[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
   USE OF AN EXPERT PANEL TO DESIGN LONG-RANGE SOCIAL SECURITY REFORM

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 1, 1998

                               __________

                             Serial 105-70

                               __________

         Printed for the use of the Committee on Ways and Means

                               ----------

                     U.S. GOVERNMENT PRINTING OFFICE
56-323 CC                    WASHINGTON : 1999




                      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


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 March 25, 1998, announcing the hearing...............     2

                                 ______

American Association of Retired Persons, Otto Schultz............    73
Center on Budget and Policy Priorities, Wendell E. Primus........    77
Dole, Hon. Robert, Verner, Liipfert, Bernhard, McPherson, and 
  Hand...........................................................    12
Gingrich, Hon. Newt, a Representative in Congress from the State 
  of Georgia, and Speaker of the House of Representatives........    25
Kolbe, Hon. Jim, a Representative in Congress from the State of 
  Arizona, and House Public Pension Reform Caucus................    47
Myers, Robert J., Silver Spring, MD..............................    84
Nadler, Hon. Jerrold, a Representative in Congress from the State 
  of New York....................................................    56
Pomeroy, Hon. Earl, a Representative in Congress from the State 
  of North Dakota................................................    60
Third Millennium, Melissa Hieger.................................    17

                       SUBMISSIONS FOR THE RECORD

Association of Private Pension and Welfare Plans, James A. Klein, 
  letter.........................................................    94
Center for the Study of Economics, Columbia, MD, statement.......    95
Council for Government Reform, Charles G. Hardin, statement......    95
National Association of Manufacturers, Paul R. Huard, letter and 
  attachments....................................................    97
Porter, Hon. John Edward, a Representative in Congress from the 
  State of Illinois, statement...................................   105
60 Plus Association, Arlington, VA, James L. Martin, statement...   107


   USE OF AN EXPERT PANEL TO DESIGN LONG-RANGE SOCIAL SECURITY REFORM

                              ----------                              


                        WEDNESDAY, APRIL 1, 1998

                          House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:10 a.m., in 
room 1100, Longworth House Office Building, Hon. Bill Archer 
(Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]
      

                                


ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                Contact: (202) 225-1721
FOR IMMEDIATE RELEASE

March 25, 1998

No. FC-12

               Archer Announces Hearing on the Use of an

                Expert Panel to Design Long-Range Social

                            Security Reform

    Congressman Bill Archer (R-TX), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing on 
the merits of establishing a bipartisan panel of experts to design 
long-range Social Security reform and how best to engage the American 
public in the process. The hearing will take place on Wednesday, April 
1, 1998, in the main Committee hearing room, 1100 Longworth House 
Office Building, beginning at 10:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The Social Security program impacts the lives of nearly all 
Americans. This year, the Social Security Administration will pay 
benefits to nearly 50 million retired and disabled workers and to their 
dependents and survivors. Nearly every worker and his or her employer 
pays Social Security taxes. Yet in the future, this vital program will 
start to run short of benefit demands.
      
    The problem of Social Security insolvency is not unprecedented. In 
1983, Congress enacted a variety of measures to address similar 
problems that the program was facing. These measures, in large part, 
were developed by a National Commission on Social Security Reform. 
Historically, the Congress has often relied on expert panels to 
thoughtfully and carefully deliberate over complex issues and report 
back to the Congress with a single set of recommendations for a 
solution. 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. Americans want to learn more and share 
their views with their elected officials.
      

FOCUS OF THE HEARING:

      
    The Committee will receive the views of Members of Congress, along 
with Social Security experts, on the merits of establishing a 
bipartisan panel of experts to design long-range Social Security reform 
and how best to engage the American public in the process.
      

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, Wednesday, April 15, 1998, 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 300 additional copies for this purpose to the Committee office, 
room 1102 Longworth 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 Archer [presiding]. The Committee will come to 
order.
    Good morning. Today's hearing has been called to begin a 
national dialog on saving Social Security and to discuss the 
creation of an eight-member, expert, bipartisan panel that will 
recommend to the Congress solutions to save Social Security. 
The panel would report back to Congress on February 1, next 
year, so I intend to pass this bill through Committee and 
through the House early this spring so the panel can begin its 
work.
    [The National Dialogue on Social Security Act of 1998 
follows:]

A Summary of Provisions--The ``National Dialogue on Social Security Act 
of 1998''--Introduced by Mr. Archer, Mr. Kasich, and Mr. Bunning

                                Title I:

Establishment of National Dialogue

    a. A National Dialogue on Social Security will be convened 
jointly by the President, the Speaker, and the Senate Majority 
Leader. The purpose of the National Dialogue is to engage the 
American public, through regional conferences, and national 
Internet exchanges, in understanding the current program, the 
problems it faces, and the need to find solutions that will be 
workable for all generations.
    b. The Dialogue will be coordinated through two 
Facilitators (one appointed by the President and one appointed 
jointly by the Speaker and Senate Majority Leader), who will be 
appointed within 30 days of enactment. After consultation with 
the President and the Congress, final plans for the development 
and operations of the National Dialogue will be submitted to 
the President and the Congress no later than 60 days after the 
date of enactment.
    c. A Dialogue Council is established to advise the 
Facilitators in the development and operations of the National 
Dialogue. The Dialogue Council will be composed of 36 members, 
9 of whom shall be appointed by the Speaker, 9 by the Majority 
Leader of the Senate, and 18 by the President.
    Those who are appointed shall be selected from a group of 
54 individuals--consisting of 3 individuals nominated by each 
of the following 18 organizations; the American Association of 
Retired Persons, the United Seniors Association, the American 
Federation of Labor and Congress of Industrial Organizations, 
the National Hispanic Council on Aging, the Older Women's 
League, the Association of Private Pension and Welfare Plans, 
the Cato Institute, the Employee Benefit Research Institute, 
Americans Discuss Social Security, the Third Millennium, the 
U.S. Junior Chamber of Commerce, Americans for Hope, Growth, 
and Opportunity, the National Federation of Independent 
Businesses, the Concord Coalition, the National Caucus and 
Center on Black Aged, the Campaign for America's Future, the 
Heritage Foundation, and the Brookings Institution.
    Members of the Dialogue Council shall include both men and 
women and will be selected to ensure that 12 members were born 
before 1946, 12 members were born in or after 1946 and before 
1961, and 12 members were born in or after 1961. The Dialogue 
Council will meet at the call of the Facilitators.
    d. In order to assure that the widest possible degree of 
opinion is received, to the extent practicable and as soon as 
possible after the date of enactment, each Member of Congress 
will develop ongoing systems of communications through the use 
of the Internet and other available electronic capabilities. 
These systems will be developed with grassroots organizations 
and other constituency groups within Members' districts. Such 
groups shall include, but not be limited to, key opinion 
leaders, journalists, business representatives, union members, 
and students of all age groups. The Facilitators shall appoint 
an Internet Dialogue Coordinator to assist Members in 
establishing systems of communication in their districts. The 
Coordinator will assist Members' offices in establishing local 
web sites, moderated chat rooms, and threaded news groups; 
assist Members in coordinating a national electronic town hall 
meeting on the future of Social Security; advise Members 
regarding the most effective technological means for reaching 
out to constituent groups; and work with other Internet-
oriented groups to broaden the reach of Internet capability.
    An Internet Advisory Board is established to advise the 
Internet Dialogue Coordinator in the most appropriate and 
effective means of employing the Internet. The Board will 
consist of 3 members, appointed by the Facilitators. Board 
members shall receive no pay, but shall be reimbursed for 
travel expenses.
    The Internet Dialogue Coordinator shall periodically report 
to the Facilitators the results of the systems of 
communications.
    e. The National Dialogue will operate by means of 
sponsorship by private, nonpartisan organizations of 
conferences. These conferences shall be convened in localities 
which are geographically representative of the Nation as a 
whole, and which shall provide for participation representative 
of all age groups.
    f. The National Dialogue Facilitators will summarize their 
findings and submit these to the Bipartisan Panel to Design 
Long-Range Social Security Reform on an ongoing basis, based on 
information generated by participants in conferences conducted 
and constituent input received from Members' offices. The 
Dialogue will terminate January 1, 1999.
    g. General revenues are authorized to be appropriated for 
the compensation of the Facilitators and the activities related 
to the Internet Dialogue.

                                Title II

    The Bipartisan Panel to Design Long-Range Social Security 
Reform

Duties:

    a. It will be the duty of the Panel to design a single 
package of long-range Social Security reforms for restoring the 
solvency of the Social Security system and maintaining 
retirement income security acceptable to six of its members and 
including the agreement of both Co-Chairs.

Membership:

    a. Eight members; with four appointed jointly by the 
Speaker of the House and the Majority Leader of the Senate, two 
appointed by the President, two appointed jointly by the 
Minority Leader of the Senate and the Minority Leader of the 
House. These officials will designate two members of the Panel 
to serve as Co-Chairs. This arrangement results in equal 
representation of the two major political parties.
    b. The members of the Panel will consist of individuals of 
recognized standing and distinction, who can represent the 
multiple generations with a stake in the viability of the 
system, and who possess a demonstrated capacity to discharge 
the duties imposed on the Panel. At least one of the members 
will be appointed from individuals representing the interests 
of employees, and at least one of the members will be appointed 
from individuals representing the interests of employers.
    c. It will be the role of the Co-Chairs to provide 
leadership to the Panel and to determine the duties of and 
oversee the Panel staff.
    d. A vacancy in the Panel will not affect its powers, but 
will be filled in the same manner as the original members of 
the Panel.

Procedures:

    a. The Panel will meet at the call of its Co-Chairs or a 
majority of its members. A majority of the members will 
constitute a quorum, but a lesser number may conduct hearings. 
The Panel may hold hearings and undertake other activities as 
necessary to carry out their duties. Meetings, as determined by 
the Co-Chairs, held in order to conduct fact finding will be 
open to the public. Meetings, as determined by the Co-Chairs, 
held in order to determine policy, may be held in executive 
session, not withstanding any other provisions of the law.

Administration:

    a. Members of the Panel will serve without compensation, 
except that members of the Panel who are private citizens of 
the United States will be reimbursed for travel, subsistence, 
and other necessary expenses incurred in the performance of 
their duties as members of the Panel.
    b. The Panel will, without regard to the provisions of 
title 5, United States Code, relating to the competitive 
service, appoint a Staff Director who will be paid at a rate 
not to exceed the rate established for level III of the 
Executive Schedule.
    c. In addition to the Staff Director, the Panel will 
appoint such additional personnel as the Panel determines to be 
necessary and may compensate such additional personnel without 
regard to the provisions of title 5, United States Code, 
relating to competitive service.
    d. The Panel will incur other additional expenses, 
including, if necessary, contractual expenses as may be 
necessary to carry out its duties.
    e. The Commissioner of Social Security will make such data 
and information necessary to the Panel to enable it to carry 
out its duties. The Panel may secure from any other department 
or agency of the United States such data and information as may 
be necessary to enable it to carry out its duties.
    The Architect of the Capitol, in consultation with the 
appropriate entities in the legislative branch, will locate and 
provide suitable office space, necessary equipment, and such 
administrative support services as the Panel may request on a 
reimbursable basis.
    g. The Panel will make its report to the President, the 
Senate Committee on Finance and the House Committee on Ways and 
Means no later than February 1, 1999. The Panel will terminate 
March 31, 1999.
    h. Funds, not to exceed $2 million, are authorized to be 
appropriated from the Old-Age and Survivors Insurance Trust 
Fund to carry out the purposes of this title.
      

                                

    Chairman Archer. For tens of millions of senior citizens, 
Social Security has been a wonderful success. Written in 1935, 
Social Security has protected our seniors, reduced poverty, and 
strengthened our families. If ever there was a depression-era 
program that has done good work for citizens, it is Social 
Security.
    But Social Security faces a long-term crisis. To solve it, 
politicians in Washington must begin now, and we must put 
partisanship aside. This may be the biggest test of our 
democracy since its inception. Can a democracy come to grips 
with a long-term problem and make difficult political decisions 
before we reach the cliff of desperation? And the jury is still 
out on that. We must bring the jury back with a positive answer 
because we're all in this together. From 116-year-old Esteller 
Jones of Waynesborough, Georgia--reportedly the oldest living 
American--to little Dillon Paul Keever who was born at 8:04 
a.m. this morning at Memorial Southwest Hospital in Houston, 
Texas, as one of my newest constituents.
    As we proceed, we must do two things: We must honor our 
commitments to today's seniors and those who will retire soon, 
and we must also protect young people so Social Security works 
well for them. Social Security must be intergenerationally 
fair.
    At my request, the nonpartisan Congressional Research 
Service analyzed for retirees this year the amount of time it 
takes to recover the value of their taxes paid plus interest. 
The information demonstrates that Social Security has been a 
fabulous program to date, but for baby boomers and everyone 
younger there are major problems. For average earners who 
retired in 1980, they got back the retirement portion of their 
Social Security taxes and their employer's share of the taxes 
plus interest in just 3 years. When they turned 68, they had 
recovered everything. By any standards, that is a good deal.
    But the same average earner today is 65 years old, making 
$25,000 a year, will live an average of 15 years; that is, 
they'll have to turn 80 before they get their money back. For 
most people, that's still a reasonably good deal.
    But I'm afraid the good deal ends right around this year. 
For tens of millions of working people younger than 65, Social 
Security's problems have already begun. Average earning 48-
year-olds will have to live to 89 to get their money back, and 
average 38-year-olds will have to make it to 91. And you should 
be aware that I have said average because if you are above 
average as a wage earner, it will take even longer as the 
benefits are reduced for those in higher income relative to the 
benefits for those in the lower income. If you are younger than 
91, Social Security's message seems to be: eat well and get 
plenty of exercise because you will have to live into the 
hundreds to get a return on the Social Security money that's 
taken out of your paycheck.
    We can't raise taxes to solve this problem because someone 
making more than $65,000 a year can really forget about it. 
Forty-eight-year-olds making $65,000--the maximum taxable wage 
base--will have to reach 104 years old to get their money back 
and 38-year-olds have to live to 117.
    Now there is more to Social Security than money. There's 
family security, family protection, and peace of mind. However, 
each generation must be treated fairly, and that's the 
challenge that we face.
    [The opening statement follows:]

Opening Statement of Hon. Bill Archer, a Representative in Congress 
from the State of Texas

    Good morning.
    Today's hearing has been called to begin a national 
dialogue on saving Social Security, and to discuss the creation 
of an eight-member, expert, bi-partisan panel that will 
recommend to the Congress solutions that save Social Security. 
The panel would report back to Congress on February 1st next 
year, so I intend to pass this bill through Committee and 
through the House early this Spring so the panel can begin its 
work.
    For tens of millions of senior citizens, Social Security is 
a wonderful success. Written in 1935, Social Security has 
protected our seniors, reduced poverty, and strengthened our 
families. If ever there was a depression era program we can be 
proud of, Social Security is it.
    But Social Security faces a long-term crisis. To solve it, 
politicians in Washington must begin work now and we must put 
partisanship aside. We're all in this together, from 116-year 
old Esteller Jones of Waynesboro, Georgia, reportedly the 
oldest living American, to little Dillon Paul Keever, who was 
born at 8:04 this morning at the Memorial Southwest Hospital in 
Houston, Texas.
    As we proceed, we must do two things. We must honor our 
commitments to today's seniors and to those who will retire 
soon. We must also protect young people so Social Security 
works for them as well.
    At my request, the non-partisan Congressional Research 
Service analyzed, for retirees this year, the amount of time it 
takes to recover the value of their taxes paid plus interest. 
The information demonstrates that Social Security has been a 
fabulous program to date...but for baby boomers and everyone 
younger, there are major problems.
    For average earners who retired in 1980, they got back the 
retirement portion of their Social Security taxes and their 
employer's share of the taxes, plus interest, in just three 
years, when they turned sixty-eight. That's a good deal.
    The same average earner who today is 65-years old, making 
$25,000 a year, will have to live 15 years, that is, they'll 
have to turn 80, before they get their money back. For most 
people, that's also a pretty good deal.
    But I'm afraid the good deal ends right around this year. 
For tens of millions of working people younger than sixty-five, 
Social Security's problems have already begun.
    Average earning 48-year olds will have to live to 89 to get 
their money back. Average 38-year olds will have to make it to 
91.
    If you're younger than that, Social Security's message 
seems to be eat well and get plenty of exercise, because you'll 
have to live into the hundreds to get a fair return on the 
Social Security money that's taken out of your paycheck.
    We can't raise taxes to solve this problem because someone 
making more than $65,000 a year can really forget about it. 
Forty-eight year olds making $65,000, the maximum taxable wage 
base, will have to reach 104 years old to get their money back 
and thirty-eight year olds will have to live to 117.
    Now, there's more to Social Security than money. There's 
family security, family protection, and peace of mind. However, 
each generation must be treated fairly and that's the challenge 
we face.
    This morning, we're honored to be joined by three 
particularly distinguished guests representing three 
generations of Americans. Our nation's youngest senior citizen, 
Bob Dole; a baby boomer, Newt Gingrich; and Melissa Hieger, a 
generation Xer from the non-partisan Third Millennium. We also 
have a panel of experts from several organizations dedicated to 
saving Social Security.
    My colleagues, the American people have never retreated 
from a crisis, and we must not do so on this issue. Our task is 
to solve this problem so when little Dillon Keever grows up and 
starts working, he'll never even know Social Security was in a 
crisis.
    When it comes to Social Security, I suspect the American 
people are well ahead of us. We now must catch up with the 
people and do so in a bi-partisan spirit, remembering that 
young people have grandparents they love, and senior citizens 
have grandchildren they adore. We are in this together.
      

                                

    Chairman Archer. This morning, we're honored to be joined 
by three particularly distinguished guests representing three 
generations of Americans. Our Nation's youngest senior 
citizen--is that really true, you're our youngest senior 
citizen----
    Senator Dole. I think so. [Laughter.]
    Me and Strom.
    Chairman Archer [continuing]. Bob Dole; and a baby boomer, 
Newt Gingrich; and Melissa Hieger, a generation Xer from the 
nonpartisan Third Millennium.
    We also have a panel of experts from several organizations 
dedicated to saving Social Security.
    My colleagues, the American people have never retreated 
from a crisis and we must not do so on this issue. Our task is 
to solve this problem so that when little Dillon Keever grows 
up and starts working, he'll never know Social Security was a 
crisis.
    When it comes to Social Security, I suspect the American 
people are well ahead of us. We now must catch up with the 
people and do so in a bipartisan spirit remembering that young 
people have grandparents that they love, and senior citizens 
have grandchildren that they adore. We're all in this together.
    And I now yield to Mr. Stark for any statement that he 
might like to make on behalf of the Minority. And without 
objection, all Members will have the right to insert written 
statements in the record at this point.
    Chairman Archer. Mr. Stark.
    Mr. Stark. Thank you, Mr. Chairman.
    Thank you for calling this hearing on the use of an expert 
panel to design a long-range Social Security reform. Your 
timing is excellent. We have a budget surplus. We can rather 
accurately anticipate the level of shortfall for the trust 
funds, and we actually have a good bit of time to proceed 
methodically. So, while I don't dispute your need for action, 
I'm baffled by your suggestion that this Committee delegate to 
another panel, at this point in time, this matter of utmost 
importance to our Nation. We basically have more experience in 
Social Security matters than any other panel that you could 
possibly assemble, and what better combination of policy 
expertise and political judgment could there be in this House 
than the Committee on Ways and Means.
    I understand and I recall that a few of us, Mr. Chairman, 
were here in 1983 when we had this problem before, and we ended 
up with a commission because there was a political stall. But 
first the politicians tried to tackle the issue, then the 
commission came back with a solution, and we ended up again 
with Pickle v. Pepper, as you recall. And Pickle won--our 
colleague from Texas; Texans always win I suspect in this 
round. Mr. Chairman, we know there will be something that comes 
up in this whole resolution to Social Security that will be 
politically tough for us. We've got time. Why don't we find out 
what that tough decision is?
    As we like to say oftentimes when you and I and Senator 
Dole in the past--we kind of go and get the chaff when we were 
having conference committees--let the staff deal with the 
majority of the technical issues; let's find out the issues 
surrounding the tough political votes. And we don't have to get 
into a fight over it, but those issues will certainly rise to 
the surface rather quickly. And let a panel then come back to 
us, if that will help us all, politically, to do the right 
thing. I just think that we're starting too soon to delegate 
our responsibility to people who don't nearly have our staff 
experts, don't have our personal expertise, and don't go to our 
town meetings. I am confident there isn't any Member of this 
panel that doesn't go home every other weekend and hear from 
the seniors in our districts, and doesn't have dedicated staff 
people working almost full time on solving Social Security 
problems for our constituents. There is no other group in this 
country that has our collective ability to understand the 
problems and the benefits of this system.
    So I would urge you, Mr. Chairman, to let our Committee 
work on this at least for the rest of this year. And we can 
come back, let's say after the election, literally, work in 
November and December when we won't have the pressures of an 
election facing us; at that time we can get our work done, and 
then hand the ball off to a commission, if it is still needed.
    [The opening statement follows:]

Opening Statement of Hon. Pete Stark, a Representative in Congress from 
the State of California

    Mr. Chairman:
    Thank you for calling this hearing on the use of an expert 
panel to design long range Social Security Reform.
    The timing is excellent. We have a budget surplus and we 
can rather accurately anticipate the level of shortfall for the 
trust funds. We have time to proceed methodically.
    So, while I don't dispute the need for action, I am baffled 
by your suggestion that this Committee delegate to another 
panel this matter of utmost importance to our nation.
    This Committee collectively has more experience in Social 
Security matters than any other panel that could possibly be 
assembled. What better combination of policy expertise and 
political judgment could there be than Committee on Ways and 
Means?
    Through our hearing process, we can hear from the best 
thinkers of our day what the problems are and the ramifications 
of possible solutions.
    Through our Town Meetings, we continue the national 
dialogue. Is there any one of us who doesn't frequently go home 
to their constituents to discuss Social Security coverage and 
solvency concerns?
    Mr. Chairman, I'm ready to roll up my sleeves and start 
today. We don't need a commission or panel to do our work 
first. I recognize the Mrs. Kennelly, the ranking Democrat on 
the Social Security subcommittee for the balance of my time.
      

                                

    Mr. Stark. I'd like to yield now, if I may, to Mrs. 
Kennelly for the balance of my time. She's the Ranking Democrat 
on the Social Security Subcommittee.
    Ms. Kennelly. Thank you, Mr. Stark; thank you, Chairman 
Archer.
    I think it's very important that we spend this year having 
a national dialog on the future of Social Security. Social 
Security has been our most successful program. Without it, one 
out of two elderly people would live in poverty, and so would 
millions who's parents have died or become disabled.
    But the country is facing some serious demographic changes 
and we all know it. Life expectancy has increased 
significantly, and the large baby boom generation is nearing 
retirement. Changes clearly have to be made.
    The American public has begun to engage in this debate. On 
April 7, in Kansas City, a bipartisan forum will be held to 
discuss Social Security. The forum is being organized by the 
American Association of Retired People and the Concord 
Coalition. In addition, the Pew Charitable Trust recently held 
a bipartisan national electronic townhall meeting linking 10 
cities. Numerous other organizations--think tanks, citizens 
groups--are holding meetings across the city. Many Members of 
Congress, as Mr. Stark said, are having their own meetings. The 
Social Security Subcommittee already has had eight hearings. 
It's encouraging to see the range and the depth of the debate.
    I question whether we need another mechanism, one which is 
expensive and complex, layered on top of this blossoming 
debate. For its part, the Congress needs to keep its pledge to 
save Social Security first. We must not spend the budget 
surplus, and we have to reform Social Security. As Alan 
Greenspan has said: We must resist the temptation to commit 
future budget surpluses prematurely. Acting now to spend the 
projected budget surpluses will damage our ability to protect 
Social Security for the future.
    In contrast, drawing down the debt will clearly enhance 
economic growth. That is what we should be talking about. The 
result would be a rapidly improving standard of living for both 
future workers and retirees.
    I look forward to this debate. We thank Mr. Gingrich and 
Senator Dole for being here.
    [The opening statement follows:]

Opening Statement of Hon. Barbara Kennelly, a Representative in 
Congress from the State of Connecticut

    Mr. Chairman, I think it is very important that we spend 
this year having a national dialogue on the future of the 
Social Security program. Social Security has been our most 
successful national program. Without it, one out of two elderly 
people would live in poverty. So would nearly a million 
children whose parents have died or become disabled.
    But the country is facing some serious demographic changes. 
Life expectancy has increased significantly and the large Baby 
Boom generation is nearing retirement. Thus, changes clearly 
have to be made.
    The American public has already begun to engage in this 
debate.
    On April 7th in Kansas City, a bipartisan forum will be 
held to discuss the future of Social Security. That forum in 
being organized by the American Association of Retired Persons 
and the Concord Coalition. In addition, the Pew Charitable 
Trust has recently held a bipartisan national electronic town 
hall meeting linking 10 US cities--and has plans to do more. 
Numerous other organizations, think tanks, and citizen groups 
are holding meetings across the country. Many Members of 
Congress are convening town hall meetings in their districts. 
The Social Security Subcommittee has already held eight 
hearings. It is encouraging to see the range and depth of the 
debate. I question whether we need another mechanism--one which 
is expensive and complex--layered on top of this blossoming 
debate.
    For its part, the Congress needs to keep its pledge to 
``Save Social Security First.'' We must not spend the budget 
surplus until we have acted to reform Social Security. As Alan 
Greenspan has said--we must resist the temptation to commit 
future budget surpluses ``prematurely.'' Acting now to spend 
the projected budget surpluses will damage our ability to 
protect Social Security for the future. In contrast, drawing 
down the debt will clearly enhance economic growth--in a way 
that other commitments will not--and result in a more rapidly 
expanding standard of living for both future workers and 
retirees.
    I look forward to today's discussion.
      

                                

    Chairman Archer. The Chair yields the balance of his time 
to the gentleman from Kentucky, Mr. Bunning, the Chairman of 
the Social Security Subcommittee for his statement.
    Mr. Bunning. I thank the Chairman for yielding. I'd like to 
just say a few words--not too much time.
    First of all, Social Security, as everybody knows in this 
room, affects almost every American, and each of us has a stake 
in the future of this vital program. Forecasts of future Social 
Security insolvency and suggested fixes have made their way out 
of the beltway onto the kitchen tables all over this country. 
Americans are often well ahead of Washington when it comes to 
knowing what needs to really be done. Real Social Security 
reform cannot take place without Americans weighing in.
    The fact that today we have a balanced budget and now see 
the potential significant budget surpluses for the next 10 
years, gives us a golden window of opportunity to strengthen 
Social Security. We should not let that opportunity pass.
    That's why I'm proud to join with Chairman Archer and Mr. 
Kasich as an original cosponsor of H.R. 3546, the National 
Dialogue on Social Security Act of 1998. This is just one more 
step--creating this national dialog--to getting all people 
talking about solutions. It is through people talking that 
consensus can be reached to find real solutions that will work 
for all our generations.
    The next step is to put together a bipartisan panel of 
experts to actually design long-range Social Security reform. 
These individuals will hammer out a plan that will work for all 
of us. Of course, we have the ultimate responsibility for 
passing or not passing the real reforms in the Ways and Means 
Committee, the Social Security Subcommittee, but we need the 
dialog so that we have a consensus built up from the American 
people.
    I'm looking forward to hearing from our panels today on 
their input on this very, very important bill, and look forward 
to working with each and every one on the Ways and Means 
Committee to craft a bill that will be acceptable to all 
generations.
    [The opening statements of Mr. Bunning and Mr. Ramstad 
follow:]

Opening Statement of Hon. Jim Bunning, a Representative in Congress 
from the State of Kentucky

    Social Security affects the lives of nearly every American 
and each of us has a stake in the future of this vital program. 
Forecasts of future Social Security insolvency and suggested 
fixes have made their way out of the beltway and onto kitchen 
tables all over the country. Americans are often well ahead of 
Washington when it comes to knowing what needs to be done. Real 
Social Security reform cannot take place without Americans 
``weighing in.''
    The fact that, today, we have balanced the budget---and now 
see the potential of significant budget surpluses for the next 
ten years---gives us a golden window of opportunity to 
strengthen Social Security. We should not let that opportunity 
pass us by.
    That's why I'm proud to join Mr. Archer and Mr. Kasich as 
an original cosponsor of H.R. 3546, the ``National Dialogue on 
Social Security Act of 1998.''
    Creating a National Dialogue is the first step to getting 
people talking. It is through people talking that consensus can 
be reached to find solutions that will work for all 
generations. 
    The next step is to put together a bipartisan panel of 
experts to actually design long-range Social Security reform. 
These individuals will hammer out a plan that will work for all 
of us. This Panel will help to focus our efforts so that we can 
get the job done for the American people.
    I look forward to hearing the views and recommendations of 
our witnesses today.
      

                                


Opening Statement of Hon. Jim Ramstad, a Representative in Congress 
from the State of Minnesota

    Mr. Chairman, thank you for calling today's hearing to 
discuss H.R. 3546, the National Dialogue on Social Security 
Act.
    A national dialogue on this important issue is long 
overdue. My constituents began this dialogue with me long ago 
at town meetings and through letters and calls. My constituents 
know the facts: the Social Security Trust Fund is nothing but a 
drawer full of IOUs and the ratio of workers paying into this 
magical trust fund to beneficiaries drawing out benefits is 
getting smaller every year.
    As we all know, Social Security was originally designed to 
supplement individual retirement savings and pensions to allow 
seniors to live comfortably throughout their retirement years. 
For the most part, this has been a success and it is for this 
reason that Social Security must be protected and preserved.
    Yet, this programmatic ``safety net'' also led many 
Americans to falsely believe Social Security alone was 
sufficient to support them through retirement. Today, far too 
many seniors do not have personal retirement sources to 
supplement Social Security benefits and find it hard to meet 
all their personal and medical needs.
    And looking at the bigger picture, our country's savings 
rate is abysmally low across all age groups and compares 
miserably to that of our partners in the Group of Seven 
industrialized nations (G-7).
    That's why I hope that our national debate will also 
address the related issue of personal savings. I am not only 
talking about the proposals to direct payroll taxes into 
special voluntary Personal Retirement Accounts, but also 
individual initiatives to save through mutual funds, IRAs or 
participate in 401k plans.
    The demands on the Social Security system grow larger by 
the hour, but by addressing this issue now--before it is an 
overwhelming crisis--just may give us the time and flexibility 
to make changes that will actually protect and preserve the 
program for generations to come.
    Thank you again, Mr. Chairman, for calling this hearing. I 
look forward to hearing from today's witnesses about designing 
long-range social security reform.
      

                                

    Chairman Archer. We do have a distinguished panel, and 
we're going to start off with Senator Dole who was a member of 
the Reagan Commission on Social Security Reform in 1982 and has 
enormous knowledge and background and experience, and besides 
that represents, I suppose, the senior citizens of today. So, 
Senator Dole, we're delighted to have you with us, and we'd be 
pleased to hear from you and your ideas on Social Security.

    STATEMENT OF HON. ROBERT DOLE, SPECIAL COUNSEL, VERNER, 
   LIIPFERT, BERNHARD, MCPHERSON, AND HAND; AND FORMER U.S. 
           SENATOR AND FORMER SENATE MAJORITY LEADER

    Senator Dole. Thank you, Mr. Chairman, and Members of the 
Committee. It's good to be back in the Ways and Means Committee 
hearing room again.
    I would say at the outset that this is an important issue, 
and when I look back over my legislative career I've been asked 
what was I proudest of, and I've picked out this effort in 1983 
to rescue Social Security. When I look back over my period of 
35\1/2\ years in the Congress, I just sort of picked that one 
out as one I thought was very important.
    I appreciate the opportunity to address this group about my 
personal experience with the use of a panel of experts to 
address Social Security reform. And it's rather hard to believe 
that just over 15 years ago, on January 26, 1983, I introduced 
S.1, a bill to implement the consensus recommendations of the 
National Commission on Social Security Reform. It was my view 
that the consensus reached by the Commission held the potential 
for marking the end of a bitter period of political 
partisanship. And I can tell you that it was very, very bitter, 
and I don't think it's going to change that much in a year or 
two. It was at that time that Republicans and Democrats, the 
House and Senate, the Congress and the executive branch, all 
demonstrated the degree of cooperation so essential for 
enacting a responsible Social Security financing bill.
    Now, I never liked the line of the argument that said: 
Let's take the politics out of the process. Name a commission 
and let the wise men decide. I don't like that line of argument 
because I've always believed the American people have already 
selected a commission to deal with these things; it's called 
the Congress of the United States. But on rare occasions, as we 
found out in 1983, a commission can get the job done. And I 
would like to note that Chairman Roth and Senator Moynihan have 
a little different idea that they were all talking about, but 
it's time to begin Social Security reform.
    And as you know, the long-term deficit today is actually 
greater than it was in 1982 and 1983. The Social Security 
crisis of the early eighties was actually more imminent because 
we were told in January if we didn't do something, the checks 
were going to be late in July. We were up against it; we had to 
do something. And I think now you probably have 10 years, but 
it's time to start.
    The National Commission on Social Security Reform, of which 
I was a member, had been created by executive order 1 year 
earlier. And at that time, the Social Security Program had been 
embroiled in political controversy for months. The system moved 
closer and closer and closer toward insolvency as proposals for 
financial reform were subject to political attack and prospects 
for any bipartisanship seemed remote.
    I think we started down the path to compromise, as I look 
back on it, largely due to just a happenstance in the U.S. 
Senate--and I'm certain there are others who played just as 
prominent a role. But I remember, I'd written an op-ed piece 
for the New York Times, which was published the day Congress 
opened on January 3, 1983, and I mentioned one of the 
challenges we had was Social Security. And I remember on that 
same day Senator Moynihan walking over to me and saying are you 
serious about that. I was then Chairman of the Finance 
Committee, and I said, ``Yes, I'm serious,'' because our 
Commission had just about collapsed; we'd just about given up 
on getting anything done. So the two of us started, and we 
brought in more and more and finally we had the whole 
Commission back on track. And in a matter of 15 days we'd 
resolved our differences and proceeded to vote in the 
Commission. The vote was 12 to 3, which I thought was a pretty 
good vote.
    We had a series of meetings. We brought in White House 
representatives, we had Democrats and Republicans. We made 
every effort to keep in close contact with all the members of 
the Commission. As we neared a compromise, we also kept in 
touch with every other group that obviously had an interest in 
this.
    And so, on January 15, as I have said, we did what some 
thought was impossible: we took the politics out of Social 
Security for the first time in my memory. And it hasn't changed 
much since then. So we had the cooperation of the President. We 
had the cooperation of Speaker O'Neill; we had the cooperation 
of the Majority Leader at that time--Senator Baker in the 
Senate. And so we put this consensus package together.
    It wasn't the only accomplishment of the Commission I might 
add--and I'll ask that my entire statement be made a part of 
the record. We also reached an agreement--a unanimous 
agreement--on the size of the short- and long-term deficits in 
the Social Security Cash Benefits Program. In concrete terms, 
the Commission quantified the seriousness and the urgency of 
the financing program. Only 1 year earlier, we'd drawn these 
partisan lines between those who did not believe there was any 
financing problem at all until the year 2000--they were totally 
wrong. The Commission also provided a valuable forum for the 
diverse views on Social Security.
    With the able leadership of then-Chairman Alan Greenspan, 
and with the expert assistance of Executive Director Robert 
Myers, we also had Bob Ball a member of the Commission--both he 
and Bob Myers have worked together--members of both political 
parties were able to work together in studying the Social 
Security financing problems and options for financial reform. 
In the final weeks before legislation was introduced, we 
engaged in very intensive negotiations--you know what those 
amount to. They were sort of free of political partisanship. I 
remember meeting in the Blair House. I remember working with 
Claude Pepper, among others, and we were all in there trying to 
get it done because we knew we were going to be responsible--we 
were going to be letting down about 40 million seniors--if we 
didn't do something. So I think the Commission, at that time, 
was the cornerstone to our success in reaching a consensus 
package.
    Ultimately, workable legislation requires concessions from 
all of the parties who have a stake in Social Security. And I 
remember on this particular package, nobody liked it, which 
meant to me it was probably a pretty good package. And it 
passed by a good vote in both the House and the Senate. Not 
every Member was happy; some couldn't bring themselves to vote 
for it, which was fine. There were some things that obviously 
we all objected to, but overall we thought the system worked 
fairly well.
    So, I think you are facing a different challenge now from 
the one we faced. Over the short term, as I said, the next 10 
years or so, Social Security can continue to pay benefits. Over 
the long term, however, and the Chairman just alluded to this, 
it will not be able to honor the benefit commitments, and there 
is widespread recognition that impending demographic shifts may 
significantly raise Federal entitlement spending early in the 
next century. And I think you've got to make the change sooner 
than later. I don't know if you have 10 years, you may waste 
9\1/2\ years, as we did; but I would hope that there would be 
some impetus to start on the program now and to get it done.
    Then, as now, a balanced solution--an intergenerationally 
fair solution--will involve bringing the cost of Social 
Security into line with the willingness and the ability of our 
working population to finance the system. The tax burden is 
already heavy and the confidence of young people is critically 
low. There is growing sentiment that the value of Social 
Security needs to be improved for younger workers. There are a 
lot of proposals out there to let people invest a portion of 
their payroll taxes privately. These proposals have benefits 
and risks that will have to be weighed carefully. And I think 
you have this very rare window of opportunity to make something 
happen in that area.
    So, I'd say finally, we thought we had fixed the problem 
for 75 years. Obviously, we didn't fix it for 75 years, it was 
closer to 25 years. So, it didn't turn out to be the case 
because it's a very complex program--very complex problem--and 
a shift in only one variable over the long run can affect the 
long-term projections.
    Yet, over the past 15 years, I think it's fair to say that 
two things have not changed: the importance of retirement 
security to this country and politics. They haven't changed. 
And I don't think they're going to change. Even though I call 
this my proudest achievement, I got beat up pretty well in 1996 
on Social Security. We thought we had probably rescued the 
program at that time. So, I don't see the politics changing. 
But I see a number of Members of this Committee on both sides 
of the aisle who I think can work together, and perhaps this 
will be a step in that direction.
    So, Mr. Chairman, there are 44 million Americans receiving 
benefits, and there are 148 million working people who support 
the system, and they deserve more than another quick fix. We've 
gone through all that process, too, that holds the system 
together until we have the next crisis which could be 5 or 10 
years. And confidence in the long-term viability of Social 
Security will be restored only by enacting measures which 
reinforce personal responsibility, put the system on sound 
financial footing, and do so without imposing an unrealistic 
tax burden on present and future workers.
    So I, Mr. Chairman, applaud your efforts. And I hope the 
efforts will be bipartisan. And I know sometimes that's 
difficult to do, particularly with an issue like Social 
Security. But the bottom line is, my experience with senior 
citizens--and now that I'm in that category--I don't think they 
are looking for solutions. I think they dismiss a lot of the 
political charges, and I think this would be a good step in the 
right direction.
    Thank you.
    [The prepared statement follows:]

Statement of Hon. Robert Dole, Special Counsel, Verner, Liipfert, 
Bernhard, McPherson, and Hand; and Former U.S. Senator and Former 
Senate Majority Leader

    I appreciate the opportunity to be here today to talk about 
my personal experience with the use of a panel of experts to 
address Social Security reform. It's hard to believe that just 
over 15 years ago, on January 26, 1983, I introduced S.1, a 
bill to implement the consensus recommendations of the National 
Commission on Social Security Reform. It was my view that the 
consensus reached by the Commission held the potential for 
marking the end of a bitter period of political partisanship. 
It was at that time that Republicans and Democrats, the House 
and the Senate, Congress and the Executive, all demonstrated 
the degree of cooperation so essential for enacting a 
responsible Social Security financing bill.
    Now, I never liked the line of argument that said, ``Let's 
take the politics out of the process. Name a commission and let 
the wise men decide.'' I don't like that line of argument 
because I've always believed the American people have already 
selected a commission to deal with these things: its's called 
the Congress of the United States.
    But on rare occasions, a commission can get the job done. 
And I would like to note that Chairman Roth and Senator 
Moynihan have each proposed a somewhat different way of getting 
the job done through legislation. However, the bottom line 
remains: it is time to begin Social Security reform.
    Although the long-range deficit today is actually greater 
than it was in 1982-1983, the Social Security crisis of the 
early eighties was actually more imminent. The Social Security 
program was not going to be able to pay benefits on time 
beginning that summer. The National Commission on Social 
Security Reform, of which I was a member, had been created by 
Executive Order a year earlier, and at that time, the Social 
Security program had been embroiled in political controversy 
for months. The system moved closer to insolvency as proposals 
for financial reform were subject to political attack. 
Prospects for a bipartisan consensus seemed remote.
    We started down the path of compromise largely due to a 
conversation Senator Moynihan and I had on the Senate Floor on 
the day the new members were being sworn in--January 3, 1983.
    That started a series of meetings among Commission members, 
and eventually those meetings were enlarged to bring in White 
House representatives and representatives of the Speaker and 
others. We made every effort to keep in close contact with all 
the members of the Commission, and as we neared a compromise, 
we consulted with all who had a direct interest.
    On January 15, 1983, the 15 member National Commission on 
Social Security Reform accomplished what some had said was 
impossible. With the cooperation and approval of President 
Reagan and House Speaker O'Neill, the Commission forged a 
consensus reform package with bipartisan support.
    Agreeing to the essential provisions of a Social Security 
solution was not the only accomplishment of the National 
Commission. The Commission also reached unanimous agreement on 
the size of the short and long term deficits in the Social 
Security cash benefit programs. In concrete terms, the 
Commission quantified the seriousness and the urgency of the 
financing program. Only a year earlier, partisan lines had been 
drawn between those who did not believe there was any financing 
problem at all before the year 2000. The Commission also 
provided a valuable forum for diverse views on Social Security. 
With the able leadership of then Chairman Alan Greenspan and 
with the expert assistance of Executive Director Robert Myers, 
members of both political parties were able to work together in 
studying the Social Security financing problem and options for 
financial reform. In the final weeks before legislation was 
introduced, we engaged in intensive negotiations, which were, 
to a large extent, free of political partisanship that so 
seriously damaged efforts for responsible reform in 1981.
    In my view, the National Commission was the cornerstone to 
our success in reaching a consensus package. Ultimately, 
workable legislation requires concessions from all of the 
parties who have a stake in Social Security, cue no one Member 
was happy with every specific recommendation, the important 
fact is that consensus was reached on how to save the system.
    Today, the Social Security system is facing a different 
challenge from the one you and I faced, Mr. Chairman. Over the 
short term, the next 10 years or so, Social Security can 
continue to pay benefits. Over the long term, however, the 
system will not be able to honor its benefit commitments and 
there is widespread recognition that impending demographic 
shifts may significantly raise federal entitlement spending 
early in the next century. Change must be made sooner rather 
than later, to avoid more serious impacts on future 
beneficiaries as baby boomers begin to retire.
    Then, as now, a balanced solution--an intergenerationally 
fair solution--will involve bringing the cost of Social 
Security into line with the willingness and ability of our 
working population to finance the system. The tax burden is 
already heavy and the confidence of young people is critically 
low. There is growing sentiment that the value of Social 
Security needs to be improved for younger workers. There are a 
lot of proposals out there to let people invest a portion of 
their payroll taxes privately. These proposals have benefits 
and risks that will have to be weighed carefully. You have a 
rare window of opportunity.
    Back in 1983, we figured we had the problem solved for the 
next 75 years. Unfortunately, that didn't turn out to be the 
case. Social Security is extremely complex and a shift in only 
one variable over the long-run can significantly affect the 
long term projections. Yet, over the past 15 years, two things 
haven't changed: the importance of retirement security to this 
country--and politics. A panel of experts, such as you have 
proposed, can provide real solutions, which will serve as a 
lighthouse to help weather any political storm.
    The American people, the 44 million receiving benefits and 
the 148 million working people who support the system, deserve 
more than another quick fix that holds the system together 
until the next crisis comes along. Confidence in the long term 
viability of Social Security will be restored only by enacting 
measures which reinforce personal responsibility, put the 
system on sound financial footing, and do so without imposing 
an unrealistic tax burden on present and future workers. I 
applaud your efforts in moving the process forward, and wish 
you every success.
      

