Those 45 and older would be provided an option--45-55
stay under the present system or privatize as shown above,
locking in at 25% of benefits or $300.p/month at age 65, 55-60
privatize and lock in at 50% of benefits or $600.p/month at age
65.
--Privatize all those under 45.
Reward, not punish those who collect while
working. Starting at age 63 allow recipient to begin collecting
10% of benefits monthly, irrespective of income, increasing
2\1/2\% annually until retirement. This partial payment plus
tax advantages and other incentives should forestall early
collection, taking pressure off the fund and preclude
anticipated shortfall. This would increase tax revenue, be more
helpful, increase money in the marketplace, save administrative
cost maintaining work penalties and give recipients more pride
in themselves.
The purpose of said Social Security is to provide for
seniors, as now, but not penalize those wanting and able to
continue working. With modern medicine, age is becoming
somewhat irrelevent. Being 65 is a lot less old now than in the
past. Hence providing the system with incentives to work beyond
65 has become attractive. As said changes suggested provide
many benefits to the system, America and the seniors along with
keeping pressure off Social Security by early retirement, that
is now encouraged at age 62. With the changes provided here and
rates comingled (with youths and seniors for life insurance), I
feel the system will beome more solvent and available to the
future leaving a viable system for those coming aboard.
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