[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                 HEARING ON SOCIAL SECURITY'S FINANCES

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


                             JOINT HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 8, 2011

                               __________

                           Serial No. 112-SS6

                               __________

         Printed for the use of the Committee on Ways and Means





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                      COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

                      SAM JOHNSON, Texas, Chairman

KEVIN BRADY, Texas                   XAVIER BECERRA, California
PAT TIBERI, Ohio                     LLOYD DOGGETT, Texas
AARON SCHOCK, Illinois               SHELLEY BERKLEY, Nevada
RICK BERG, North Dakota              FORTNEY PETE STARK, California
ADRIAN SMITH, Nebraska
KENNY MARCHANT, New York

                       Jon Traub, Staff Director

                  Janice Mays, Minority Staff Director


                            C O N T E N T S

                               __________
                                                                   Page

Advisory of July 8, 2011, announcing the hearing.................     2

                               WITNESSES

Sylvester Schieber, Ph.D., Independent Consultant, New Market....    10
Thomas S. Terry, President, T. Terry Consulting, on behalf of the 
  American Academy of Actuaries..................................    19
C. Eugene Steuerle, Ph.D., Senior Fellow, Urban Institute........    30
Joan Entmacher, Vice President for Family Economic Security, 
  National Women's Law Center....................................    45
Charles P. Blahous, Ph.D., Research Fellow, Hoover Institution...    58
Barbara Bovbjerg, Ph.D., Director for Education, Workforce, and 
  Income Security, U.S. Government Accountability Office.........    69

 
                 HEARING ON SOCIAL SECURITY'S FINANCES

                              ----------                              


                          FRIDAY, JULY 8, 2011

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:02 a.m., in 
Room B-318, Rayburn House Office Building, the Honorable Sam 
Johnson [chairman of the subcommittee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

                       Chairman Johnson Announces

                 Hearing on Social Security's Finances

                         Friday, July 08, 2011

    U.S. Congressman Sam Johnson (R-TX), Chairman of the House 
Committee on Ways and Means Subcommittee on Social Security announced 
today that the Subcommittee will hold a hearing on Social Security's 
current benefit expenditures, proposed changes to future benefits and 
the impact those changes would have on the program, future 
beneficiaries, workers, and the economy. The hearing will take place on 
Friday, July 8, 2011 in B-318 Rayburn House Office Building, beginning 
at 9:00 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. A list of invited 
witnesses will follow.
      

BACKGROUND:

      
    The Social Security Act (P.L. 74-271) was signed into law by 
President Franklin D. Roosevelt on August 14, 1935. Initially, Social 
Security was focused on the income needs of retired workers age 65 and 
older. Soon, protections for other vulnerable populations were added. 
The Social Security Act Amendments of 1939 (P.L. 76-379) shifted the 
emphasis from protection of the individual worker to protection of the 
family by authorizing payments to the spouse and minor children of a 
retired worker, (dependents' benefits) and survivors' benefits to 
certain family members in the event of the death of a worker. The 
Social Security Act Amendments of 1956 (P.L. 84-880) created the Social 
Security Disability Insurance (SSDI) program to provide protection 
against economic insecurity resulting from a disabled worker's loss of 
earnings.
      
    Social Security continues to play a key role in preserving the 
economic security of Americans. About one-in-six Americans receives a 
Social Security benefit today. For a third of the elderly, Social 
Security is virtually their only income. Poverty rates among the 
elderly fell from 35.2 percent in 1959 to less than 10 percent in 
2008--a reduction of almost three-quarters in the last 49 years. 
Younger workers and their families receive valuable disability and 
survivors insurance protection. In fact, about one-in-three Social 
Security beneficiaries is not a retired worker.
      
    According to the 2011 Annual Report of the Social Security Board of 
Trustees, in calendar year 2010, 54 million retired workers and their 
families, disabled workers and their families, and survivors of 
deceased workers received $713 billion in Social Security benefits. By 
2035, Social Security costs as a percent of GDP will increase 28 
percent, from 4.85 percent of GDP in 2011 to 6.22 percent of GDP in 
2035.
      