                                

    Chairman Archer. Thank you, Senator Dole.
    Our next witness is Melissa Hieger who is here to speak for 
the younger generation that has a strong, strong interest in a 
program that is intergenerationally fair. Ms. Hieger, we're 
glad to have you with us and we would pleased to receive your 
testimony.

   STATEMENT OF MELISSA HIEGER, NATIONAL BOARD MEMBER, THIRD 
                           MILLENNIUM

    Ms. Hieger. Thank you.
    Good morning, ladies and gentleman. Thank you, Mr. 
Chairman, for including Third Millennium in this dialog about 
Social Security, the largest program in the Federal Government. 
We greatly appreciate the fact that you have chosen to include 
voices from all generations in this critically important debate 
today.
    My name is Melissa Hieger, and I am a board member of the 
New York-based Third Millennium, a national, nonpartisan 
organization launched in 1993 by young adults offering 
solutions to long-term problems facing the United States. I am 
also a Ph.D. candidate in economics at Boston University. My 
research focuses on public pension reform and retirement 
policy.
    Today you have asked me to address two issues: the merits 
of establishing a bipartisan panel to design long-range Social 
Security reform, and the best way to engage the American public 
in the process of this reform. I will address these issues one 
at a time.
    Regarding the proposed panel, it is fair to ask: Is it 
really necessary? After all, the 32-member Kerrey-Danforth 
Commission in 1994 effectively laid out the options for reform, 
and that panel's cochairman made reasonable recommendations 
that are still under consideration today. Then 15 months ago, 
the President's 13-member Social Security Advisory Council 
issued a report that presented three divergent paths for Social 
Security. Clearly, we know what our reform options are.
    After reading your proposal, Mr. Chairman, you have 
convinced me and my colleagues that your approach would help 
achieve Social Security reform. For example, we agree that 
members of the panel should be named by the administration as 
well as by Congress so that both branches have stake in the 
outcome. You have wisely set the deadline at exactly 10 months 
hence so the panel must move expeditiously. And you have 
designed the panel to be small so that building support will 
likely be simpler. Clearly, you are trying to bring the process 
of Social Security reform to successful completion.
    But I do have one question. Have you considered modeling 
this new panel after the Base Closure Commission? As you will 
recall, in that instance, Members of Congress took an up or 
down vote on the Commission's full package of recommendations 
rather than evaluating them through a series of congressional 
Committees that would likely have rendered them unacceptable. 
Isn't it possible that in the case of Social Security, an 
equally contentious political issue, the House Ways and Means 
Committee and the Senate Finance Committee would want to amend 
whatever the bipartisan panel proposes and in the end undo 
their fragile agreement? This is our main concern, since long-
overdue Social Security reform has been delayed time and time 
again.
    Regarding the composition of this proposed bipartisan 
panel, I would suggest that the bill mandate that two panel 
members, one from each party, be Americans born after 1960. If 
this panel is comprised exclusively of white males over the age 
of 50, it will have great difficulty gaining the support of the 
majority of American people who do not fit that category. 
Indeed, in your proposal, you consciously and wisely designed a 
Dialog Council with a generational perspective in mind, 
including one-third of its members from my generation born 
after 1960. Why not use the same standard to allocate positions 
on the bipartisan panel, the group that actually would be 
devising the Social Security reform plan? As you know, the 
bipartisan panel's proposals stand to affect the lives of 
people in younger generations as much as, if not more than, the 
lives of today's older Americans.
    Speaking of the Dialog Council, I must commend you not only 
on the creation of such a group, but the emphasis you place on 
the Internet as a channel for political discussion. Clearly, 
there is a role for young adults to play in the proposed 
Internet Advisory Board. We hope if it is created, Third 
Millennium will be called upon to offer its knowledge and 
leadership.
    Finally, I should make the Ways the Means Committee aware 
that Third Millennium is already working to foster a national 
discussion about Social Security. In conjunction with three 
other organizations--the United States Student Association, the 
Foundation for Individual Responsibility, and Social Trust, and 
the 2030 Center--and with the generous support of Americans 
Discuss Social Security Project of the Pew Charitable Trust, we 
have just launched the Social Security Challenge. Starting in 
late-February, our groups began issuing a call to college and 
graduate students nationwide. We are saying the following: If 
you had $100,000 to spend to make Social Security a hot topic 
of conversation among college students nationwide, how would 
you spend the money? Tell us your plan in 1,000 words or less 
and submit a budget. The winning team of between two and four 
students will win two prizes: One, the ability to spend the 
$100,000 to implement their project; and two, each member of 
the team will win $10,000 toward college expenses.
    We would ask that Members of this Committee inform their 
constituents about the Social Security Challenge. And I do have 
brochures with me today, so if you would like to have one, 
please ask. The deadline for entries is April 28. We have 
mailed a promotional brochure to the chairs of every economics 
and political science department in the country, as well as to 
key administrators at every college and university. We have 
also been aggressively promoting the Social Security Challenge 
via banner advertising on the world wide web, and directing 
viewers to the Web site: www.sschallenge.org, and also callers 
to the program's headquarters.
    Mr. Chairman, we have a major task ahead of us. In the 
absence of an immediate crisis, reforming Social Security 
remains a daunting task. But you and Members of your Committee 
should know that Third Millennium is in this for the long haul. 
We intend to stimulate public discussion about Social Security 
until the program is fixed and dignified retirements can be 
assured not only for today's seniors, but also for the people 
of my generation and those that follow.
    Thank you.
    [The prepared statement and attachment follow:]

Statement of Melissa Hieger, National Board Member, Third Millennium

    Good morning, ladies and gentlemen. Thank you, Mr. 
Chairman, for including Third Millennium in this dialogue about 
Social Security, the largest program in the federal government. 
We greatly appreciate the fact that you have chosen to include 
voices from all generations in this critically important 
discussion today.
    My name is Melissa Hieger, and I am a board member of New 
York-based Third Millennium, a national, non-partisan 
organization launched in 1993 by young adults offering 
solutions to long-term problems facing the United States. I am 
also a graduate student earning a Ph.D. in economics from 
Boston University, and my area of expertise is retirement 
policy. My faculty advisor is Dr. Lawrence Kotlikoff, the 
creator of ``generational accounting'' and a member of Third 
Millennium's board of advisors.
    Today you asked me to address two issues: the merits of 
establishing a bipartisan panel to design long-range Social 
Security reform, and the best way to engage the American public 
in the process of reform. I will address these issues one at a 
time.
    Regarding the proposed panel, it is fair to ask: Is it 
really necessary? After all, the 32-member Kerrey-Danforth 
Commission in 1994 effectively laid out the options for reform, 
and that panel's co-chairmen made reasonable recommendations 
that are still under consideration today. Then, 15 months ago, 
the President's 13-member Social Security Advisory Council 
issued a report that presented three divergent paths for Social 
Security. Clearly we know what our reform choices are.
    After reading your proposal, Mr. Chairman, you have 
convinced me and my colleagues that your approach would help 
achieve Social Security reform. For example, we agree that 
members of the panel should be named by the Administration as 
well as by Congress, so that both branches have a stake in the 
outcome. You have wisely set the deadline at exactly 10 months 
hence, so the panel must move expeditiously. And you've 
designed the panel to be small, so that building support will 
likely be simpler. Clearly you seek to bring the process of 
Social Security reform to successful completion.
    But I have one question: Have you considered modeling this 
new panel after the Base Closure Commission? As you'll recall, 
in that instance Members of Congress took an up or down vote on 
the Commission's full package of recommendations, rather than 
evaluating them through a series of Congressional committees 
that likely would have rendered them unacceptable. Isn't it 
possible that in the case of Social Security, an equally 
contentious political issue, the House Ways and Means Committee 
and the Senate Finance Committee would want to amend whatever 
the Bipartisan Panel proposes and, in the end, undo their 
fragile agreement? This is our main concern, since long-overdue 
Social Security reform has been delayed time and time again.
    On another issue, the composition of this proposed 
Bipartisan Panel, I ask you, Mr. Chairman: please incorporate 
wording in your bill that mandates that two panel members, one 
from each party, be Americans born after 1960. If this panel is 
comprised exclusively of white males over the age of 50, it 
will have great difficulty gaining the support of the majority 
of the American people who do not fit that category.
    Indeed, in your proposal you consciously and wisely 
designed the Dialogue Council with a generational perspective 
in mind, including one-third of its members from my generation, 
born after 1960. Why not use that same standard to allocate 
positions on the Bipartisan Panel, the group that actually 
would be devising the Social Security reform plan? As you know, 
the Bipartisan Panel's proposals stand to affect the lives of 
people in younger generations as much as, if not more than, the 
lives of today's older Americans.
    Speaking of the Dialogue Council, I must commend you not 
only on the creation of such a group, but the emphasis you 
place on the Internet as a channel for political discussion. 
Clearly there is a role for young adults to play in the 
proposed Internet Advisory Board, and we hope that if it is 
created that Third Millennium is called upon to offer its 
knowledge and leadership.
    Finally, I should make the Ways and Means Committee aware 
that Third Millennium is already working to foster a national 
discussion about Social Security. In conjunction with three 
other organizations (the United States Student Association, the 
Foundation for Individual Responsibility and Social Trust and 
the 2030 Center) and with the generous support of the Americans 
Discuss Social Security project of the Pew Charitable Trusts, 
we have just launched the ``Social Security Challenge.''
    Starting in late February, our groups began issuing a call 
to college and graduate students nationwide. We are saying the 
following: ``If you had $100,000 to spend to make Social 
Security a hot topic of conversation among college students 
nationwide, how would you spend the money?'' Tell us your plan 
in 1,000 words or less, and submit a budget. The winning team 
of between two and four students will win two prizes: 1) the 
ability to spend the $100,000 to implement their project and 2) 
each member of the team will win $10,000 toward college 
expenses.
    We would ask that members of this Committee inform their 
constituents about the Social Security Challenge. The deadline 
for entries is April 28th. We have mailed a promotional 
brochure to the chairs of every economics and political science 
department in the country, as well as to key administrators at 
every college and university. We have also been aggressively 
promoting the Social Security Challenge via banner advertising 
on the World Wide Web, and directing viewers to the web site 
www.sschallenge.org, and callers to the program's headquarters 
at 212-625-0403.
    Mr. Chairman, we have a major task ahead of us. In the 
absence of an immediate crisis, reforming Social Security 
remains a daunting task. But you and members of your Committee 
should know that Third Millennium is in this for the long haul. 
We intend to stimulate public discussion about Social Security 
until the program is fixed and dignified retirements can be 
assured not only for today's seniors, but also for the people 
of my generation and those that follow. Thank you.
      

                                

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    Chairman Archer. Thank you, Ms. Hieger.
    Our last witness today representing the baby boomers, our 
own congressional baby boomer, the Speaker of the House of 
Representatives, Newt Gingrich. Mr. Speaker, we would be 
pleased to receive your testimony.

   STATEMENT OF HON. NEWT GINGRICH, SPEAKER OF THE HOUSE OF 
  REPRESENTATIVES, AND A REPRESENTATIVE IN CONGRESS FROM THE 
                        STATE OF GEORGIA

    Mr. Gingrich. Thank you, Chairman Archer.
    Let me first of all thank you and Chairman Bunning for the 
work you have already done in establishing this base, and let 
me commend to any interested citizen that they look at the 
hearings Chairman Bunning has already had in Subcommittee on 
the variety of reforms occurring around the world. I also want 
to commend Chairman John Kasich of the Budget Committee for 
some very innovative ideas in trying to solve the problem with 
action this year. And I want to mention some of our colleagues: 
John Porter, Nick Smith, Mark Sanford, and Mark Neumann who 
have been particularly aggressive in trying to develop answers 
and solutions to stabilize Social Security and create a better 
future.
    Although America's Social Security system is not currently 
in crisis, the signs are clear that we are rapidly approaching 
one. Early in the next millennium, the Social Security trust 
funds will begin to dwindle as wave after wave of baby boomers 
surge into retirement. Within 15 years, the system will begin 
to pay out more than it takes in. Unless we act soon, within 
roughly 30 years, the system will be bankrupt and the 
retirement security and happiness of millions of Americans will 
be placed in grave danger.
    I think that's why President Clinton in the State of the 
Union and in other comments has called again and again for a 
bipartisan effort to create a dialog. I believe that's why on 
April 7, he is going to a bipartisan event in Kansas City. And 
so, I see what this Committee is doing today is a very 
bipartisan effort to work with the President in developing an 
approach to have the country educate itself and then help make 
wise decisions.
    When you look at the facts about Social Security, it is 
little wonder that more young people believe in UFOs than that 
they will receive a Social Security check. The system is in 
trouble and the time to act is now.
    We can and we will save Social Security. I want to repeat 
this. As the Speaker of the House of a team that reformed 
welfare; balanced the budget for the first time in 30 years; 
passed the tax cut we promised, which is $400 per child this 
year and $500 next year; saved Medicare without raising taxes 
by increasing choice for senior citizens, let me emphasize the 
positive--we can and we will save Social Security.
    Today, I am proud to introduce the initial steps in the 
plan that will permanently save Social Security while 
increasing the amount of retirement income available for 
virtually every American. Most importantly, the plan I am about 
to outline will not take a penny from our current Social 
Security system. It protects and fulfills the obligations of 
the U.S. Government and the American people to current and 
future retirees.
    Let me emphasize this point: This plan will not touch the 
FICA tax; this plan will not touch the trust funds; this plan 
will not raise taxes on the American people; and this plan will 
not cut a single persons' Social Security benefits now or ever. 
We will guarantee every American, whether you are 17 or 70, 
that you will get every scheduled payment, including future 
cost of living increases, on time and in full from the current 
system.
    Our goal should be the creation of a dramatically better, 
modern, personal Social Security system for the information age 
while protecting all the benefits in the current system. We can 
reach that goal in three stages.
    Stage one involves the legislation this Committee is 
meeting to discuss today. I believe we must launch a national 
dialog on retirement security to help Americans understand the 
issues and the choices we face. We must bring together baby 
boomers with older and younger Americans, and we should link 
them via the Internet to local task forces in every 
congressional district to examine the range of reform ideas. 
Let me mention: The goal here is not necessarily to find the 
perfect solution, it is to engage all of the American people, 
so all of the American people believe they have access to the 
information and they have a right to participate in thinking 
through and discussing their economic future.
    On January 5, I called for a commission to lead such a 
dialog, and I am very pleased that Chairman Archer has 
introduced legislation to advance that idea. I also would like 
to commend Rick White for all the outstanding work he has done 
in helping show us how to use the Internet as a tool to advance 
this dialog. And with Chairman Archer's help, I think this is 
the first commission ever designed with the Internet as an 
integral part of its involvement of the American people.
    In stage two, we should lock in the surplus so it truly 
saves Social Security by using it to fund new, personal, 
market-based retirement accounts for 130 million Americans--
those that pay the FICA tax. We must plant a flag in the ground 
that says, this surplus belongs to the American people and 
should be returned to the American people. Every time someone 
proposes spending this money on something else, they are 
spending our children's future. We know that if we don't lock 
in the surplus and guarantee it can't be used for other 
programs, it will be spent. The strongest force in the universe 
is the attraction between a politician and a pot of unspent 
money.
    That is why I support the President's call to save every 
penny of the surplus to save Social Security. We can do so by 
using the surplus to fund these new, supplemental, personal 
retirement accounts for working Americans. Through these Social 
Security plus accounts, we can add to the existing Social 
Security system without taking any money from it. Under this 
plan, Social Security would be strengthened and preserved. It 
will be safe, intact, and secure for future retirees. We will 
use the opportunity presented by the surplus to create a huge 
new pool of private capital that will lower interest rates, 
strengthen economic growth, and increase the personal control 
of the baby boomers and their children over their own savings. 
So even if a person made a terrible investment, or the stock 
market went into a dive, that person would always have Social 
Security to fall back on. There will be zero risk of ever 
falling below the benefit level of the Social Security system. 
The safety net would be strong and unbroken.
    But this plan would also give every American the 
opportunity to rise above the status quo. In addition, these 
new Social Security plus accounts would painlessly create the 
framework for a new, modern, personal retirement system without 
putting any senior citizens or current benefits at risk. They 
would begin the transition to a better more effective system 
for our children and grandchildren without taking any money 
away from our parents and grandparents.
     Best of all, these accounts would compliment ongoing 
Republican tax-cutting efforts. Creating Social Security plus 
accounts would be the equivalent of giving the American people 
a $671 billion tax cut over the next 10 years, plus hundreds of 
billions more in interest in investment returns.
    Through this surplus bonus, we would simultaneously 
strengthen Social Security, cut taxes, harness the power of 
compound interest, and give Americans a choice of how best to 
plan for their retirement.
    In stage three, after the Commission reports back next 
year, we will work with the President to implement the most 
effective long-term reforms to the Social Security Program. In 
his State of the Union, President Clinton said that he would 
``convene the leaders of Congress next year to craft historic 
bipartisan legislation to achieve a landmark for our 
generation: a Social Security system that is strong in the 21st 
century.'' Mr. President, we, as leaders of Congress, accept 
your invitation. We look forward to shaping bipartisan 
legislation that is based on the recommendations of the 
Commission and fits into the framework of personal retirement 
accounts we create this year. Working together, we can ensure 
that no American will have to worry about his or her financial 
security in retirement.
    By contrast, there is one prominent Democrat proposal that 
also claims to save Social Security. And while Democrats have 
recognized the problem, and I think on a bipartisan basis 
deserve a lot of support, I particularly commend the President 
and Senator Moynihan for having said: There is a problem and we 
have to solve it. One solution depends on the false medicine of 
tax increases and benefit cuts. Under that proposal, a single 
62-year-old retiree, with a $19,000 annual income, could face a 
tax increase of nearly $1,700 next year. A married couple the 
same age earning $27,000 could see their retirement income 
hacked by more than $2,000. That is totally unacceptable. By 
the way, the source for both of those is the Joint Tax 
Committee analysis of the proposal.
    Now, I just want to suggest the opposite of what Chairman 
Archer said: that would launch generational warfare in its most 
bitter form. That would pit grandparents against grandchildren. 
And it is exactly wrong. We need a solution where the 
grandparents are safe and secure and know it; where the 
children are doing better and know it; and where the 
grandchildren have a chance to have a retirement plan they 
trust and believe will be real and uses the power of compound 
interest to increase their retirement.
    We must save Social Security, but we cannot do it by taxing 
older Americans into deeper poverty. We must enhance the 
current system, not eviscerate it. Over this upcoming recess, I 
urge every Member to return to their district and begin this 
important dialog. And the best way to begin this process is not 
by talking, but by listening. I urge every Member to ask your 
constituents what they think. And let me suggest just a few 
questions to start that conversation.
    First, how important do you think it is for us to save 
Social Security? Second, do you think we should use the surplus 
to save Social Security? Third, would you like to have a 
personal investment account that you control for retirement? 
And finally, do you think you can invest your money more wisely 
than the government can invest your money?
    This dialog must begin at the grassroots, around kitchen 
tables and living rooms across America. Through this dialog and 
this plan, we will protect every current and future retirement 
and start the transition for younger Americans toward a modern, 
personal, market-oriented retirement system.
    Thank you for your time.
    [The prepared statement follows:]

Statement of Hon. Newt Gingrich, Speaker of the House of 
Representatives, and a Representative in Congress from the State of 
Georgia

    Although America's Social Security system is not currently 
in crisis, the signs are clear that we are rapidly approaching 
one. Early in the next millennium, the Social Security trust 
funds will begin to dwindle as wave after wave of baby boomers 
surges into retirement.
    Within fifteen years, the system will begin to pay out more 
than it takes in. Unless we act soon, within roughly thirty 
years the system will be bankrupt, and the retirement security 
and happiness of millions of Americans will be placed in grave 
danger.
    Little wonder that more young people believe they will see 
a UFO than a Social Security check when they retire. The system 
is in trouble, and the time to act is now.
    We can--and we will--save Social Security.
    Today I am proud to introduce the initial steps in a plan 
that will permanently save Social Security while increasing the 
amount of retirement income available for virtually every 
American.
    Most importantly, the plan I am about to outline will not 
take a penny from our current Social Security system. It 
protects and fulfills all of the obligations of the United 
States government to current and future retirees.
    Let me emphasize that point: This plan will not touch the 
FICA tax. This plan will not touch the trust funds. This plan 
will not raise taxes on the American people. And this plan will 
not cut a single person's Social Security benefits--now or 
ever.
    We will guarantee every American--whether you're 17 or 70 
that you will get every scheduled payment, including future 
cost-of-living increases, on-time and in-full from the current 
system.
    Our goal should be the creation of a dramatically-better, 
modern, personal Social Security system for the Information Age 
while protecting all of the benefits in the current system.
    We can reach that goal in three stages.
    Stage One involves the legislation this committee is 
meeting to discuss today. I believe we must launch a national 
dialogue on retirement security to help Americans understand 
the issues and the choices we face. We must bring together baby 
boomers with older and younger Americans, and we should link 
them via the Internet to local task forces in every 
congressional district to examine the range of reform ideas.
    On January 5th, I called for a commission to lead such a 
dialogue, and I'm very pleased that Chairman Archer has 
introduced legislation to advance that idea. I also would like 
to commend Rick White for all of the outstanding work he has 
done in helping show us how to use the Internet as a tool to 
advance this dialogue.
    Stage Two--We should lock in the surplus so it truly saves 
Social Security by using it to fund new, personal, market-based 
retirement accounts for 130 million Americans.
    We must plant a flag in the ground that says this surplus 
belongs to the American people and should be returned to the 
American people. Every time someone proposes spending this 
money on something else, they're spending our children's 
future.
    We know that if we don't lock in the surplus and guarantee 
it can't be used for other programs, it will be spent. The 
strongest force in the universe is the attraction between a 
politician and a pot of unspent money. That is why I support 
the President's call to use ``every penny'' of the surplus to 
save Social Security.
    We can do so by using the surplus to fund these new 
supplemental personal retirement accounts for working 
Americans. Through these Social Security Plus accounts, we can 
add to the existing Social Security system without taking any 
money from it.
    Under this plan, Social Security would be strengthened and 
preserved. It will be safe, intact, and secure for future 
retirees. We will use the opportunity presented by the surplus 
to create a huge new pool of private capital that will lower 
interest rates, strengthen economic growth, and increase the 
personal control the baby boomers and their children have over 
their savings.
    So even if a person makes a terrible investment, or the 
stock market goes into a dive, that person will always have 
Social Security to fall back on. There would be a zero risk of 
ever falling below the benefit level of the Social Security 
system the safety net would be strong and unbroken. But this 
plan would also give every American the opportunity to rise 
above the status quo.
    In addition, these new Social Security Plus accounts would 
painlessly create the framework for a new modern personal 
retirement system without putting any senior citizen or current 
benefits at risk. They would begin the transition to a better, 
more effective system for our children and grandchildren 
without taking any money away from our parents and 
grandparents.
    Best of all, these accounts would complement ongoing 
Republican tax cutting efforts. Creating Social Security Plus 
accounts would be the equivalent of giving the American people 
a $671 billion tax cut over the next ten years--plus hundreds 
of billions more in interest and investment returns.
    Through this surplus bonus, we would simultaneously 
strengthen Social Security, cut taxes, harness the power of 
compound interest, and give Americans a choice of how best to 
plan for their retirement.
    Stage Three--After the Commission reports back next year, 
we will work with the President to implement the most effective 
long-term reforms to the Social Security program. In his State 
of the Union, President Clinton said that he would ``convene 
the leaders of Congress [next year] to craft historic, 
bipartisan legislation to achieve a landmark for our 
generation--a Social Security system that is strong in the 21st 
century.''
    Mr. President, we--as leaders of Congress--accept your 
invitation.
    We look forward to shaping bipartisan legislation that is 
based on the recommendations of the Commission and fits into 
the framework of personal retirement accounts we create this 
year. Working together, we can ensure that no American will 
have to worry about his or her financial security in 
retirement.
    By contrast, there is a prominent Democrat proposal that 
also claims to save Social Security. While Democrats have also 
recognized the problem, their solution depends on the false 
medicine of tax increases and benefit cuts.
    Under the leading Democrat proposal, a single 62-year-old 
retiree with a $19,000 annual income could face a tax increase 
of nearly $1,700. A married couple of the same age earning 
$27,000 could see their retirement income hacked by more than 
$2,000. That is totally unacceptable. (source: Joint Tax 
Committee)
    We must save Social Security, but we cannot do it by taxing 
older Americans into deeper poverty. We must enhance the 
current system, not eviscerate it.
    Over this upcoming recess, I urge every member to return to 
their district and begin this important dialogue. And the best 
way to begin this process is not by talking, but by listening.
    I urge every member to ask your constituents what they 
think. And let me suggest a few questions to start that 
conversation.
    First, how important do you think it is for us to save 
Social Security?
    Second, do you think we should use the surplus to save 
Social Security?
    Third, would you like to have a personal investment account 
that you control for retirement?
    And finally, do you think you can invest your money more 
wisely than the government?
    This dialogue must begin at the grassroots around kitchen 
tables and living rooms across America.
    Through this dialogue and this plan, we will protect every 
current and future retiree, and start the transition for 
younger Americans toward a modern, personal, market-oriented 
retirement system.
    Thank you for your time.
      

                                

