[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 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
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 
exhibit not in compliance with these guidelines will not be printed, 
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 
be typed in single space on legal-size paper and may not exceed a total 
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 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    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 
summary of the comments and recommendations in the full statement. This 
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).

---------------------------------------------------------------------------
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.]

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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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