    The 2011 Annual Report of the Social Security Trustees again 
highlighted the financing challenges facing the Old Age and Survivors 
Insurance (OASI) and the Disability Insurance (DI) programs. The 
trustees project permanent and growing cash flow deficits and estimate 
that by 2036 the combined OASI and DI Trust Funds will be exhausted. At 
that point, revenues would cover only 77 percent of benefit payments. 
The DI Trust Fund is projected to become exhausted in 2018, at which 
time revenues would cover only 86 percent of benefit payments. The 
Public Trustees expressed the need for action soon in order to be able 
to protect vulnerable populations and those at or near retirement age.
      
    The Social Security actuaries have estimated a number of proposals 
to adjust benefits, including those put forward by the President's 
Fiscal Commission, including: making the retirement benefit formula 
more progressive, providing an enhanced minimum benefit for low wage 
workers, altering Social Security's Cost of Living Adjustment (COLA) by 
shifting to the ``chained CPI,'' increasing benefits for aged 
beneficiaries, and gradually increasing the early and full retirement 
age.
      
    In announcing the hearing, Subcommittee Chairman Sam Johnson (R-TX) 
stated, ``We need to make sure Social Security is safe, secure and 
sustainable. Congress must act and the sooner we do so, the sooner we 
can protect those who are most vulnerable, including current retirees 
and those nearing retirement. And for younger workers and families, we 
have a responsibility to provide certainty about the future of their 
Social Security.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on Social Security's benefit expenditures, 
how benefits have changed over time, options for change, and their 
impacts. Also, efforts by the SSA to inform workers of their future 
benefits through the Social Security Statement will be examined.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word or 
WordPerfect document, in compliance with the formatting requirements 
listed below, by the close of business on Friday, July 29, 2011. 
Finally, please note that due to the change in House mail policy, the 
U.S. Capitol Police will refuse sealed-package deliveries to all House 
Office Buildings. For questions, or if you encounter technical 
problems, please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item 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. I69  
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies 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. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    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. Note: All Committee advisories and news releases are 
available on the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman JOHNSON. Good morning to all of you. We are going 
to try to crank this hearing up on time, so I am going to bring 
the hearing to order.
    We heard a few weeks ago from the public trustees that 
unless Congress acts, in 2036 Social Security revenues will 
only cover 77 percent of promised benefits. Congress needs to 
act, and the sooner we do the sooner we can protect those who 
are vulnerable.
    Republicans and Democrats agree on this much: current 
benefits should not change for those in or near retirement. All 
their lives, they have worked hard and played by the rules. 
They deserve the peace of mind, knowing that Social Security 
will be there for them.
    But young people deserve peace of mind, too. At our last 
hearing, the subcommittee looked at options to raise payroll 
taxes to address these challenges, and heard that these options 
don't promote savings, reward, work, or permanently fix Social 
Security's shortfall.
    With chronic unemployment, falling incomes, and so many 
young people unable to find work, nothing we do should make it 
harder for Americans to find good-paying jobs. Today we will 
learn more about Social Security's benefits, proposed changes 
to benefits, and their impact on future beneficiaries, workers, 
Social Security's finances, and economic growth.
    Since the beginning of the program, benefits have been 
based on workers' lifetime earnings. The formula that 
determines benefits is designed to replace a higher percentage 
of career earnings for lower earners. Benefits are increased 
almost every year to keep pace with inflation through cost of 
living adjustments.
    Social Security first paid monthly benefits in 1940 to a 
lady named Ida Mae Fuller, who worked for just 3 years under 
Social Security. Her first monthly check was $22.54. But her 
check was not indexed for inflation, and her lifetime benefits 
for her and her age group were soon supported by a surge of 
young workers. During her lifetime, she collected nearly 
$23,000 in Social Security benefits.
    Today 55 million Americans receive benefits, averaging over 
$1,000 per month. By 2035, over 90 million will receive 
benefits. Benefits are more generous, but the number of 
beneficiaries will rise much more rapidly than the number of 