    Chairman Archer. Thank you, Mr. Speaker.
    Let me very briefly inquire of Senator Dole. With your 
experience over many, many years of serving in the Congress, 
and with your experience on the Social Security issue, which 
you mentioned in your comments, do you believe that it is 
possible within this body, both Senate and House, that this 
issue can stay above the temptation of individual Members to 
attempt to gain partisan political advantage if you simply turn 
the Congress on this issue without a driving force of a 
bipartisan nature, which is intergenerationally determined, 
such as the Commission that is being recommended in the 
legislation on which we're having a hearing today?
    Senator Dole. Well, as I said in my statement, I think it's 
only on rare occasions you would want a commission--maybe 
campaign finance reform, maybe Social Security; there may be 
another one or two out there, base closings.
    But I must say, I was on the Social Security Subcommittee, 
the Chairman of the Finance Committee. We had a lot of partisan 
wrangles, even though people I think generally with well 
intention--we had different views. And I must say as a 
Republican, we suffered a great deal because of the politics of 
Social Security over the years. And we thought we were trying 
to fix it. We thought we were offering good legislation that 
would make the trust fund secure, and all these things.
    I don't believe anything has changed that much. Obviously, 
I think there's still some partisanship in the Congress. I 
don't notice as much as I used to, because I'm not up here, but 
if I were here I'd probably notice it. But I read about it and 
I watch C-Span, and I see all the harmony, and I occasionally 
see disharmony. But I don't generally stay up that late.
    So, having said that, I don't see how you do it. You're all 
friends here, Democrats and Republicans. You may have different 
views, but in the final analysis I don't see how you get it 
done. Now maybe if somebody can put together a package that 
everybody will rally around, but there's just too much 
involved.
    And if you're a widow, and your only income is Social 
Security, and maybe Medicare, you're concerned about it. And if 
we start playing politics, in my view that person and millions 
of others are going to have nothing but uncertainty, and 
they're going to lose more confidence in those of you who have 
the present responsibility for making the system work.
    Chairman Archer. Mr. Stark.
    Mr. Stark. Thank you, Mr. Chairman.
    A comment, and particularly on Senator Dole's last 
statement: I just returned from a meeting in Germany with the 
U.S. Government, Japanese Government, and the German 
Government, all discussing this same problem. The Germans and 
the Japanese have a far older population than we do, and the 
crux of 2 days was looking around the table in three languages, 
and looking, wondering, ``who's going to pay for it?'' And 
nobody wanted to pay for it. And they were looking around for 2 
days for this magic bullet, and I suspect that's where we're 
going to end up.
    Chairman Archer, in his minority views in the last 
Commission, was against any increase in taxes. The Speaker, I 
believe, had instructed some members of the Medicare Commission 
not to support increases in taxes.
    So if that comes off the table, you certainly limit your 
options for reform--now the Speaker has suggested private 
pensions.
    If you took 80 percent of the budget surplus, and 
distributed among 148 million qualified workers, you'd be 
giving them $4 a month to invest in a plan, running up to a 
magnificent $33 a month by the year 2004. That would barely 
accumulate over 30 years accumulate $4,000 at 8 percent, and I 
don't know that you can offer people this as an alternative for 
us doing the responsible thing for Social Security. Maybe 
you've got a better idea, but I don't think that sells.
    Are we going to get more money in there?
    Mr. Gingrich. Would you yield for 1 minute?
    Mr. Stark. Surely, I'd be happy to. It was your plan that 
I'm trying to outline.
    Mr. Gingrich. Again, I'm suggesting a general principle as 
a step. You'll notice I said there are three steps here. One is 
the Commission, so we get the whole country engaged in the 
dialog; the second is the principle that the surplus should go 
into a private personal account; and the third is, that we look 
at the future of Social Security within the context of those 
two steps. I'm not here today to say this is a panacea, but I 
want to make two observations that are startling.
    The first is, the Congressional Budget Office has had to 
refigure the outyear debt in the last 15 months by $2 trillion. 
That is, 15 months ago they were projecting a debt over the 
next decade that is $2 trillion higher than they're currently 
projecting.
    This year we were supposed to run a $229 billion deficit, 
which means we'd borrow from Melissa's generation $229 billion. 
Instead, the minimum surplus is $10 billion and our most 
accurate estimator, Mark Newman of Wisconsin, estimates it will 
be at least $40 billion, and the CBO will once again be wrong 
when the numbers come out.
    If you take just the current, very low, very timid, 
Congressional Budget Office projection, it is about a $670 
billion number over the next 10 years. That for the FICA 
taxpayers turns out to be about $3,500 to $4,000 in a savings 
account, at no cost to anybody. It simply means government 
can't spend the money in Washington.
    If you have a tax-free buildup of that money, and you're a 
20-year-old, you have in fact--a 20-year-old today, if that 
program were set up today, and you didn't extend the surpluses 
beyond 10 years; you only said there's a 10-year window, they 
would still have a significantly larger amount of money than 
they have today.
    But let me go a step further. Marten Feldstein, who is 
fairly reputable, who was the chairman of the Council of 
Economic Advisors, the record suggests that this program, if 
you deliberately work to have a surplus that allowed you to 
return the equivalent of 2 percent of FICA, that this program 
could ultimately basically provide a sufficiently large asset; 
that you would not only guarantee the stability of the system, 
but----
    Mr. Stark. But Mr. Speaker----
    Mr. Gingrich. Yes?
    Mr. Stark [continuing]. If we increase FICA by 2 percent 
the Social Security problem would be resolved?
    Mr. Gingrich. I didn't say that; I said something very 
different. I said the surplus.
    Mr. Stark. I'm just saying, all we have to do is increase 
the Social Security tax 2 percent, 1 percent for you and 1 
percent for the government, to resolve the problem.
    Mr. Gingrich. Can I just state my point? Mr. Stark, you 
just made my point about the difference in our two approaches.
    I would control government spending to have a surplus large 
enough to equal 2 percent of FICA, and give people the money by 
not having it spent; you'd raise the taxes. I believe there's a 
non-tax increase approach, and the key's very simple.
    The power of compound interest, if you are young enough, 
allows you to offset the demographics of an aging population. 
You give young people enough savings to have compound interest 
buildup without taxation, and they will be in a position to 
save the system without a tax increase. If we don't act in the 
next year or two, and don't have time for the compound 
interest, you are either by 2012 going to have to radically cut 
benefits or raise the FICA maybe as high as 18 percent.
    Now I am opposed to a solution which has us raise the FICA 
tax to an 18-percent-per-person FICA for a program that my 
daughters may never see the money from. And I think it's much 
better for us to find a solution that locks in the surplus, 
returns it as a bonus, gives the American people the chance to 
invest that money, and gives them the chance to have that kind 
of compound interest work for them, rather than work against 
them.
    Chairman Archer. The gentleman's time has expired.
    Mr. Crane.
    Mr. Crane. Thank you, Mr. Chairman.
    Chairman Archer. Yes.
    I want to express appreciation to Senator Dole and Ms. 
Hieger, and to our distinguished Speaker, Mr. Gingrich, for 
their participation. And I don't know whether Ms. Hieger is a 
registered voter yet, but I am assuming that with this 
bipartisanship here that it's irrelevant whether you registered 
and whether you have cast votes for the other side. We're 
working in a joint effort to save the program that touches all 
American's welfare. One of the concerns I've had is that, 
relatively speaking, the rate of return under the Social 
Security Program is such a rip off in contrast to the return 
rate if you had invested your own money. How we make the 
transition into mandated investments into your own savings 
account as opposed to the current Social Security Program, is 
the question of the day.
    I led a Trade Subcommittee trip down to Chile in 1995, and 
while there, we had an interesting opportunity to meet with 
their former labor secretary who had privatized Social Security 
down there. Under the Chilean system, individuals were given 
options. In 1995 over 90 percent of Chileans had chosen the 
private alternative, and that was understandable, because the 
returns were so significantly better than under the existing 
program.
    And I thought about it afterward, and it's just tragic that 
when the Social Security Program was first established, it 
wasn't established that way.
    I think the same principle applies to our Medicare Program. 
Had it been set up as a medical savings account at its 
inception, we wouldn't be going through the crisis we'll be 
going through again in another decade with respect to Medicare.
    But let me ask a question from a third millennium 
perspective, and that question is, you talk about having 
analyses being made by panels involving people who were born 
after 1960. You don't trust any of us older folks?
    Ms. Hieger. In my discussions with younger people, it just 
seems that there are very diverse views on solutions, and 
possible solutions, and in particular the investment option. 
And I think younger people tend to have more experience with 
401(k) plans, they like the portability, and in general see 
that as a more realistic option than staying with the pay-as-
you-go structure. We don't see that as being such a large risk 
as somebody from the older generations that maybe lived through 
the Great Depression.
    Mr. Crane. Well, let me simply comment, that as a parent of 
eight children, I'm infinitely more concerned about their 
welfare than I am about my own. I think there is perspective 
that can be brought into the whole discussion by grandparents; 
even folks that are current beneficiaries and recipients of 
Social Security benefits who are aware at least of the 
potential threat, not to their own benefits, but to yours and 
your children, too. I would hope you might soften your position 
in opposition to some of us older folks.
    And one of the things I'm interested in, Bob, from your 
comments, and that is the differences between the people who 
were pessimistic about reform really working in 1983 in 
contrast to today.
    Do you see any significant differences in the pessimism on 
the part of those folks who think this program isn't going to 
survive?
    Senator Dole. I don't see a great deal of change. And I 
might point out one thing; it has only been 15 years, but we 
never considered any personal investment possibilities. It 
shows how far its moved in just 15 years. It's going to happen 
one of these days. You can still protect those in the pipeline 
and let young people, like Melissa, give them opportunities, 
too.
    But I think you go out to the average group of people, 
wherever you go--Kansas, Illinois, wherever, and they think 
it's going to be gone; it's not going to be there. And that's 
why I think it's very important. I think another exception for 
a commission would be Medicare, which you've already done.
    When you have the Commission it shouldn't be all Members of 
Congress, because then you're right back in the same partisan 
problem. You need a few outsiders to not only referee, but to 
help bring some outside information, some outside wisdom to the 
problem, even though there's a great deal of expertise in this 
Committee and on the Senate Finance Committee.
    Mr. Crane. Well, again, I express my appreciation to all of 
you. Keep the faith, fight the good fight; we shall prevail. 
And I think we can solve this problem too.
    Thank you.
    Mr. Bunning. Thank you.
    Mr. Speaker, you say our goal should include the creation 
of a personal Social Security account and a system for the 
information age.
    How do you see Social Security unfolding in an information 
age, and how do you answer the critics that say, in a personal 
savings account that you use the market forces, what happens if 
the market is negative? In other words, if we have the late 
sixties, early 1970 market as these accounts are starting to be 
formed?
    Mr. Gingrich. Let me start and point out, Mr. Bunning, I 
appreciate your question; that what I am suggesting today is a 
very timid, very cautious approach, which simply says, create 
the Social Security Plus accounts with the surplus. Keep the 
entire current system as a safety net. So if the market 
tomorrow morning crashed and we had a zeroed out, you would 
still have the current safety net. From that standpoint, it is 
a very low risk system.
    Mr. Bunning. Excuse me. You're not suggesting that those on 
retirement or those that have already secured Social Security 
and are on it, would then have a Plus account on top of that?
    Mr. Gingrich. They could have a Plus account if they were 
FICA taxpayers. But again----
    Mr. Bunning. Only FICA tax.
    Mr. Gingrich [continuing]. That's something for this 
Committee to look at, and I'd like the Committee to think it 
through. But I don't know why you'd want to discriminate 
against FICA taxpayers who are over 65, as long as they're 
paying FICA tax.
    Mr. Bunning. Oh, I certainly wouldn't want to discriminate 
against--
    Mr. Gingrich. Right. So seniors would have their exact 
current system. Those who were working would get a Social 
Security Plus account; everybody else who's working and paying 
FICA tax gets a Social Security Plus account.
    But here is the other half of that answer. When I said an 
information age, virtually everybody in this room has credit 
cards. Virtually everybody in this room has used credit cards 
in foreign countries. Virtually everyone has seen a level of 
information handling that allows your credit card to be 
validated in real time while you're standing in a store 
overseas. You've then seen your credit card company capture all 
the data of all your purchases, even if you're in five 
different countries, organize them, and send them to your home 
address, along with a bill asking you to pay for them. Now 
that's the level of information handling outside the Federal 
Government, which is normal.
    Today we have a 1935 paper-based, bureaucratic, Social 
Security information system, which cannot tell you what taxes 
you paid, cannot tell you what interest you earned, cannot tell 
you what's in your account, and can't track you as an 
individual. It is a highly obsolete, precomputer, 
preinformation age model.
    Now I'm simply suggesting for the Commission to look at how 
you could design a personal account that followed you all your 
life, that handled all the information, that allowed you to 
earn 5, 6, or 7 percent a year. And I would suggest as a 
historian, that if you look at the historic long-term track 
record, the stock market average returns since 1920, including 
the Great Depression, are 7 percent a year. The third 
millennium generation is going to have a minus return; minus 
1.19 is one example, but it's going to be a minus.
    So the gap in compound interest: between paying into a 
system that has a negative return rate and paying into a system 
that has 7 percent average over time. So let's say you're 
unlucky. You end up with the generation where you only have 4 
percent a year or more. At 4 percent a year or more, you're 
still compounding out at about 2\1/2\ times the amount of money 
you get out of the current system.
    Now I'm not suggesting in any way that we take a big leap 
this year. This year we should only do two things: Establish 
Social Security Plus accounts which do not touch anything in 
the Social Security system, not a penny, doesn't change 
anything, it's all positive; it's all improvement; and second, 
have a commission to look at the current system and see whether 
or not over time we could make a transition.
    And you've held the hearings, you know more than anybody 
else here I think, about how many different countries are 
understanding this and how--Great Britain for example, Sweden. 
This is not just a Chilean model. There are lots of countries 
that are saying exactly as Mr. Stark said, the current 
demographic pattern of the industrial world will not survive 
massive retirements with longevity without significant reform.
    Mr. Bunning. Ms. Hieger, I want to ask, To what do you 
attribute the fact that your generation, and my kids, and my 
grandkids, have such a lack of confidence that the Social 
Security system will be there for them?
    Ms. Hieger. Well, I think that Social Security has been a 
very successful program in the past, but we understand the 
demographic situation and we understand that most of us can 
expect, as the Speaker said, negative returns from Social 
Security. It's a bad deal.
    We can expect upon retirement approximately 70 percent of 
our promised benefits. Many times we are told that we should be 
happy that we're getting that much, and that scares us.
    The average Social Security benefit in 1998 is $765 a 
month. If we cut that by 30 percent, that leaves only $535 a 
month. That's not much for the many people in this country who 
exist only on Social Security. We need more.
    And the last thing I think that creates the cynicism is 
that we have been looking for leadership on this issue, and we 
are just beginning to see it. This problem has been around, and 
we've known about it, and we don't see a lot of action, and we 
definitely want to see more of that to regain our confidence.
    Mr. Bunning. Thank you.
    Senator Dole, thank you for your testimony.
    Chairman  Archer. Ms. Kennelly.
    Ms. Kennelly. Thank you, Mr. Chairman. Regarding the 
discussion with the Speaker and Mr. Stark, I'd like to say for 
the record that there is a difference between the plan Mr. 
Gingrich is talking about and the plan that I and the President 
have discussed. We think it's more important to draw down the 
Federal debt and to really reduce debt for the future, as 
represented by this young woman who's appearing before us, and 
I thank her very much.
    I think this is a much more certain way of making sure we 
create new savings than to go immediately into small, private 
savings accounts. And I'd like to ask Ms. Hieger, Do you think 
it is better to keep the budget surplus to reduce the debt, 
rather than immediately getting into these individual accounts; 
that we really don't know how they will work out?
    Ms. Hieger. Last weekend I attended--sorry, the weekend 
before last, The Americans Discuss Social Security, 10-City 
Teleconference, and in general there was a lot of anger from 
the individuals participating in this; that the surpluses from 
Social Security are currently being used to finance the general 
budget. And I think people see that as money that belongs to 
Social Security, and they would like to see that set aside.
    It is also very important to reduce the long-term debt in 
this country. We realize these are future taxes that we're 
going to have to pay. In general, we would like you to tackle 
both problems.
    Ms. Kennelly. Yes, and I'd just like to mention that what 
we're really doing is a bookkeeping issue. We're reducing the 
amount of the debt by having a surplus, and it's not that we 
are spending to reduce that surplus; it's making our debt look 
smaller than it really is.
    But you do agree that we should hold back on this so-called 
surplus until we decide how we're going to save Social 
Security?
    Ms. Hieger. I would agree with that.
    Ms. Kennelly. How was the reception with that booklet? I 
read that booklet before the hearing, about the colleges 
competing to get involved in this dialog. What was the 
reception you found last weekend?
    Ms. Hieger. We've had over 30,000 hits on our website. Do 
you mean from the ADSS teleconference----
    Ms. Kennelly. Yes.
    Ms. Hieger [continuing]. Or from our Social Security 
challenge? They're two separate things.
    Ms. Kennelly. The challenge.
    Ms. Hieger. The challenge, we've had many hits on the 
website, as I said, and the deadline is not until April 28, and 
we are beginning to see proposals come in, but we expect we'll 
see many more in the next couple of weeks.
    Ms. Kennelly. Thank you. And thank you for your work toward 
this, because it is very important.
    Senator Dole, I remember when you had the 1983 Social 
Security Reform Commission, and I remember when the Commission 
didn't complete its recommendations, and it had to be extended 
twice by President Reagan. Once was January 15, and then again 
January 20, 1983.
    And then the Commission finally reached agreement, due to 
the yeoman's effort of you and others, and I well remember it, 
and I thank you very much. And at that time the Social Security 
Trust Fund had about 6 months left in it.
    We're trying to begin a dialog now. Mr. Bunning and I have 
had eight hearings. We've had a young woman who's gone out in 
the country, we've had the Pew Group being very, very active. 
We've had the AARP and the Concord Coalition being extremely 
active.
    What do you think it's going to take to bring us together 
in a bipartisan fashion to resolve this, without getting into 
what happened when you had the Commission, when there was an 
immediate crisis situation.
    Senator Dole. Well, no doubt about it, we had a gun at our 
head in 1983. Had we not acted, payments would have been 
delayed in July, so we had about a 6-month period. And then it 
was difficult, and we had a 16-member Commission. I think there 
were 7 Members of Congress out of the 15, as I recall, and the 
vote was finally 12 to 3.
    But you have 10 years I think before you have a real 
crisis. But it seems to me the one advantage of what the 
Chairman talks about is the fact this Committee is going to 
have the final jurisdiction, and I assume whoever's on the 
Commission will include Democrats and Republicans from this 
Committee and also from the Senate Finance Committee, which 
will be, I think, some considerable help to the other Members 
in both parties.
    But I'm a little concerned about having so much time. Ten 
years is a long time; why vote on it now? Let's wait until the 
next election. Let's wait until 2000. Well, let's wait until 
2004. And that's something we went through a number of times, 
and perhaps based on the experience of 1983 and the subsequent 
studies that have been made, and the commissions that have been 
appointed, this effort will be more helpful. I don't know for 
certain what will happen.
    Ms. Kennelly. Do you think we can resolve it without 
waiting for the crisis?
    Senator Dole. Pardon?
    Ms. Kennelly. Do you think we will be able to resolve it 
without waiting for the crisis, which often happens around 
here?
    Senator Dole. I hope so. I hope things have changed enough 
that you could do that. Certainly, there are people on this 
Committee who could sit down--Republicans, Democrats--and come 
up with a package I think would pass the House and pass the 
Senate. And I think the same is true on the Senate side. But 
there are some very--I'm only talking about process. I won't 
get into all the specifics of different plans, but I think it 
can be done.
    Ms. Kennelly. Thank you, Senator.
    Chairman Archer. Mr. Houghton.
    Mr. Houghton. Thank you, Mr. Chairman.
    Just one quick question of Senator Dole. But before I ask 
that question, I think it's a wonderful, timely issue that you 
bring up that we've got a problem. We've got the will to fix 
it. We've got creative financing that we can work with. And 
also we have this extraordinary surplus. I really appreciate 
what you're doing, Mr. Chairman, in bringing this to a fine 
point.
    Senator, you've heard the proposal of Social Security Plus 
by Mr. Gingrich. Do you think that does the thing that you were 
alluding to in terms of the final paragraph of your statement? 
You talk about personal responsibility and a variety of other 
things.
    Does that get at the things which you're most concerned 
with?
    Senator Dole. Well, it may. Again, I don't know if I want 
to comment on different pieces of legislation; they're plenty 
of them around. I may have a little different view than Newt 
has. But I think the important thing is that they are taking a 
look at how we can have this intergenerational security for 
both younger people and the seniors, who are already eligible 
or will be eligible in the next 10, 15, 20 years.
    I think there you make senior citizens nervous when you 
start talking about personal savings accounts. There's got to 
be a lot of education done, and maybe that's part--that's what 
the dialog group would do between now and next January, as I 
understand it; disseminate information. Let seniors know about 
the program. Let young people know about proposed programs. But 
I think it's a step in the right direction.
    Mr. Houghton. Thanks very much. Thank you, Mr. Chairman.
    Chairman Archer. Mr. McCrery.
    Mr. McCrery. Thank you, Mr. Chairman. Welcome, Senator 
Dole. It's nice to have you back with us.
    Ms. Hieger--is that how you pronounce your name?
    Ms. Hieger. That's correct.
    Mr. McCrery. OK, thanks.
    If we were able to construct a plan for Social Security 
that would allow people in your generation to establish an 
individual investment account and would guarantee you at least 
100 percent of the current Social Security benefit, and would 
likely allow you to receive more than the current Social 
Security benefit, would that be a plan you could sign on to?
    Ms. Hieger. I think we would definitely sign on to any plan 
that could do that.
    Mr. McCrery. And let me go further, make it even better. If 
we could come up with a plan that would do those things, and 
would not involve any increase in your payroll taxes, you'd 
like that too?
    Ms. Hieger. I'd like to see that plan.
    Mr. McCrery. Well, we're working on one. We're not quite 
there yet. But I think Mr. Chairman, what we have is a unique 
opportunity, a window in time, if you will, with the surplus 
that we are going to enjoy if all the projections are accurate 
for the next 10 years or so.
    It gives us a unique opportunity, Mr. Chairman, to provide 
a transition from the current Social Security system, which is 
basically a pay as you go, dependent on payroll taxes from the 
current working generation, to a system which relies more on 
investment in the private sector and builds on the dynamics of 
that investment, compounded interest, all those things that the 
Speaker talked about.
    And Mr. Chairman, contrary to our colleague, Ms. Kennelly, 
I think if we do nothing with the surplus but buy down the debt 
and in effect rely on government investment, rather than 
freeing that money for private investment, we are missing a 
huge opportunity. We ought to take advantage of this, not only 
for Ms. Hieger's sake, but for my two children's sake, and for 
future generations of Americans.
    I commend the Chairman, the Speaker, and others for not 
being afraid to think outside the box on this; look at how we 
can use the surplus in imaginative ways to get us to a system 
that Ms. Hieger can sign on to.
    Thank you, Mr. Chairman.
    Chairman Archer. Mr. Levin.
    Mr. Levin. There's going to be a hopefully bipartisan 
dialog on April 7--that's in less than a week--sponsored by 
AARP and the Concord Coalition in Kansas City, and then they're 
going to be three more.
    I'm hopeful that both parties will actively participate. I 
was going to ask the Speaker whether he might be there, and I 
hope some of you in the media will ask the Speaker if he's 
going to participate.
    And I don't know, Mr. Chairman, if you're planning on 
participating in any of these fora. They're going to be four of 
them, in addition to those sponsored by the Pew Foundation. And 
then the expectation is, after these four bipartisan hearings 
in the next months and the Pew-sponsored dialogs, the President 
intends to have a full-fledged session in December to see if we 
can work out a bipartisan approach on Social Security.
    And essentially what is being suggested here, is that we 
have a second mechanism put in place, that overlaps or competes 
with a process that has already begun. I'm afraid that can 
undermine the very hope that we can have a bipartisan approach 
here. I don't understand it. I guess a test will be the level 
of participation in the April 7 meeting and in these others.
    I hope, Senator Dole, that you'll use your prestige to try 
to help make these meetings work. You have among us, from me 
personally, the highest respect. You describe the need for a 
commission in 1983. It was embroiled in political controversy 
for months. The system moved closer to insolvency and prospect 
for a bipartisan consensus seemed remote.
    I don't know how that really fits exactly where we are 
today, and it would seem to me the prudent thing to do is to 
see in these next months whether the dialog can be meaningful, 
and then after the election whether a White House bipartisan 
session fails or not. If it fails, then we go to the next step.
    So, I don't know, Senator Dole, if you want to comment on 
that. You know from our personal relationship my respect for 
you. I'm just afraid setting up competing mechanisms sends the 
very opposite message of bipartisanship. I don't see how else 
people read this.
    Senator Dole. I think the one big difference of course is 
that Congress has no responsibility in the other--Concord and 
AARP. And as I recall back in the early eighties, when we knew 
we were going to have to face up to this issue sooner or later. 
We had Interfund--and we did everything we could to avoid 
facing up to it, and many people thought nothing's going to 
happen until the Year 2000. We had a number of groups then, and 
advisory councils and commissions were trying to be helpful, 
and they were helpful to some extent. But it wasn't until we 
got into this crisis stage that we knew if we didn't produce, 
it might be another extension of the Commission. And I think 
both parties then understood it would be a very difficult thing 
to go back home and say, well, we couldn't solve Social 
Security, so your July 1 check will arrive July 10, or 
whatever.
    So I think it's a different time, but hopefully better 
bipartisan spirit prevails now.
    Mr. Levin. So, the question is, Why not see if this effort 
can't work the next 7 or 8 months. The members of Concord are 
being invited to participate on a bipartisan basis in these 
AARP-Concord coalition sessions. It's up to us to make those 
work.
    Senator Dole. Well, I'll let the Committee make that 
judgment.
    Mr. Levin. OK, thank you.
    Senator Dole. Thank you, Senator.
    Chairman Archer. Mr. Ramstad.
    Mr. Ramstad. Thank you, Mr. Chairman. Thank you for 
initiating this important national dialog on the crucial issue 
of preserving Social Security. Nothing's more important to the 
American people, as it's been pointed out here today. And I 
share some of the concerns that have been raised.
    If ever a situation called for a bipartisan, pragmatic 
approach, it's the current situation involving the future of 
Social Security. I think we started on a good foot here today, 
and certainly appreciate the three witnesses here, all three 
very distinguished, very appropriate, representing the three 
generations.
    As the Speaker said, ``I support the President's proposal 
to save every penny of the surplus to preserve Social 
Security,'' and that certainly indicates a desire to work in a 
bipartisan, pragmatic way.
    I was intrigued, Ms. Hieger, by your proposal to put Social 
Security reform on a fast track, if you will. That is, we give 
fast track authority to Social Security reform. We take the 
consensus recommendation of this bipartisan commission, have an 
up or down vote, and depoliticize the issue as we did with 
respect to the Base Closure Commission.
    Senator Dole, what's your opinion of that recommendation by 
Ms. Hieger?
    Senator Dole. Well, I think on the surface, with all due 
respect, it might appear to be a remedy, but I don't think it 
will work. You couldn't extend the Base Closure Commission the 
last time around--you, the Congress. There's no enforcing 
mechanism enforcing the bill, that's one thing that you know 
immediately. But I'm not certain I would pursue that policy.
    I think if the Commission or the Dialogue Council, whatever 
dialog it may have, does its work well and has outstanding 
members on the Commission, and keep it out of politics as much 
as you can, it's going to have so much momentum when it comes 
into Congress, you're going to have a lot of bipartisan 
support. And if you don't have bipartisan support, it's not 
going to go anywhere, and you're going to wait, as I said, 
you've got 1 year to go or 6 months to go, or don't get the 
checks out on time, and then something will happen.
    I think some of the surplus, we ought to pay off the debt. 
We're paying about a $1 billion a day in interest, and that 
also affects the younger generation.
    Mr. Ramstad. Ms. Hieger, did you want to comment further on 
that idea?
    Ms. Hieger. I think our idea that we model it after the 
Base Closure Commission was just to expedite the entire 
process. One thing that this bill does have in it that we do 
like, that if the Commission does come about there's a 10-month 
deadline, and we feel that that's very quick, but we know that 
these things can get extended.
    Mr. Ramstad. Well, I have already begun this dialog back 
home by listening to my constituents. And the American people 
are smarter than many politicians give them credit. They 
understand that if we don't make some significant reform to 
Social Security, the trust fund will be insolvent by the year 
2029. They understand that when the first of my generation, the 
Speaker's generation, the so-called baby boomers, start 
collecting Social Security in another 10 years, that more 
people are going to be collecting than paying in through FICA 
taxes.
    The American people are going to hold us accountable and 
responsible whether or not we have an up or down vote, or we 
bring it into the legislative process, in the normal course of 
the process. So, I appreciate again the input from the three 
witnesses today, and would yield back the balance of my time. I 
look forward to working with you in the future.
    Chairman Archer. Ms. Dunn.
    Ms. Dunn. Thank you very much, Mr. Chairman, and I commend 
the Chairman for calling this hearing today. I think it's very 
important that we begin this public first step in the Congress 
to debating the important issues surrounding the continuation 
and the protection of Social Security. I, as Mr. Ramstad has 
done, have started this debate in my district and have held 
several townhall meetings on it. And, in fact, after joining 
Mr. Crane on his trip to Chile, did invite and was lucky enough 
to secure Jose Pinera, the former labor minister, brought him 
to Seattle. And we were able to put him in a situation with 
reporters and with young people who are part of my youth 
congress, and with other members of our community to talk about 
Chile's remarkable success. And so many of us are learning 
about the Social Security issue with that as a premise, and I 
think it's a very exciting plan.
    What I have discovered, Mr. Chairman, is that it may be 
very good to start a national dialog but there are some first 
steps that have to be taken and we must assure, first of all, 
that all the participants in this dialog are informed and in a 
position to have a meaningful debate through information. So I 
just want to bring to your attention the fact that today I 
introduced the Social Security Sunshine Act which I think will 
contribute to a very strong, genuine, and informed dialog about 
Social Security.
    As we look at the ways we can personalize and modernize the 
current system, we've got to include those who are most 
affected by the program: the current beneficiaries. And so the 
legislation I'm proposing will supplement the Chairman's 
legislation by helping Americans to understand the problem that 
they system faces, and it will help to design a long-range 
program to modernize Social Security.
    The legislation, the Sunshine Act, is much like a pilot 
program that I introduced into law in the 104th Congress. Two 
experiments are being conducted right now on groups of 250 
people, and the results and analysis of that experimental 
program will be presented by the Commissioner, and the survey 
responses that we receive back from those folks will come to 
Congress very soon.
    The point of it is to assist people, and seniors in 
particular, to better understand their contributions and the 
benefits under the Social Security system. What I've discovered 
through townhall meetings, in talking with seniors in my 
district, is that it's very ironic that other retirement 
benefit programs like mutual funds or IRAs do provide this sort 
of information in writing on a quarterly basis, and many 
provide access by 24-hour-a-day telephone lines.
    We will request this information be given annually to 
people who are eligible for Social Security: Number one, the 
total wages and self-employment income the individual has 
earned; number two, the total contributions of the employer, 
the employee, and self-employment from wages; number three, the 
total amount paid to the individual as benefits; number four, 
an explanation of this statement in terms that are easy to 
understand.
    So, by bringing this to your attention today, Mr. Chairman, 
I would like to request that as the Committee moves forward 
with consideration of your bill, you consider inclusion of the 
Social Security Sunshine Act into your base bill.
    Thank you, Mr. Chairman.
    Chairman Archer. Thank you, Ms. Dunn. Mr. McNulty. Is he 
here?
    Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman. I'll be very brief. I 
just want to thank the two panelists who appeared for the 
presentation. Ms. Hieger, as a father of four, I hear your 
echoes at home quite often, too, that my children are very 
frustrated with the fact that we take money out of their 
paychecks and bring it to Washington for a program that they're 
very doubtful about. They feel if they had those funds, they 
could invest them themselves. Of course, I often wonder if they 
would have the discipline to do that, and that's one of the 
reasons we have such a program.
    But it is a program that has to be addressed. We want to 
ensure that our seniors today, and those of us who are going 
into the system in the very near future, will receive our 
benefits. I think that if we put in place a program that will 
allow the compounded interest to be accrued to your account, 
you will be far ahead when you reach the age of retirement.
    I would hope we would be able to put together a program to 
enhance those benefits to a point, for your age, that would 
also allow us to reduce the payroll tax on you as time goes, so 
that you have more funds to direct in your way rather than 
through our way.
    Thanks again for coming. Senator Dole, it's always a 
pleasure to be in your company.
    Thank you, Mr. Chairman.
    Chairman Archer. Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. Actually, before I 
ask any questions, if I could just add a few comments with 
regard to Chile.
    Everyone seems to focus on the example of Chile and making 
a comparison with the United States. I think we should not 
forget that 10 or 15 years ago, this was a dictatorship and an 
authoritarian government that provided few rights to its 
workers, let alone benefits including private pension 
opportunities. And chances are that if there were pension plans 
there in Chile for some of its workers, they were either not 
solvent or not funded for those who reached retirement age.
    We should also remember that the demographics of Chile are 
much different from the demographics of this country. They have 
a much younger population that has not had this social contract 
with Social Security as we have had here. We have a baby boomer 
generation that is getting very close to retirement age which 
must be addressed. Chile does not have that situation, where it 
must deal with a large retirement population.
    If I could ask--and it's Hieger, is that correct?
    Ms. Hieger. That's correct.
    Mr. Becerra. A quick question for you. You mentioned, and I 
read with some humor part of your testimony, where you mention 
in regard to your discussion of the Dialog Council, the 
overseeing body for this legislation, that, if I'm quoting 
correctly, it says, ``If this panel is comprised exclusively of 
white males over the age of 50, it will have great difficulty 
gaining the support of the majority of the American people who 
do not fit this category.''
    Would you urge that the Dialog Council be as reflective as 
possible of the American people that you mention?
    Ms. Hieger. Well, I believe the way that the Dialog Council 
is set up is that is reflective of that. It's the expert panel, 
the bipartisan panel, that would come up with the actual 
reform, that only mandates that employees be represented and 
employers be represented by one member each. And we want that 
to have this intergenerational diversity as well.
    Mr. Becerra. What about some of the other demographics of 
the country, for example, male, female: the majority of this 
country is female. Too often, as you mention, white male over 
50, we don't find in these bodies that get to make decisions 
that we have a representative sample of the population, whether 
female or in the case of ethnic or racial minorities. Is that 
something that would be important to have in any body that 
makes decisions that affect all of America?
    Ms. Hieger. I think it's something that should be 
considered. I think what you're saying is accurate. These 
groups don't tend to be represented on groups like this.
    Mr. Becerra. And I'm also disappointed the Speaker is not 
here, but perhaps I could ask both Senator Dole and you, Ms. 
Hieger, this question: We are right now in the process today of 
debating legislation on the floor of the House that deals with 
authorizing moneys for all of our transportation projects 
nationwide, whether it's a highway or a mass transit system on 
rail, or it's busses. That proposal, it's H.R. 2400, proposes 
to spend about $218 billion over the next 5 or 6 years for 
transportation projects. That's about $26 billion over what the 
balanced budget deal of last year said we should provide for 
that type of spending, highway and mass transit spending. So 
it's above the cap set by the balanced budget deal.
    We know we've been told there will be a budget surplus of 
about $8 or 9 billion for this year. Would you recommend that 
Members of Congress support legislation that would overspend by 
$26 billion in the area of transportation rather than, as the 
Speaker had mentioned, and others had mentioned, we preserve 
that budget surplus for purposes of Social Security?
    Ms. Hieger. I would rather not comment on that legislation, 
I'm not familiar enough with it. But I do think one of the 
things that we worry about in reforming Social Security is that 
we don't come up with a plan that gives every district in the 
country something so that we end up with a plan that doesn't 
fix the system. We have to be very careful about that, and get 
a plan that is fair to everyone and is cost effective.
    Mr. Becerra. Senator, I don't know if you wish to comment 
on that question.
    Senator Dole. No, I think I'll limit my comments to the 
process here. I'd get into a debate with all my colleagues, but 
it's a good question. [Laughter.]
    Mr. Becerra. One last question. The legislation creates 
these councils and commissions, but it doesn't require that 
they live under the standards that most public bodies would 
live under which require full disclosure and openness. Would 
you recommend that whatever panels are created, that they live 
under the same rules that require openness and disclosure, that 
we currently have for most bodies that provide public input?
    Senator Dole. I would.
    Mr. Becerra. I'm sorry, Senator, I don't think your 
comments were captured by the mike.
    Senator Dole. I said I would. I don't know what--I read the 
bill, but I don't know what disclosure you're talking about, 
but----
    Mr. Becerra. The Federal Advisory Committee Act requires 
that meetings be open to the public, and the stated purpose of 
the council in this legislation is to encourage the American 
public in understanding the current Social Security Programs 
and to generate comments----
    Senator Dole. I think you need to be a little careful there 
because I can recall back in 1983 when we got down to the nitty 
gritty, and we had everyone else in the room, we never would 
have gotten it done. I think that's an exception, obviously, if 
you get into the second phase as I understand H.R. 3546 does.
    Mr. Becerra. Thank you.
    Chairman Archer. The gentleman's time has expired.
    Mr. Portman.
    I would like very much to release this panel when we go to 
vote so that they don't have to stick around, and I hope that 
will be acceptable to the Members of the Committee, but we will 
return after the vote. And the Chair would announce also that I 
would encourage Members to get a bite of lunch, and we'll come 
back here at 12:15 with the next panel, after Mr. Portman 
completes his inquiry.
    Mr. Portman. Thank you, Mr. Chairman. We're down to the 
hard core now, and not much time left. I want to thank you both 
for being here and for the Speaker. I think this is very 
exciting. This is really the next step in the process. I'm on 
the Social Security Subcommittee, and we've heard from Third 
Millennium and a lot of other good outside groups, as well as 
from Members of Congress.
    This takes it to the Full Committee level, and now we have 
a specific proposal for a process to actually come up with a 
bipartisan and fair solution to, as Senator Dole said earlier, 
one of the most pressing problems in our Nation. One that you 
indicated, of your long and distinguished career, you take 
great pride in working on, from your 1983 experience. I've got 
a couple of specific questions, but let me also say, in 
response to Sandy Levin's question, and Mr. Levin is not here 
now, there are a lot of groups out there who are trying to 
encourage dialog on this. I have in my district next month, 
what I think is going to be a very important exercise--it's 
called an ``Exercise in Hard Choices,'' and the Third 
Millennium is involved in it, as is AARP, as is the Concord 
Coalition, and a number of other groups. I understand that 
they're having 10 town meetings around the country, and I am 
participating.
    I encourage other Members to do that. I think most of them 
are, as we've heard today. And I think, the more the merrier. 
Let's encourage all this. But it's different than the process 
that Senator Dole talked about in 1983 which is actually having 
Members of Congress involved and drafting legislation.
    I just went through this process with the IRS Commission, 
as you know, Senator Dole, and in that instance we had 17 
Commissioners, 4 of whom were Members of Congress, and we often 
said that was good because we had real world experience and not 
just politicians. But on the other hand, it was helpful, I 
think, to have the four Members of Congress to be able to push 
the process through.
    We actually passed legislation recommended by the 
Commission in the House within 3 or 4 months. It's now in the 
Senate and probably will be enacted into law within the next 
month or so. So my question to you is, having looked at the 
Dialog Council and the bipartisan panel, and the legislation 
that's proposed, it would imply, perhaps, that there might not 
be Members of Congress. I think it would be possible on the 
bipartisan panel to have some Members of Congress, although 
it's not stated. Do you think it's important to have some 
Members of Congress involved in the process?
    Senator Dole. No doubt about it. That's the difference 
between this and all the other groups that have been mentioned 
here. You've got Members of Congress who are going to be 
responsible to their colleagues on both sides of the aisle, 
there are going to be Members of the Committees of 
jurisdiction. I think it's very important.
    Mr. Portman. OK. Ms. Hieger, do you have any thoughts on 
that, this would be in regard to the bipartisan panel, which I 
think is limited under the legislation to eight members. I know 
you earlier indicated you had seen the draft of legislation and 
that you would support the general concept. Do you think there 
should be Members represented on that panel?
    Ms. Hieger. Yes, I do. I think that holds the Members 
accountable and it gets Congress involved in the reform 
process, and I think that's very important at this stage.
    Mr. Portman. OK, thank you. The other quick question I 
would have is with regard to Ms. Hieger's suggestion that we 
follow the base closure model where it's an up or down vote, 
which worked well with regard to base closure, in my view, and 
my question is whether that would apply to this situation. I'm 
not sure it would, but I wonder, Senator Dole, given your 
experience in 1983, if you would have some thoughts on that.
    Senator Dole. I think I'd want to think about that very 
carefully, but it just seemed to me, based on my experience, 
there are probably--when you cast votes on Medicare, Social 
Security, or pay raises, they're about the most sensitive votes 
you can cast around here, and that's why I think this 
bipartisan effort by the Chairman and others is off on the 
right foot. But I'm not certain I would go as far as Melissa 
does on the base closing. It might work there, it might work 
with certain other things that I've recommended over the years, 
but I'm not certain about Social Security.
    Mr. Portman. You think having the Ways and Means Committee 
and the Finance Committee and the House and Senate more 
involved might be helpful to come up with a solution?
    Senator Dole. They have to be involved. It would be very 
helpful. It doesn't mean you're going to have success. It may 
not work. You may have to go back and extend it again. But it 
seems to me it has a greater possibility of working now than it 
did in 1983.
    Mr. Portman. Well, again, thanks very much for the input. 
And, again, I think this is an exciting development, and we're 
moving forward. I appreciate your input and look forward to 
continuing to work with both of you.
    Thank you, Mr. Chairman.
    Chairman Archer. Ms. Thurman is recognized for inquiry. At 
the conclusion of her inquiry, the Committee will stand in 
recess until 12:20, for the next panel.
    Ms. Thurman. Mr. Chairman, I appreciate that and I am 
particularly pleased to have both of you here. Senator, let me 
commend you for the prior work you did on the Commission.
    I want to make a statement here, very briefly. In the 
district that I represent, I have the second oldest population 
in the State of Florida, and the second poorest district, so 
you can see the makeup and many of these live month to month on 
their Social Security.
    And just a statement that I know is going to be made in the 
next, or one of the next panels, by AARP, that says, Social 
Security faces a long-term challenge but is not a crisis. I 
think to start this debate in this country, we should not put 
fear into people, but we should let them understand that we are 
looking at a time of 2029, potentially. And even in that, we're 
looking at the fact that incoming revenue, at this point, will 
finance three out of four of our benefit dollars.
    But I do think this dialog has to take place. I think we've 
been given an opportunity because we have been given long term. 
But I do not want to see this debate turn into somebody being 
scared or to think about people there today are worried that 
tomorrow that safety net might not be available to them.
    And I would say, also, the reason I left is because I was 
talking to the chancellor of my university system in Florida. I 
also have the University of Florida. I'm going to make sure 
they get this pamphlet, and see if we can't help you get some 
ideas for some of these things.
    Senator Dole. I agree with your statement, we shouldn't 
frighten people. We have time now to do this in a deliberate 
way and get it done, hopefully in a bipartisan way.
    Thank you.
    Ms. Thurman. And I thank you both.
    [Recess.]
    Chairman Shaw [presiding]. We're going to go ahead and 
start the hearing. The Chairman will be back shortly. For our 
next panel, we've got Jim Kolbe, a Member from Arizona. He'll 
be joined by Jerry Nadler, a Member from New York, and Earl 
Pomeroy, a Member from North Dakota.
    Mr. Kolbe is recognized. We, of course, have your full 
statement, as you're well aware, which will be made part of the 
record. We invite you to summarize in any way you see fit.

STATEMENT OF HON. JIM KOLBE, A REPRESENTATIVE IN CONGRESS FROM 
THE STATE OF ARIZONA; AND COCHAIR, HOUSE PUBLIC PENSION REFORM 
                             CAUCUS

    Mr. Kolbe. Thank you, Mr. Chairman, and, yes, I will 
summarize my statement since the full statement is in the 
record. I want to thank you, Chairman Archer, and the other 
Members of this Committee, for having this very important 
hearing, and also for the work that several Members of the 
Committee are doing on the Social Security front.
    There's no doubt that Social Security has been, and 
continues to be, one of America's most successful social 
programs. I think we look to that as the principle reason that 
poverty among the elderly has declined dramatically. However, 
it's time to face the underlying challenge, the fiscal 
challenge to Social Security. The United States, like a lot of 
other nations, is about to embark on an unprecedented 
demographic transformation which is going to place a really 
heavy burden on the Federal Government to pay Social Security 
benefits.
    Looking at this 3 years ago, Charlie Stenholm and I 
cofounded the House Public Pension Reform Caucus. Together, 
with now more than 70 other Members, almost equally split 
between both parties, we spent the last 3 years researching, 
discussing, examining problems that plague the Social Security 
Program, and looking at various options for reform of it. We 
know, as anybody in this body knows, that bipartisanship is the 
only path that's going to lead to a resolution of the Social 
Security challenges that are before us.
    I'm here today to talk about an idea of using a bipartisan 
panel or commission to develop a Social Security reform 
proposal. Before I comment on the desirability of a commission 
to formulate a Social Security reform proposal, let me briefly 
highlight some of the work that has already been done in the 
area of Social Security.
    The President's participation in Social Security reform 
debate in his State of the Union announcement has given the 
issue a very high, national profile, but it's certainly not a 
new one. We didn't just figure out in 1998 that baby boomers 
are going to start to retire in the year 2012.
    A lot of Members of Congress, Democrats and Republicans 
alike, have helped to lay the groundwork for reform. They've 
begun the discussion with the American people. They've made it 
possible for the President and other Members of Congress to 
discuss what has been always called, affectionately, the third 
rail of politics.
    There's a lot of different information in my statement. I 
have a list of the various commissions that have worked in the 
past on the Social Security issue, but let just take a moment 
to highlight a couple of those and the key things they have 
done. First there was, in 1994, the President's Bipartisan 
Commission on Entitlement and Tax Reform, cochaired by Senators 
Bob Kerry and John Danforth. And it brought to light, certainly 
made the public aware, and I think Members of Congress aware 
for the first time, of the long-range, the alarming long-range 
budget impact of entitlement programs as they are currently 
designed under law.
    Then in 1994 to 1996, we have the Advisory Council on 
Social Security. It broke ground in a number of ways, with the 
completion of their package. It dealt not only with the long-
term financing of the program, but with equity and adequacy of 
rates of return between generations. Second, the council 
included Social Security reform, three reform proposals, rather 
than one. Some criticized it for not proposing one unified 
reform proposal, but I think it made a major step forward by 
being the first to talk about using the marketplace to help 
solve some of the problems, and creating the national dialog. 
Even though they didn't come, as I said, to one uniform 
proposal, all three of the proposals they had, each utilizes 
the private market in some way to help ensure the long-term 
solvency of the program, provide a more equitable rate of 
return across generations.
    So the groundwork is being laid. The public is ready, the 
Congress, I think, the public is ready to get--go forward with 
this.
    Last, we have the work of the Center for Strategic and 
International Studies National Commission on Retirement Policy. 
The NCRP is a bipartisan, bicameral, public-private sector 
Commission, cochaired by my self, Congressman Stenholm, 
Senators Judd Gregg and John Breaux. It's a Commission that is 
special and includes representation from both the public and 
private sectors, including such places as IBM, Fidelity, Paine-
Webber, Exxon, the World Bank, the Urban Institute, and the 
Third Millennium. We've had a lot of hearings, and we expect to 
have a comprehensive recommendation for reforms in May 1998.
    Why do I mention all of these Commissions? It's not to 
suggest that the bipartisan panel that the Speaker spoke about 
earlier today doesn't have merit. I strongly believe there is a 
need to develop a mechanism for Members of Congress to join 
together to develop comprehensive reform legislation. But the 
key word in this statement is Congress. We don't need another 
expert, external commission operating outside of the realities 
of the legislative process, and that's why Congressman Stenholm 
and I have introduced legislation which would create a 
supercommittee.
    It would establish the process for elected Representatives 
in the Congress to review all of these reform proposals, 
develop a consensus that can be enacted into law. It's 
important that the supercommittee is like a commission in that 
it will develop a bipartisan, bicameral Social Security reform 
proposal. If we're going to create another commission, we ought 
not to begin at ground zero. The expert groups of the past 
years have diagnosed the problems, they've offered solutions. 
We need to look at these options and continue to move forward. 
There are a lot of other grassroots programs that are out 
there.
    And my time is up, Mr. Chairman, and I won't go into those. 
But I think it's worth noting there is a tremendous effort 
being spent at the grassroots level, just let me mention one. 
The Pew Charitable Trust is spending $12.5 million this year to 
educate the American public on the problem of Social Security. 
That's a good deal of money that can be spent in this area.
    I think we have the will, I think we have the tools to move 
ahead with Social Security reform. I don't think we should 
delay it. I hope we will do so. Saving Social Security first 
should not be rhetoric; it has to be our plan of action, and we 
should put that plan into place now.
    Thank you, Mr. Chairman.
    [The prepared statement and attachments follow:]

Statement of Hon. Jim Kolbe, a Representative in Congress from the 
State of Arizona; and Cochair, House Public Pension Reform Caucus

    Mr. Chairman, and members of the Committee, I am pleased to 
be here this morning to discuss the very important issue of 
Social Security reform.

                         Demographic Realities:

    It's time to face the facts underlying Social Security's 
fiscal challenge. The United States, like so many other 
nations, is about to embark on an unprecedented demographic 
transformation. Social Security beneficiaries are destined to 
grow five times faster than workers. As Baby Boomers begin to 
retire in 2010, this country will have a greater proportion of 
elderly citizens than it ever has in the past.
    Exacerbating the situation is the fact we are now living a 
great deal longer than our grandparents. The framers of the 
Social Security system designed it with contemporary life spans 
in mind. When created in 1935, 65 was the benchmark retirement 
age. However, the average life expectancy of a child born in 
that year was only 64. Today, men and women are living well 
into their late 70s and early 80s.
    We must be certain that we do not take our eye off the end 
goal of short-term gains. Social Security is one of America's 
most successful social programs. It has been a principal reason 
that elderly poverty has declined dramatically. The Social 
Security program is credited with reducing the proportion of 
senior households with incomes at or below poverty level to 13 
percent.
    Social Security deserves to be saved. The data and 
statistics generated both in the private sector and the 
Administration show that the program is headed toward 
bankruptcy. Knowing the facts is the only way to cut through 
the half-truths and distortions that stifle change. The Social 
Security and Medicare Board of Trustees reported that the 
Social Security trust fund will be bankrupt in the year 2029. 
And, even more alarming, in 2012 the government will begin 
paying out more in benefits than is collected in payroll taxes.
    In 2012, Members of Congress will have to begin to make the 
hard choices in order to continue paying retirees' benefits. 
Some of the hard choices will be to increase workers' payroll 
taxes, decrease retirees' benefits, or force deeper cuts in 
discretionary spending on other federal programs including, but 
not limited to, defense, medical research, park maintenance, 
and education in order to redeem the Treasury bonds held by the 
Social Security Trust Fund.
    But, we do not have to wait until 2012! Rather, we can be 
bold and proactive and look for ways to reform Social Security 
today. Currently, we have a strong economy, the Social Security 
trust fund is in surplus, and the American people understand 
that the program will begin to experience problems in the very 
near future.
    A poll conducted by the Washington Post and ABC News found 
that 88 percent of Americans polled believe that Social 
Security stability should be a major goal of the government. 
Social Security stability topped the agenda for Americans 
nudging the fight against crime and drugs into the 2nd priority 
slot.

                     Public Pension Reform Caucus:

    If we do nothing now we will leave the hard work for future 
generations to sort out. Due to the many changes in Social 
Security benefits since its inception and the demographic 
realities that face our country, today and tomorrow's workers 
will pay for our inability to act today. We can do something 
now.
    For the past three years, as co-chair of the House Public 
Pension Reform Caucus, I have worked with my Democratic co-
chair, Congressman Stenholm, and the 70 other Public Pension 
Reform Caucus members to discuss, research, and examine the 
problems plaguing the Social Security program and the various 
options for reform. The interesting fact about the Public 
Pension Reform Caucus is that membership is divided evenly 
amongst Democrats and Republicans and includes representation 
from all over the political spectrum within both parties. We 
recognize that bi-partisanship is the only path that will lead 
us to resolution of the Social Security challenges will face.
    I welcome the President's participation in the Social 
Security reform debate and am pleased that his State of the 
Union announcement has given this issue a national profile. 
However, I would like to congratulate all the members of 
Congress who have been a part of this debate for many years. 
Members that have had the courage to discuss this issue at home 
with their constituents; and made it possible for the President 
and other members of Congress to discuss the third rail of 
politics. These leaders include: Senators Bob Kerrey, Patrick 
Moynihan, Judd Gregg and John Breaux, Congressmen John Porter, 
Mark Sanford, Tom Barrett, Nick Smith, my PPRC co-chair Charlie 
Stenholm, and all 70 PPRC members.
    A number of ideas have been developed on how best to 
proceed with the Social Security reform discussion. Some have 
advocated saving budget surpluses for Social Security: thus, 
creating yet another trust fund. Others advocate the creation 
of a Commission or Bi-partisan panel--the focus of today's 
hearing. I believe the Kolbe/Stenholm Super Committee 
legislation is the route we should take.

                              Commissions:

    It is important to note that a lot of work has already been 
done to help set the stage for Social Security reform. The 
legislative process is moving in the direction of reform. Many 
of the previously mentioned members of Congress have already 
introduced comprehensive Social Security reform legislation. 
For the review of the Committee, attached is a complete list of 
these Social Security reform bills--Attachment A: Social 
Security Reform Legislation.
    Additionally, a number of past commissions have also begun 
to set the stage for Social Security reform. These commissions 
have explored the long-range budget impact of entitlement 
programs, the financial solvency of the Social Security trust 
fund, the equity and adequacy of Social Security benefits 
across generations, and have developed various Social Security 
reform solutions. Attached is a brief listing of the past 
commissions that have worked on the Social Security issue--
Attachment B: Social Security Reform Policy Commissions.

Bi-partisan Commission on Entitlement and Tax Reform:

    The President's 1994 Bi-partisan Commission on Entitlement 
and Tax Reform, co-chaired by Senators Bob Kerrey and John 
Danforth, brought to light the alarming long-range budget 
impact of entitlement programs as designed under current law.
    The Commission found that the long-term entitlement 
problems hinge on the impending retirement of the 76 million 
Baby Boomers beginning around 2010. The retirement of the baby 
boom population will place an enormous strain on the federal 
government's ability to pay 100% of retirees benefits. 
Currently, the Social Security program accounts for nearly 22% 
of federal expenditures. In 2010, when the Baby Boom generation 
begins to retire the cost of the Social Security program is 
projected to balloon enormously.

Advisory Council on Social Security:

    While the Bi-partisan Commission on Entitlement and Tax 
Reform was defining the impact of the baby boom generation's 
retirement on the federal government, the President's 1994-1996 
Advisory Council on Social Security was examining the long-
range financial status of the Social Security program, and 
making reform recommendations which took into consideration 
equity and adequacy of benefits between generations.
    The Advisory Council broke ground in a number of ways with 
completion of their package. First, the Council dealt with not 
only the long-term financing of the program but the equity and 
adequacy of rates of return between generations. Second, the 
Council included three Social Security reform proposals rather 
than one. Some criticized the Advisory Council for not 
proposing one unified reform proposal; however, I was pleased 
with the package since it took a meaningful first step to 
stimulate a national dialogue on the issue of Social Security.
    Finally, it is important to note that although the 
Commission was unable to issue a unified reform proposal the 
one common element in all three proposals is that each plan 
utilizes the private market to help ensure the long-term 
solvency of the program and provide a more equitable rate of 
return across generations.

Center for Strategic & International Studies: National 
Commission on Retirement Policy

    In 1997, the Center for Strategic and International Studies 
convened the National Commission on Retirement Policy. The NCRP 
is bi-partisan bi-cameral public/private sector Commission 
which is co-chaired by myself, Congressman Stenholm, Senators 
Judd Gregg and John Breaux. Outside expert Commission members 
include representation from the following organizations, The 
Urban Institute, EBRI, IBM, Fidelity, Paine Webber, EXXON, and 
the World Bank, to name a few. The Commission has conducted 
hearings on the various reform proposals and will complete its 
work on a bi-partisan solution to the problems plaguing our 
Social Security program in May, 1998. The Commission will also 
be conducting education forums throughout the country over the 
next year.
    Why do I mention all of these Commissions? It is not to 
suggest that the Bi-partisan panel concept does not have merit. 
I strongly believe there is a need to develop a mechanism for 
members of Congress to join together and develop comprehensive 
Social Security reform legislation. The key word in this 
statement is Congress. We do not need still another expert, 
external commission operating outside of the realities of the 
legislative process developing yet another list of 
recommendations. What we do need is movement toward actual 
legislation which can be passed by Congress and signed into 
law.

Super Committee Legislation:

    Congressman Charlie Stenholm and I have introduced 
legislation which will create a bi-partisan bi-cameral Super 
Committee. The Super Committee will establish the process for 
the elected Representatives in Congress to review all of the 
Social Security reform proposals and develop a consensus 
proposal that can be enacted into law. By establishing the 
framework necessary to analyze the numerous Social Security 
reform recommendations previously proposed, we can ensure that 
Congress will not delay in reforming Social Security.
    It is time for Congress to step up to the plate and take 
the next important step and formulate Social Security reform 
legislation. Specifically, the ``Super Committee'' will look at 
the Advisory Council proposals, the CSIS Commission work, other 
members legislation, and conduct hearings on other issues to 
help formulate a solution that will ensure the most viable 
Social Security program for the American people.
    The ``Super Committee'' will include 16 House members and 
16 Senators and it will be divided evenly between Republicans 
and Democrats. It is important to note, like a Commission, the 
Super committee will develop Social Security reform 
recommendations, but in the final analysis the Committees of 
jurisdiction would have final review of the legislation. After 
completion of the legislation, it would be referred to all 
House and Senate Committees with jurisdiction over the Social 
Security and then brought to the floor for consideration.
    We do not need to begin at ground zero, again. The expert 
groups of the past several years have diagnosed the problems 
facing Social Security and many of these groups have also 
offered options to reform these problems. We need to look at 
these reform options and continue to move forward. During a 
recent Senate Budget Committee hearing, Alan Greenspan, the 
chairman of the 1986 Greenspan Commission on Social Security 
recognized the work of these groups, and stated, ``that we 
don't start at square one. We are far beyond square one at this 
point.''
    If we are planning to move forward with a Commission or Bi-
partisan panel we must make certain that it does not take us a 
step back. Members of Congress were elected to make tough 
choices. Our constituents expect their elected representatives 
to make the decisions on changes to a program of this 
importance in their lives.

                          Grassroots Campaign:

    There has also been a call for a national campaign which 
would devise methods of informing and engaging Americans--from 
all walks of life--and invite them to assist as members of 
Congress begin to formulate a Social Security reform proposal. 
However, it is important to note that many grassroots 
organizations have already begun an intense national campaign. 
Please review attachment C which outlines all of the grassroots 
organizations--Attachment C: Social Security Reform Grassroots 
Activities.
    I would like to mention one of these organizations. The Pew 
Foundation's Americans Discuss Social Security is an 
unprecedented nationwide initiative to advance public 
understanding of Social Security and engage Americans to 
participate more actively in determining its future. The Pew 
Charitable Trust grant of $12.5 million has created this two-
year non-partisan effort. It will use a series of forums and 
round tables in all 50 states designed to create a national 
conversation about the future of Social Security and provide a 
framework in which millions of citizens from all walks of life 
can help America's policy makers resolve this issue.
    The first ADSS event was a huge success with over 1,200 
citizens participating in an interactive video teleconference 
linking citizens in 10 cities throughout the country. ADSS is 
already working on their next educational series. ADSS will 
host five citizen engagement forums to give 500 to 700 citizens 
in each location the opportunity to engage in an informed 
discussion about the future of Social Security. One of these 
events will be in Phoenix, Arizona which neighbors my district, 
and I intend to participate. ADSS will not stop with these five 
forums; it is their strategy to convene an educational forum in 
every state during this two-year campaign. Please review 
attachment D, which provides further details on the ADSS 
campaign-- Attachment D Americans Discuss Social Security.

Kolbe Task Force on Retirement Savings:

    Members of Congress can also develop their own Social 
Security reform dialogue in their districts. Recently, I have 
convened a group of 30 Tucsonans to participate in the Kolbe 
Task Force on Retirement Savings. The Task Force will meet 
quarterly and will coordinate Social Security reform 
discussions and information exchanges in conjunction with 
National Social Security events such as those convened by ADSS 
and the Concord and AARP forums.
    Specifically, the Task Force will: assist in coordinating 
education campaigns in Congressional District 5 in conjunction 
with national forums; evaluate various Social Security reform 
options; disseminate information regarding retirement savings 
to Tucsonans; and share information with peers and report 
information to the Task Force.

                              Conclusion:

    There is no doubt that we need to develop a campaign to 
engage the American people in the Social Security reform 
discussion; however, we should not repeat work that is already 
being done. We should work with existing educational efforts 
that prove effective in the communities. And, we need to give 
members of Congress the information necessary to discuss this 
information at home with their constituents. Each Member of 
Congress can and should develop task forces in their districts 
to engage their constituents in this discussion.
    Mr. Chairman, the last point I would like to make is to 
urge Congress to move ahead with Social Security reform. If we 
convene a panel or create a national campaign, we must do so 
today. We cannot and should not delay reform. Saving Social 
Security should not be rhetoric, we must put the mechanisms in 
place to truly save Social Security first.
    Let me reiterate; reform must happen today. Democrats and 
Republicans have both stated the need to reform Social Security 
today rather than tomorrow. In a letter from the Bi-partisan 
Commission on Entitlement and Tax Reform co-chairs, Senators 
Kerrey and Danforth stated ``America is at a fiscal 
crossroads--if we act, we can help ensure continued growth and 
prosperity, but if we fail to act, we threaten the financial 
future of our children and our Nation.''
    And, although the Advisory Council on Social Security was 
unable to devise a unified Social Security reform proposal, in 
a hearing before the Ways and Means Social Security 
Subcommittee last year, the authors of the three Council 
options concurred on one point: reform is needed sooner rather 
than later. Ignoring the impending Social Security problems 
will harm the American people. If we delay reform we shorten 
the time needed by the American people to accumulate savings 
and adjust their plans for retirement. Any changes should be 
made while the baby boomer generation is still in the work 
force and have time to make adjustments.
      

                                


   Attachment A.--Social Security Reform Legislation, Public Pension 
   Reform Caucus, Co-Chairs Congressmen Jim Kolbe & Charles Stenholm

    104th Congress--Senators Alan Simpson & Bob Kerrey--S. 
824--The Personal Investment Plan Act of 1995--Would allow 
taxpayers to reduce their Social Security payroll tax payments 
by 2 percentage points and direct this money into a Personal 
Investment Plan (PIP) of their own choice. Workers who choose 
this option would have their future benefits reduced by a 
corresponding amount, but this reduction would be offset with 
earnings form their PIP.
    1994-1995 Advisory Council on Social Security--Option One--
Maintenance of Benefits: Maintains benefits and increases 
revenues--increase benefit taxation, expand coverage, and 
increase taxes in distant future. Also, require government to 
begin investing large portion (35%-40%) of trust fund assets in 
private equity. Supported (as of Dec 14, 1995) by 6 of 13 
members.
    1994-1995 Advisory Council on Social Security--Option Two--
Publicly-Held Individual Accounts: Maintain tax rate and scale 
back benefits plus mandatory individual account add-on-increase 
retirement age (and index longevity), and slow the growth of 
benefits for middle-and high-wage workers. Also, create 
mandatory individual accounts funded by 1%-2% increase in the 
payroll tax. These accounts would be held by the federal 
government, which would offer a narrow range of investment 
options. Supported by 2 of 13 members.
    1994-1995 Advisory Council on Social Security--Option 
Three--Two-Tiered System with Privately-Held Individual 
Accounts: Transition to a Two-tiered system, with half of the 
retirement program privatized. The first tier would be 
comprised of a flat benefit for full-career workers and second 
tier would be compromised of fully funded, privately managed, 
individual accounts. These accounts would be funded with 5% of 
the current payroll tax, and the balance of the payroll tax 
(7.4%) would ultimately finance tier benefits on a pay-as-you-
go basis. Additional transition costs would be absorbed by a 
consumption tax and additional federal borrowing.
    Congressmen Jim Kolbe & Charlie Stenholm--H.J. Res. 112--
Super Committee Legislation: This legislation establishes the 
process for the elected representatives in Congress to take all 
of the suggestions and develop a consensus Social Security 
reform proposal that can be enacted into law. The joint 
committee would have membership evenly divided between the 
parties. Legislation would be reported by the Joint Committee 
to the Committees of jurisdiction for review and modification.
    Congressmen Bill Archer & John Kasich--H.R. 3095--
Bipartisan Panel to design Long-Range Social Security Reform 
Act of 1998. The Panel would be deemed with the responsibility 
of designing a single set of reforms for restoring the solvency 
of the Social Security system for maintaining retirement income 
security in the United States.
    Congressmen Bill Archer & John Kasich--H.R. 3546--
Bipartisan Panel to design Long-Range Social Security Reform 
Act of 1998. The Panel would be deemed with the responsibility 
of designing a single set of reforms for restoring the solvency 
of the Social Security system for maintaining retirement income 
security in the United States. Additionally, the legislation 
would provide for the development of a National Dialogue on 
Social Security.
    Senator Judd Gregg--S.321 Strengthening Social Security Act 
of 1997--Refunds 1 percentage point of each employee's current 
SS payroll tax into a personal savings account which may be 
invested in an IRA, or in a combination of funds (like the 
Thrift Savings Plan).
    Senator Patrick Moynihan--S. 1792--cuts the payroll tax 
from 12.4 to 10.4 percent between 2001 and 2024. After 2024, 
the payroll would slowly increase and would top out at 13.4 
percent in 2060. The proposal also allows individuals to invest 
in personal retirement accounts and increases the amount of 
wages subject to payroll tax. It also reduces the CPI by 1.0%.
    Congressman Tom Petri--H.R. 1611 Retirement Security Act of 
1997--Adds a new part B (Individual Retirement Investment 
Program--IRIP) to SSA which establishes a Personal Social 
Security Investment Account (PSSIA) with an initial one-time 
balance of $1,000 for each newborn after enactment.
    Congressman John Porter--H.R. 2929 Individual Social 
Security Retirement Accounts Act of 1997--Workers stay in 
current system or choose voluntary Individual Private 
Investment Retirement Accounts (ISSRA). ISSRA accounts funded 
by diverting 5% of current 6.2% tax paid by both workers and 
employers resulting in 10% total contribution. A portion of the 
ISSRA account contribution will be used to purchase private 
disability and life insurance.
    Congressman Mark Sanford--H.R. 2782 Strengthening Social 
Security Act of 1997--All individuals would maintain a Private 
Retirement Account (PRA). 6% is automatically deducted from 
each paycheck, which is matched by the employer for total 
contribution of 12%. Of that, 8% goes into the individual's 
PRA.
    Congressman Nick Smith--H.R. 3082 Social Security Solvency 
Act of 1997--Worker's receive 2.8% of the 12.4% currently paid 
into SS starting in 1999 to put into an individually owned 
investment account, over time contribution rate will rise to 
10.2%.
    Congressmen Jim Kolbe & Charlie Stenholm--H.R.--May 1998--
Congressmen Kolbe & Stenholm will be revealing their bi-
partisan Social Security reform legislation.
      

                                


Attachment B.--Social Security Reform Policy Commissions, Public 
Pension Reform Caucus, Congressmen Jim Kolbe & Charlie Stenholm

    1994 Bi-Partisan Commission on Entitlement and Tax Reform: 
The Bi-partisan Commission was chaired by Senators Bob Kerrey 
(D-NB) and John Danforth (R-MS). The Commission assessed the 
need for and recommended long-term budget savings entitlement 
reform proposals. The Commission's findings specifically 
describe the economic future that will confront Americans and 
federal entitlement programs such as Medicare and Social 
Security with the retirement of the baby boom generation.
    1994-96 Advisory Council on Social Security: The Advisory 
Council was deemed with the responsibility of formulating 
policy recommendations to address the long-range financial 
status of the OASDI program. After two years of meetings, the 
13 member council, which included Social Security experts from 
both sides of the aisle, for the first time developed three 
different Social Security reform proposals. The one common 
element in all three plans is that each plan utilizes the 
private market to help ensure long-term solvency of the 
program.
    Council--Option One: Maintains benefits and increases 
revenues--increase benefit taxation, expand coverage, and 
increase taxes in distant future. Also, require government to 
begin investing large portion (35%-40%) of trust fund assets in 
private equity. Supported (as of Dec 14, 1995) by 6 of 13 
members.
    Council--Option Two: Maintain tax rate and scale back 
benefits plus mandatory individual account add-on-increase 
retirement age (and index longevity), and slow the growth of 
benefits for middle-and high-wage workers. Also, create 
mandatory individual accounts funded by 1%-2% increase in the 
payroll tax. These accounts would be held by the federal 
government, which would offer a narrow range of investment 
options. Supported by 2 of 13 members.
    Council--Option Three: Transition to a Two-tiered system, 
with half of the retirement program privatized. The first tier 
would be comprised of a flat benefit for full-career workers 
and second tier would be compromised of fully funded, privately 
managed, individual accounts. These accounts would be funded 
with 5% of the current payroll tax, and the balance of the 
payroll tax (7.4%) would ultimately finance tier benefits on a 
pay-as-you-go basis. Additional transition costs would be 
absorbed by a consumption tax and additional federal borrowing.
    1997-98--Center for Strategic and International Studies 
(CSIS) National Commission on Retirement Policy: A bi-partisan 
bi-cameral public/private sector Commission. The Commission 
will conduct hearings throughout the country to educate and 
engage the American people in the debate. The Commission, which 
includes Social Security experts from the private sector, is 
developing a bi-partisan fix to the problems plaguing our 
Social Security program.
    1996-98 House Public Pension Reform Caucus: the caucus 
provides Members of Congress and their staff a bi-partisan 
forum to discuss, research, and examine the problems plaguing 
the Social Security program and the various options for reform.
    1997-1998 National Academy of Social Insurance: Academy on 
Privatization of Social Security. The Academy's Panel on Social 
Security Privatization is analyzing all Social Security reform 
options, including all three Advisory Council on Social 
Security options. The Panel is conducting extensive research in 
all areas of Social Security reform, including administrative 
costs and feasibility, generation equity and public private 
arrangements.
      

                                


Attachment C.--Social Security Reform Grassroot Activities, Public 
Pension Reform Caucus, Congressmen Jim Kolbe & Charlie Stenholm

    March 1997--Kolbe Forum--Social Security Reform: Putting 
Market Forces to Work & May 1997--Stenholm Summit--
Strengthening Social Security For Today And Tomorrow The 
purpose of each conference was to provide an opportunity for 
constituents to personally participate in a discussion with 
policy-makers, and to inform as many as possible about the 
problems and solutions for Social Security.
    The PEW Foundation--Americans to Discuss Social Security: 
The mission of the ADSS campaign is to engage Americans from 
all walks of life in a country-wide debate about the future of 
Social Security, and to provide a framework within which these 
citizens can help America's policy makers to resolve this 
issue. The campaign is planning the following:
     A 10-city interactive teleconference linking 
people from across the country.
     Sponsor a college outreach program called the 
``Social Security Challenge.''
     Public opinion surveys on 1) Images of Aging, 2) 
Public Attentiveness, and 3) Intergenerational Issues.

Executive Director Carolyn Luckensmeyer
2001 Pennsylvania Avenue, NW, Suite 825
Washington, DC 20006
Tel: 202.955.9000
Fx: 202.955.3011
www.adss.org

    Cato Institute: Cato will continue to publish research 
papers and host forums and conferences on how to move to a 
Chilean-style system of personal retirement accounts. In May 
will be a forum on the Hill on women and Social Security 
reform, and a major conference will be held at Cato in June. 
Jose Pinera, the architect of the Chilean system, is the co-
chairman of Cato's project and visits regularly. Cato's social 
security website, www.socialsecurity.org, includes all 
published materials and an interactive calculator.

Lea Abdnor/Michael Tanner
1000 Massachusetts Avenue, NW
Washington, D.C. 20001
Tel: 202-842-0200
Fax: 202-842-3490
www.socialsecurity.org

    Committee for Responsible Federal Budget & American Express 
Building a Better Future--The Graying of America: A year-long 
ten-city tour which combines an educational program on the 
budgetary impact of the aging population with an Exercise in 
Hard Choices, utilizing electronic polling to test pre-and 
post-program perspectives.

President Carol Cox Wait
220 E Street, N.E.
Washington, D.C. 20002
Tel 202-547-4484

    Concord Coalition & American Association For Retired 
Persons: In conjunction with the White House the AARP & Concord 
will coordinate four forums throughout 1998 discussing the 
problems and solutions to Social Security.

AARP Executive Director--Horace B. Deets
601 E Street, NW
Washington, D.C. 20049
Tel: 202.434.2277
Fx: 202.434.3714
www.aarp.org

    Concord Coalition: Concord will be coordinating at least 
one forum a month as part of its Paul Tsongs Project on 
Generational Responsibility. In addition, Concord will be 
hosting its new public education exercise, ``Just Generations'' 
in which small groups work together as their own entitlement 
reform commission.
Martha Phillips
1019 19th Street NW, Suite 810
Washington, D.C. 20036
Tel: 202.467.6222
Fx: 202.467.6333
www.concordcoalition.org

    Economic Security 2000: Economic Security 2000 is a 
nationwide, grassroots organization dedicated to saving and 
reforming Social Security. ES 2000 seeks to focus the Social 
Security debate on the need to create savings, and wealth, 
specifically, for those middle and lower income workers 
currently cut out of the chance to save.

President Sam Beard
1522 K Street NW, Suite 634
Washington, D.C. 20005
Tel: 202-408-5556
Fax: 202-408-5352
www.economicsecurity2000.org

    The Heritage Foundation: Heritage has developed reports 
analyzing social security/retirement savings reform efforts in 
Great Britain and Australia. Heritage has also created a 
program to perform rate of return analyses. It allows 
individuals to compare rates of returns for benefits under the 
current Social Security program and on investments in the 
market for both current and future retirees.

Bob Moffit/Dan Mitchell/Bill Beach
214 Massachusetts Avenue, NE
Washington, DC 20002-4999
Tel: 202.546.4400
Fx: 202.544.5421
www.heritage.org

    House Public Pension Reform Caucus: The PPRC will continue 
its educational briefings, informational papers and exchange of 
ideas with members of Congress and their staff throughout 1998.
      

                                

    Chairman Archer [presiding]. And my congratulations to you 
for the work you have done over the years on what is really a 
significant, major, long-term problem for this country.
    Mr. Kolbe. Thank you.
    Chairman Archer. And we have two other Members who are also 
very interested in this issue, and have worked on it. And our 
next witness is Congressman Nadler from New York, and we're 
happy to have you before the Committee, and I think maybe that 
Chairman Shaw mentioned we'd like for you, if you could, to 
keep your oral testimony within 5 minutes, and your entire 
written statement, without objection, will be inserted in the 
record. And you may proceed.

STATEMENT OF HON. JERROLD NADLER, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF NEW YORK

    Mr. Nadler. Thank you, Mr. Chairman. Thank you for your 
invitation to testify here and for holding these hearings.
    Maintaining the Social Security system on a sound financial 
footing is a pressing issue of great importance, and I 
appreciate the opportunity to be involved in the debate. Only a 
few months have passed since the President's State of the Union 
Address in which he called for Congress to dedicate the 
upcoming budget surplus to strengthening Social Security. In 
that short time, however, the entire Nation seems to have begun 
a national dialog about what to do about Social Security. From 
the dining room table, to the shop floor, to Washington think 
tanks, people all over the country are talking about Social 
Security.
    On the national level, the dialog is growing as well. In 
addition to the President's townhalls, there is Americans 
Discuss Social Security, and the AARP is planning to hold a 
series of national meetings. Along with these meetings, every 
major group involved in Social Security, including those listed 
in H.R. 3546, has plans for national outreach and dialog 
efforts. This groundswell of democratic debate is cause for 
celebration. It shows that our political system is alive and 
well, and capable of holding meaningful, large-scale debates.
    But it does raise a question: Why do we need to empanel yet 
another deliberative body to talk about Social Security? We 
already have the means at hand to determine how various 
constituencies and groups feel about Social Security. We also 
have the mechanism of the democratic process: hearings, 
testimony, townhall meetings, and public forums. While I 
respect the desire to create a bipartisan body to help devise a 
comprehensive bipartisan solution, I do not think we need a new 
blue-ribbon panel or commission to come between the American 
people and its elected representatives.
    I support the spirit behind this resolution, but I disagree 
with its approach. If Congress wants more input from the 
American people and from the groups that represent them, more 
than we're getting from our normal relations with our 
constituents and from all these other groups and dialogs that 
are happening, let's have a direct dialog. We don't need 
another middleman.
    I also have more than a little suspicion that one of the 
unstated purposes of the resolution is to create a commission 
to serve as a panel from which to give an official blessing to 
the real, and from my point of view, pernicious goal of the 
exercise: privatizing the Social Security system.
    After all, Social Security has long been considered the 
third rail of American politics: Touch it and you die. So if 
you want to rob the American people of the security they have 
long been guaranteed by the Social Security system, and subject 
each of them instead to the uncertainties of the stock market, 
it's difficult to admit what is being done. First you whip up 
hysteria based on the false notion that the Social Security 
system is in crisis, that it's going bankrupt, and then you 
hide behind a commission.
    I would like to take a moment to remind the Committee that 
Social Security is not bankrupt and it is not in crisis. In 
fact, the Social Security trustees tell us that the Social 
Security system is not very sick at all. The trustees' 1997 
report estimates that Social Security is fully funded to pay 
all benefits for the next 30 years, and it is funded to pay at 
least 75 percent of benefits due for 45 years after that. This 
does not describe a crisis, and certainly not an imminent 
crisis.
    The trustees tell us that the system faces a long-term, 
that is 75-year shortfall, of 2.2 percent of taxable payroll, 
or 1.1 percent each for employers and employees each over that 
75-year period. This is a problem of modest dimensions that can 
be managed and should be managed with modest measures while 
completely protecting Social Security beneficiaries, past and 
future, from risk and from poverty.
    This Committee should also be aware that there is a major 
body of responsible economic opinion that believes even this 2-
percent estimate over 75 years is substantially overstated. The 
estimated shortfall is based on long-term average economic 
growth projections of only 1.7 percent annually for the next 30 
years, and a 1.3-percent annually averaged over 75 years, rates 
of growth this country has experienced in its history only for 
a few years during the Great Depression.
    For perspective, I would remind the Committee that we are 
currently experiencing not 1.3 or 1.7-percent growth, but 3.8 
percent--3.8 percent growth. The administration projects long-
term growth of 2.4 percent, a rate of growth that, if 
sustained, would generate Social Security surpluses for at 
least the next 75 years and for, in fact, as far into the 
future as we can foresee.
    This should be the starting point for future Social 
Security discussions: that what is essentially a worst-case 
scenario, projecting wildly pessimistic growth rates of 1.3 
percent, still projects a long-term shortfall of only a 
manageable 2 percent. We should avoid taking drastic and 
radical actions such as privatization or increasing the 
retirement age or similar measures to deal with this modest 
long-term problem. Privatization, in particular, is not 
necessary and would expose millions of American families to 
substantial economic risks.
    We are told that the stock market enjoys an average return 
over the long term of 7-point-something percent, and that we 
should take advantage of this. There are several problems with 
this, three problems.
    First, studies have shown that the stock market goes in 20 
year spurts. You may have a high rate of growth for 20 years, 
then a low rate for 20 years, and so forth, and that means that 
if you have a privatized system, whether you do very well with 
your account on average or not, depends on whether you start 
your working career at the beginning of a high 20-year period 
or a low 20-year period.
    Second, when the baby boomers start to take their money out 
of the market when we retire--I'm a baby boomer--when we start 
retiring and taking our money out of the market to spend during 
our retirement, that's going to be a tremendous downward 
pressure on the stock market. Right now it's all going in, a 
lot of it is going to be coming out then, so we can't assume 
that kind of growth in the market over the long term.
    And, finally, all of these--even if you're talking about 
long-term growth at high rates--are averages. Averages are very 
deceptive. If someone were standing in front of us with one leg 
in a caldron of boiling water, and the other leg in a vat of 
liquid hydrogen at -400 degrees, on average, he'd be doing 
fine. He would have severe problems with both legs, but on 
average, he'd be doing fine because one leg would be boiling 
and the other freezing.
    Millions of Americans under a privatized system, even if 
the average were fine or very good, millions of Americans would 
do very well, and millions of Americans who guessed wrong or 
didn't invest wisely would be in abject poverty. We allow for 
risks for people's private savings and private IRAs and so 
forth, because we say the third leg of that stool--we always 
said that there should be three legs on the retirement stool: 
private savings, private pensions, and Social Security, which 
should be almost risk free or entirely risk free. And this 
would put a huge risk into it.
    It would shift the risk. A privatization scheme shifts the 
risk from the government. The worst risk that you have under 
the current Social Security is maybe you run short of money and 
the government has to run a deficit to pay the benefits due 
which is a legal entitlement. It's a far-fetched risk but it's 
there. Under a privatized system, the risk is on the 
individuals, and for all these reasons, we shouldn't consider 
it.
    Returning to the resolution at hand, we should have faith 
that the ongoing debate will yield the information we need to 
forge sound legislation to enable Social Security to meet the 
challenges, the mild challenges, of the 21st century as 
admirably as it has met the challenges of this century. We 
should also take steps to ensure the debate starts with a sound 
assessment of the problems facing Social Security. If we do 
not, and we allow the current mood of hysteria to rule the 
debate, we will wind up administering a cure worse than the 
disease, and there's not a family in America that would not 
stand a real chance of feeling the pain.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of Hon. Jerrold Nadler, a Representative in Congress from the 
State of New York

    Thank you Mr. Chairman for inviting me to speak here today. 
Maintaining the Social Security system on a sound financial 
footing is a pressing issue of great importance to the country 
and to my constituents, and I appreciate the opportunity to be 
involved in the debate.
    Only a few months have passed since the President's State 
of the Union Address--in which he called for Congress to 
dedicate the upcoming budget surplus to strengthening Social 
Security. In that short time, however, the entire nation seems 
to have begun a national dialogue about what to do about Social 
Security. From the dining room table to the shop floor to 
Washington think tanks, people all over the country are talking 
about Social Security. On a national level, the dialogue is 
growing as well. In addition to the President's town halls, 
there is Americans Discuss Social Security, and the AARP is 
planning to hold a series of national meetings. Along with 
these meetings, every major group involved in Social Security--
including those listed in HR 3546--has plans for national 
outreach and dialogue efforts.
    This groundswell of democratic debate is cause for 
celebration--it shows that our political system is alive and 
well and capable of holding meaningful, large-scale debates.
    But it does raise a question: why do we need to empanel yet 
another deliberative body to talk about Social Security? We 
already have the means at hand to determine how various 
constituencies and groups feel about Social Security. We also 
have the democratic processes: hearings, testimony, town hall 
meetings, and public forums. While I respect the desire to 
create a bi-partisan body to help devise a comprehensive bi-
partisan solution, I don't think we need a new blue ribbon 
panel or commission to come between the American people and its 
elected officials. I support the spirit behind this resolution, 
but disagree with its approach. If Congress wants more input 
from the American people and from groups that represent them, 
let's have a direct dialogue. We don't need another middleman. 
I also have more than a little suspicion that the unstated 
purpose of this resolution is to create a commission that will 
give an official blessing to the real--and I believe, 
pernicious and destructive, goal of the exercise--privatizing 
the Social Security system.
    After all, Social Security has long been considered the 
``third rail of American politics''--touch it and you die. So, 
if you want to rob the American people of the security they 
have long been guaranteed by the Social Security system, and 
subject each of them, instead, to the uncertainties of the 
stock market, you had better not admit what you are doing. 
First, you whip up hysteria based on the false notion that the 
Social Security system is in crisis--that it is going 
bankrupt--and then you hide behind a commission.
    I would like to take a moment to remind the Committee that 
Social Security is not bankrupt, and it is not in crisis.
    In fact, the Social Security Trustees tell us that the 
Social Security system is not very sick at all. The Trustees' 
1997 report estimates that Social Security faces a long-term 
shortfall of 2.2 percent of payroll--or 1.1 percent each for 
employers and employees. This is a problem of very modest 
dimensions that can be managed with modest measures--while 
completely protecting Social Security beneficiaries, past and 
future, from risk and from poverty.
    This Committee should also be aware that there is a major 
body of responsible economic opinion that believes even this 2 
percent estimate to be substantially overstated. This estimated 
shortfall is based on long-term economic growth projections of 
only 1.3% annually--a rate of growth this country has 
experienced only during the Great Depression. For perspective, 
I would remind the committee that we are currently experiencing 
3.8 percent growth. The Administration projects long-term 
growth of 2.4 percent--a rate of growth that--if sustained--
would generate Social Security surpluses for at least the next 
seventy-five years.
    This should be the starting point for future Social 
Security discussions--what is essentially a worst case 
scenario, projecting wildly pessimistic growth rates of 1.3%, 
and still arriving at a long-term shortfall of only a 
manageable 2 percent. We should avoid taking drastic and 
radical actions such as privatization, increasing the 
retirement age, decreasing benefits, or similar measures. 
Privatization, in particular, is not necessary, and would 
expose millions of American families to substantial economic 
risks. In the end, privatizing Social Security will most 
certainly cost the American people far more than would 
modifying the system within its current structure.
    Returning to the resolution at hand, we should have faith 
that the ongoing debate will yield the information we need to 
forge sound legislation to enable Social Security to meet the 
challenges of the twenty-first century as admirably as it has 
met the challenges of this century.
    We should also take steps to ensure that the debate starts 
with a sound assessment of the problems facing Social Security. 
If we don't--and we allow the current mood of hysteria to rule 
the debate--we will wind up administering a cure worse than the 
disease--and there's not a single family in America that won't 
feel the pain.
      

                                

    Chairman Archer. Thank you, Mr. Nadler. Our last witness on 
this panel is Mr. Pomeroy. We're pleased to have you before our 
Committee, and you may proceed.