workers, now struggling in today's economy, who will need to 
support them.
    The reality is there is simply not enough young workers to 
support the Baby Boomers who are retiring at the rate of 10,000 
a day for the next 19 years. Social Security also provides 
essential income to workers' families. Spouses, children, and 
survivors are all eligible for benefits. In fact, 1 out of 
every 13 beneficiaries receives family benefits.
    Many of our witnesses will review how America and Social 
Security have changed over the past 76 years. Today, people are 
just living longer. That's nice, isn't it?
    [Laughter.]
    Chairman JOHNSON. When Social Security was created, 
Americans lived, on average, to 64. And Social Security's 
retirement age was 65. According to the actuaries, had Congress 
tied Social Security's full retirement age to increases in life 
expectancy from the beginning, instead of being 66, it would be 
close to 71. However, I know that the life insurance guys tell 
you you're going to live to be 100 nowadays. No wonder members 
on both sides of the aisle have expressed support for raising 
the retirement age.
    In 1935, Social Security was born amidst a great economic 
crisis, The Great Depression. Then none other than FDR said 
that Social Security can furnish only a base upon which each 
one of our citizens may build his individual security through 
his own individual efforts. In other words, Social Security 
benefits were intended to provide a modest safety net. In these 
challenging economic times, FDR's statement still rings true. 
While everyone who pays into Social Security should receive a 
benefit, not everyone relies on Social Security. Whatever 
solutions Congress may ultimately consider, we must protect 
those who depend on Social Security the most.
    In the meantime, until Congress acts, workers and their 
families are challenged to plan for their retirement. An 
important tool in their planning is the Social Security 
statement, which includes a worker's earnings history, and 
estimated future Social Security benefit. It's the main 
document that Social Security uses to communicate with over 150 
million workers about their future benefits. Today, we will 
hear from GAO regarding the results of their review which was 
done earlier this year. New Americans want, need, and deserve 
this certainty that Social Security will be there for them. I 
am confident, by working together, we can provide that 
certainty.
    I thank all our witnesses for joining us today, and look 
forward to hearing their expert advice on ways to move forward.
    And we are expecting votes around 10:00 or 10:15 this 
morning, so we are going to try to work you all in, and I would 
implore all our members to commit to 5 minutes.
    You are recognized for five minutes, Mr. Becerra.
    Mr. BECERRA. Mr. Chairman, thank you very much. Today's 
hearing illustrates a basic question of right and wrong. Social 
Security has never contributed a dime to the nation's $14.3 
trillion debt, not a penny to our federal deficit this year, or 
any year of our nation's history. Yet, some in this town insist 
that we should cut Social Security benefits for seniors to pay 
for these deficits, deficits run up over the last 10 years, 
principally as a consequence of fighting two unpaid-for wars, 
and giving unpaid-for tax cuts to millionaires.
    Most Americans would say it is immoral and un-American for 
this congress to tax Peter to pay for Paul's sins, to make 
retirees, widows, disabled workers, and children who rely on 
Social Security pay for the Bush debt. How can that be right?
    Here is a simple truth. Today, Social Security has over 
$2.6 trillion in its trust fund, entirely generated by worker 
contributions. Over its lifetime, Social Security has earned 
$14.6 trillion, and only spent $12 trillion. Do the math.
    As a result, Social Security has enough income in reserves 
to pay full benefits to our seniors for the next quarter 
century, and about 3/4 of benefits after that. Social Security 
is not broke, and it will not go bankrupt. That is because, 
unlike the federal operating budget, Social Security cannot 
deficit spend. Nor will it ever face its own debt ceiling 
crisis.
    Our challenge is to address a manageable shortfall in 
Social Security after 2036. The size of that shortfall is about 
the same size as the cost of keeping in place the Bush tax cuts 
for just the wealthiest two percent of American taxpayers.
    Preserving Social Security for the future is simply a 
matter of priorities, a matter of right and wrong. What is 
wrong is cutting Social Security benefits for people who worked 
hard all their lives to earn benefits for themselves and their 
families. It's especially wrong if you are cutting their Social 
Security in order to pay for tax cuts for millionaires.
    Social Security benefits are very modest, and most seniors 
have limited incomes. The average benefit for a retiree is 
$14,000 a year. Six out of ten seniors rely on Social Security 