 STATEMENT OF HON. EARL POMEROY, A REPRESENTATIVE IN CONGRESS 
                 FROM THE STATE OF NORTH DAKOTA

    Mr. Pomeroy. Thank you, Mr. Chairman and colleagues. I 
appreciate very much the opportunity to testify before you 
today on what I believe is the most important issue we'll ever 
have the responsibility to address: preserving Social Security 
for future generations of Americans.
    I think our work on this topic in this session should 
address three goals. First, we must set aside the budget 
surplus for use in assuring Social Security's long-term 
financial health. Second, we must stop legislative proposals 
that would spend the surplus to make piecemeal changes under 
the guise of Social Security reform. And, third, we must 
advance a public discussion of Social Security's future, 
leading to the development of comprehensive, bipartisan reform 
to preserve the program.
    I believe the American people understand that Social 
Security is more than an individual investment plan. It's a 
comprehensive program that protects against the unforeseen 
risks presented in life and provides a guaranteed, dependable 
benefit for as long as each of us may live.
    The experiences in my own family are representative of the 
critical role Social Security has played in the lives of 
millions over the last six decades. My father died while my 
brother and I were minors. Social Security provided vital 
income for my newly widowed mother and survivor benefits to my 
brother and myself. We absolutely depended on this support 
while we pulled ourselves together and moved on. My mother is 
now 77, lives independently, thanks to the Social Security 
check. As long as she's healthy, be it 87, 97, or 107, she'll 
be able to live independently, provided her health allows, 
thanks to the guarantee of lifetime Social Security benefits.
    As a result, Social Security is simply the most important, 
most successful program every undertaken by the Federal 
Government, and saving the budget surplus to preserve this 
program must be our highest priority.
    Our second goal should be to stop legislative proposals 
that run counter to the save Social Security first pledge and 
the aim of comprehensive, bipartisan reform. Unfortunately, the 
Personal Retirement Savings Account Act of 1998, introduced by 
Budget Chairman John Kasich, and endorsed this morning by the 
Speaker, is a proposal that I believe is inconsistent with 
saving Social Security first.
    Rather than saving the budget surplus to be used as part of 
a long-term Social Security plan, the proposal would spend the 
surplus now in a piecemeal way when we have barely begun the 
public discussions and bipartisan deliberations we all know 
will be necessary. The budget surplus the Speaker proposes to 
spend this year comes from excess reserves in the Social 
Security trust fund. Make no mistake: the surplus is 100 
percent from Social Security. So what he's really proposing is 
to take money from the current Social Security program, with 
all its strengths for American families, to initiate an 
untested experiment in individual accounts.
    This plan is quite simply the beginning of the end of 
Social Security as we know it. Funding individual accounts this 
year out of the Social Security surplus makes the solvency 
challenge to Social Security worse, not better. It makes our 
job of shoring up the program for the long haul even more 
difficult. The Speaker's plan sounded wonderful this morning, 
but think about it a minute. There's no free lunch. Money 
directed from the existing Social Security Program into 
individual accounts is money not available to support the 
Social Security Program. And what does this critical tradeoff 
bring the American people? A weaker Social Security Program in 
exchange for an individual account containing an amount 
estimated to be a whopping $44 this year. Now such a sum will 
do nothing, almost nothing to advance the retirement security 
of American families. It'll barely buy them dinner. And the sum 
is certainly not worth the high price of undermining the goals 
of saving Social Security first and developing a comprehensive, 
long-term plan for Social Security's future.
    In my remaining moments, Mr. Chairman, I'll specifically 
address your bill. I think we need to think long and hard 
before deciding that a commission rather than Congress itself 
led by this able Committee is the best place to being 
developing bipartisan recommendations on saving Social 
Security's future. I'm not automatically opposed, but I believe 
that probably we'd be better served keeping that function 
within the halls of Congress itself.
    On the part of the bill that involves a national dialog, I 
think we should address three aspects--or answer three 
questions. The dialog should not duplicate or detract from the 
nonpartisan national discussions already underway by the AARP, 
Concord Coalition, and by Americans Discuss Social Security. 
Second, I'd hope that the organizations that would nominate the 
participants to the dialog provided for under the bill would be 
fully representative of the broad perspective of views on this 
issue. And third, I think the source of funding should be also 
identified for this dialog function.
    The final point of concern regarding the legislation--I 
think the legislation advances a positive effort: developing 
national dialog, advancing a bipartisan solution. That's very, 
very good. The final concern I have about it, however, is that 
the timetables provided in the bill would actually delay the 
timetables advanced by the President of leading to a White 
House summit in December of this year, 1998, and on to 
negotiations between the administration and Congress in early 
1999.
    I desperately want to get this done within the next 
Congress and before the new millennium. And I fear that any 
sliding on those timelines will make it difficult to accomplish 
this before the Presidential election in the year 2000 
overtakes all else.
    Thank you very much for listening.
    [The prepared statement follows:]

Statement of Hon. Earl Pomeroy, a Representative in Congress from the 
State of North Dakota

    Mr. Chairman, Mr. Rangel, Members of the Committee, thank 
you for the opportunity to appear before you this morning to 
discuss what I believe is the foremost policy imperative facing 
our nation and this Congress--preserving Social Security for 
the baby-boom generation and beyond.
    As we begin this task in earnest, I believe our goals must 
be three-fold. First, we must set aside the budget surplus for 
use in assuring Social Security's long-term financial health. 
Second, we must advance the public discussion of Social 
Security's future with an eye toward development of a 
comprehensive bipartisan plan to preserve the program. And 
third, we must resist legislative proposals that would undercut 
these first two goals by using the surplus to make piecemeal 
changes under the guise of Social Security reform.

                       Save Social Security First

    Like Americans throughout our country, I have been 
extremely heartened by the high priority placed on this issue 
by President Clinton and his entire Administration. In making 
his State of the Union declaration to ``Save Social Security 
First,'' President Clinton challenged the Congress to resist 
the temptation to use the surpluses for tax cuts or spending 
increases and set forth a process for national discussions 
followed by bipartisan legislative reform.
    The President's pledge to Save Social Security First has 
resonated with the people of my home state of North Dakota and 
with families throughout our nation. Americans understand that 
far from being a mere pension plan, Social Security protects 
families against the unforeseen risks of life. The experiences 
in my own family are representative of the critical role Social 
Security has played in the lives of millions over the last six 
decades. My father died while my brother and I were still 
minors. Social Security provided vital income for my newly 
widowed mother and survivor benefits to my brother and myself. 
We absolutely depended on Social Security support while we 
pulled ourselves together and moved on. My mother is now 77 
years old and lives independently, free from the fear of 
poverty and dependence in old age. Without Social Security, 
this would not be possible. Social Security is simply the most 
important and most successful program ever undertaken by the 
federal government. Saving the budget surplus to preserve this 
program must be our highest priority.
    Mr. Chairman, I have been encouraged not only by the 
President's words but also by the statements and initiatives 
put forward in recent weeks by the Republican leadership that 
express a commitment to Saving Social Security First and 
working together to preserve the program for future 
generations. I welcome these developments and believe firmly 
that only a comprehensive and bipartisan approach to reform 
will result in success.

             Comprehensive, Responsible, Bipartisan Reform

    With this second goal of comprehensive, responsible, 
bipartisan reform in mind, Mr. Chairman, I welcome all 
proposals that move us in that direction. A bipartisan 
commission of experts such as would be authorized under your 
National Dialogue on Social Security Act--H.R. 3546--is 
certainly one way to move toward this shared goal and I applaud 
its emphasis on development of long-term solutions. I do 
believe, however, that we must think long and hard before 
deciding that a commission, rather than the Congress itself led 
by this able Committee, is the best body to develop bipartisan 
recommendations on Social Security's future.
    As we all recognize, public discussion and input will be 
critical to the success of any Social Security plan, and I am 
pleased to see that Title I of H.R. 3546 will establish a 
formal National Dialogue on Social Security. I have three 
suggestions with respect to this portion of the bill. First, I 
urge you to ensure that this Dialogue will not duplicate or 
detract from the non-partisan national discussions already 
undertaken by AARP and the Concord Coalition and by Americans 
Discuss Social Security. Second, I hope you will work to see 
that the organizations that will nominate the participants in 
this Dialogue represent the full and broad spectrum of views on 
Social Security. And third, I hope you will soon specify the 
source of private funding for the Dialogue. Resolving each of 
these issues will help ensure that the National Dialogue you 
have proposed will advance the second goal of an open and 
honest public conversation leading to comprehensive, 
responsible, bipartisan reform.

                        No Piecemeal Experiments

    Mr. Chairman, I have stated that our third goal must be to 
steadfastly oppose legislative proposals that run counter to 
the Save Social Security First pledge and the aim of 
comprehensive reform. Unfortunately, the Personal Retirement 
Savings Account Act of 1998, H.R. 3456, recently introduced by 
Chairman Kasich is just such a proposal. Rather than saving the 
budget surplus to be used as part of a long-term Social 
Security plan, Mr. Kasich's legislation would spend the surplus 
now in a piecemeal way--when we have barely even begun the 
public discussions and bipartisan deliberations we all know 
will be necessary.
    We must also remember where the budget surplus Mr. Kasich 
would spend this year will come from--from excess reserves in 
the Social Security Trust Fund. So what he is really proposing 
to do is to take money out of the current Social Security 
program--with all its strengths for American families--to 
initiate an untested experiment in individual accounts. This 
plan is quite simply the beginning of the end of Social 
Security as we know it.
    While the dangers of Mr. Kasich's piecemeal retirement 
account legislation are thus clear, the benefits for the 
American worker are not. Under H.R. 3456, each eligible 
employee would be entitled to a retirement account worth a 
whopping 44 dollars this year. Such a sum will do almost 
nothing to advance the retirement security of American 
families. And such a sum is certainly not worth the high price 
of undermining the goals of Saving Social Security First and 
developing a comprehensive, long-term plan for Social 
Security's future.
    I should also note that Chairman Kasich has expressed 
interest in a fundamentally redesigned Social Security system 
based on individual accounts. He may well see his Personal 
Retirement Savings Account legislation as a means toward that 
end. Yet such an individual account redesign involves 
monumental transition costs--literally trillions of dollars--
and no one has yet explained how these costs would be paid for. 
In addition, a Social Security system based on individual 
accounts will entail greater retirement risk for workers, 
insufficient survivor and disability coverage, a loss of 
progressivity, and higher administrative costs. We must be very 
cautious about heading in that direction. At the very least, we 
must not adopt such an individual account plan before we have 
had the opportunity for a full and open national debate.
    Thank you, Mr. Chairman, for the opportunity to appear 
before you this morning. I look forward to continued 
cooperation with you and the Members of the Committee in 
advancing the public discussion and in enacting a bipartisan 
solution that will preserve Social Security for the baby-boomer 
generation and beyond. The American people deserve nothing 
less.
      

                                

    Chairman Archer. Thank you, Mr. Pomeroy. I find myself a 
wee bit confused as I listen to your comments and I happen to 
listen to those of Mr. Nadler. Mr. Nadler said we really don't 
need to worry about doing anything between now and the next 
millennium, as I understood it. That this is not a pressing 
problem. That it's 30 years off, and why should we be 
attempting to move so rapidly? Did I misunderstand you?
    Mr. Nadler. Yes, you did. What I said was, and let me 
clarify, I appreciate the question. What I said was, we have a 
problem. It's not a problem we should wait 30 years to deal 
with. The problem won't manifest itself for 30 years, but we 
should deal with it now. The Social Security system, according 
to the Trustees' Reports, and no one has disagreed with them, 
is fully funded for 30 years----
    Chairman Archer. You have not heard the Chairman's view on 
that yet, but go ahead.
    Mr. Nadler. OK, well, I haven't read any disagreements. I'm 
not a Member of this Committee. I haven't read--the Social 
Security, what I said was, according to the trustees, the 
system is fully funded to pay all benefits due until the year 
2029. It's 77 percent funded, that is, it's funded to pay 77 
percent of all benefits for the next 40 years after that. So 
there is an imbalance over the 75-year forecast period. There's 
a shortfall, according to the trustees, equal to 2.23 percent, 
2.2 percent of taxable income. That is a problem, but it's a 
manageable problem. It may not be manageable if you wait 30 
years to deal with it. It's a manageable problem if we deal 
with it now. We don't need radical solutions. There are a menu 
of things you could do, easily, in the next year or two, 
without privatizing, without raising, you know, without raising 
the retirement age. There are a number of things you could do 
to cover that 2.2-percent problem, as long as you do it fairly 
soon.
    In addition that is a very pessimistic outlook. There's a 
body of economic opinion that points out, well, it's a fact. 
It's not debatable. It's a fact that that projection of the 
2.2-percent problem, is based on assumptions of an economic 
growth rate, average economic growth rate for the next 30 years 
annually of 1.7 percent, an average over 75 years of 1.3 
percent, far lower than we've ever done in our history. We're 
now doing about 3.8. Historically, we've done between 2.5 and 
3.5 percent. If you make an assumption--if you assume a 2.4-
percent economic growth average, which the administration does 
in its budget projection in the next 10 years, if you assume 
that you maintain that rate, you have no problem at all. I'm 
not urging that we should make that assumption, I'm simply 
saying that even what amounts to a pessimistic assessment says 
we have a small manageable problem which we ought to deal with 
now. But that if we don't deal with it, it will hit us over the 
head, but it won't hit us over the head for quite a while.
    Chairman Archer. I'm glad you were able to clarify because 
I think then we're all in agreement that we need to address 
this----
    Mr. Nadler. Yes.
    Chairman Archer [continuing]. Problem now. It is very 
important that we be in bipartisan agreement on that. I'm 
curious about the idea that the Congress should simply act on 
this, without having the benefit of any recommendations from a 
bipartisan intergenerational Committee designed in such a way 
to where there is equal input from all generations.
    Number one, I'm not sure the Congress represents that 
equally. But perhaps the Congress in its infinite wisdom can 
override the fact that it is not representative of all of the 
various age groups that need to be considered. But if we were 
to follow your suggestion and not have a commission, you fully 
believe that no individual in the Congress would attempt to get 
partisan political advantage out of the issues as they begin to 
emerge and be debated?
    Mr. Nadler. I think, sir, if you're asking me a question, 
sir?
    Chairman Archer. Right, yes.
    Mr. Nadler. First of all, let me say, that I think we've 
had a number of commissions that Congressman Kolbe mentioned 
several of them, the advisory commission, there have already 
been a number of commissions. There are a number of dialogs and 
commissions functioning out there right now. The Pew, the 
Americans Discuss Social Security, the AARP is doing them, the 
President's series of panelists, all of these are going on. I'm 
not sure we need another one.
    Second, do I believe that a Member of Congress--that no 
Member of Congress, or anybody else for that matter, no 
candidate for Congress, will seek to make political hay out of 
this? Of course not. People are going to make political hay out 
of anything, and certainly on issues as important as this. Some 
people are going to be demagogs, and some people are going to 
be more responsible.
    What I think, though, is ultimately we have to make that 
decision. We're the elected representatives of the American 
people. What I don't want to see is a commission represented by 
age groups, or otherwise, that--I don't want a situation 
structured whereby that commission, bipartisan, and so forth, 
comes in with a report that has such momentum behind it that 
Congress can't really change it. That the people who really 
make the decision are the people on that commission, and that 
Congress, which is the representative body of the American 
people, is sort of steamrolled into accepting whatever they 
propose, where they make a proposal in March, and we're going 
to enact a bill in June. That bothers me.
    I think there is plenty of wisdom and plenty of 
responsibility in the elected representatives of the American 
people, in both parties represented in the House, and in the 
other body. If we need more information, go out and get it. 
We've been informed by a number of commissions. There are 
others that are working now. I don't think we're going to 
suffer from a dearth of information.
    I do think that dialogs and more publicity, and hearing 
people, and so forth, as are being done in several different 
forums now, and are starting to be done in the townhall 
meetings, and so forth, is useful and necessary. But I don't 
see that we need a commission. I wouldn't mind a commission if 
I were assured, if I were confident, I should say, that it 
wouldn't be--that the situation wouldn't be structured in such 
a way that for all practical purposes, they would make the 
decision which would then be rammed through Congress, 
essentially unchanged.
    Chairman Archer. Number one, the legislation that is before 
the Committee now, which can be changed, obviously, in a markup 
process, in no way authorized a commission to take over the 
role of the Congress, and that the Congress will be bound 
precisely by what the commission recommends. Clearly, that is 
not the intention of the Chairman, or the intention of the 
legislation. So, I would disabuse you of those fears.
    But, let me I compliment you on what you clearly have done, 
which is to inform yourself, and to study, and to learn a lot 
about Social Security. And that comes through in your testimony 
today. And since this information, all kinds of information, as 
you say, has been developed, and is out there in the public 
sector for anybody that wants to read it, do you have a 
specific proposal you would like to put before the Committee to 
resolve this problem?
    Mr. Nadler. Some of us are developing a proposal. It's not 
ready yet. There is a menu, one could just off the top of one's 
head, recite a menu of proposals that would solve the problem, 
that would----
    Chairman Archer. But Mr. Nadler, we're not looking for menu 
right now----
    Mr. Nadler. Right.
    Chairman Archer [continuing]. If we are to make this 
decision congressionally, we need to have a specific minority 
proposal, and if you have one, then we would be more than 
pleased to receive it----
    Mr. Nadler. Right.
    Chairman Archer [continuing]. So we could look at it and 
then determine whether if it's worth having a commission, or 
whether it's worth going with your proposal.
    Mr. Nadler. Well, I appreciate that, Mr. Chairman. I am 
working with a number of groups now trying to come up with a 
consensus proposal. We're not ready yet, but it will be 
certainly within this Congress that we will have a proposal.
    Chairman Archer. Well, we'd be more than happy to receive 
it, and to look at it. If the commission is set up, then the 
commission would, of course, look at your proposal, whatever it 
might be. We'll move in that direction.
    Mr. Nadler. Mr. Chairman, if I may comment on, or answer 
something you said a moment ago. Obviously, the legislation 
doesn't call for the commission to displace the role of the 
Congress, and I did not mean to suggest that it did, my concern 
is not the legislation, is not what the legislation says about 
the commission, it's a situation that perhaps is being set up. 
The rhetoric we hear, and I don't mean to suggest it's only 
rhetoric, the concern we hear, and we've heard this for 
decades, it's such a volatile issue, such an important 
situation, such a volatile issue, that we can't trust Congress, 
or we can't rely on Congress to come up with a responsible 
bipartisan solution, because everybody is afraid that if 
somebody--if sacrifice on the part of somebody is called for, 
don't blame me for suggesting it. Blame the other guy, and 
nobody in Congress wants to be in the position of taking that 
responsibility.
    Therefore, what happened in 1983, as I recall, a bipartisan 
commission was set up. It made what in retrospect were, I 
think, quite good recommendations. And they were pushed through 
Congress. I wasn't here, but what I understand is, they were 
pushed through Congress rather quickly, and pretty 
substantially what was recommended, and it essentially did the 
work that Congress should have done. And, frankly, that's not 
what I would like to see repeated.
    Chairman Archer. Well, Mr. Nadler, I was on that Commission 
with Senator Dole, and I lived through all of those 
deliberations. I sat on this Committee when the recommendations 
of the Commission came back, and they were very seriously 
deliberated and considered by this Committee. I myself offered 
a complete substitute in this Committee which was also debated 
and considered by this Committee. Nothing was rammed through 
the Congress simply because the commission made its 
recommendations.
    But the Congress had been unable to come together, 
certainly not on a bipartisan basis, because a number of 
Members demagogued the entire issue, and poisoned the entire 
environment for those who did want to work together 
cooperatively, and made it impossible for the Congress to come 
together and to reach a solution. The Commission then did come 
forward, it was debated thoroughly.
    I happened to be one of the three that was on the minority 
and did not approve of the Commission's recommendations, 
primarily for one reason, as I analyze the actuarial 
projections, I believed it did not save Social Security for 75 
years. And we were instructed to reform Social Security so that 
it would be stable for 75 years. The Commission did not do 
that. It fell woefully short, and that's why we're here today. 
Had it done its job, and had the recommendations provided the 
solution for 75 years, we wouldn't be here today.
    Now part of the rationale for that was that the actuaries 
were off in their projections. But I didn't wait until this 
last year to say they were off. I said they were off when the 
Commission met. I said we cannot rely on this. They are not 
valid. It is clear from a commonsense standpoint that they will 
not hold up.
    Now once again, and this is inherent in your testimony, and 
I'm not trying to put it down because it's what you have to 
rely on, we are relying on actuarial projections, and those 
projections may be better this time than they were before 
because I haven't looked at them, but I can tell you the ones 
that were relied on in 1982 were woefully wrong, and clear on 
their face that they would be woefully wrong. And so in the 
end, the bottom line was that the Congress did adopt almost 
everything in the commission's recommendations, and then also 
added some other things to it. But we could not come together 
on a bipartisan basis in the Congress at that time.
    I lived through the budget summit which also dealt with 
long-term difficult issues before the Congress. And the budget 
summit was an effort on the part of the administration and a 
Democrat Congress to come together to try to get the deficit 
down, and in the end for political purposes leaks came out of 
that over and over again. Those were Members of Congress 
together. No outside individuals from the private sector, 
deliberately released for political advantage, and frankly, I 
doubt that in this sensitive an issue that the Congress will 
come together and do something on a bipartisan basis without 
those trying to take political advantage of it, poisoning the 
entire environment. I've been through that too many times and 
what we seem to learn from history is we never seem to learn 
from history.
    Mr. Nadler. Mr. Chairman, I think there's one other thing 
we might learn from history in light of your remarks. You may 
very well be right about most of what you're saying. I think 
that one, I think we should learn at least one other thing from 
history. The Commission in 1983, and the Congress in 1983 did a 
good job, ultimately. And they didn't make the system 
actuarially sound for 75 years, if we can believe the current 
actuarial estimates they made it sound for 47 or 48 years, 
which is not bad given the inherent risks of projections.
    I suspect, frankly, that it is unrealistic to expect that 
you can make anything actuarially sound or project anything for 
75 years. Imagine at the end of the Civil War in 1865 trying to 
project the state of the economy at the beginning of World War 
II in 1940, that's 75 years. And, frankly, the job that was 
done in 1983 that we now believe will keep the system perfectly 
sound through 2029 is a good long run, and it's a system that, 
like any other system, needs midcourse corrections from time to 
time.
    And by the way, it might be, I don't want to suggest this, 
but it might be that a more realistic thing should say we 
should look in 50 year increments, instead of 75, because I 
don't think anybody can have any idea now what the economy is 
going to be like, what the economic growth rate is going to be 
in 2065.
    Chairman Archer. Well, I personally believe we can do it. I 
think where you're dealing with Social Security, in contrast to 
Medicare which has all kinds of variables and subjectivity in 
them, you can adequately predict demographics for 75 years, 
barring some of cataclysm or world war or something of that 
nature, but I think you can. And I predicted in 1982 what we 
were going to face over 75 years and I was pooh-poohed. And I 
was right. It can be done much better. If we want to take a 
Pollyanna approach so we don't have to make the tough 
decisions, of course, you can say, ``Well, let's only do it for 
30 years. Let's only do it for 40 years.'' But if you want to 
err on the side of being safe, you can do it for 75 years and I 
think we should because young people in this country today are 
totally disillusioned by this system, and we need to restore 
the confidence on the part of young people that there will be 
something there in 75 years. I think that's our responsibility 
but, I guess we've belabored that long enough.
    Mr. Pomeroy, you made a comment about the Social Security 
money being used to pay other government expenses. What would 
you do with the Social Security money that is not being done 
with it today? How would you've handled it differently than 
it's being handled today?
    Mr. Pomeroy. I would love to see this Congress commit 
itself on a course that ultimately has, takes this unified 
budget concept, where we complain that we've got to balance----
    Chairman Archer. No, I'm not talking about the budget. You 
said the money is being used to pay other benefits, other 
General Treasury expenditures. And I think the record will show 
that that's what you said. What would you do with that money 
differently than what we're doing with it today?
    Mr. Pomeroy. But, Mr. Chairman, what essentially----
    Chairman Archer. So that you could ensure the American 
people that that money is not being used to pay other General 
Treasury expenses, what would you do with the extra money 
coming into the Social Security fund, over and above what's 
necessary to pay benefits?
    Mr. Pomeroy. Mr. Chairman, I think with a result of a 
comprehensive bipartisan study and discussion, we could end up 
with a proposal where we have----
    Chairman Archer. Mr. Pomeroy, I'm asking you what you would 
do, not what would be the result of some big global study. What 
would you personally suggest that we do with the money?
    Mr. Pomeroy. Mr. Chairman, I'd like to see a portion of the 
Social Security Trust fund privately invested, probably not in 
an individual account structure, but that would be directly 
responsive to your question in terms of where----
    Chairman Archer. OK.
    Mr. Pomeroy [continuing]. The proceeds would go other----
    Chairman Archer. OK.
    Mr. Pomeroy [continuing]. Than to fund other functions of 
government in the way that they presently are doing.
    Chairman Archer. So you would take the $70 billion of 
excess money expected to come in this year, over and above the 
cost of the benefits, and you would put what percent of that 
into private securities?
    Mr. Pomeroy. I don't have a fully developed proposal, Mr. 
Chairman, but I would associate myself this year with the 
positions taken by Members Bunning, Rangel, and Kennelly, in 
locking up that surplus, having it available so that when we 
move toward this bipartisan reform of Social Security, the 
solvency hole we have to dig out of isn't quite as deep.
    Chairman Archer. OK, specifically what would you do with 
that extra money, that's the question? You said a while ago 
that you would put some of it into private securities. What 
would you do with the rest of it?
    Mr. Pomeroy. Some of the rest of it, Mr. Chairman, the bulk 
of it, the balance of it would be invested in treasuries 
similar to----
    Chairman Archer. Well, so that's exactly what we're doing 
today.
    Mr. Pomeroy. Correct.
    Chairman Archer. So you would continue with the bulk of it 
to do exactly what we're doing today which would not change 
anything except that you would take part of it and put it at 
risk in private securities as I understand it, is that correct?
    Mr. Pomeroy. Mr. Chairman, I'm not, I'm not entirely 
certain about whether we have disagreement or not here. What 
I'm trying to suggest to you is that the action I believe that 
this Congress should take this year is not to commit the 
surplus in any other way other than toward the saving of Social 
Security first goal. Bipartisan proposals from this Committee 
itself have advanced the same proposition.
    As we move on to reform, Mr. Chairman, I believe a portion 
of the reform that I'll be inclined to support would involve a 
portion of private investment of the trust fund proceeds, while 
continuing, of course, to have a public investment mixed in 
there as well.
    Chairman Archer. Well, there's such--I just hate for the 
public to get the wrong idea of what's happening with Social 
Security. And I fear that your testimony puts it in a light 
that is not accurate. The money that's in the Social Security 
fund, from FICA taxes, is already committed totally to paying 
Social Security benefits. It has never been used for anything 
else. It will never be used for anything else. And to create 
any sort of impression on the part of the American people that 
it is being used to pay other government bills, outside of 
benefits, is just not true. It is not true.
    Mr. Pomeroy. Mr. Chairman----
    Chairman Archer. It is being invested, as you said, in 
treasury securities which, when cashed in, can only be used to 
pay Social Security benefits. So we have already by law walled 
off the ``surplus in the Social Security fund'' so that it 
cannot be spent for anything other than Social Security 
benefits.
    Now, it is true that some, like Senator Moynihan, want to 
go back to a pay-as-you-go basis to where we don't buildup any 
money in the trust fund, and don't wall it off, and secure the 
fact that it will be payable in the future for benefits. And 
strictly to have enough to pay the current benefits every year. 
Now we went through that back in the seventies, and it became a 
disaster for the fund.
    Mr. Pomeroy. I believe the Moynihan proposal is ill 
advised, Mr. Chairman, and I agree with you on that. What I was 
responding to specifically, with the remarks in my testimony, 
is that I believe the proposal advanced by Budget Chairman 
Kasich, and endorsed by the Speaker this morning, would take 
the budget surplus, establish individual accounts, making the 
money unavailable for comprehensive reform. That money 
represents Social Security surplus. It is not, therefore, 
available as we tackle the long-term solvency questions of 
Social Security.
    Chairman Archer. Well, none of those programs, as I 
understand them, touch the bonds that Social Security holds 
that are committed to pay benefits--bonds which represent the 
surplus in Social Security. None of those programs touches any 
of those treasury bonds. They are kept intact. They are roped 
off. They can only be used to pay Social Security benefits. 
And, I'm sad to say, that an awful lot of American people get 
very misled by those, and on the right and the left, get misled 
by those who say, ``Well, the money is gone, it's been spent on 
other treasury programs.'' And it hasn't, it's been invested in 
government bonds that are the same as Series EE bonds in the 
safest investment in the world. And can never be used for 
anything else, and we should continue to let the American 
people know that and I see----
    Mr. Pomeroy. Mr. Chairman----
    Chairman Archer [continuing]. Both of you nodding, and I 
appreciate that. I've belabored this too long and I'm going to 
yield to Mr. Cardin for input.
    Mr. Cardin. Thank you, Mr. Chairman. Let me just follow up 
with Mr. Pomeroy for one moment. If I understood your testimony 
and what you have advocated on the Social Security surplus, 
under our current budget rules it would not be difficult for 
Congress to figure out a way to spend the projected surplus on 
other programs. That would be something that we could do, or we 
could use it as a tax cut. And if I understand your statement, 
you want to see that money held, not spent, not used for any 
specific purpose on the Social Security system, but not used as 
a way to expand government spending or to reduce government 
revenues until we first have figured out a game plan to deal 
with the Social Security system. It's not that you feel that 
money will evaporate or that the Social Security money will 
evaporate. We have problems. We've all acknowledged it. Let's 
figure out a way to deal with Social Security before we talk 
about other priorities. Is that what----
    Mr. Pomeroy. That's precisely correct. It's absolutely 
precisely correct. The deeper the debt situation of this 
country, the more challenge we're going to have meeting those--
retiring those Social Security bonds. We need to save the 
surplus for Social Security first, precisely as you suggested 
in our question.
    Mr. Cardin. And let me also compliment your work on private 
pensions and savings because one of the areas that we're going 
to need to take a look at, is how we can get more private 
savings and retirement in our community to deal with the 
retirement security of Americans. And, Mr. Pomeroy, you have 
brought forward many suggestions in that area that have been 
very helpful to this Committee, and I hope that you'll work 
with us in figuring out a way to deal with the Social Security 
system.
    Mr. Chairman, I must tell you, I'm optimistic that we're 
going to deal with this issue because there's been 
acknowledgment by both the Democrats, the Republicans, the 
White House, and Congress, that we need to deal with Social 
Security. There's a long-term problem, there's no question 
about it. We need to deal with those issues. And I must tell 
you I agree with Senator Dole, that we're not going to get it 
done unless we figure out a mechanism in a bipartisan way to 
get it done. I think there's an acknowledgment of that.
    I really do applaud President Clinton for bringing this 
issue up, for starting a national dialog, for getting people 
talking about the demographic changes in this country, and what 
we're going to need to do about income security in the future, 
and that we need to take a look at a variety of options.
    I congratulate you, Mr. Chairman, this is a good proposal 
that you've brought forward. It brings us together in a 
bipartisan way.
    But let me just caution everyone here. If we in Congress 
come up with a good proposal on which the White House goes in a 
different direction, or the White House moves on this issue in 
a positive way, and we don't join, then we're not going to have 
a bipartisan approach. So I would hope our efforts in the next 
several weeks focus on figuring out a way that we can get the 
White House, along with Congress, together in a bipartisan 
mechanism that will have the confidence of the American people 
and of our colleagues in Congress. We must have a mechanism 
that can work in a bipartisan way. Senator Dole is absolutely 
right. The only way that this is going to succeed if we move 
forward in a bipartisan way. And I know that the Democrats and 
Republicans in Congress want to do that. Sure, there'll be some 
of us who may politicize the issue, but the leadership here 
wants the decision done. And I'm confident that we can find a 
way to do it.
    And I really do applaud you, Mr. Chairman, for bringing 
forward your suggestion. I just hope we can get forward a 
process that we all can sign off on soon that will use the 
expertise of the Members of Congress, the three Members we 
have, Mr. Kolbe, Mr. Nadler, and Mr. Pomeroy, are certainly 
going to be very helpful to us in coming forward with those 
solutions. We need to figure out a way to do it. The sooner 
rather than later, and I just really wanted to compliment all 
three of you on your testimony.
    Chairman Archer. I thank the gentleman from Maryland. I 
certainly agree that we've got to come together on a bipartisan 
basis to solve this long-range problem.
    Mr. Shaw.
    Mr. Shaw. Thank you, Mr. Chairman. I know two of our 
witnesses gave a very fine testimony that made reference to the 
remark of the President and, Earl, you quoted him almost 
exactly a moment ago in regard to any surplus and save Social 
Security first. When the President said that we all leaped to 
our feet on both sides of the aisle. All of us have some very 
strong feelings about that. But when you sit down and start to 
analyze what that statement really means, or what it did mean, 
then you begin to scratch your head, because the surplus is 
whatever you have left after you have gone through your budget. 
So that surplus isn't a fixed figure of something that's going 
to happen automatically. We've got to have constraints in 
spending so that we do come up with a surplus. But then you 
look at it further--and this is what bothers me most of all.
    I think you gentleman may agree with me on this. In 
arriving at the surplus, and looking at the unified budget, the 
excess that the Chairman just referred to. The surplus that's 
in the Social Security system which this year is over $70 
billion may actually be used to show that we have a surplus. 
When, in fact, if you use truth in accounting and take out the 
Social Security money, we are in the red for over $70 billion.
    In my opinion, and I feel very strongly about this, if we 
are serious about using our surplus to save Social Security, 
then we must be very careful in defining that surplus, and take 
Social Security out of the equation. As the Chairman just said, 
this money is in there. It is committed. It's fully committed. 
And it should not be used to show a false figure. I think the 
Republicans and the Democrats and the President need to come 
together and come forth with a budget that has truth in 
accounting, which shows that we aren't near a surplus condition 
at this time. We should wall off Social Security, not only by 
saying that it's going to be there for everybody, but agree 
that the Congress and the President cannot use the surplus in 
Social Security to support new spending plans. What do you all 
think about that?
    Mr. Nadler. Well, I have a couple of comments on that. 
First of all, how you define the surplus. Under the current 
accounting system we've been using since 1967, Social Security 
is part of the unified budget, as is the transportation trust 
funds, and everything else.
    Mr. Shaw. I will say, though, that some of us thought we 
had taken it out of the budget a few years ago----
    Mr. Nadler. Well----
    Mr. Shaw [continuing]. And we voted on that but evidently--
--
    Mr. Nadler. Apparently not.
    Mr. Shaw. We didn't cross enough ``t's'' there.
    Mr. Nadler. In any event, that's the way the accounting is 
done now. I think we ought to solve the Social Security 
problem. I think they're really two questions. One, solve the 
Social Security problem. Until we do that, which should be in 
the next Congress, wall off the current surplus from anything 
else, so that if we need it, it's available for that. But I 
don't think we mean to say that Congress can spend no money of 
the surplus on anything else except Social Security. We should 
figure out what we're doing about Social Security, and then 
look at the other question. If you talk about truth in 
accounting, which is a different question, what does your 
budget really mean. Should you keep Social Security in there?
    I agree with you to the following extent: Social Security 
should not be in the budget, either now when it's masking a 
deficit by having a surplus, or 20 years from now when it may 
be the opposite. But to have a really accurate budget, you have 
to create a capital budget like any company, any State or local 
government.
    Mr. Shaw. We don't have capital. We do not have capital.
    Mr. Nadler. Well, I know that but if you want an accurate 
budget, we should have to change it to have a capital budget.
    Mr. Pomeroy. We have a vote imminent, so I will agree with 
you. I agree with every word you said.
    Mr. Shaw. Thank you very much.
    Chairman Archer. Gentleman, thank you, we have a vote on 
now and only a couple of minutes to get over there so I think 
it'd be best for us to excuse you, and we'll get to the next 
panel when we get back after the vote.
    Mr. Nadler. Thank you.
    Chairman Archer. Thank you very much.
    [Recess.]
    Mrs. Johnson [presiding]. The hearing will resume. Welcome 
back, Wendell, from the other side of the dias here.
    Let us start with Mr. Schultz, a member of the board of 
directors of the American Association of Retired Persons.
    Mr. Schultz.

STATEMENT OF OTTO SCHULTZ, MEMBER, BOARD OF DIRECTORS, AMERICAN 
                 ASSOCIATION OF RETIRED PERSONS

    Mr. Schultz. Good afternoon. I'm Otto Schultz, a member of 
AARP's board of directors. For 2 years AARP has been calling on 
Congress and the administration to engage the American people 
in a national dialog regarding Social Security and the options 
to ensure its long-term financing.
    AARP believes this is a critical first step toward making 
changes to strengthen Social Security. Social Security has 
provided essential income protection for generations of 
American workers and their families. It replaces a portion of 
the wages lost when a breadwinner retires, becomes disabled, or 
dies. We must find a way to maintain this firm income 
foundation for tomorrow's beneficiaries.
    That is why AARP has launched its own nationwide effort to 
encourage all Americans to discuss Social Security and its 
future, and that is why we accepted the President's invitation 
to cohost a series of national forums on the issue. Social 
Security faces a long-term challenge, but it is not a crisis. 
Without any changes, the program can continue paying full 
benefits until 2029. After that, incoming revenue will cover 
three out of every four benefit dollars currently promised.
    A dialog with the American people about Social Security is 
a necessary precursor to enacting legislation in the next few 
years that addresses the program's long-term financial 
condition. A national dialog can help lay the groundwork for 
the legislative process and personalize the stake all Americans 
have in the future of Social Security.
    This does not mean we should delay action into the distant 
future. If we enact legislation sooner rather than later, the 
changes will be more modest and will give those affected more 
opportunity to adjust their plans.
    The National Dialogue on Social Security Act outlines a 
two-pronged approach for the discussion. One part would take 
place electronically, and the other through local forums. All 
Members of Congress are encouraged to engage their constituents 
via electronic methods. Forums sponsored by private, 
nonpartisan organizations would take place in geographically 
representative locations throughout the country.
    In our written testimony, we describe some goals regarding 
the local events. We believe every effort must be made to 
ensure that Americans from all walks of life can and do attend, 
that varying viewpoints are represented in a balanced fashion, 
and that no organization is excluded because of limited 
finances. The results of this dialog would be presented to a 
36-member National Dialogue Council. It would represent 
different age groups and different points of view.
    The legislation also creates an eight-member bipartisan 
panel to design long-term Social Security reform. Appointed by 
all the congressional leaders and the administration, the panel 
is charged with reporting by next February 1 a solvency 
proposal acceptable to six of its eight members. In the last 
year or so, many solvency proposals have been put forth. AARP 
welcomes this exchange of ideas. All options should be put on 
the table, and they deserve to be thoroughly examined with 
regard to their impact on individuals and on the program.
    While there are many factors that go into making this 
bipartisan panel successful, three are particularly important. 
First, in order to ensure consideration of the widest range of 
options, we believe panel members should be selected based on 
their knowledge, abilities, and openmindedness, not their 
adherence to particular ideas. We believe it is important that 
no member come to the panel with preconditions or other limits.
    Second, whether through formal or informal means, it is 
critical that the work of this panel yield a product that will 
be useful to the congressional Committees of jurisdiction--the 
stewards of the Social Security Program. The challenge for the 
panel is to develop a framework or a set of recommendations 
that reflect our collective best thinking--not just options or 
bold proposals--with which the Congress and the administration 
can work and which will ultimately lead to legislation.
    Third, and most importantly, the panel must, as a part of 
its explicit role, involve the American people. The American 
people have to be involved. They need to understand the 
problems, the tradeoffs, and how they will be affected in order 
to support the solution.
    Mr. Chairman, I would be glad to answer any questions that 
you or other Members of the Committee may have.
    Thank you.
    [The prepared statement follows:]

Statement of Otto Schultz, Member, Board of Directors, American 
Association of Retired Persons

    AARP appreciates the opportunity to present its views on 
H.R. 3546, the National Dialogue on Social Security Act of 
1998. For two years, the Association has been calling upon 
Congress and the President to engage in a dialogue with the 
American people regarding the Social Security program and the 
options that would strengthen its long-term financing. Social 
Security has provided essential income protection for 
generations of American workers and their families. It replaces 
a portion of wages lost when a breadwinner retires, becomes 
disabled, or dies. Given Social Security's critical role in 
providing income security, we must find a way to maintain that 
firm economic foundation for tomorrow's beneficiaries.
    A dialogue with the American people about Social Security 
is a necessary precursor to enacting legislation in the next 
few years that addresses the program's long-term financial 
condition. A national dialogue can help lay the groundwork for 
the legislative process and personalize the stake all Americans 
have in the future of Social Security. This does not mean we 
should delay action into the distant future. If we enact 
legislation sooner rather than later, the changes will be more 
modest, and we will give those affected more opportunity to 
adjust their plans.
    Social Security faces a long-term challenge, but it is not 
a crisis. The current debate stands in stark contrast to the 
debate which led to the 1983 Social Security Amendments when 
the trust funds could finance benefits for only a short time. 
The Social Security trustees report that without a single 
change in current law, the program can continue paying full 
benefits on time until 2029. After that, incoming revenue will 
finance 3 out of 4 benefit dollars.
    In order for this dialogue to be instructive, it must begin 
from a solid base of information about Social Security and its 
financial condition. Wherever possible the dialogue should 
allow the American people to examine options and work through 
the trade-offs involved. But this dialogue should not focus on 
Social Security alone. The broader framework of retirement 
income security, including the role of individuals, employers, 
and government programs, must all be part of this debate. We 
believe the dialogue should stress Social Security's role 
within the overall retirement income framework--that Social 
Security is the solid base of retirement income to which 
workers can and should add pensions and individual savings. 
Such a comprehensive approach will send a strong signal to 
today's workers about the need to save for their own retirement 
as a supplement to Social Security.