for more than half of their income, and nearly a third have 
virtually nothing else to count on. As people get older and 
begin to outlive their other retirement savings, they begin to 
rely increasingly on their Social Security paycheck.
    The benefit cuts Republicans have put on the table this 
year would have devastating consequences for today's seniors, 
and for the 155 million future beneficiaries who are paying 
into Social Security today.
    In our last hearing, we learned from Social Security's 
chief actuary that, under the Social Security privatization 
bill, H.R. 2109, introduced by Congressman Pete Sessions and 
other members of the House Republican leadership, Social 
Security's ability to pay benefits to current beneficiaries 
would be ``severely compromised.''
    If we enacted the Republican bill, current seniors might 
not get the monthly checks they earned through a lifetime of 
work. In addition, the chairman of the House Budget Committee, 
Republican Paul Ryan, has a plan to privatize Social Security, 
to raise the retirement age, and to cut benefits for the middle 
class. And House Republicans recently voted to create a special 
fast-track process for Social Security cuts.
    It doesn't end there. The Republican Study Committee, which 
represents about three-fourths of my colleagues on the 
Republican side, including majority leader Eric Cantor, has 
proposed raising the retirement age to age 70, with benefit 
cuts starting in just 3 years, 2014, at a time when Social 
Security will have $3 trillion in its trust fund. Their plan 
would cut benefits for middle income workers, and it could 
easily cost them about $3,400 a year when they retire.
    Mr. Chairman, I am grateful that we are holding a hearing 
on Social Security benefits. We need to have a comprehensive 
discussion on all of the options available to us to strengthen 
Social Security. Where you stand on Social Security and where 
you fall on the ways to strengthen it will speak volumes about 
your priorities for our country and for the generation that 
built the America we so love.
    And with that, Mr. Chairman, we look forward to the 
testimony of our witnesses.
    Chairman JOHNSON. Thank you, Mr. Becerra. You know, $3 
trillion is a lot of money. You can't pay benefits in bonds. 
Social Security needs cash. And I don't know where Treasury 
gets the cash to redeem the bonds.
    In times of this deficit, Treasury has to borrow it. Today, 
the U.S. borrows $.40 for every dollar it spends, much of it 
from the Chinese, and sends the bill to our children and 
grandchildren. And----
    Mr. BECERRA. Mr. Chairman, if I--may I comment on that?
    Chairman JOHNSON [continuing].--Part of that is to cover 
Social Security----
    Mr. BECERRA. So this is a piece of paper, like the Treasury 
certificate that Social Security has. It's simply a piece of 
paper. It says $20 on it. It's worth $20 only if the full faith 
and credit of the United States backs it up.
    This is a savings bond, a Treasury certificate my daughter 
got when she was born 16 years ago. It is worth--supposed to be 
worth--$50 if she cashes it in when she turns, I think it is, 
18. It is a certificate. It is based on the full faith and 
credit of the United States. It is worth money, versus this 
envelope or this piece of paper, simply because we say we are 
going to have the full faith and credit of the United States 
back it up.
    But whether it is this or this, or the Social Security's 
Treasury certificates, or the ones that China has, or Japan 
has, we either are going to follow and live up to our 
obligations and our debts, or we are not. But to say that the 
trust fund's $3 trillion are mere paper, but this paper is 
worth money and China's paper is worth money, I think is an 
egregious way to tell seniors that they have paid into a 
system, and to make them believe that it is not there for them, 
and for our kids, as well.
    My daughter relies on this $50 savings bond just the way 
that she is going to rely on Social Security.
    Chairman JOHNSON. Okay. Before we move on to our testimony 
today, I want to remind our witnesses to limit their oral 
statements to five minutes, please, and be advised that, 
without objection from this gentleman here, your statements in 
writing will be entered in the record.
    Mr. BECERRA. No objection.
    Chairman JOHNSON. No objection. We have one panel today. 
Our witnesses are seated at the table, and they are Sylvester 
Schieber, an independent consultant from New Market, Maryland. 
Yes, thanks for coming to Washington.
    Thomas Terry, president, T. Terry Consulting, on behalf of 
the American Academy of Actuaries.
    Eugene Steuerle, Ph.D., senior fellow, Urban Institute.
    Joan Entmacher, vice president for family economic 
security, National Women's Law Center.
    Charles Blahous, Ph.D. research fellow, Hoover Institute.
    And Barbara Bovbjerg, Ph.D., director for education, 
workforce, and income security, U.S. Government Accountability 
Office.
    Thank you all for being here.
    Dr. Schieber, you may proceed.

    STATEMENT OF SYLVESTER J. SCHIEBER, PH.D., INDEPENDENT 
                CONSULTANT, NEW MARKET, MARYLAND

    Mr. SCHIEBER. Good morning, Mr. Chairman, Mr. Becerra. 
Thank you very much for inviting me here today, Members of the 
Subcommittee.
    My remarks today will focus on the need to modernize Social 
Security's benefit portfolio to improve the effectiveness with 
which the program meets one of its long-term specified goals, 
one of the ones you mentioned in your opening remarks, Mr. 
Chairman, the redistributive character of the program.
    In the opening analysis in my submitted remarks, I show how 
the retirement system has gotten more costly over time. The 
results in table one of this submission show that an individual 
retiring today will have borne payroll taxes relative to 
lifetime earnings more than six times those of a worker 
retiring in 1955.
    In your opening remarks you mentioned Ida Mae Fuller 
getting the first Social Security benefit. When she retired she 
had paid $25 in lifetime taxes into Social Security. She did 
fairly well under the program. Today the participants are not 
doing quite as well.
    If you add in the supplemental cost of saving for an 
adequate retirement income, the cost of retirement today has 
tripled over what it was in 1955. These costs will 
automatically continue to climb under current law for at least 
another decade. Add in health costs, and today's workers are 
facing claims exceeding one-third of their lifetime pay, just 
to cover retirement and health costs. And that is before we 
address the under-funding of Social Security and Medicare that 
I know you are all aware of.
    While retirement security is important, we should not lose 
sight of the need to preserve the prospects of some prosperity 
gain for workers in the future. We cannot simply address our 
financing issues by throwing more costs at workers. Some of our 
financing shortfalls can be addressed by making Social Security 
more consistent with the stated goals, and modernizing it to 
correspond with 21st century realities.
    The benefit formula established in 1935 was intended to 
provide relatively higher benefits compared to earnings for low 
earners when you compare it to those with higher earnings. At 
least a dozen different times since 1935 Congress has 
reaffirmed that commitment.
    Table two in my formal submitted remarks shows estimates 
prepared by the Social Security actuaries on what they call the 
system's money's worth. The calculations are for persons born 
in 1949 and compare the value of their expected lifetime Social 
Security benefits at age 65 to the accumulated value of payroll 
tax collections on lifetime earnings.
    Numbers in the table that are greater than one suggest some 
segment of the 1949 birth cohort will receive more in expected 
lifetime benefits than the value of their contributions. Those 
numbers less than one suggest the opposite. If you look at the 
values for one-earner couples, you will see that they can 
expect to do much better at every earnings level, on average, 
than their single counterparts or married individuals in two-
earner couples.
    Where the one-earner couple is a higher earner, the system 
provides relatively higher benefits than for low earner single 
workers or two-earner couples. In a program that is intended to 
pay relatively higher benefits for lower earners, this is an 
inconsistent result with the stated goal.
    In the third table in my presentation I factor in 
supplemental savings, the tax benefits for employer-sponsored 
savings, and this result carries through the whole system.
    In my formal statement I cite two significant empirical 
studies that have documented that the spousal benefit feature 
is essentially defeating the redistributive feature embedded in 
Social Security's benefit formula. The reason that these 
results have arisen in recent decades is because the spousal 
benefit tends to be concentrated among higher earners. Families 
with low earning levels often have little choice but to send 
both members of a couple to work in order to make ends meet.
    Partly, this is so today to a greater extent than in the 
past, because many modern workers have to surrender so much 
more of their earnings to cover Social Security and their own 
retirement savings and health insurance costs that economic 
circumstances leave them no choices, but that both spouses have 
to work to cover family needs.
    For most workers today, the spousal benefit has little or 
no economic value, but renders their treatment unfair, relative 
to those who benefit from it and pay nothing extra for it. 
Either we should quit the pretense that Social Security is 
redistributive, as Congress has repeatedly specified in the 
benefit formula, or we should make the actual structure fit the 
stated intent.
    Another change to the benefit structure that is important 
then is--and should be considered in modernizing Social 
Security--is the introduction of a true joint and survivor 
benefit for married couples. The operation of the spousal 
benefit partially covers this void now. But by perpetuating its 
inequitable existence, and mitigating the need for a joint 
survivor benefit, existing policy propagates another inequity.
    Today the longest-living spouse in a two-earner couple 
receives little or no benefit in consideration of the deceased 
spouse's income and participation in Social Security. This 
makes the benefit in single-earner couples an even more glaring 
problem.
    The Retirement Equity Act of 1983 required that private 
employer-sponsored pensions offer a joint and survivor benefit, 
and the only way that it can be waived is by both persons 
actually waiving the benefit. It can be financed within the 
structure of the benefit itself; it does not have to add 
expense to Social Security's cost. It would modernize the 
system, it would make it more equitable, and it would also be 
more efficient.
    Thank you, Mr. Chairman.
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    Chairman JOHNSON. Thank you, sir. I appreciate it.
    Mr. Terry, you may proceed.