              I. The National Dialogue on Social Security

    H.R. 3546 would create a National Dialogue Council 
(hereafter referred to as ``the council'') composed of 36 
representatives, one-quarter selected by the Speaker of the 
House, one-quarter by the Majority Leader of the Senate, and 
half by the president. The legislation identifies 18 
organizations that will submit 3 nominees each for the 36 
positions on the council. The organizations include 
representatives of older Americans, younger Americans, labor, 
business as well as other groups and think tanks involved in 
the Social Security issue. One-third of the council members 
would be born after 1961, another third would be born from 1946 
through 1961, and the remainder would be born before 1946. 
Without commenting on specific organizations, casting a broad 
net is a positive feature.
    Since the legislation specifies a bipartisan, bicameral 
appointment procedure for appointing the solvency panel, we 
believe a similar approach should be used to determine the 
members of the dialogue council. (The allocation of ``slots'' 
that was used in the appointment of the Medicare Commission is 
an example.) Involving the congressional leadership of both 
parties in this process will help ensure broad, bipartisan 
participation by our elected officials in this very important 
phase of the national discussion.
    The national dialogue would have two components: electronic 
discussions sponsored by Members of Congress and local 
conferences convened by nonpartisan, private organizations in 
geographically representative areas throughout the nation. The 
results would be forwarded to a bipartisan panel that will 
recommend a solvency plan for Social Security.
    Sponsorship of local forums by private, nonpartisan 
organizations would reduce federal costs. It could lead, 
however, to unanticipated problems unless the extent of a 
group's involvement and the purpose of the forums are spelled 
out before the events begin. Both are important in order to 
ensure that all viewpoints are represented. It is critical that 
the dialogue maintain the appropriate balance of ideas and 
points of view. We must also ensure that organizations are not 
excluded simply because of limited finances.
    We hope event organizers will schedule activities at a time 
convenient to working Americans and their families and at 
convenient locations that are accessible by public 
transportation. This will encourage attendance by a more 
representative group of people.
    These considerations are particularly important since there 
will be a limited number of local forums, whereas electronic 
discussions will take place within many congressional 
districts. Indeed, AARP believes that the face-to-face 
interaction in local forums should be strongly encouraged. 
While a growing number of Americans are comfortable in a ``chat 
room'' and navigating the electronic highway, many others do 
not own or have access to a computer. Their voices deserve to 
be heard in the dialogue as well.
    AARP concurs with H.R. 3546's intent to facilitate a 
national dialogue on Social Security. In fact, we are engaged 
in our own nationwide effort to advance the current debate by 
fostering a constructive dialogue. We plan to conduct citizen 
forums, distribute voter education guides and other education 
materials, and engage the public. We will attempt to bring 
together the viewpoints of all age groups--from our current 
members to our future members--to help ensure that the long-
term needs and interests of each group are addressed. We would 
be willing to share the results of our activities when they 
become available. The Association believes that such a dialogue 
is critical, especially when dealing with programs such as 
Social Security that impact virtually every American. Proposals 
to modify Social Security cannot simply spring from inside-the-
beltway. Without the support and input of the American public, 
any reform effort is bound to fail. The public must have the 
opportunity to hear about the proposals and work through 
potential trade-offs.

  II. The Bipartisan Panel to Design Long-Term Social Security Reform

    The legislation would create an eight member commission 
appointed by the bipartisan congressional leaders and the 
President. By March 31, 1999, the Bipartisan Panel to Design 
Long-term Social Security Reform (the ``panel'') would report 
out a solvency package acceptable to 6 of its 8 members. Their 
findings would be forwarded to the President, as well as the 
Senate Committee on Finance and the House Committee on Ways and 
Means.
    While there are many factors that go into making an 
initiative like this successful, three are particularly 
important. Obviously the first is the composition of the panel 
itself, including the staff leadership. In order to ensure that 
the Social Security panel considers the widest range of 
options, we believe members should be selected based on their 
knowledge, abilities, and open-mindedness, not their adherence 
to particular ideas. We believe it is important that no member 
come to the panel with pre-conditions or other limits.
    Second, whether through formal or informal means, it is 
critical that the work of this panel yield a product that will 
be useful to the congressional committees of jurisdiction--the 
stewards of the Social Security program. Ultimately, it is the 
committees and the Congress as a whole which bear the 
responsibility. The challenge for the panel is to develop a 
framework or set of recommendations that reflect our collective 
best thinking--not just options or ``bold proposals"--with 
which the Congress and the Administration can work and which 
will ultimately lead to legislation. No panel, regardless of 
how ``blue ribbon'' it may be, can or should provide cover or a 
``fig leaf'' on a matter of this importance.
    Third, and perhaps most importantly, the panel must, as 
part of its explicit role, involve the American people. If 
there is one thing that is clear from earlier major efforts to 
reform health care and Social Security, it is that the American 
people have to be involved--they need to understand the 
problems, the tradeoffs, and how they will be affected. AARP 
does not suggest that the panel can do this alone. But, if the 
American people don't understand the problems, and the basic 
tradeoffs, they won't support the solutions.
    A commission has been used before to resolve Social 
Security's financing problems. In late December 1981, the 15 
member National Commission on Social Security Reform, 
subsequently called the ``Greenspan Commission,'' was asked to 
analyze the factors threatening the program's long-term 
solvency and make recommendations to the President and 
Congress. Although the program faced a serious financing 
crisis, the Greenspan Commission members could not reach 
consensus on a solvency package. However, the Greenspan 
Commission's deliberations provided a basis for the solution 
that was eventually developed by key congressional leaders and 
the Administration--the ultimate decision-makers in the 
process. These decision-makers resolved their differences, and 
that discussion led to the enactment of the Social Security 
Amendments of 1983.
    The situation today is quite different than it was in the 
1981-1983 period, largely because Social Security does not face 
an immediate threat. While in 1983 the Social Security Trustees 
projected the system could pay full benefits for only 6 months, 
today that projection is for 31 years. This time-frame allows 
for a more thorough dialogue. In order to ensure that both the 
Social Security panel and the recently launched Medicare 
Commission can devote as much time as feasible to their 
respective tasks, we would recommend that an individual serve 
on only one of these panels.
    In the last few years or so, a considerable number of 
solvency proposals have been suggested, including the 3 
approaches outlined by the Social Security Advisory Council. 
AARP is hopeful that the bipartisan panel will thoroughly 
explore and carefully analyze a broad range of options. This 
analysis should examine the impact of each proposal on 
individuals, as well as on the program. The panel should also 
carefully review the interaction between the different 
components of any proposal and consider the impact on other 
parts (e.g., pensions, savings) of the retirement income 
framework.

                            III. Conclusion

    The discussion regarding the future of Social Security, our 
nation's most popular program, is moving gradually outside the 
``beltway'' and into the living rooms of America. This is 
encouraging. Americans continue to value a program that has 
directly or indirectly touched of all us, and they recognize 
its contribution to the economic well being of this nation. 
Changes will be needed, as they have been in the past, to 
ensure that future generations continue receiving this secure 
and predictable base of income security. We must look at the 
choices available and confront the face of retirement in the 
21st century. While some contend that we can no longer afford 
Social Security, AARP continues to believe that we cannot 
afford to be without Social Security.
      

                                

    Chairman Archer [presiding]. Thank you, Mr. Schultz. I 
appreciate your coming and appreciate your patience in waiting 
through the other panels.
    Mr. Primus is no stranger to the Ways and Means Committee. 
He has been with us for many, many years, and we're glad to 
have you back before the Committee and we welcome your 
testimony.

 STATEMENT OF WENDELL E. PRIMUS, DIRECTOR OF INCOME SECURITY, 
             CENTER ON BUDGET AND POLICY PRIORITIES

    Mr. Primus. Thank you, Mr. Chairman, and Members of the 
Committee. I appreciate your invitation to testify on H.R. 
3546.
    Social Security reform can best be achieved by educating 
the public about issues facing the program, involving them in 
the reform process through public forums, and then developing a 
bipartisan agreement through the regular legislative process. I 
applaud the goals of this bill.
    However, the bill would create a council that would 
duplicate initiatives already underway, rely on the Internet as 
a key means of communication with the American public, a tool 
that will exclude many low and moderate income households, and 
establish a panel to conduct work that could best be carried 
out by this Committee.
    I have great respect for this Committee, its expertise and 
role in the legislative process. This Committee is in the best 
position to assist the Congress and the administration in 
reaching a political consensus and a bipartisan agreement to 
restore the solvency of Social Security. The creation of yet 
another advisory panel seems unnecessary.
    The circumstances we confront today are substantially 
different from those in 1981, when the Senate voted down by a 
96 to 0 vote a plan by the administration to address Social 
Security financing. The regular process had broken down. I 
would urge you to allow the process outlined by the President 
and the regular legislative procedures work before resorting to 
the creation of a new panel.
    I would hope and presume that you, Mr. Chairman, and the 
Ranking Member will engage the Committee in a series of events, 
such as hearings, seminars, and retreats over the next year. 
You are the key decisionmakers.
    Social Security is one of the Nation's most important 
programs. Census data show that half of the population aged 65 
and older would be poor if not for the benefits of government 
programs. After counting government benefits, the poverty rate 
among the elderly drops to 9.2 percent. These same data show 
that government benefit programs lifted 13 million elderly out 
of poverty in 1996, and out of this 13 million, 11.7 were 
lifted out by the Social Security Program.
    Social Security also plays an important role in the 
economic well-being of the nonelderly. Some 3.5 million 
nonelderly adults and 800,000 children were lifted out of 
poverty by Social Security in 1996.
    In the opinion of myself and many other economists, the use 
of the budget surplus that would serve best both the Social 
Security Program and the U.S. economy is to reduce the national 
debt. This has four effects. First, if the projected surplus in 
the unified budget is used to pay down debt, national savings 
and investment will rise and produce a somewhat larger economy 
over time. A larger economy would bring in more payroll tax 
revenue without raising the payroll tax rate.
    Second, using the surplus to reduce the debt will drive 
down Federal interest payments and free up funds as the baby 
boom generation retires. And third, under CBO projections, the 
budget surplus is temporary. If the surplus is preserved, the 
point at which deficits return and the debt begins to rise can 
be delayed. Social Security and other programs will not need to 
be reduced as much in the long term, nor will tax burdens on 
future generations need be as great.
    And, finally, shrinking the national debt will give us more 
room to borrow in the future, when the baby boom generation 
retires, if that should prove necessary.
    President Clinton has called on the Nation to save Social 
Security first. The President has asked Congress not to spend 
the projected budget surpluses until Social Security is 
restored to long-term balance. Given the Nation's demographics 
and its low savings rate, that is a very wise and prudent 
course of action.
    Social Security is only one part of our retirement security 
system. The fact that only 50 percent of individuals reaching 
retirement today have a pension is also a matter of concern. 
There is a need to bolster other aspects of our retirement 
security system as well.
    The establishment of individual accounts is, however, a 
fundamental change and should be considered in the overall 
context of eliminating the long-term imbalance that currently 
exists between income and benefits in the Social Security 
Program. Because Social Security is so important to the lives 
of low and moderate income families, changes such as the 
establishment of individual accounts, or other efforts to 
strengthen individual savings or pensions, should be considered 
during or after the long-term funding imbalance in the Social 
Security Program has been eliminated.
    If individual accounts are established without addressing 
the long-term imbalance in the Social Security Program, the 
nature of the Social Security debate could shift from restoring 
solvency to bolstering those accounts. Before any steps are 
taken to create these individual accounts or make other 
structural changes in other aspects of our retirement system, a 
bipartisan agreement should be put in place to restore and 
maintain long-term solvency in the Social Security Program.
    Mr. Chairman, in conclusion, I would urge that you follow 
the regular order and the process outlined by President Clinton 
in reaching a bipartisan agreement on Social Security, and 
Members of this Committee can assist greatly in reaching that 
consensus. Social Security is our most important program, and 
because it is so important, we should save Social Security 
first.
    I want to thank you again for the opportunity to testify on 
this important issue, and I look forward to working with this 
Committee as you move forward.
    [The prepared statement follows:]

Statement of Wendell E. Primus, Director of Income Security, Center on 
Budget and Policy Priorities

    Social Security reform can best be achieved by educating 
the public about issues facing the program, involving them in 
the reform process through public forums, and then developing a 
bipartisan agreement through the regular legislative process. 
While the goals of this bill are consistent with that, the 
process the bill would employ would create a council that would 
duplicate initiatives currently underway, rely on the Internet 
as a key means of communication with constituents--a tool that 
may exclude low- and moderate-income households--and develop a 
commission to conduct work that could best be carried out by 
this Committee.
    Members of this Committee already have at their disposal 
the means for establishing dialogues, including the legislative 
hearing process and town hall meetings within your districts. 
Beyond hearing from your own districts, there are two 
bipartisan national dialogues underway. Bipartisan regional 
hearings are being organized at the request of President 
Clinton by the American Association of Retired Persons and the 
Concord Coalition. Additionally, the Pew Charitable Trust is 
sponsoring nonpartisan hearings through its Americans Discuss 
Social Security initiative. Unlike the Internet, these 
approaches to engaging the public in the dialogue will create 
access for individuals of all income levels to participate.
    This Committee is also in the best position to put together 
a bipartisan agreement to restore the solvency of Social 
Security. Although it is difficult to argue strongly against 
forming a panel of experts, the creation of yet another 
advisory panel does not appear necessary. This Committee is in 
the best position to access research and information available 
or being generated on Social Security and to hear first-hand 
from the American public. This is the regular legislative 
process that should be used to address Social Security.
    If the Committee proceeds with the creation of the Dialogue 
Council and Panel, I would recommend some changes.
    There are three additional points that need to be made 
concerning the importance of Social Security and how best to 
preserve this system.
    1. Social Security plays a crucial role in eliminating 
poverty among the elderly.
    2. Congress can substantially enhance the long-term 
solvency of Social Security by preserving the budget surplus 
and using these funds to pay down the debt.
    3. We should adhere to the President's call to ``save 
Social Security first.''
    Mr. Chairmen and members of the Committee on Ways and 
Means, I appreciate your invitation to testify on H.R. 3546, 
the National Dialogue on Social Security Act of 1998. My name 
is Wendell Primus, and I am Director of Income Security at the 
Center on Budget and Policy Priorities. The Center is a 
nonpartisan, nonprofit policy organization that conducts 
research and analysis on a wide range of issues affecting low- 
and moderate-income families. We are primarily funded by 
foundations and receive no federal funding.

             Title I--National Dialogue on Social Security

    Two important steps in achieving Social Security reform are 
to provide the public with education on issues facing the 
program and to obtain their views through public discussions, 
debates, and hearings. The goals of Title I, to promote a 
national dialogue and provide a forum for the American people 
to learn more about the program, are consistent with this view. 
I applaud these goals. However, this title would create a 
council that would duplicate other initiatives currently 
underway. The title also would instruct members of the 
Committee to develop ongoing systems of communication with 
constituency groups, a process in which I am sure every member 
is already fully engaged. Additionally, members would be 
required to rely on the Internet as a key tool for educating 
the public and means for communicating with constituents. This 
approach may exclude many low- and moderate-income individuals 
for whom Social Security is an essential program.
    The creation of a 36-member Dialogue Council adds a layer 
between members of this Committee and the public when what is 
needed is direct access to the public and individuals with 
expertise on Social Security. I have great respect for this 
Committee, its expertise and role in the legislative process. 
Thus, I really believe that members of this Committee are in 
the best position to gather and weigh information on Social 
Security reform, as well as to help stimulate discussions and 
debate on the issue.
    You have at your disposal existing mechanisms for creating 
dialogues in which members of this Committee can participate 
directly and become informed on a first-hand basis. One is 
through the Congressional hearing process. Your position on 
this powerful Committee gives you access to the most 
knowledgeable individuals on Social Security.
    In addition to this system for holding hearings, you have 
ongoing access to the general public residing in your 
districts. I know many, if not all, of you have been holding 
town-hall meetings and similar sessions with your constituents 
to learn their views and concerns. I am sure Social Security 
has been raised as an issue on numerous occasions. Organizing 
town hall meetings in your districts that specifically address 
Social Security would be an excellent way for you to become 
that much more knowledgeable about aspects of the program that 
are of particular concern to the people you represent. It seems 
unnecessary to pass a law instructing members to perform 
activities they currently conduct.
    Beyond hearing from your own districts, there are two 
bipartisan national dialogues underway or in the finally 
planning stages. President Clinton called for four regional 
meetings that would engage the general public in a discussion 
on Social Security. They are being organized by the American 
Association of Retired Persons and the Concord Coalition. These 
are organizations with differing views on how best to reform 
Social Security. Consequently, their joint effort to bring 
people together should lead to a full and open debate on the 
issues.
    Similarly, Americans Discuss Social Security is holding a 
series of town meetings and conferences, as well as developing 
strategies to stimulate dialogues on college campuses. This 
initiative is nonpartisan and fully funded by the Pew 
Charitable Trusts. The goal is to educate the public on Social 
Security. As recently as March 21, 1998, the organizers held a 
10-city teleconference. Speaking time was allotted for both 
President Clinton and Representative Nick Smith.
    In light of work being done by these organizations, I do 
not think there is a need for the Dialogue Council. If, 
however, this Committee chooses to pursue it, I would suggest 
that the proposed method for creating this body is problematic. 
Eighteen private organizations would be vested with the right 
to nominate Council members. Controversy will undoubtedly be 
created about the process for selecting the 18 organizations 
and reasons why others were not included. For example, three 
important organizations are not mentioned: the National 
Committee to Preserve Social Security and Medicare; the 
National Council of Senior Citizens and the 2030 Center. While 
most of us would agree that these organizations should take 
part in the debate, it is less clear why they should be given 
the authority to designate members of the Dialogue Council. 
Furthermore, a council comprised of representatives of such a 
large number of organizations that hold very diverse opinions 
about Social Security could easily get bogged down. A number of 
these organizations have already stated diametrically opposed 
positions on Social Security from which they will not budge.
    Title I also proposes to establish an Internet Advisory 
Board and Dialogue Coordinator to assist members in 
establishing a system of communications in their districts. The 
Internet, while widely available to many of us, is primarily 
available to those who have access to computers at work or at 
home. Many of the people most in need of Social Security have 
few resources available for accessing the Internet. 
Consequently, they could easily be left out of the education 
and discussion process if the Internet is relied upon as a 
primary vehicle for communication.
    Research cited in several recent news article indicates 
that the ownership of personal computers is correlated with 
income. The March 10, 1998 issue of the ``Wall Street Journal'' 
stated that 80 percent of households with income over $100,000 
have personal computers, while only 25 percent of households 
with incomes under $30,000 have them. (This research was 
conducted by Computer Intelligence.) The New York Times 
described research by International Data Corporation in its 
March 8, 1998 issue. According to this study, the average 
income of Internet users is $70,400. Thus, communication 
through the Internet can miss many households this Committee 
should reach. On the other hand, the approaches I previously 
discussed create opportunities for people of various means to 
have access to individuals who are discussing and explaining 
the issues.

 Title II--Bipartisan Panel to Design Long-Range Social Security Reform

    Title II of the bill would create a third body--the 
Bipartisan Panel to Design Long-Range Social Security Reform--
that would be given responsibility for designing 
recommendations for reform. The creation of another advisory 
panel does not appear necessary.
    The National Commission on Social Security Reform was 
appointed under substantially different circumstances. The 
regular legislative process had gone awry. In early 1981, both 
the ranking member of this Committee and the Social Security 
Subcommittee Chairman had introduced bills to restore the 
solvency of the Social Security program. Congressman Pickle 
constantly urged the Administration to present a Social 
Security plan. In May 1981, the Administration did produce a 
plan, but it was rejected overwhelmingly by a 96-0 vote through 
a Senate resolution. The regular process had broken down, and a 
Commission was needed to restore short-term solvency to the 
Social Security program.
    The circumstances we confront today are different from 
those in 1981. There is no reason the regular legislative 
process should not work. And while it is important to begin 
taking action now to address the financial status of Social 
Security, there is time to work through this process to achieve 
a bipartisan solution. I would like to think that the members 
of this Committee can reach a bipartisan agreement on 
eliminating the long-term imbalance in Social Security. This 
Committee is composed of bright, capable people. The first 
votes on Social Security will be made by this body. You are the 
equivalent of a board of directors who will have to determine 
how to reform the program. Rather than distance yourself from 
the process, I would hope you and the ranking member would 
engage the Committee in a series of events such as hearings, 
seminars, and retreats. You are in the best position to gain 
access to research and other information that is being 
generated on Social Security and to hear in person from the 
American public. I am confident that you can do this without 
creating a panel.
    In addition to the remarks I have shared on H.R. 3546, 
there are three points I would like to make concerning the 
importance of Social Security and how to proceed on restoring 
solvency to it.
    1. Social Security plays a crucial role in eliminating 
poverty among the elderly.
    2. Congress can enhance the long-term solvency of Social 
Security by preserving the budget surplus and using these funds 
to pay down the debt.
    3. We should adhere to the President's call to ``save 
Social Security first.''

            Importance of Social Security to People's Lives

    Social Security is one of the most important programs 
affecting your constituents. That this is so is shown by recent 
Census data on income from earnings, Social Security and other 
government programs. These data show how many elderly people 
(as well as people of other ages) are below the poverty line 
before receipt of government benefits and how many remain poor 
after receipt of various types of benefits.
    These Census data show that of all age groups in the 
population, it is the elderly who depend on government programs 
to the greatest degree. Half of the population aged 65 and 
older--50.1 percent in 1996--would be poor if not for the 
benefits of government programs. After counting government 
benefits, the poverty rate among elderly people dropped to 9.2 
percent in 1996.
    Social Security is the primary reason that government 
benefit programs have such a large impact in reducing poverty 
among the elderly.
     The Census data show that government benefit 
programs lifted 13 million elderly people out of poverty in 
1996. Of this 13 million, some 11.7 million--or nine of every 
ten elderly people lifted out of poverty by government 
programs--were lifted out by Social Security.
    Poverty rates have dropped consistently over the past two 
decades among people 65 and older, largely because of the 
increased effect of Social Security.
     In each year since 1979 for which data are 
available, about half of the elderly population was poor before 
counting government benefits.
     After counting social insurance benefits (mainly 
Social Security) but not other government benefits, the poverty 
rate among elderly people was 17.4 percent in 1979. By 1996, 
the elderly poverty rate after social insurance benefits are 
counted had dropped to 12.3 percent. In other words, the 
proportion of elderly people lifted out of poverty by Social 
Security has increased in recent decades.
     In 1979, two-thirds of the elderly people who 
would otherwise be poor--68 percent--were lifted from poverty 
by social insurance programs, mainly Social Security. In 1996, 
three-quarters of those who would otherwise be poor--75.6 
percent--were moved out of poverty by these programs.
    Social Security also is important to low-income elderly 
people because it contributes a large portion of their income. 
In 1995, Social Security made up two-thirds of the total 
incomes of elderly people who were poor under the official 
measure of poverty.
    Social Security plays an important role in the economic 
well-being of the non-elderly, too. Some 3.5 million non-
elderly adults and 800,000 children were lifted out of poverty 
by Social Security in 1996.

Preserving the Federal Budget Surplus is the best Way to Strengthen Our 
                           Retirement System

    Given the significance of Social Security to the lives of 
so many people, the budget surplus should be used in a manner 
that helps to address the long-term solvency of the program. 
The use of the surplus that would best serve both Social 
Security and the U.S. economy is to reduce the national debt.
     If the projected surplus in the unified budget is 
used to pay down the debt, national saving and investment 
should rise and produce a somewhat larger economy over time; a 
larger economy would bring in more Social Security payroll tax 
revenue without raising the payroll tax rate. A bigger economy 
also would enable us better to afford modifications in the 
Social Security benefit and/or revenue structure needed to 
restore the system to long-term balance.
     Using the surplus to reduce the debt will drive 
down federal interest payments. Funds that would otherwise have 
been spent on interest will be available to meet future fiscal 
policy challenges of the baby boom generation as it retires and 
requires Social Security and Medicare benefits.
     The budget surplus is temporary. If the surplus is 
preserved, the point at which deficits return and the debt 
begins to rise can be delayed. Social Security and other 
programs will not need to be reduced as much in the long term 
nor will tax burdens on future generations need to be as great 
as they would if the surplus were not used to bring down the 
debt now. If the surplus is used for other purposes, deficits 
will return sooner and rise to higher levels.
     Shrinking the national debt will give us more room 
to borrow in the future when the baby boom generation retires, 
if that should prove necessary.
    If a portion of the surplus is used now to cut taxes or 
increase government expenditures, some of the surplus will be 
used for current consumption rather than investment that can 
boost economic growth and income. The national debt and the 
interest paid on it will be larger than they would if the 
surplus were preserved. Higher interest payments will mean 
fewer resources for meeting other needs. Deficits will return 
earlier and the debt will begin to rise sooner if the surplus 
is forfeited, ultimately creating greater pressure to cut 
programs or raise taxes. A large national debt will place the 
government in a weaker economic position to borrow in the 
future if necessary to meet pressing needs when the baby 
boomers retire.
    There are important national priorities that need 
attention. Preserving the surplus does not imply ignoring those 
needs. It means that those national priorities should be 
considered under the regular federal budgeting rules. If 
increased expenditures are required to address a national need, 
other expenditures should be lowered or taxes increased to 
finance those expenditures, as the budget rules require.

                     ``Save Social Security First''

    President Clinton has called on the nation to ``save Social 
Security first.'' The President has asked Congress not to spend 
the projected budget surpluses until Social Security is 
restored to long-term balance. His call is designed to ensure 
that if Congress and the Administration decide to use some or 
all of the surplus to shore up Social Security, that option has 
not been foreclosed by Congress having already used the surplus 
for other purposes. And as I argued earlier, preserving the 
surplus has important economic benefits.
    Social Security is an important component of income for 
many individuals and families when reaching retirement age. 
That only 50 percent of individuals reaching retirement have a 
pension is also a matter of concern. There is a need to bolster 
those aspects of retirement security as well.
    The establishment of individual accounts is, however, a 
fundamental change and should be considered in the overall 
context of eliminating the long-term imbalance that currently 
exists between income and benefits in the Social Security 
program. Because Social Security is so important to the lives 
of low- and moderate-income families, changes such as the 
establishment of individual accounts or other efforts to 
strengthen individual savings or the pensions should be 
considered while, or after, the long-term funding imbalance in 
the Social Security program has been eliminated.
    Individual accounts are established without addressing this 
long-term imbalance, the nature of the debate could shift from 
restoring solvency to bolstering these accounts. Before (or at 
the same time) any steps are taken to create individual 
accounts or make other structural changes in Social Security, a 
bipartisan agreement should be put in place to restore long-
term solvency.
    Some specific proposals have been developed by members of 
Congress that would use the surplus to establish individual 
accounts. Mr. Kasich recently introduced his bill, and Mr. Roth 
intends to introduce a similar measure in the near future. As 
noted here consideration of such proposals before considering 
overall Social Security reform would be premature and could be 
counter-productive. An assessment of those proposals is beyond 
the scope of this testimony, but I would note that we have 
examined them and have identified a number of concerns with 
them.

                               Conclusion

    Mr. Chairman, rather than creating a Council and 
Commission, I would urge that you follow the regular order and 
the process already underway to reach a bipartisan agreement on 
Social Security. A Council and Commission have the potential of 
being counter-productive. These entities may distance you from 
the process of hearing from the public and gathering 
information on Social Security. They may distract from the 
normal legislative process. Requiring that six of the eight 
members of the Panel to reach agreement including both the co-
chairs, may not be possible.
    Instead, you and the Members of the Committee can assist 
greatly in reaching consensus by participating directly in the 
national dialogues that already are underway. In addition, 
through the Committee process (bipartisan hearings, retreats, 
and seminars), you can educate yourselves first-hand on the 
crucial issues facing Social Security and the impact that 
various proposals would have upon working and retired 
individuals and families.
    Social Security is one of the most important programs 
affecting the American public. It lifts millions of people out 
of poverty each year. Given its importance to the economic 
well-being of so many, we need to ``save Social Security 
first'' by using the surplus to pay down the debt and by 
restoring long-term actuarial balance before any actions are 
taken prematurely to restructure the program.
      

                                

    Chairman Archer. Thank you, Mr. Primus. Our last witness 
today on the final panel is Bob Myers, and for the benefit of 
the Committee, let me just briefly tell you that this gentleman 
has probably more knowledge in his head about Social Security 
than any other human being in the country. He was one of the 
original actuaries when Social Security was first established 
back in the thirties, and has been a great source of expertise 
for this Committee over the years. So, Bob, we're delighted to 
have you back again with us, and we would be pleased to hear 
your testimony.

 STATEMENT OF ROBERT J. MYERS, FORMER CHIEF ACTUARY AND FORMER 
DEPUTY COMMISSIONER, SOCIAL SECURITY ADMINISTRATION; AND FORMER 
  EXECUTIVE DIRECTOR, NATIONAL COMMISSION ON SOCIAL SECURITY 
                             REFORM

    Mr. Myers. Thank you very much for those very kind words, 
Mr. Chairman. It's always a great honor and pleasure to testify 
before this distinguished Committee.
    The two initiatives proposed in the bill, the National 
Dialogue on Social Security and a Bipartisan Panel to Design 
Long-Range Social Security Reform, will be extremely helpful, 
if not even essential, to solving the likely long-range 
financing problems of the Social Security Program.
    Mr. Chairman, as you noticed, I used the term ``the likely 
long-range problem.'' Certainly, the intermediate cost estimate 
shows that in the year 2029 the trust funds will be exhausted 
and that thereafter the revenues coming in can support only 
two-thirds to three-fourths of the benefit costs.
    Now, as you well know, and as you pointed out so 
eloquently, estimates are subject to variation. There is a low-
cost estimate that shows there's no problem in the next 75 
years, or even beyond. It's based on assumptions which are 
reasonable, but in my opinion it's very unlikely that they will 
all materialize. Likewise, there's a high-cost estimate that 
shows an even worse picture than the intermediate estimate.
    Nonetheless, despite the fact that there might not be a 
problem, I think it's very unlikely, and I think it is only 
prudent to take action now on the basis of the intermediate 
cost estimate, which, hopefully, is the best estimate for the 
future.
    The first initiative is to establish a national dialog 
through regional conferences and national Internet exchanges. 
This is most certainly an excellent step, and the plans 
therefor in the bill are well designed, including the 
procedures for obtaining the cooperation of national 
organizations so as to assure balance and widespread 
participation. This procedure will have two advantages. First, 
it will enable policymakers to know what the views of the 
public are on this very important and complicated subject, and 
second, it's a good opportunity to educate people about all the 
complexities involved.
    Although the use of the Internet for dialog will produce 
valuable results, it should be kept in mind that those who use 
the Internet are a select class of citizens, and their views 
are not necessarily the same as those of the citizenry at 
large.
    The second initiative is to establish a panel which will 
operate in much the same way as did the Greenspan Commission, 
which Senator Dole described very eloquently this morning. The 
Greenspan Commission did have large elements of cooperation, 
and there was a reasonable consensus of views, not quite on 
every subject. But I think on the whole, as Senator Dole said, 
the results of the Greenspan Commission have been quite good. 
Certainly, in the past 15 years, there have been no financial 
crises in the way some people predicted that there would be 
after the 1983 act was enacted.
    Of course, it's quite true, as the distinguished Chairman 
has said, that the actuarial estimates made for the long range 
in 1983, as viewed now, apparently, were too optimistic. 
However, in the first 15 years, the actuarial estimates were 
quite closely on target. But there are signs of deterioration, 
and I certainly think that consideration of the present 
intermediate estimates will be necessary. Hopefully, they will 
be closer to the mark than the estimates made in 1983, which I 
think were not made with a political approach, but rather they 
were the best estimates that the actuaries could make, and it 
just turned out that they were too low.
    There are two important differences between the panel and 
the Greenspan Commission--and both, I think, are advantages to 
the proposed panel. For one thing, the panel will be truly, 
equally bipartisan, with completely equal representation of the 
two political parties, whereas the Greenspan Commission did 
have a weighting a bit toward one party, namely the 
Republicans. There were eight Republican and seven Democratic 
Members, and two of the Democratic Members were named by 
President Reagan. Nonetheless, I think that Chairman Greenspan 
ran the Commission in a very fair and equitable way, and in the 
end there was good cooperation between all parties involved.
    The second difference is that the mandate in the bill for 
the panel is to come forth with a single set of 
recommendations. I think this is highly desirable if it could 
be done. The Greenspan Commission almost had a complete 
concurrence. Many of the provisions everybody agreed on, even 
though they didn't necessarily like them all, and there were 
left two alternatives at the end. But it sought to do this, 
although there was no mandate to do it.
    So, in summary, Mr. Chairman, I think the bill that you 
have developed along with two other Members of the House is an 
excellent beginning to solving this problem. I think that it 
probably is essential to do this, and I most certainly hope 
that the bill will be enacted, more or less in the form that 
you have introduced it.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of Robert J. Myers, Former Chief Actuary and Former Deputy 
Commissioner, Social Security Administration; and Former Executive 
Director, National Commission on Social Security Reform

    Mr. Chairman and Members of the Committee: My name is 
Robert J. Myers. I served in various actuarial capacities with 
the Social Security Administration and its predecessor agencies 
during 1934-70, being Chief Actuary for the last 23 of those 
years. In 1981-82, I was Deputy Commissioner of Social 
Security, and in 1982-83, I was Executive Director of the 
National Commission on Social Security Reform (Greenspan 
Commission).
    The bill developed by the distinguished Chairman of this 
Committee, jointly with the distinguished Chairman of its 
Subcommittee on Social Security, Mr. Bunning, and Congressman 
Kasich, contains two initiatives which will be extremely 
helpful in solving the likely long-range financial problem of 
the Social Security program (Old-Age, Survivors, and Disability 
Insurance).
    Digressing a moment you will notice that I said the 
``likely'' problem. Despite the prophets of gloom and doom who 
assert that the program as now constituted is absolutely 
financially unsupportable, I would point out that, although the 
intermediate-cost estimate shows serious problems 20-30 years 
from now, the low-cost estimate shows no problems in the next 
75 years, and even beyond then. The low-cost estimate is based 
on reasonable assumptions, but it is not very likely that they 
will all occur. Thus, it is only prudent that program changes 
should be made soon, even though they may be put into effect in 
a deferred, gradual manner beginning 10-15 years hence.
    The first initiative is to establish a National Dialogue on 
Social Security through regional conferences and national 
Internet exchanges. This is most certainly an excellent step, 
and the plans therefore in the bill are well-designed, 
including procedures for obtaining the cooperation of national 
organizations so as to assure balance and widespread 
participation. This procedure will have the dual advantages of 
obtaining the views of the public on various aspects of the 
matter and, at the same time, educating the public about this 
complex subject. Although the use of the Internet for a 
dialogue will produce valuable results, it should be kept in 
mind that those who use the Internet are a select class of the 
citizenry, and their views are not necessarily typical of the 
population as a whole.
    The second initiative is to establish a Bipartisan Panel to 
Design-Long-Range Social Security Reform. This Panel would 
operate, in many ways, in the same manner as did the Greenspan 
Commission in 1982-83. The differences for the Panel are, in my 
view, improvements. Digressing, I might say that the Greenspan 
Commission was, to a considerable extent, a great success, as 
evidenced by the fact that the Social Security program has had 
very favorable operations in the past 15 years, just about the 
same as had been estimated, and will likely have no cash-flow 
problems in the next 15-20 years.
    The major difference between the roles of the Panel and the 
Greenspan Commission is that the Panel is given the specific 
assignment of designing a single set of recommendations to 
restore the long-range solvency of the program. With the 
cooperation and good will of its members, it should be able to 
accomplish this. It is likely that any package of changes which 
is developed will contain some provisions that some members 
will not like, but within the charge of designing a single set 
of recommendations, all members will likely consider the 
aggregate result as the ruling element.
    The Greenspan Commission attempted to obtain such complete 
consensus, although this was not part of its charter, and came 
reasonably close. However, what happened was that there was, in 
essence, complete agreement on all recommendations except on 
what might be said to be the balancing item. One group wanted 
to raise the payroll tax rate over the long run, while the 
remainder wanted to reduce benefit costs by increasing the 
Normal Retirement Age. So, all members agreed to let the 
decision up to Congress (which chose the latter approach), and 
whichever way that the decision went, they would support it. 
This procedure is in sharp contrast to the 1994-96 Advisory 
Council on Social Security, which broke up into three 
irreconcilable groups, with only a few recommendations in 
common.
    Another difference between the Panel and the Greenspan 
Commission is that the Panel will have the advantage or the 
availability of the wealth of information as to the views of 
the general public which are developed by the National Dialogue 
on Social Security.
    Still another difference between the Panel and the 
Greenspan Commission is that the Panel is completely evenly 
bipartisanly divided. On the other hand, the Greenspan 
Commission had a slight excess of one party over the other 
(actually, 8 to 7). However, I believe that it is fair to say 
that all members were equitably treated, and there was a fine 
spirit of cooperation in seeking consensus to solve the 
problem.
    Finally, I have suggestions of a minor nature as to how the 
bill might be changed to improve the procedures with regard to 
both the National Dialogue and the Panel.
    As to the National Dialogue, for which 36 individuals are 
to serve on the Dialogue Council, selected from 54 individuals 
nominated by 18 designated private organizations, it is not 
clear whether there should be approximately equal numbers of 
men and women (as there are to be equal numbers in each of 
three year-of-groups). Also, it would appear that there will 
need to be informal cooperation between the private 
organizations in advance and later between the three appointing 
persons so that no individual is sought to be appointed more 
than once. Also, I believe that there should be nominating 
private organizations from two more fields--farmers and 
students.
    As to the Panel, it would seem that the two Co-Chairs 
should be of different political parties. Under the bill as now 
written, they are both to be appointed by a group consisting of 
the Speaker, the Senate Majority Leader, the President, the 
House Minority Leader, and the Senate Minority Leader. The 
desired result would more clearly be obtained if one Co-Chair 
were to be appointed jointly by the Speaker and the Senate 
Majority Leader, and the other Co-Chair were to be appointed 
jointly by the President, the House Minority Leader, and the 
Senate Minority Leader.
    In summary, I strongly support this bill and hope that it 
will be enacted quickly. If this occurs, it will be a most 
important element in the effort to restore long-range financial 
soundness to the Social Security program.
      

                                

    Chairman Archer. Thank you, Mr. Myers, and the Chair is 
grateful to all three of you for your contribution to this 
discussion.
    I must admit there is no perfect way to get at this 
problem, and so, understandably, people who are very genuine 
that want to resolve the problem may have disagreement as to 
how the best approach can be designed. I only hope we do not 
spend a long amount of time arguing about the design of the 
table before we can begin negotiations. So often that occurs, 
and it would be my desire that we try to shorten discussions 
about the design of the table and move on to the substance of 
trying to reach a bipartisan intergenerationally fair solution 
to the Social Security situation.
    And I yield to Mrs. Johnson.
    Mrs. Johnson. Thank you, Mr. Chairman. I do think the bill 
makes a very good proposal, because in today's world you 
can't--the discussion has to be at a bigger table than the 
table of the Congress. While you could do that at the time the 
Greenspan Commission worked, and then come to a conclusion and 
educate people about that, in controversial areas in today's 
world you simply have to find a way of stimulating a broader 
discussion in America where more people have more input, where 
people of all ages and circumstances and points of view have a 
chance to listen to each other. And from that discussion I 
believe we will develop a far better understanding in America 
of both the seriousness of the problem and of our ability to 
solve it, and I am absolutely confident we can assure the 
future of Social Security.
    But Wendell, one comment you made kind of interested me--
your concern about using the surplus for individual accounts. 
You're right when you say that 50 percent of retirees have no 
additional pension income, and if you're retired on just Social 
Security, and if you were a lower earner and you're retired on 
the minimum Social Security benefit or even slightly above 
that, you're living in New Britain, Connecticut, on $6,000 or 
$7,000 a year.
    Now that's a lot of women, and that's going to continue to 
be a problem because people are going to continue to retire on 
rather low incomes. And it's the very low-income people who 
worked for small businesses who are unlikely to have additional 
pension benefits.
    And so this idea of immediately starting accounts for 
everyone so that through compounding they will have some 
additional benefit, I think is very exciting. I don't know yet 
whether it's the right thing to do, but compounding is so 
important that in a sense we can't afford to wait. Also, we do 
know that we cannot, even if we shoreup Social Security and do 
everything that's required to make it a sound system that can 
deliver on its promises--and I believe we're going to do that--
that's still not enough. You can't live on the minimum Social 
Security benefit in today's world, with medicines, and so on 
that are really necessities in life.
    I think to acknowledge that we have to solve the Social 
Security problem, but that that isn't going to be enough, is 
important, and if we use these surplus funds to create these 
individual accounts over and above Social Security and outside 
of Social Security, the people they're going to help the most 
are people who work for small businesses that don't provide any 
pension benefit plans.
    And since government, frankly, has been a big actor in 
driving out pension plans that small businesses could afford--
and we all know we did it, through super regulation--and we're 
trying to get it back in now. We passed the SIMPLE plan; we're 
going to pass the SAFE plan. We're working on it. But this 
would immediately inject into the system some retirement 
possibilities that aren't there now for the very people who 
need them the most, so I hope you will help us think through 
this issue, rather than just rejecting it.
    Mr. Primus. I didn't mean to reject it. I'm very concerned 
about the individual savings. You're absolutely correct that 
these other aspects of the retirement system ought to be 
bolstered as well, but I was really making two points. The 
first point is that I really do believe that reducing the 
national debt increases national savings more than the 
establishment of the accounts. And the best thing we can do 
right now, while we have this year of dialog and debate, is 
that we use those surpluses for measuring our national savings. 
Don't spend the surplus, either on a tax cut or a spending 
increase.
    And the second is a political point, not an economic point, 
and that is that I think we should restore Social Security 
solvency first, and maybe at the same time consider the 
establishment of individual accounts. I think that should be 
considered, but I don't think you should establish the accounts 
before you restore the solvency. They go hand in hand.
    Mrs. Johnson. Thank you.
    Chairman Archer. Mr. Cardin.
    Mr. Cardin. Thank you, Mr. Chairman. First, let me thank 
all three witnesses for their testimony. It's certainly very 
helpful as we start this National Dialogue on Social Security.
    Mr. Primus, if I understood your point about the surplus, I 
think we're in agreement. The President has suggested that we 
do not spend the surplus until we've come out with a proposal 
concerning Social Security. You're suggesting the surplus be 
used to pay down the deficit. I think that's the same idea; we 
just have a clarification. We're saying----
    Mr. Primus. We're saying the same thing.
    Mr. Cardin. And Mr. Myers, I particularly appreciated your 
observations about the 1983 reforms. They were successful. The 
system has been working well. Social Security has accomplished 
its purpose of providing income security for our retirees. Not 
everything we hoped to do in 1983 was accomplished, but the 
program has been working well and people have been protected 
under the system.
    And now we need to take a look at changes that are current 
today that we didn't know about in 1983. There are some people 
entering the work force today that have retirement options 
available that weren't present in 1983. The demographic changes 
in our country make it very clear that the number of people in 
the work force are going to continue to drop compared to the 
number of people receiving Social Security, so it seems to me 
that this is just a continuation of the debate that took place 
in 1983 and that we are looking for a way to make sure that the 
objective of the Social Security system to protect the income 
of the people who are retired in this country is maintained. 
So, I just look at it as continuing the work that you have been 
doing over your lifetime, and I really thank you for that.
    I think it's key, as we look for the reforms that are going 
to be needed in Social Security--and there are a lot of 
different suggestions that have been made--I agree with the 
Chairman. I think right now it's more important for us to 
figure out a bipartisan process than to look at any specific 
solution. I have my favorite, and I'd be glad to review it with 
you and go over it, review it with the Chairman and get his 
views on it, and maybe even get his support for the changes 
that I would like to see in the Social Security system.
    But I know that it's going to need a lot more discussion 
and debate because it has a lot of rough edges on it, and I'm 
sure there are going to be some problems that people are going 
to bring to my attention. But it's only through this type of 
debate and discussion that we're going to be able to continue 
to achieve the objectives of Social Security and make sure that 
it's going to be available for future generations, and that's 
what this is about.
    The President--and Mr. Primus, I agree with you--the 
President's National Dialogue is good. We don't want to do 
anything that will compromise the national debate, getting 
people involved around the Nation in this debate, particularly 
young people. It's their system that we need for the future. I 
will be having a forum next week on a college campus on Social 
Security because that's where the debate really needs to be 
engaged, with our young people, so they understand what's at 
stake.
    But I think the Chairman has brought up a very good point. 
We need a mechanism that ultimately will allow us in a 
bipartisan way in Congress to deal with this issue. We can't 
substitute the Committees. We can't substitute the work of 
Congress, but it's got to come to us in a way that we can 
receive it in a bipartisan way, that it has the credibility.
    And although I'm sure that we can come up with 
improvements, and so forth, to any mechanism that has been 
suggested, I would just encourage all of you to work with us so 
that the good work that the administration is going forward 
with, the good debate that we've started, that we understand 
that Congress is a very political body. And if we don't figure 
out some way to hand off this issue to Congress in a bipartisan 
way, then all this good work and all this good debate may go 
for naught.
    So, any suggestions that you have, I certainly--
particularly Mr. Primus. You're very sensitive to the political 
environment here on this Committee, so any suggestions you have 
that we could make sure that we carry out those objectives, we 
certainly would appreciate it.
    Mr. Myers. Mr. Cardin, I most certainly agree with you that 
the action that was taken in 1983 was quite successful. But no 
matter what is done, if action is taken now to restore the 
apparent long-range solvency of the system, at some time in the 
future further adjustments will be needed.
    Mr. Cardin. Right.
    Mr. Myers. And perhaps it will be in the other direction. 
We may find that what we're doing today would provide more 
financing than needed. As I recall, back in 1983, people were 
willing to raise the normal retirement age, not merely to 67; 
they would have been willing to raise it to 68, but it didn't 
seem to be needed at the time. We knew then, of course, that 
the baby boomers were coming along. That's why cost estimates 
should be made for long periods of years, like 75 years, as the 
distinguished Chairman said. It's quite possible that the 
future experience will be more favorable than estimates made 
today, and in that case action can be taken.
    For example, if for some reason longevity does not improve 
as rapidly as the actuaries now assume, and if the retirement 
age is raised, later it might be found that it will not need to 
be raised that far. Of course, that's much more pleasant, to 
freeze the retirement age or lower it some than to take steps 
going in the other direction. I think that over the years and 
for all time to come, adjustments will need to be made in this 
system.
    Mr. Cardin. The error that was made in 1983 was that we 
expected the change to last for 75 years. There's nothing we 
could do here in Congress, ever, that will allow a program to 
go without modification or change for that long a period of 
time, nor is it healthy for us to have changes that are so 
permanent in nature for such a long period of time. We should 
have been more realistic in 1983, recognizing that by the end 
of the century we would need to look at the system again, and 
that's what we need to do.
    Thank you, Mr. Chairman.
    Mr. Primus. Can I make one comment, and that is that I 
think the task that confronts Chairman Archer and Chairman 
Bunning is much more difficult than the task that confronted 
Chairman Rostenkowski and Chairman Pickle. As you heard in 
testimony earlier, we were 6 months away from the trust fund's 
not having sufficient dollars to pay in 1983.
    Right now, regardless of what set of assumptions the 
actuaries use to make their projections, it's still a long time 
in the future, and I think reaching the political consensus and 
bringing the two parties together is going to be a much more 
difficult task. And I think we need to stimulate the dialog; 
the American public has to be involved in that.
    And you, the Committee, are going to have to also engage 
in--I would argue for retreats and some other--where you can 
bring in experts and do all of those kinds of things to educate 
the Committee because there are only seven Members of this 
Committee that were around during the 1983 debate.
    Chairman Archer. Mr. Primus, I think your comments are 
exceedingly well taken, and from a practical standpoint, I 
agree completely with them. And that's why I mentioned in my 
preliminary remarks that this was going to be a real test of 
democracy, as to whether we could make difficult decisions when 
we're not staring oblivion in the face, but where it is 30 
years down the road.
    It also is another reason why, after examining all of the 
alternatives, I decided that a commission--and a smaller 
commission than what we had in 1983--would be the best 
opportunity to focus on this issue and attempt to drive it in a 
way that would reach consensus, that the Congress could--
although not accepting automatically--be put in a position to 
where we at least would have to consider it.
    It seems to me one of the difficulties we have today is 
that all of the outside panels, all of the outside groups that 
have looked at this issue have come forward with extremely 
diverse suggestions as to what we ought to do. There is no 
consensus.
    The recent Social Security Advisory Council was split 
almost one-third, one-third, one-third. Well, that doesn't give 
very much direction to the Congress of the United States. It 
simply creates more confusion and more opportunity for conflict 
within the political fabric of the Congress.
    And one of the things we put into the legislation to create 
the Commission is they would be charged with coming back with 
one consensus recommendation. And it almost would be like a 
jury. A jury cannot come back divided and have a verdict in a 
regular litigation case in this country, and they are put under 
a responsibility to attempt to resolve their differences and 
come back with a uniform verdict. And I see this Commission as 
being under a similar charge, if they need to work this out and 
come back with a strong consensus, rather than divided one-
third, one-third, one-third, which I don't think helps the 
process.
    But I do agree with your views that this is not going to be 
easy to do because we're not right at the edge of the cliff.
    Mr. McCrery.
    Mr. McCrery. Thank you, Mr. Chairman, and thank all of you 
for your testimony.
    Mr. Chairman, I'd like to make a comment about the previous 
panel, since we had to go vote before I had a chance to 
question the panel, and it's very simple. One of the members of 
the previous panel had said that Speaker Gingrich had endorsed 
the Kasich bill that was dropped today, and I don't believe 
that's the case. The Speaker has not endorsed that bill, and so 
I just wanted to clear that up.
    Mr. Primus, when you say that we ought to use the surplus 
to buy down the debt, what surplus are you talking about? Are 
you talking about just this year's surplus, or are you talking 
about the next 5 years or the next 10 years as projected under 
current conditions? Just define for me what you mean by the 
surplus.
    Mr. Primus. Well, I would like to see you draw down the 
national debt for a long period of time. Gwen, the demographics 
of the country right now and our low national savings rate--
that really is the best economic solution, if you will, to 
expanding and growing our economy.
    But I think at the same time I would like to see this 
Committee and the administration and Congress come to a 
solution that would restore solvency in the Social Security 
Program, as well as in the Medicare Program. Right now, 
demographics is destiny. We know that very soon a lot more 
people are going to be reaching age 62 and 65, and I think we 
should be taking a very prudent course right now in recognizing 
that fact and drawing down--reducing our national debt.
    Mr. McCrery. Well, let me see if I understand you. Are you 
saying we should buy down the debt with the surplus until we 
figure out an overall solution for Social Security, and if 
necessary--then--we could use the surplus to shoreup the Social 
Security system? Is that what you're saying?
    Mr. Primus. Yes. The surplus exists today because, as the 
Chairman said in front of the other panel, Social Security 
revenues exceed Social Security outgo and that excess is loaned 
back to the general fund. The rest of government is currently 
not in balance. We have not reached a balance in the rest of 
government, and I'm basically saying you should continue to 
apply your budgetary rules. While there are still important 
national priorities that need attention, you should still 
continue the pay-as-you-go process that was established in the 
late eighties. And that's a very good process in terms of 
budget discipline.
    Mr. McCrery. OK, so you're not averse, then, to using any 
surplus for the next 10 years to shoreup the Social Security 
system, to apply that surplus to a fix, a long-term fix for the 
Social Security system. Is that correct?
    Mr. Primus. That's correct. I have a little problem in the 
sense that that surplus exists because Social Security is in 
surplus, and so it's kind of like double investing, if you 
will, if we took the surplus that exists because of Social 
Security and then use it to help it again. It doesn't sound 
quite right to me.
    Mr. McCrery. Yes, I understand your discomfort there, but 
we don't know what the solution is to Social Security. As the 
Chairman pointed out, there are a variety of suggestions for 
fixing the systems, and some of those, if not most of those, 
probably require some sort of transition funding to get us from 
where we are now to the new system.
    So, while I share your discomfort with spending money that 
we don't really have in a sense, it seems to me we have an 
opportunity now with the surplus being generated, thanks to the 
fiscal policies that have been adopted for the last few years, 
that we have an opportunity to finance this transition from 
where we are now to a new system, which we hope would, with the 
help of actuaries, be sound for as far as the eye could see. 
And it seems to me that that would be a reasonable investment 
to make as a society.
    So, I think that if we can reach consensus--and that's a 
big if--but if we could reach consensus or even reach a 
majority and get a President to sign a majority will of the 
Congress for an approach to solving the problems in the Social 
Security system, then we might ought to spend that surplus. 
Because in the long run, we would make more than we would spend 
in the short run, if you get my meaning.
    Mr. Primus. If I could comment on that, I guess I'm not 
quite willing to buy the notion that Social Security is 
fundamentally broke or unsound. We need to restore the 
imbalance between income and outgo. But it's like, if I may use 
a sports analogy--since we just got through March madness. 
There are different components to our retirement system. And 
Social Security as one component of that system has inflation 
protection, it's universal, it's a defined benefit, and so 
forth. You don't need or expect each component of the system to 
have the same attributes. Just as we don't expect the same 
attributes of a point guard as the center, we do not need each 
component of the retirement system to be extended.
    So, the fact that we have a lower rate of return in the 
Social Security system--we have other attributes that make up 
for that. For each American there ought to be Social Security 
and individual savings and pension, as well as Medicare--the 
health side of the retirement system. And so because Social 
Security is so important to low and moderate Americans, I think 
the imbalance that exists in Social Security needs to be 
eliminated.
    But when you say transition to a new system, I'm not 
convinced we need a transition to a completely different 
system. I think we can restore Social Security, work on those 
other components--try to increase the coverage rate in the 
pension system, try to encourage Americans to save. Neither one 
of those components are completely broke and each one could use 
some incremental improvements.
    Mr. McCrery. Well, if I might respond, Mr. Chairman, for 
just a moment. I don't mean to say a completely new system, 
vastly different from what we have now. But any change would be 
a new system, and that could be anywhere from just a little 
tweaking here to a completely new system. I don't know where 
that's going to fall, but most of the suggestions, many of the 
suggestions that have been made for changing the system require 
some kind of transitional funding.
    And I think you will admit, Mr. Primus, that if we put 
every bit of the surplus on paper into financing future Social 
Security benefits, it would not solve the actuarial problem 
that we have, at least the surpluses that are now projected. Is 
that correct?
    Mr. Primus. I think that's correct, yes; especially if you 
use the Congressional Budget Office.
    Mr. McCrery. So it doesn't make much sense, does it, to 
stick our heads in the sand and say, ``Well, let's just use the 
surpluses to finance Social Security and not worry about making 
any changes to the system.''
    Mr. Primus. I'm not arguing for sticking our heads in the 
sand. I'm saying----
    Mr. McCrery. So you're not against changing the system?
    Mr. Primus. No----
    Mr. McCrery. OK.
    Mr. Primus [continuing]. It needs to be changed, and there 
are, unfortunately, I think, only three big ways of doing that, 
and that is reducing benefits, increasing taxes, and maybe 
investing some of the balances in securities and trying to get 
a higher rate of return. Those are really--there are 
permutations on that, but there really isn't any other way of 
solving this imbalance.
    Mr. McCrery. I think you've got it. Thank you.
    Chairman Archer. Any----
    Mr. Schultz. Mr. Chairman.
    Chairman Archer. Yes, Mr. Schultz.
    Mr. Schultz. Just a general comment, maybe before closing. 
You said Americans want to learn more and share their views 
with their elected officials. And I think when you said 
Americans, you're talking all Americans, you're talking all 
generations. I'm sure that my 14 grandchildren and even my 4 
great-grandchildren might want to have a voice in what happens, 
and I think you have set up a plan that will permit these 
things to happen.
    I think we have to be sure we have all avenues open to 
them, that we hold these meetings at times when they can get 
there, that we use all means. I think it was pointed out by Mr. 
Primus that the Internet will only provide an opportunity for 
certain segments of the population. As we go forward, I want 
you to know that AARP looks forward to working with the 
President and Members of Congress on a bipartisan basis to 
carry out this national dialog. And as our own initiatives go 
forward, if there is any information that we glean from them 
that might be useful to the Dialog Council or to the bipartisan 
panel, we'd be very happy to share that with them.
    Chairman Archer. Mr. Schultz, thank you very much, and 
thank you for your participation today. We look forward to 
working with AARP and many other groups and sources of 
information and expertise in trying to work through this 
problem.
    Mr. Cardin, do you have any further questions?
    Mrs. Johnson.
    Thank you very much, gentlemen. Have a good day. The 
Committee will stand adjourned.
    [Whereupon, at 2:26 p.m., the hearing was adjourned, 
subject to the call of the Chair.]
    [Submissions for the record follow:]

       Association of Private Pension and Welfare Plans    
                     1212 New York Avenue, N.W., Suite 1250
                                             Washington, D.C. 20005
The Honorable Bill Archer
Chairman
Committee on Ways & Means
U.S. House of Representatives
Washington, D.C. 20515

    Dear Mr. Chairman:

    The Association of Private Pension and Welfare Plans (APPWP) 
commends you and Reps. Kasich and Bunning on the introduction of H.R. 
3546, the ``National Dialogue on Social Security Act of 1998.'' APPWP 
is prepared to assist in any way in the passage of this important 
legislation and, once enacted, to ensure the successful implementation 
of of its provisions. As you know, APPWP is the national association 
representing employers on the full range of employee benefit matters. 
Our members either sponsor directly or administer retirement and health 
plans covering more than 100 million Americans.
    Certainly, Social Security reform is one of the most important 
issues facing the nation. Accordingly, it is vital that as many 
Americans as possible be fully engaged in the discussions and debate 
that will lead to the changes that Congress and the President will 
consider. Your call for an official National Dialogue on Social 
Security and for the establishment of a Bipartisan Panel to Design 
Long-Range Social Security Reform is precisely what must be undertaken 
before either the nation or lawmakers can make informed decisions that 
will enjoy the support of the American public.
    APPWP applauds your leadership and foresight in establishing both a 
structure and a timetable for informed decision-making by the general 
public and those charged with the responsibility for designing reform 
proposals.
    Naturally, APPWP will gladly assume our responsibility under H.R. 
3546 to nominate individuals for consideration for the Dialogue 
Council. In addition, throughout the entire Social Security reform 
process, APPWP will provide whatever assistance possible to you and 
your colleagues as you undertake this vital initiative.

            Sincerely,
                                             James A. Klein
                                                          President
      

                                


Statement of Center for the Study of Economics

    We need an expert panel to discuss the real problem posed 
by the coming tsunami of Social Security claimants, and the 
Social Security payroll tax is already very high (most 
Americans pay more in payroll tax than they do in income tax).
    Social Security privatization is one way to go, but 
realistically it could only cover part of the Social Security 
cost. Social Security will still have to find a tax source for 
its revenue. Both payroll and income taxes are high and burden 
the economic growth needed by poor people.
    Rather than tax producers, Social Security should tax the 
locational value of land instead.
    (1) If Social Security taxes production, production is 
discouraged. But if Social Security taxes locations, there 
won't be fewer locations (impossible) and we tax land into 
fuller use, thereby creating jobs and economic growth.
    (2) Most voters will pay less in taxes if Social Security 
taxes the locational value of land rather than production. 
That's because most voters (especially the poor) own very 
little locational value (otherwise they wouldn't be poor).
    All studies have shown that a tax on the locational value 
of land fully substantiate the above benefits. It is endorsed 
by literally hundreds of urban experts and by eight recent 
American Nobel Prize winners in economics.
    The Center for the Study of Economics has had experience 
administering such a tax and offers to help the panel pro bono 
if called upon.
      

                                


Statement of Charles G. Hardin, President, Council for Government 
Reform

    Mr. Chairman, thank you for allowing me to testify for the 
record about our nation's federal retirement income security 
system: Social Security. I greatly appreciate this opportunity 
to share the views of our 350,000 members with the Committee.
    My name is Charles G. Hardin and I am President of the 
Council for Government Reform (CGR). CGR is a non-profit 
citizen lobbying organization that seeks to encourage greater 
responsiveness by, and an overall reduction in the size and 
scope of, government at all levels. CGR advocates a lower tax 
burden, improved financial security for our Senior Citizens, 
and a less costly system of government for ourselves and future 
generations.
    CGR would like to thank Chairman Archer and the members of 
the Committee on Ways and Means for turning their attention to 
the thorny problem of the long-term solvency of Social 
Security. Chairman Bunning of the Subcommittee on Social 
Security deserves much credit too. Because of his leadership, 
the Subcommittee has held eight important hearings discussing 
the long-term problems with Social Security. CGR believes that 
these hearings have contributed greatly to the public education 
process and looks forward to future hearings in the series.
    For the more senior members of the Committee on Ways and 
Means, I am sure that anytime the words ``Social Security'' and 
``reform'' are mentioned in the same sentence, you may have 
flashbacks to former Chairman Dan Rostenkowski and the spot of 
trouble he had with some seniors over catastrophic coverage. It 
takes a special type of courage to brave the slings and arrows 
that will be fired over this issue and I would like to make it 
clear that in taking up this cause, you are showing the courage 
necessary to lead effectively. We thank you for that courage.
    CGR would also like to thank Speaker Gingrich for coming to 
this panel today and lending his powerful and eloquent voice to 
the proceedings. CGR is pleased that he has joined the chorus 
calling for reform. The Speaker is well known for his vision 
and his determination in fulfilling that vision. CGR is 
confident that in the absence of partisan politics, the 
President, the Speaker, and the Majority Leader can work 
together to craft a long-term solution to the Social Security 
crisis that will increase rather than decrease the standard of 
living for all Americans.
    As we are all aware, Social Security is a vital program for 
the millions of Americans who currently receive benefits and 
for the millions more who are counting on Social Security 
income for a secure retirement. Therefore, when the current 
Social Security structure is threatened by the increasing 
numbers of retirees, with fewer workers to support them, and 
with stagnant wages to tax, it is a problem that Congress and 
the American people must address while there is still time to 
fashion a pain-free and politically possible solution.
    No one seriously denies Social Security's lack of long-term 
viability. Estimates range from the year 2006 to 2030 as to 
when the Trust Fund will exhaust its surplus and begin running 
at a deficit. At that time, we will face the Hobson's choice of 
massive benefit cuts or staggering tax hikes.
    Benefit cuts would cripple millions of seniors who have not 
had the ability to save for their own retirement because they 
trusted Social Security's promises. And tax hikes would hurt 
workers already burdened with the challenge to rear their 
families while struggling to make enough after-tax income to 
support themselves, let alone provide for their futures. 
Clearly, this scenario is a recipe for economic stagnation and 
decay.
    Fortunately, the avenue of escape from this dreary scenario 
lies readily at hand. Congress must burst the old mold of tax 
hikes and benefit cuts and cast a new mold by increasing the 
rate of return on dollars invested in Social Security. The 
exact details of any plan will require much discussion and 
debate over the next year, but I would like to outline the most 
important principles necessary to save Social Security:
     The federal government must stop raiding the 
Social Security Trust Fund to pay for current spending. The 
feeding frenzy on the temporary Social Security surplus simply 
creates more debt. Congress should also dedicate a substantial 
portion of any federal budgetary surplus to repay the money 
owed to the Trust Fund.
     Any Social Security reform must not increase 
payroll taxes and must not cut benefits. These traditional 
solutions have only deepened the problem by slowing economic 
growth and fueling the federal government's free-spending ways.
     Congress must facilitate an increased rate of 
return on Social Security investment dollars. We need to create 
wealth through investment, not subsistence through the 
indebtedness of our grandchildren. The best strategy would 
require individuals to place Social Security taxes directly 
into some form of personal retirement savings accounts (PRSAs). 
From these accounts, individuals would then invest their 
savings in various investment vehicles, such as stocks, bonds, 
and mutual funds which will return enough income to ensure a 
safe and secure retirement for most Americans. Not only would 
individuals benefit directly, but so too would the entire 
economy.
    Regarding the aforementioned principles, CGR is pleased 
that Speaker Gingrich endorsed the reforms embodied in 
Representative John Kasich's H.R. 3456, ``The Personal 
Retirement Savings Account Act of 1998.''
    H.R. 3456 allocates 80% of any general fund surplus to 
Personal Social Security Plus Accounts for all covered workers 
in that year. This is a step in the right direction and I 
applaud Rep. Kasich's ingenuity and courage in offering a 
workable bill that would give every working American some 
ownership and control over their retirement income.
    H.R. 3456 would ensure that most of the surplus money 
raised by the current payroll tax is spent on retirement 
programs, as was originally intended. When Congress reformed 
Social Security in 1983, it increased payroll taxes. But 
Congress overestimated the money it needed to pay to retirees 
and the Social Security Trust Fund began to run a large 
surplus. Instead of returning this money to the taxpayers or 
investing it, Congress spent it and replaced it with non-
negotiable U.S. Treasury Bonds that can only be repaid with tax 
dollars. As of 1998, the U.S. Government will owe the Social 
Security Trust Fund more than $700 billion.
    For Fiscal Year 1998, the unified budget could run a 
surplus as high as $40 billion. But the calculation of this 
surplus includes nearly $100 billion taken from the Social 
Security Trust Fund. In a sense, H.R. 3456 repays some of the 
money owed to Social Security Trust Fund because that money is 
used for retirement purposes. Also, H.R. 3456 uses the 
remaining 20 percent of the unified budget surplus to pay down 
the national debt which also helps to repay the Social Security 
Trust Fund.
    But notwithstanding my praise for Representative Kasich=s 
proposal, CGR views H.R. 3456 only as a small part of the 
solution to the overall problem with Social Security. Clearly, 
H.R. 3456 would improve the Social Security long-term deficit 
situation. But it is only a supplement, not a solution.
    American taxpayers cannot continue to pour 12.4 percent of 
their earnings into a public investment program that already 
provides a negative rate of return for far too many future 
retirees. Undoubtedly, maintaining the status quo will lead to 
a lower standard of living. To reverse this course, Congress 
must allow Americans to invest more of their FICA tax dollars 
in investment instruments where they can achieve greater rates 
of return.
    That is why CGR supports H.R. 3546, The National Dialogue 
on Social Security Act of 1998 and is pleased that the 
Committee on Ways and Means is holding this hearing on the 
bill. Because a plethora of options purport to solve the long-
term problems associated with Social Security, CGR sees great 
value for members of Congress, and for the public at large, for 
a blue-ribbon panel of experts to distill the best portions of 
these plans into a working model for Congress and the public to 
consider. Presumably this model would then serve as the 
consensus starting point to craft final legislation for the 
House Committee on Ways and Means and the Senate Committee on 
Finance.
    Inevitably, in the give and take of legislative politics, 
this plan, like any other plan, would be modified to reflect 
the needs of practical politics. Establishing a baseline to 
start the dialogue seems like as good a place to begin this 
daunting task.
    CGR also believes that the panel and the national dialogue 
established by H.R. 3546 is more representative of the debate 
at large than the dialogue hosted by the American Association 
of Retired Persons and the Concord Coalition. The townhall 
meetings in which President Clinton will participate have the 
potential, given the weight of his office, for focusing public 
attention on the debate. For this we commend him. However, CGR 
is very concerned that some of the more thoughtful 
privatization proposals will not receive a fair hearing in the 
dialogue they sponsor. On the other hand, the dialogue 
established by H.R. 3546 would include all points of the 
political spectrum, from those who advocate an expansion of the 
current Social Security program to others who advocate 100 
percent privatization.
    Mr. Chairman, thank you for this opportunity to discuss 
long-term Social Security reform. On behalf of our 350,000 
members, I look forward to working with you and all the other 
members of the Committee on Ways and Means during the next 
several months to ensure a fair and equitable retirement and 
safety net for all Americans in the future.
      

                                

                  National Association of Manufacturers    
                             1331 Pennsylvania Avenue, N.W.
                                          Washington, DC 20004-1740
The Honorable Bill Archer
Chairman
Committee on Ways and Means
1236 Longworth House Office Building
Washington, D.C. 20515-4307

RE: STATEMENT FOR THE RECORD

    Dear Chairman Archer:

    The National Association of Manufacturers commends the Ways and 
Means Committee for scheduling a hearing on the merits of establishing 
a bipartisan panel of experts to design Social Security reform. In 
addition, the NAM applauds the attention that the Committee is giving 
to the vital issue of engaging the American public in discussion of the 
problems facing Social Security and of equitable solutions.
    The NAM has taken a lead among trade associations in calling for 
fundamental reform of the Social Security system. We recognize that the 
system directly affects all working Americans, their dependents, and 
those in or approaching retirement. To this effect, an open and 
thorough discussion of the economic and demographic issues is entirely 
appropriate, and cannot begin too soon.
    The NAM also recognizes that an unreformed Social Security system 
would cripple the American economy. American workers and businesses 
could no longer compete successfully in the global market for goods and 
services. Indeed, the U.S. is well behind several other nations in 
Europe, South America and the Pacific Rim in addressing the problems of 
their unfunded public retirement systems. Unless the U.S. steps up to 
these issues quickly, we can anticipate a stagnant domestic economy, 
with a reduced standard of living and lowered expectations for all 
Americans.
    Based on the work of a NAM Task Force on Social Security reform, we 
believe that two issues are at the heart of any successful program of 
reform. First the ``safety net'' of social insurance must be 
maintained, so as to allay fears of old-age poverty. Secondly, reform 
must result in creation of funded retirement accounts that represent 
real savings and wealth creation for individual members of the U.S. 
workforce.
    We request that this letter be made a part of the public record. 
Also for the record, we attach a ``Statement of Principles'' for Social 
Security reform, approved the NAM Board in 1997. In addition, we 
include for the record a recent Issue Brief that describes in detail 
the position of the White House, the Chairman of the Federal Reserve, 
and explains the methodology of significant pieces of Social Security 
reform legislation currently before the Congress.

            Sincerely,
                                              Paul R. Huard
                                              Senior Vice President
      

                                


A Public Policy Summary Issue Brief, April 1998

   Social Security Reform and Economic Growth, The second in a series

             Legislative Proposals and Policy Prescriptions

    An April 1997 NAM Issue Brief identified the relationship 
between economic growth and reform of federal entitlements 
programs. The issues examined in that document,''An Overview of 
Issues and Terminology,'' remain relevant, even as lawmakers 
introduce new legislative proposals. In addition to 
introduction of several bills, the White House, congressional 
leaders and the chairman of the Federal Reserve System have 
made major policy statements on reform.

Issue

    As Congress and the Administration move toward a consensus 
on reform,
    what legislative proposals and policy prescriptions form 
the basis for debate on Social Security reform?

NAM Position

    During the past several months, the NAM has retained its 
leadership among trade associations in addressing structural 
imbalance of the Social Security system and in calling for 
early enactment of fundamental reform. Although the NAM has not 
endorsed any specific reform proposal, it continues to evaluate 
bills and policy proposals according to the ``Statement of 
Principles'' for reform approved by the NAM Board in April 
1997. A summary of those principles, which appeared in the 
April 1997 Issue Brief, includes: (1) separation of the 
accumulation of retirement savings from the provision of a 
needs-based ``safety-net'' of retirement income security; (2) 
individuals' ownership of retirement savings account, with 
contributions and accrued earnings available upon retirement, 
or transferable to survivors and heirs; (3) investment of 
assets free of government control or influence, in such a 
manner as to produce market rates of return; (4) recognition 
that fundamental reform is closely related to issues of federal 
tax policy and rules affecting private pension plans; and (5) 
recognition that changes must be implemented as soon as 
possible.

Policy Proposals

    Legislative and policy proposals currently under discussion 
for reform or restructuring of the Social Security retirement 
system include the following:

The White House Policy Proposal

    In his State of the Union message on January 27, President 
Clinton advocated using federal budget surpluses to support the 
existing Social Security retirement system. Gene Sperling, 
director of the President's National Economic Council, 
described the White House initiative as a ``Social Security 
First'' strategy.
    According to the President, the budget surplus should be 
``reserved'' and not expended for either tax cuts or new 
spending until the Social Security system is brought into 
fiscal balance. The President, however, failed to specify how 
to achieve this balance.
    At a meeting of the Center for Strategic and International 
Studies held two days after the State of the Union address, 
Sperling noted that now, with projected tax receipts exceeding 
earlier expectations, there is a ``unique opportunity'' for 
Social Security reform. He explained that ``reservation'' of 
any budget surplus to reform or restructure the system creates 
a mechanism for fiscal discipline by both the Congress and the 
White House. Responding to a question from the NAM, Sperling 
declined to state whether the Administration would consider a 
reform proposal based in part on individual accounts.
    Subsequent testimony by Treasury Secretary Robert Rubin and 
Office of Management and Budget director Frank Raines before 
the House and Senate Budget Committees produced no further 
clarification. Aside from the stated strategy of ``Social 
Security First,'' the Administration has been cautious in 
revealing publicly its preferred mechanism for reform.
    Individual Accounts. In a February 9 speech before students 
at Georgetown University, President Clinton reiterated the 
importance of Social Security reform, and--in a manner 
consistent with reform advocates--stressed the significance of 
early attention to the issue, in order to avoid a financial 
crisis. Beyond this, the President made few specific policy 
recommendations. He emphasized the importance of individuals 
putting their retirement savings individuals in a variety of 
vehicles (an issue previously discussed at a NAM Employee 
Benefits Committee meeting by Mark Irwy, benefits tax counsel 
at the Treasury Department). According to the President, these 
savings vehicles would include IRAs and 401(k) plans.
    The following day at a hearing before the Senate Special 
Aging Committee, Social Security Commissioner Kenneth Apfel 
indicated that items ``on the table'' at the White House is use 
of individual accounts as a possible means of addressing 
structural problems of the current system. Economic advisor 
Gene Sperling, in remarks on the following day, voiced similar 
comments.
    Reform Strategy/Timetable. In his testimony before the 
Senate Special Aging Committee, Apfel provided a timetable for 
Administration efforts on Social Security reform. President 
Clinton himself will participate in at least four public forums 
that will address the issue. The forums will be held in 
conjunction with the American Association of Retired Persons 
and the Concord Coalition--organizations identified with 
opposing poles of the debate over fundamental reform. The first 
forum is scheduled for April 7, in Kansas City. (The NAM 
already participates, with the Concord Coalition, in a program 
of public forums throughout the nation, and in related 
educational efforts.) Following the public forums, the 
Administration will sponsor a White House conference on Social 
Security in December 1998. Apfel also stated that the 
Administration will work with the House and Senate leadership 
on a legislative proposal during the first session of the 106th 
Congress.
    Compatibility With NAM Principles. The White House is 
concerned both with the ``philosophy'' and the ``mechanism'' of 
achieving reform or restructuring of Social Security. During an 
NAM policy forum last fall, Raines clearly showed the 
Administration's reluctance to consider individual accounts in 
any reform mechanism. Apfel's recent testimony and comments by 
Gene Sperling indicate a possible change in philosophy.
    Individually owned accounts are central to the NAM 
principles, and the NAM would oppose any ``reform plan'' that 
did not provide for such accounts. Early implementation of a 
reform plan, as called for by President Clinton in his 
Georgetown speech, is quite consistent with the NAM principles.

Senate Testimony by Alan Greenspan

    Federal Reserve chairman Alan Greenspan testified before 
the Social Security Task Force of the Senate Budget Committee 
on November 20. He acknowledged that a financial imbalance 
exists in the current Social Security system, such that, ``... 
the [Social Security] system as a whole [is] badly 
underfunded.'' According to Greenspan, funding remains the 
critical element in any debate over reform, because of the 
obvious fact that any retirement system requires an 
accumulation of real resources over working lifetimes 
sufficient to fund the retirees' consumption. Because the 
current system is underfunded, additional resources can be 
accumulated only through increased taxes (with negative effects 
on growth), through reduced benefits, increased private 
savings, or government surpluses.
    Increased National Savings. The crux of Greenspan's 
testimony was that only increased national savings can provide 
the additional national productive capacity necessary to fund 
liabilities to future retirees. He suggested reforming the 
existing ``defined benefit'' (DB) Social Security model in 
favor of a funded ``defined contribution'' (DC) system of 
accounts for individuals. Regardless of a DB or DC model, a 
funded retirement system would require increased national 
savings--merely shifting current trust fund investments from 
federal debt securities to private equity securities would 
fail.
    Recognition Bonds. Greenspan also suggested using 
``recognition bonds'' to bring unfunded liabilities of the 
Social Security system ``on budget.'' The government would 
distribute such bonds to individuals, in recognition of prior 
contributions to Social Security in the form of FICA taxes 
paid.
    Out of the Blue. The candor and specificity of Chairman 
Greenspan's testimony took the Senate Task Force and the 
financial press by surprise. As a result, his observations on 
the state of the Social Security retirement system and proposed 
remedies have yet to receive substantial attention. Despite 
this, Greenspan's testimony and his continuing observations are 
likely to encourage a consensus in favor of a funded, DC model.
    Compatibility With NAM Principles. Greenspan's suggestions 
for funded DC accounts is fully in keeping with NAM principles. 
Although the principles do not address recognition bonds or 
creation of new federal debt as a means of satisfying existing 
liabilities, the NAM advocates a reform plan under which 
neither debt nor taxes increase.