 STATEMENT OF THOMAS S. TERRY, PRESIDENT, T. TERRY CONSULTING, 
         ON BEHALF OF THE AMERICAN ACADEMY OF ACTUARIES

    Mr. TERRY. Thank you, Mr. Chairman and Members of the 
Subcommittee. I am glad to be here this morning. I am here 
representing the American Academy of Actuaries. We are an 
organization of roughly 17,000 members whose mission is to 
serve the public on behalf of the U.S. actuarial profession.
    I want to talk--in my five minutes I would like to talk 
about two things. I would like to talk about actuaries and the 
role of actuaries in assessing the solvency and sustainability 
of financial systems, and I would like to talk about a position 
that the American Academy of Actuaries has advocated, and that 
is that the Social Security retirement age be increased.
    First, about actuaries. Actuaries go about the business of 
evaluating complex financial systems. And we do that by 
constructing models. And these models are designed to gauge the 
long-term solvency and the long-term sustainability of these 
financial systems. We go about that by looking at the system 
from the standpoint of the principles that seem to be 
functioning in that system, and the assumptions that support 
that.
    Now, the reason we do that is because we then turn around 
and we project those principles into the future, based on a 
certain set of assumptions.
    Now, as you know, there is talk about actuarial imbalances 
in the Social Security system. Well, those calculations are not 
here-and-now assessments, because, as we know, there is a $2.6 
trillion trust fund. This is really a long-term imbalance that 
we talk about. It is actuarial principles and assumptions that 
give transparency into that sort of imbalance. And so, 
therefore, what we do as actuaries is we examine and explore 
those principles, and we test those assumptions.
    Now, one of the key principles, for example, that the 
Social Security system operates on is that the current cohort 
of workers will support the current cohort of retirees. That is 
one of the foundational principles upon which the system has 
been built.
    Now, one of the assumptions that has gone into that system 
is that--right from the very start--is that longevity was a 
relative fixed notion. Back in--as the chairman indicated, back 
in 1937, longevity was what it was. And for people at birth at 
that age, longevity was--or life expectancy was 64. For those 
that reached age 65, their life expectancy at that point was 12 
years.
    Fast forward to today. Life expectancy for a 65-year-old is 
roughly 18 years. That is a 50 percent increase over that which 
was in place in 1937, which brings us now to my second point, 
which is the American Academy of Actuaries and our position 
around retirement age.
    You know, we at the academy have examined and explored all 
sorts of suggestions, options, alternatives for closing that 
imbalance, closing that long-term 75-year imbalance. One of the 
topics that has risen to the top of the list that we look at is 
increasing retirement age. And the reason is because we believe 
it was an assumption that was a fixed assumption back in 1937 
that deserves re-evaluation today.
    Every actuarial forecast or projection that has been done 
since then has, in fact, updated and anticipated improved 
longevity, including the forecasts that have been done in the 
most--you know, in the current time frame that takes into 
account this 50 percent improvement in longevity.
    To restore balance to the system and to maintain that 
balance between the working years and the retirement years, the 
academy believes that it is paramount that, at the top of any 
list of reform items, increasing the retirement age has to 
appear on that list.
    We are mindful of the fact that any increase or any change 
to the system has to be done with respect to what objectives we 
are trying to achieve, the impact on both near-term as well as 
long-term retirees. We are mindful of the fact that there are 
always going to be consequences to any change. And to the 
extent that there are consequences, those consequences may need 
to be mitigated. We are well aware of that, and we stand ready 
to sort of help evaluate any sorts of proposals that may come 
forward that appear in any sort of a reform package.
    So, those are my remarks, Mr. Chairman.
    [The statement of Mr. Terry follows:]
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    Chairman JOHNSON. Thank you very much.
    Dr. Steuerle, you may proceed.

 STATEMENT OF C. EUGENE STEUERLE, PH.D., SENIOR FELLOW, URBAN 
                           INSTITUTE

    Mr. STEUERLE. Thank you, Mr. Chairman, Members of the 
Subcommittee. It is an honor to be before you again today.
    As has been commented already by several people, including 
you, Mr. Chairman, since Social Security was first enacted, 
vast changes have occurred in the economy and life expectancy, 
and the health care and the labor force participation of women. 
We simply cannot design a system for 2080 by what we think were 
the needs of a society in 1930.
    That doesn't mean Social Security hasn't been a great 
success. It has. But at the margin it is not serving us as well 
as it could. So, consider the following.
    If you count lifetime benefits in Social Security, taking 
into account the retirement age issues that Mr. Terry just 
talked about, Social Security now provides about $555,000 worth 
of lifetime benefits to the average couple retiring today. For 
someone of Mr. Becerra's generation, the average benefits rise 
to over $700,000. If for your generation, if we count in 
Medicare, it's over a million, it is about $1.2 million or $1.3 
million.
    So, what we are really talking about here is the growth in 
the benefits that we are trying to try to figure out how to 
constrain so we can stay within a reasonable system, not 
cutting back on existing levels.
    In addition, the current system has morphed into a middle-
aged retirement system. Basically, younger and younger people 
are--essentially, relative to their life expectancy--are 
getting benefits. It has recently made only modest progress in 
dealing with poverty.
    It discourages work among older individuals, and we need 
them to be in the labor force. It encourages the near-elderly 
to spend down their retirement income too soon, so it is a 
threat to the very old, and it denies equal justice in all 
sorts of ways. It discriminates against the single working 
heads of household; against the long-term worker; and many 
others.
    None of these features--I just want to be clear--derives 
from any conservative or liberal principle. They are just badly 
designed features that don't meet the needs of today, and are 
not well targeted, if you are worried about--as I am--about the 
progressivity of the system.
    So, in my testimony I talk about four different types of 
reforms that I think are really important and worth 
considering.
    One is simply to try to figure out ways to restrict the 
growth in benefits and the growth in number of years of 
benefits, which is largely the retirement age issue. It is not 
necessarily and issue of cutting back on the number of years, 
but cutting back or limiting growth while the system is out of 
balance. I think we need to really think about ways of 
increasing labor supply. We really need workers in the economy 
who bring revenues to the Social Security system, who bring 
revenues to the income tax.
    I talk about increasing the equity and efficiency of the 
system, particularly this discrimination, largely against 
single heads of households, who are often working women, 
abandoned mothers, who basically don't have access to about a 
quarter of the system for which they pay.
    And I would also like to encourage you to think about 
latching on some private pension reform--to extend pension 
coverage to lower-income people--as a part of a broader fix of 
the programs for the elderly.
    Very briefly, I first suggest restricting growth when the 
system is out of balance. If Congress would simply put on a 
rule that says, ``While Social Security and Medicare are out of 
balance, we are going to cap the total amount of benefits at $1 
million per couple,'' the systems would be in long-term 
balance. It is the growth in the benefits well beyond this 
million-dollar package of benefits per couple that is causing 
the imbalances.
    Another issue I would address here, as I said, is to 
gradually adjust the retirement age to take into account that 
people are living longer and longer, because it is having an 
effect on who is getting the benefits. More and more benefits, 
as I show, are going to people further and further from death. 
Benefits are not well concentrated to periods when people's 
needs are the greatest.
    I would also index the benefits more slowly for higher-
income people, although I would favor a strong minimum benefit 
that is wage-indexed for low and moderate-income people. So we 
could really provide an even sounder base of protection for the 
bottom third, or the bottom half of the income distribution.
    I mentioned in the testimony that I would try to encourage 
greater labor force participation, and that's where increasing 
the retirement age, I think, is really important. And that 
includes the early retirement age. Increasing the early 
retirement age has very little effect on Social Security 
balances, but does a lot, by the way, for income tax revenues. 
It helps us deal with this demographic issue of going to a 
world where we are encouraging about one-third of adults to be 
on Social Security.
    I also suggest all sorts of ways of improving the equity 
and efficiency of this system. These include, as I mentioned, 
designing strong minimum benefits to really help lower-income 
people. I would move toward actuarial neutrality in designing 
survival and spousal benefits, because that is a major cause of 
the problem of this discrimination against single heads of 
households.
    And finally, as I mentioned, I would try to add on some 
private pension reform on to Social Security, so that we get 
some saving for this broad mass of middle class people who 
don't have much saving in retirement.
    Finally, Mr. Chairman, Mr. Becerra, Members of the 
Committee, I would like to note that the definition of a 
pessimist is someone, when he smells the scent of flowers, 
looks around for a casket. I actually think that what you are 
going through politically these days on Social Security, on 
taxes, on the debt, is very difficult. You are having to 
identify who is going to pay for government, either through 
lower benefits or higher taxes because the promises we made in 
the past just cannot be met.
    But if we take this straightjacket off ourselves, I think 
we are actually freeing up ourselves--and you as a congress--to 
put resources towards those needs that we consider to be the 
most important in society. Thank you.
    [The statement of Mr. Steuerle follows:]
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    Chairman JOHNSON. Thank you, sir.
    Ms. Entmacher, you may proceed.