Legislative Proposals

    Members of the House and Senate have introduced a variety 
of bills that address the state of the Social Security system. 
Among the more significant proposals are the following:

H.R. 2929

    Rep. John Edward Porter (R-IL-10) is sponsor of this 
comprehensive proposal that would allow individuals to opt out 
of the current Social Security retirement system in favor of 
individual investment accounts. Rep. Porter, a well-respected 
nine-term congressman, was among the first in the House to draw 
attention to the fiscal imbalance of a maturing Social Security 
system.
    Individual Choice. Rep. Porter's bill allows individuals to 
make contributions to ``Individual Social Security Retirement 
Accounts'' (ISSRAs). In lieu of the current 12.4-percent 
combined Old Age, Survivor's and Disability Insurance (OASDI) 
portion of FICA tax on wages, H.R. 2929 provides for a 10-
percent combined contribution to an ISSRA. In addition, an 
employee could elect to make an additional 10-percent 
contribution to the account.
    Under the Porter bill, the remaining 2.4 percent of FICA 
tax would continue payable to the Social Security Trust Fund, 
for a period of 10 years after an individual had opted out of 
the current system. Thereafter, neither employer nor employee 
would have an obligation for its respective 1.2 percent tax 
payment on behalf of the individual.
    Disability and Life Insurance Coverage. A portion of the 
ISSRA would purchase private disability insurance and life 
insurance, in amounts consistent with current SSDI and survivor 
benefits.
    Tax Effects. Under H.R. 2929, employee contributions (the 5 
percent basic contribution, plus any additional contribution) 
are not deductible for income tax purposes. Employers continue 
to take a deduction for business tax purposes, as is currently 
the case with FICA. Investment earnings on amounts contributed 
to ISSRAs are not taxed until distributed. The bill allocates 
distributions of contributions between taxable and non-taxable 
portions. Accounts may be liquidated through annuity purchase 
or through a series of periodic payments. Retirement age is 59-
and-a-half. Unliquidated amounts become a part of an 
individual's estate.
    Investment. Investment management of individual accounts is 
based upon a government-approved list of private investment 
managers.
    Recognition Bonds. For those opting out of Social Security 
and into ISSRAs, the government would provide a recognition 
bond as evidence of FICA paid to date. Such bonds would be 
redeemable as an annuity upon retirement. Persons younger than 
age 30 would receive no recognition bond.
    Basic Benefit. The government guarantees a minimum ISSRA 
benefit, financed through general revenues. The minimum benefit 
is the lesser of 40 percent of pre-retirement income or 95 
percent of the Social Security benefit an individual opting out 
would have otherwise received.
    Phased Changes. Social Security benefits for those electing 
to remain in the current system are reduced somewhat, over an 
extended time period, with the Social Security Normal 
Retirement Age (NRA) increasing, as under current law, to 66 in 
2005. Under the bill, the NRA would increase to 70 by 2028. 
Wage indexing of the Cost of Living Adjustment (COLA) replaces 
the present Consumer Price Indexing (CPI). Early retirement age 
remains 62, and the bill provides a minimum benefit or ``safety 
net.''
    Co-sponsors. Co-sponsors of H.R. 2929 include Reps. Spencer 
Bachus (R-AL-6), Thomas E. Petri (R-WI-6), Mark Sanford (R-SC-
1), Christopher Shays (R-CT-4) and Nick Smith (R-MI-7).
    Compatibility With NAM Principles/Effects on Capital 
Formation. Rep. Porter's bill is consistent with the NAM 
principles. Because the bill is generous to persons opting out 
of the current system, it is estimated to produce new capital 
of $4 trillion by 2015. But because of this generosity and 
because the bill gives recognition bonds to those opting out, 
the costs of transition remain formidable.
    Additional Comments. The Porter bill is ambitious. It draws 
heavily upon the aggressive Social Security reform plan 
implemented by the nation of Chile, which has proven 
surprisingly popular and dramatically successful in producing 
individual wealth and increasing national capital. The 
similarity of the bill to the Chilean plan reflects policy work 
by Peter Ferrara. Ferrara is an outspoken advocate of reform, 
associated both with the CATO Institute and Americans for Tax 
Reform (ATR). (The policy work of CATO is well respected on the 
Hill and within the business community. ATR is a potent grass 
roots group that advocates dramatic tax reduction and smaller 
government.)
    The NAM applauds the zeal of the Porter bill, but is 
concerned that costs of transition, particularly the 
recognition bonds, may not be financially and politically 
achievable.

H.R. 2768--Personal Retirement Accounts Act

    Rep. Mark Sanford (R-SC-1) is sponsor of the Personal 
Retirement Accounts Act of 1997. Rep. Sanford, a sophomore 
congressman from a district that is economically and ethnically 
diverse, ran for Congress on a platform of reforming Social 
Security. He was re-elected to a second term without 
opposition.
    Rep. Sanford's bill, like Rep. Porter's, creates investment 
accounts. Under H.R.2768, each individual contributes to a 
``Personal Retirement Account'' (PRA). Unlike ISSRA accounts 
under the Porter bill, Rep. Sanford's PRA accounts are 
mandatory.
    Contribution Level. Under H. R. 2768, PRA contributions 
total 12 percent of each individual's wages (compared with the 
current 12.4 percent OASDI portion of FICA), with employers and 
employees contributing equal amounts. Of the 12 percent amount, 
8 percent constitutes an addition to the individual's 
retirement account. The remaining 4 percent finances 
liabilities already accrued under the current Social Security 
system and accruing during the transition period. The bill 
allows additional voluntary contributions by individuals, 
limited by current rules applicable to 401(k) plans.
    Disability Coverage. Rep. Sanford anticipates significant 
changes to the Social Security disability income program 
(SSDI). As a consequence, his bill provides no mechanism for a 
separate disability income component, and the portion of OASDI 
tax allocated to SSDI (currently 1.8 percent of the 12.4 
percent OASDI total) continues as a separate FICA tax.
    Tax Effects. The employee's half of the 12 percent amount 
contributed to a PRA remains non-deductible for income tax 
purposes. The employer's portion remains deductible. No tax 
liability accrues for investment earnings on contributions. In 
contrast to the Porter bill, the entire amount of retirement 
distributions under the Sanford bill is free of income tax.
    Investment. Under Rep. Sanford's bill, investment of PRA 
amounts must be within standards of risk that replicate 
performance of the Standard and Poor's 500, until the PRA 
amount reaches a present value sufficient to provide the 
individual with a straight life annuity of $9,200 annually. 
Once the account balance surpasses such amount, investment 
guidelines are relaxed, so as to encourage higher yields.
    Protection for Participants. Among the key aspects of H.R. 
2768 is a detailed regulatory mechanism. To this effect, 
investment managers are subject to license by the Securities 
and Exchange Commission. The SEC will consider capital adequacy 
and experience in providing retirement fund investment 
services. In addition, the SEC will require full disclosure of 
management fees. Otherwise, the Sanford bill encourages a great 
variety of investment managers to apply for licenses under the 
PRA program, including mutual funds, trust banks, integrated 
investment companies, insurance companies and others.
    The Sanford bill provides for investment insurance with 
premiums paid annually by the account manager from a portion of 
PRA contributions.
    Retirement Age. Under H.R. 2768, NRA is 70. The Sanford 
bill specifies the early retirement age (ERA) at 62. At 
retirement, and according to the individual's option, the PRA 
amount can fund annuity purchase or may be liquidated through 
periodic payments or a lump-sum distribution. Unliquidated 
amounts become a part of the individual's estate.
    Grandfathering. Persons currently in retirement upon 
enactment of H.R. 2768 are unaffected and will continue to 
receive Social Security benefits as scheduled. For those 
nearing retirement, the Sanford bill provides total retirement 
benefits under the current system and the PRA at a level no 
less than scheduled Social Security benefits. During the 
transition period such benefits are financed through the 4 
percent portion of the PRA not allocated to investment 
accounts, and through such mechanisms as a bipartisan 
commission on transition funding shall determine.
    Prior Contributions. Unlike the Porter bill, H.R. 2768 
provides no recognition-bond device. In absence of the 
recognition bonds, and because of lower allocations to 
individual accounts than under the Porter bill, the transition 
costs of the Sanford bill are less.
    Phased Changes. Separately, the Sanford bill changes the 
basic benefit formula for future retirees under the current 
Social Security system. Such revisions change ``bend-points'' 
so as to reduce benefits. The bill also gradually reduces the 
combined benefits of working spouses, from the current 150 
percent of the larger Primary Insurance Amount (``PIA'') to 133 
percent.
    Co-sponsors. Co-sponsors of H.R. 2768 include Reps. Amo 
Houghton, Jr. (R-NY-31) and Nick Smith (R-MI-7).
    Compatibility With NAM Principles/Effect on Capital 
Formation. Rep. Sanford's bill is consistent with NAM 
principles. Because a lesser percentage of wages is allocated 
to PRAs under the Sanford bill than to ISSRAs under the Porter 
bill, the estimated capital formation under the former is $3 
trillion by the year 2015, compared to the $4 trillion. The 
difference, however, is largely offset by the fact that the 
Sanford bill creates no new federal debt, unlike recognition 
bonds under the Porter bill.
    Additional Comments. Among elected officials, Rep. Sanford 
is one of the most committed and articulate proponents of 
reform. His bill is finely crafted. Less aggressive than the 
Porter proposal, it nonetheless offers a vigorous reform 
agenda. Although the Sanford bill would produce somewhat less 
capital formation than the Porter measure, its more modest 
contribution base raises less dramatic transition-funding 
questions.

H.R. 3082--Social Security Solvency Act

    In the second session of the 104th Congress, Rep. Nick 
Smith (R-MI-7) introduced a Social Security reform bill, the 
first comprehensive proposal offered in the House. The 
provisions and methodology of the initial bill now appear in 
H.R. 3082, the Social Security Solvency Act of 1997.
    As with the Porter and Sanford measures, the Smith bill 
creates a system of individual accounts, referred to as 
``Personal Retirement Savings Accounts'' (PRSAs). Investment is 
at an individual's choice, among specified investment companies 
approved by the Secretary of the Treasury. Investment options 
are similar to choices under the Federal Thrift Savings Plan 
for federal employees.
    Although an individual has a choice among investment 
companies, the Smith bill, like Rep. Sanford's, requires 
establishment of individual accounts for all members of the 
workforce.
    ``Carve-Out'' Methodology. H. R. 3082 finances 
contributions to PRSAs through the mechanism of a ``carve-out'' 
from the payroll taxes that individuals and their employers 
continue to pay.
    In this regard, the language of H. R. 3028 describes a 
``reallocation percentage'' that each year determines the 
amount transferred from the Trust Fund to PRSAs. (Because the 
Trust Fund is an accounting fiction, without marketable assets, 
the reallocation percentage actually comes from the income 
stream that payroll taxes continue to provide.) Initially, the 
reallocation percentage is 2.8 percentage points of the 12.4 
percent OASDI FICA tax. In succeeding years, the reallocation 
percentage increases in proportion to the reduced liabilities 
under the Social Security system (discussed below), ultimately 
reaching 10.2 percentage points.
    ``Offsets.'' The use of private accounts to ameliorate the 
financial imbalance of the Social Security system is implicit 
in all reform proposals that employ private accounts. However, 
the Smith bill uses a more specific ``offset'' mechanism to 
accomplish the dual goals of reducing the imbalance and 
financing transition to a fully-funded system.
    To this effect, H.R. 3062 reduces Social Security benefits 
in proportion to amounts accrued by an individual's PRSA. 
Accordingly, persons near retirement, with few years for PRSA 
accumulations, would receive relatively larger benefits from 
Social Security. Those with more working years remaining would 
accrue larger PRSA balances, with greater offset of their 
Social Security benefits as a consequence.
    Deemed Rates of Return. Scheduled reduction in Social 
Security benefits under the Smith bill is based on 
contributions actually made to the PRSA, plus amounts deemed to 
have been earned by such accounts. Actual earnings experience 
and the resulting size of an individual's PRSA are irrelevant 
to operation of the offset mechanism. The bill simply assumes 
that PRSAs will earn 3.7 percent, then reduces Social Security 
benefits accordingly. As a protective measure, the specified 
rate is well below historical yields for diversified investment 
portfolios. As a result, if PRSA investments accrue earnings 
greater than the assumed rate, individuals would enjoy 
retirement income greater than Social Security currently 
promises.
    Disappearing Transition Costs. The Smith bill achieves 
financial balance for Social Security through a program of 
increasing contributions to individual accounts and decreasing 
benefits under the current system. The two complementary 
factors achieve balance for Social Security over an extended 
period of years. Because of this structure, the Smith bill 
avoids separate funding for costs of the transition period.
    Elective Contributions. In addition to payroll tax carve-
outs, H.R. 3082 allows individuals to make elective 
contributions to PRSAs of no more than $2,000 annually. Half 
the amount of such contributions is deductible when computing 
an individual's income tax liability.
    Distribution. Payments from PRSAs may begin at the 
individual's discretion, any time after age 59-and-a-half. 
Forms of distribution from PRSAs include a broad range of 
annuities or periodic distributions, including interest-only 
payments or principal pay-down.
    Tax Effects. The carved-out portion of payroll taxes 
transferred to PRSAs is not additional gross income to an 
individual. Investment earnings on PRSAs are not taxed. 
Distributions from the accounts upon retirement are taxed in 
the same manner as benefits under Social Security. One half of 
the elective contributions (and earnings) are similarly taxed, 
with rules for 401(k)'s applicable to the portion that was tax-
deductible when contributed. Retirement distributions are taxed 
like Social Security benefits.
    Phased Changes. H.R. 3082 increases the ERA from 62 to 65 
by 2011, with gradual increases thereafter. The effect of the 
increase is minimized by the availability of PRSA's upon an 
individual's election after age 59-and-a-half. Moreover, the 
ERA for surviving spouses is set two years earlier than the 
``normal'' ERA.
    Separately, the Smith bill adjusts the benefit calculation 
for future retirees, through changes in bend-points and 
addition of more earnings years to the defined-benefit formula. 
Ultimately, all bend-points are reduced, so that Social 
Security produces a minimum basic benefit.
    Like the Sanford Bill, Rep. Smith's gradually reduces 
combined spousal benefits from 150 percent of the larger PIA to 
133 percent.
    Disability Coverage. Under H.R. 3082, the Social Security 
disability program remains a largely unchanged defined-benefit 
model. In the event of disability, PRSA balances continue to 
accrue earnings but otherwise are reserved, and not used to pay 
disability benefits.
    Co-sponsors. Co-sponsors of H.R. 3082 include Reps. Porter 
(R-IL-10), Sanford (R-SC-1), Tom Campbell (R-CA-15), Joe 
Knollenberg (R-MI-11) and Amo Houghton (R-NY-31).
    Compatibility With NAM Principles/Effects on Capital 
Formation. Rep. Smith's bill is generally consistent with the 
NAM Principles. The fundamental mechanism employed by the bill 
in achieving reform--scheduled reduction in Social Security 
liabilities as PRSA balances accrue--is unique. The mechanism 
represents an almost ``painless'' means of financing the 
transition to a funded system of retirement savings. However, 
the cost of painless transition is a model that achieves reform 
very slowly, with an estimate of only $50 to $75 billion 
additional capital formation by the year 2015. Compared to the 
Porter and Sanford bills, the cash inflows to capital markets 
is very modest.

S. 321--Strengthening Social Security Act

    Sen. Judd Gregg (R-NH) is among the leading voices in the 
call for fundamental reform of the Social Security retirement 
system. Sen. Gregg's bill is the Strengthening Social Security 
Act of 1997.
    The NAM is working closely with Sen. Gregg and his staff on 
Social Security reform. The senator is a co-chair of the 
National Commission on Retirement Policy of the Center for 
Strategic and International Studies, of which former NAM 
Chairman Warren Batts is an active member. The NAM is aware 
that S. 321 represents Sen. Gregg's initial approach to reform 
and that he will introduce an expanded and more detailed 
legislative proposal later.
    Like the Smith bill, S. 321 employs a ``carve out'' 
mechanism, for contribution of 1 percentage point of OASDI tax 
to an individual investment account. Under S. 321, such the 
account may be invested in one or more mutual funds or pooled 
investment vehicles similar to options available under the 
Federal Thrift Savings Plan. The investment fund is the 
property of the individual wage-earner, and withdrawals may 
begin at age 59 and a half. The investment accounts supplement 
a restructured Social Security retirement system, under which 
benefits are adjusted downward through phased changes in bend-
points. The changes would not affect persons aged 55 and older. 
COLAs would continue to rely upon CPI adjustments, but based on 
a half-point reduction in the actual index. Retirement age 
would increase gradually to age 70.
    Co-sponsors. Sen. Michael Enzi (R-WY) is co-sponsor of S. 
321.
    Compatibility With NAM Principles/Effects on Capital 
Formation. Sen. Gregg's bill is generally consistent with the 
NAM principles, notwithstanding the fact that the bill is a 
modest first step toward a consensus on reform.

Other Legislative Proposals

    A variety of other proposals affecting the Social Security 
retirement system have been introduced by members of the House 
and Senate. Some bills require that the Social Security 
Administration (SSA) provide greater detail to individuals in 
their Personal Employees Benefits and Earnings Statement 
(PEBES). Other proposals would require SSA to make formal 
recommendations to the Congress on a means of bringing the 
system into balance. A novel proposal by Rep. Thomas Petri (R-
WI-6) would establish private investment accounts of $1,000 for 
each newborn. A proposal by Rep. Sanford would require 
disclosure of the employer-paid portion of FICA on pay stubs.
    A bipartisan group of eight members of the House have 
created an informal House Bi-Partisan Public Pension Reform 
Caucus. Co-chairs are Rep. Jim Kolbe (R-AZ-5) and Charles 
Stenholm (D-TX-17). The caucus is expected to produce reform 
legislation that uses the mechanism of individual accounts. 
Reps. Kolbe and Stenholm are also co-chairs of the CSIS 
Commission.

Status

    The NAM is the acknowledged leader among trade associations 
and in the greater business community in seeking fundamental 
reform of the Social Security retirement system. Based on its 
continuing attention to reform, the NAM believes that a 
consensus on the mechanisms, policy and politics of reform is 
likely by the end of the 105th Congress.

NAM Social Security Reform and Economic Growth Series

     ``An Overview of Issues and Terminology,'' NAM 
Issue Brief, 4/7/97
      

                                


Statement of National Association of Manufacturers

Principles on Social Security Reform (new policy as approved by the NAM 
Board of Directors)

                               Background

    The Social Security retirement system, as currently 
structured and financed, cannot pay in full the benefits 
promised to a significant portion of the American workforce. As 
a result, reform or restructuring is necessary, if only to 
bring the current system into financial and actuarial balance.
    Even strong supporters of Social Security agree the system 
needs restructuring. The 1996 Report of the Advisory Council on 
Social Security presented alternative proposals for reform, the 
most modest of which would alter Social Security fundamentally. 
Separately, critics of the current system have offered 
proposals for significant restructuring. The common element of 
such proposals is conversion of the system in varying degrees, 
from an entitlement program to a system of funded retirement 
savings.
    Both defenders and critics of the current system agree that 
the social and economic issues surrounding reform will 
stimulate contentious debate. This statement of principles is 
designed as a framework for evaluating specific proposals as 
the debate moves forward.
    The NAM believes that economic growth is essential for the 
well-being of this country. By placing ever-increasing burdens 
on both employers and workers, the maturing Social Security 
system can only undermine the growth of business, reduce the 
level of savings and ultimately stifle the economic security of 
individuals in the workforce. Thus, any reform proposal should 
foster economic growth for both business and individuals.
    Further, any reform proposal should address the inequitable 
way the current system determines benefits and payroll taxes. 
Individuals receiving benefits based on contributions to a 
relatively young Social Security system have enjoyed very 
generous returns. Without reform, however, future Social 
Security benefits will provide a negative rate of return and be 
inadequate as a source of retirement income, thus treating 
later generations of contributors quite unfairly. This would 
undercut the very idea of retirement security and undermine 
confidence in government.
    In summary, the NAM believes that generational inequity, 
the potential of failed public promises and the depressing 
effects of a maturing Social Security system on U.S. economic 
growth call for public discussion of these issues, consensus on 
reform and prompt implementation of the new system.

                               Principles

    To this end, the NAM believes that a reformed Social 
Security system should:
    1) Include a needs-based safety net of benefits for those 
participants financially unable to provide for themselves.
    2) Assure that savings for retirement are maintained 
separately from the needs-based safety net with separate 
contributions and funding vehicles for these two distinct 
programs.
    3) Permit individuals to accumulate retirement savings 
based on their contributions to individually-owned accounts 
with any remaining benefits in such accounts transferable to 
survivors and heirs.
    4) Assure that accumulated retirement savings are for the 
single purpose of retirement and are not available for any 
other purpose.
    5) Require that individuals' retirement savings accounts 
are kept separate from the assets of the federal government and 
are managed and invested independent of government control or 
influence, for the sole benefit of these individuals and 
subject to the rules applied to fiduciaries.
    6) Take into consideration appropriate coordination with 
existing federal tax and retirement policy.
    7) Begin as soon as possible, given the coming financial 
shortfalls in the current system and the time needed to develop 
sufficient savings for the future.
    8) Pursue retirement policy goals that various generations 
consider fair and which offer individuals and businesses the 
potential of expanding opportunity and economic growth.
      

                                


Statement of Hon. John Edward Porter, a Representative in Congress from 
the State of Illinois

    Mr. Chairman, members of the Committee, thank you for the 
opportunity to testify on these important issues. I am very 
pleased by your proposal to use an expert panel to study Social 
Security reform. I agree that we need to begin a national 
dialogue about how the Social Security system should prepare 
for the challenges it will face when the baby boom generation 
begins to retire, and that a bipartisan panel to design long-
range Social Security reform would serve a necessary role in 
evaluating potential reforms.
    Mr. Chairman, as I've previously stated before this 
committee, the time is now for Social Security reform. We are 
on the verge of balancing the federal budget for the first time 
since 1969 and I believe that it would be a clear abdication of 
our responsibilities if we do not seize this historic moment to 
implement a lasting reform of Social Security.
    As you know, I have been working on Social Security reform 
since the 1980's. In this Congress, I have introduced H.R. 
2929, the most recent version of my Individual Social Security 
Retirement Account (ISSRA) Act legislation. This bill, 
developed with noted economist Peter Ferrara, would create a 
new retirement option for all Americans and fully address the 
impending shortcomings of our Social Security system. Rather 
than using my time here today to advocate any specific 
legislation, I would like to illustrate my beliefs about how 
our existing Social Security system should be reformed, and 
highlight some issues that the proposed expert panel will have 
to address.
    My legislation adheres to three fundamental principles that 
must be present in any reform to our existing Social Security 
system. First, existing benefits must be guaranteed without 
reductions for all current retirees. Second, workers must have 
the option of staying in existing Social Security, or choose to 
start an individual account. Finally, we simply cannot levy new 
taxes to further extend the Ponzi scheme that is our current 
Social Security system. In contrast, we must consider an 
eventual tax cut for individual account participants.
    The individual accounts created by my ISSRA legislation are 
not only fiscally sound, but also necessary to any reform that 
will ensure the survival of our national retirement system. For 
example, under my plan the Social Security taxes (currently 
6.2% of wages paid by both worker and employer, or a total of 
12.4%) of those workers who choose to create an ISSRA would be 
redistributed. Workers and employers would each contribute 5% 
of wages to an ISSRA (10% total), and workers could make 
additional contributions of up to 20% of gross income. The 
remaining 2.4% of the payroll tax would continue to help fund 
the ongoing obligations of Social Security but could be 
eliminated 10 years into the transitional period, thus 
providing a 20% tax cut. Current workers who opt out of 
traditional Social Security would also receive ``recognition 
bonds'' from the government that would pay a portion of their 
retirement benefit based on the proportion of taxes they had 
already paid into the current system.
    These individually owned and managed accounts should be 
governed by the same rules currently utilized for IRA accounts, 
with the exception of the right to withdrawal. All workers 
choosing to form an individual account could choose from among 
approved private investment managers. This safeguard would make 
the system easy to use, and protect unsophisticated investors 
from potential fraud and abuse.
    Like the current system, employee contributions to ISSRA 
accounts would not be tax deductible, while employer 
contributions would remain deductible. Investment returns over 
the years would be tax free until withdrawal, in a manner 
identical to today's IRAs. During retirement, only half of the 
benefits would be included in taxable income.
    Benefits at retirement would be based on what the 
individual's ISSRA account could support. The worker could 
choose to purchase an annuity or make periodic withdrawals in 
such a manner that the account would not become exhausted 
within the beneficiary's lifetime. Retirement age for 
individuals choosing to utilize an ISSRA would be variable 
after age 59 and one-half, based on funds available in their 
account.
    As a safeguard, a minimum benefit would be guaranteed for 
all individuals assuring that no worker would fall below the 
minimum necessary for a dignified retirement. This benefit 
would supplement an individual's shortfall in private benefits 
and would be financed from general revenues and the eventual 
surplus in the Social Security Trust Fund.
    Under my ISSRA plan, and similar reform plans utilizing 
individual accounts, benefits for retirees would grow 
enormously. Of particular importance to me is the plight of the 
working poor, who would receive increased benefits under my 
plan as opposed to their level of benefits under Social 
Security. Indeed, the working poor would experience the largest 
gains in retirement benefits under my plan. For example, an 
individual working for a minimum wage would receive more than 
three times the benefits promised by our current system. In 
addition, these financially vulnerable individuals would also 
have substantial funds to leave their heirs thereby breaking 
the cycle of poverty.
    Up until now, the costs associated with the implementation 
of a Social Security reform like my ISSRA plan were thought to 
be too severe to be addressed through reasonable measures. 
However, projections of the fiscal impact of this plan have 
demonstrated that the transition costs can be financed without 
new taxes or any benefit cuts for current retirees. According 
to a recently published analysis by Peter Ferrara, transition 
deficits under my ISSRA plan would disappear within only 14 
years.
    Indeed, in any reform plan using individual accounts, 
transition costs can be accommodated through a number of reform 
measures designed to strengthen the Social Security Trust Fund. 
The first would be the displacement of Social Security benefits 
as workers choose the private system. Although starting slowly, 
these savings will grow substantially over time. Immediate 
savings would be realized by transferring responsibility for 
the disability and pre-retirement benefits of all individuals 
who opt out to private disability and life insurance carriers. 
Rather than using Social Security funds, these benefits would 
be accommodated by the private marketplace through Treasury 
Department approved ISSRA fund managers.
    Further savings would result from the waiver of past tax 
payments. Recognition bonds will be waived for individuals 
under the age of 30 who choose to utilize the new ISSRAs, and 
the Social Security Trust Fund will not be expended for their 
retirement benefits.
    Several sources of revenue would also be available to 
finance the transition. The continuing payroll tax of 2.4% for 
workers opting out of traditional Social Security would be 
credited to the Trust Fund for a period of ten years. This 
revenue, when combined with revenues resulting from the sale of 
a new issue of ``Social Security Trust Fund Bonds'' would 
finance the majority of transition costs. 
    The net effect of these measures would be a Social Security 
Trust Fund with net revenues in 14 and a large positive balance 
after 22 years. Eventually these surpluses would grow large 
enough to cover losses in revenue from a 20% payroll tax cut 
and reduce the national debt.
    Not directly accounted for in my plan, but substantially 
aiding the federal government in meeting transition costs would 
be the generation of substantial new revenues as a result of 
new savings and investment in a reformed Social Security 
system. The net increased savings resulting from the 
implementation of my ISSRA plan or another plan utilizing 
individual accounts would also lead to significant economic 
growth, and increases in productivity, wages and jobs.
    Clearly, support is growing among the American people for 
Social Security reform. A recent CATO Institute poll indicated 
that 69 percent of respondents favor reforms that would allow 
them to invest privately the amount they pay into Social 
Security; 74 percent support a plan that gives people a choice 
of staying in traditional Social Security or moving to a new 
system; and 77 percent want a system that allows individuals to 
control investment of their retirement funds. My ISSRA plan 
includes all of these desirable features, as should any serious 
Social Security reform proposal. Clearly reform involving 
optional individual accounts is a comprehensive way to protect 
the benefits of current retirees, preserve the integrity of the 
system for future generations, and help sustain the long-term 
health of our economy.
    Our efforts must result in a return to integrity and 
solvency in a reformed Social Security system that gives every 
American worker control over his or her retirement destiny.
    Thank you, Mr. Chairman, for this opportunity to testify 
before the Committee. I commend you for your efforts in moving 
forward with a national debate about the future of Social 
Security, and support your initiative to create a bipartisan 
panel to design long-range Social Security reform.
      

                                


Statement of James L. Martin, President, 60 Plus Association

    When I came to Washington as a newspaper reporter in 1962, 
John F. Kennedy was in the White House, Neal Armstrong had not 
yet walked on the moon, Strom Thurmond was a Democrat and the 
problems with Social Security were perceived by few, other than 
Barry Goldwater.
    So, today, August 14, 1997, on the 62nd anniversary of 
Social Security, the 60 Plus Association becomes the first 
seniors group to publicly go on record to overhaul the system, 
releasing a paper it commissioned by economist Richard A. Hart, 
entitled ``Personalizing Social Security: Unplugging the Third 
Rail.'' Why did a senior citizens group decide to tackle the 
issue of Social Security reform? Let me answer by citing a 
question I'm asked often about the program signed into law by 
President Franklin Delano Roosevelt on August 14, 1935.
    The question is always the same, ``Jim, why get involved?'' 
After all, the theory goes, even if the current system is going 
bankrupt, ``your seniors are protected, so why bother with the 
uncertain future of this politically volatile issue?''
    Believe me, it would be easy to take a head-in-the-sand 
approach as so many do, including, I'm sorry to say, other 
senior citizens groups. Unfortunately, this attitude leads to a 
false impression that seniors are ``greedy old geezers,'' a 
``gimme, gimme, gimme'' mentality which I hope to dispel. 
Seniors who built this country, in Depression and war time, 
through their blood, sweat and tears, deserve better.
    To help dispel that erroneous image, I harken back to some 
of the advice one particular senior citizen has given me, and 
still does--my favorite senior--my mom, my sainted mother, if 
you will, Mary L. Martin, who, in her eighties, still works 
part-time. Her advice is that seniors' most valued assets are 
not their social security, their retirement income or their 
pensions--although these are certainly near the top of their 
list--but in her opinion, seniors' most valuable assets are 
their children, their grandchildren and their great 
grandchildren.
    So that's why I decided to involve 60 Plus, a seniors group 
responsibly trying to find a solution to the problem, for the 
sake of our children and our grandchildren.
    To put it bluntly, Heritage Foundation economist Dan 
Mitchell said, or perhaps it was another often quoted 
economist, Americans for Tax Reform's Peter Ferrara, who said: 
'Social Security was a Ponzi scheme then. It's a Ponzi scheme 
now.' But even a Ponzi scheme--borrowing from Peter to pay 
Paul--worked well in the beginning, not only for Carlos Ponzi 
but for others, just as the so-called Social Security Ponzi 
scheme worked well for seniors. But there looms now a ``run on 
the Ponzi bank'' as the Baby Boomers prepare to retire.
    As Mr. Hart states in his paper, ``the Social Security 
retirement train is on a collision course with demographics. 
Social Security's pay-as-you-go system, where the taxes of 
today's workers are transferred to today's retirees, leaves it 
particularly vulnerable to demographic trends. As Baby Boomers 
age, life expectancy is rising and birth rates are falling. As 
the Social Security train heads straight into a demographic 
wall,'' Mr. Hart continues, ``more and more Americans 
anticipate the oncoming wreck.'' Mr. Hart is right. More and 
more of us recognize the looming crisis.
    A recent poll said that a majority of Democrats, for the 
first time, acknowledged not only that there is a problem with 
the system, but a majority of Democrats now even favor 
privatization as a solution. Everybody universally agrees 
there's a problem. But a solution remains elusive.
    For example, President Clinton's Social Security Advisory 
Council has issued its long awaited report. This 13-member 
panel of experts readily agreed there is problem but did they 
agree on a solution? Well, yes and no. They offered three 
solutions. It's not an exaggeration to say they split three 
ways from Sunday, six endorsing one solution, five another and 
two yet a third. Significantly, all three directly, or 
indirectly, advocated privatization. In 1983, President 
Reagan's Social Security Reform Commission came forth with its 
solution to keep the system solvent for, it said, at least 
another 75 years, well into the next century.
    That begs the question, why another Commission so soon in 
the 1990s, after the 1983 Commission? The answer is that the 
system is in more trouble than previously thought. The problem 
is twofold. One: The good news is that we seniors are living 
longer, due to medical advances and our own better health 
habits. Two: The bad news is that you younger generations have 
to pay.
    Of course, that's the way the system has always worked. But 
before there were more than 20 workers, not three, paying into 
the system for each beneficiary. One other fact that bears 
noting is that when first enacted, according to the actuarial 
tables, seniors died at about age 64, or as Mr. Hart so 
delicately phrases it, most workers were conveniently dead and 
buried before they could collect their benefits at age 65. As 
60 Plus Honorary Chairman, former Indiana Congressman Roger 
Zion puts it, at a vigorous and robust 75, he has been 
``statistically dead'' for 11 years. Now that seniors are 
living longer, that places further financial strains on the 
system. Clearly, a day of reckoning has come. The old fix of 
just raising taxes, some 51 times in 62 years, cannot continue. 
There's a limit.
    There have been half-hearted attempts in the past to 
address the problem, half-hearted because not many politicians 
want to be accused of touching the so-called third rail. You 
know the old song--Social Security is the third rail of 
politics, touch it and you die.
    Politicians have gotten away with this third rail scare 
tactic for too long, scaring seniors for political gain. Some 
of us recall the 1964 Barry Goldwater-Lyndon Johnson 
Presidential campaign when there was a TV commercial showing a 
giant pair of scissors cutting a Social Security card with a 
voice-over solemnly intoning that this would be the result if 
you voted for Goldwater. Another 1964 TV commercial also stated 
that a vote for Goldwater could result in U.S. soldiers being 
sent to fight and die in southeast Asia. Well, as one political 
wag put it, he ``voted for Barry and sure enough, U.S. soldiers 
were soon sent to fight and die in Vietnam.''
    So, I would like to put politicians, regardless of party, 
on notice that seniors are tired of falsely being told their 
Social Security is going to be taken away. It's more likely 
that a meteorite will fall on the Social Security 
Administration building in Baltimore before a politician, of 
either party, would propose taking away Social Security.
    Let me point out how 60 Plus became engaged on this issue. 
A few years ago the Third Millennium, Generation X'ers in the 
18-34 age group, announced the startling news that most X'ers 
believed more in UFOs (unidentified flying objects) than that 
the system would be around when they retired. I responded on a 
radio talk show that seniors are also aware that the system is 
headed for bankruptcy. Then I added, somewhat flippantly, 
perhaps, that seniors believe more in the second coming (has it 
been 20 years this week?) of Elvis Presley than in the system's 
future solvency and that seniors might also prefer changes. 
After a few call-ins and further discussion of UFOs and Elvis, 
I decided to poll senior citizens. Our poll to approximately 
100,000 seniors found that, by a surprising 3-to-1 margin, 
seniors preferred a privatized system. We then commissioned a 
survey by pollster Frank Luntz, an excerpt of which is in the 
study we've released. The Luntz poll confirmed our 3-to-1 
ratio.
    We were called by Insight Magazine, and we debated, in 
print, our counterpart at the American Association of Retired 
Persons, Horace Deets, in dueling 2000-word essays. If I could 
sum up each essay in one word, it would be: AARP--taxation, 60 
Plus--privatization. AARP favors the same old solution, tax 
increases, while 60 Plus looks for new solutions.
    Will privatization work? The privatization role model is 
the Chilean system. During the 1983 Social Security study, when 
Chile was mentioned as a solution, the status quo seekers 
dismissed their system as a new and unproven experiment. But, 
fast forward 15 years later and Chile now has an amazing track 
record of success. Now the status quo seekers try to demonize 
the word ``privatize,'' implying that you have to be a stock 
market expert or the big boys on Wall Street will fleece you. 
Nothing could be further from the truth. There are a lot of 
workers in Chile who can't play the stock market but who 
proudly walk around with a passport-sized book with their name 
on it, keeping track of their investments. That is one of the 
reasons we use the word ``personalize'' because the system 
would allow each and every individual to take ``personal'' 
control of his or her own financial destiny.
    Since 60 Plus is nonpartisan, we credit legislators from 
both parties for coming up with innovative ideas. One is 
Democratic Sen. Bob Kerrey of Nebraska, from whom we borrowed 
the word ``personalize.'' Another suggestion, by one of the 
Generation-X'ers, is to ``modernize'' the system. Many others 
on Capitol Hill deserve credit, including Republican 
Congressman Jim Kolbe of Arizona and Democratic Congressman 
Charlie Stenholm of Texas, co-chairs of a public pension reform 
caucus which now numbers more than 70 members of Congress, 
equally represented by both parties. Michigan Congressman Nick 
Smith has introduced legislation to address the problem, as 
have Reps. Mark Sanford of South Carolina, David McIntosh of 
Indiana, Mark Neumann of Wisconsin and John Porter of Illinois. 
Others safeguarding Social Security include House Ways and 
Means Committee Chairman Bill Archer of Texas and Subcommittee 
Chairmen, Reps. Bill Thomas of California, Dennis Hastert of 
Illinois and Jim Bunning of Kentucky. Surely, the latter, Jim 
Bunning, the big, burly Hall of Fame baseball pitcher--known as 
a fierce competitor in his playing days and now the father of 
nine and grandfather of 31 (at last count)--would be a 
formidable opponent for those who try to demagogue Social 
Security as they did in the 1980s when some Members of Congress 
courageously talked about reform in order to save it.
    More than two dozen countries in South America, Europe and 
Asia, have adopted, or are in the process of adopting, a 
Chilean-style system. Even socialist Sweden is going that 
route. And here, workers in three Texas counties, before a 
loophole in the law was closed, opted for privatization and 
their rate of return is making for a lot of serious discussion 
as they prepare for retirement. Moreover, a resolution recently 
passed both the House and Senate in Oregon asking the state to 
opt out of the Social Security system and create a separate 
retirement system for state workers.
    So the slight spark across the sky of the Chilean 
experiment has become a bright constellation. It's a success 
story that I believe, with all my heart and soul, can be a 
guide for our own troubled system.
    Incidentally, in the old days, the father of the Chilean 
plan, Dr. Jose Pinera, literally visited Washington in the dead 
of night because his untested plan was so controversial. But a 
few years ago, the Cato Institute gave a dinner in his honor 
and a number of Members of Congress allowed their names to be 
placed on the host committee. What a change in attitude. Of 
course, it was not lost on them that this former minister of 
labor was elected to office himself, with a major plank in his 
platform his plan to privatize social security.
    Having read an article years ago by Ed Crane, President of 
the Cato Institute, about the social security problem, we 
started searching for solutions. We kept being referred back to 
the Cato Institute itself, which has taken a pioneering road on 
this issue for more than a dozen years. One name kept coming 
up, time and again. That name was Michael Tanner, Cato's 
Director of Health and Welfare Studies, and the author of 
several books on health and welfare reform. Mr. Tanner has 
worked on the Social Security issue extensively, to say the 
least. Spoken on it. Written on it. Debated on it, around the 
world, often with Dr. Pinera at his side. That's why 60 Plus, 
particularly Roger Zion and I, are so pleased that Mr. Tanner 
has not only eloquently embraced this new plan Mr. Hart 
proposes, but has joined us at today's official release of the 
proposal, along with an equally strong endorsement by today's 
other featured speaker, Fund for a New Generation's Adam 
Dubitsky.
    Richard A. Hart takes up the challenge to find a solution 
in an insightful paper showing how Personal Retirement Accounts 
(PRAs) can assure both dignity and comfort for future 
generations of senior citizens. This paper, a variation on a 
theme advanced by others, should continue the dialogue on a 
system which urgently needs reform.
    To those who fear Social Security's ruin, wise seniors know 
that there is no Social Security Trust Fund. 60 Plus calls it 
the Social Security Bust Fund as surpluses are used for other 
government programs. As Democratic Senator Ernest Hollings of 
South Carolina has said, ``There is no trust. There is no 
fund.'' We need to alert people to keep at arm's length those 
politicians who spread fear among seniors, as we stand at a 
crossroads to which direction Social Security reform should go.
    In the 60 Plus Association's opinion, some form of 
'personalization' remains the best and most feasible option. We 
must guarantee present retirees their benefits as part of a 
government promise to them, but we must also safeguard current 
generations paying into Social Security system so that the 
benefits will be there when they retire.
    On August 14, 1935, President Roosevelt signed into law the 
Social Security Act. On May 2, 1997, the FDR Memorial was 
opened here in Washington, D.C. The Social Security system 
helped seniors escape poverty, but we now know there are major 
problems facing future generations. What more lasting 
commemoration to FDR can we embrace than the adoption of a 
system which will save it for a new age, a new era, and a new 
population.

                                   - 
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