STATEMENT OF JOAN ENTMACHER, VICE PRESIDENT FOR FAMILY ECONOMIC 
             SECURITY, NATIONAL WOMEN'S LAW CENTER

    Ms. ENTMACHER. Thank you, Chairman Johnson, Mr. Becerra, 
Members of the Subcommittee. Thank you for giving me the 
opportunity to testify on behalf of the National Women's Law 
Center.
    I am going to shift focus from the balance sheet of the 
Social Security program to what Social Security means to the 
budgets of the Americans who rely on Social Security. Two out 
of three beneficiaries 65 and older get most of their income 
from Social Security. And for one out of three, it is virtually 
their only source of income. That is particularly striking when 
you realize that the average Social Security benefit is just 
$14,000 a year for older Americans, and it is just $12,000 a 
year for older women.
    As a result, even with Social Security at its current 
levels, economic insecurity among the elderly persists, 
especially among women. And their incomes are modest. The 
median older beneficiary has a total income of less than 
$21,000 a year. That is total.
    That is about what Jeanette O'Linger in Medford, Oregon, is 
living on right now. She is a widow, 84 years old, living 
alone. She worked until age 73, but her only income now, apart 
from a little help from her adult children, is her Social 
Security check. Her benefit is about $20,000 a year, so it is 
actually higher than average. But it is still a struggle for 
her to make ends meet, and she told us about it.
    Forget cable TV or new clothes. What about food? She 
explained. ``I can't afford meat any more. But every once in a 
while, if I see a great bargain, I will splurge on a small 
piece of meat. There is a special discount cheese that I like. 
I make very thin slices.''
    Slicing the cheese very thin can maybe stretch your food 
budget to the end of the month. But it won't cover health care. 
She also told us, ``A couple of months ago my dentist told me 
that I need a root canal. I have had to put it off, because it 
is $800, and that would be too tough to take on now. I am 
taking a chance with my health, but I don't know what else I 
can do.''
    Not a lot of room to cut there. And Social Security 
benefits are already scheduled to decline. The retirement age 
is going up right now. It has already increased from 65 to 66, 
and rising to 67. Every year's increase in the retirement age 
is an across-the-board benefit cut of about seven percent at 
whatever age people take their benefits.
    In addition, rising Medicare premiums will consume a 
greater portion of retirees' Social Security income.
    On top of that, other sources of secure retirement income 
are declining. And, of course, the recession has made things 
worse. This adds up to a compelling case for protecting and 
strengthening Social Security benefits. Yet there are a number 
of proposals out there that would cut Social Security benefits, 
even for current retirees and those near retirement. So I was 
very pleased to hear your statement, Mr. Chairman, about the 
bipartisan support for protecting those people.
    For example, switching to the chain CPI for calculating the 
cost-of-living adjustment in Social Security would cut benefits 
for current beneficiaries, like Ms. O'Linger. And they would 
produce deeper cuts with every year of benefit receipt. This 
change would particularly hit women, because they live longer 
than men, are more reliant on Social Security, and already at 
much greater risk of poverty as they age.
    Those who say that that cut won't hurt aren't trying to 
live on Social Security. A cut of $56 a month represents the 
loss of a week of food every month for the median Social 
Security female beneficiary.
    The Bowles-Simpson plan relies on benefit cuts for two-
thirds of its savings over the next 75 years, and four-fifths 
of the savings in the 75th year. Restoring solvency to the 
Social Security program by slashing the benefits people need to 
live is like fixing a stubbed toe by cutting off a foot.
    And there are some proposals that would cut benefits more 
quickly and more deeply than Bowles-Simpson. For example, the 
Republican Study Committee proposal to speed up the increase in 
the retirement age and bills that are pending on the Senate 
side to accelerate that increase would cut benefits for people 
currently between the ages of 55 and 60.
    In addition, the SAFE Act introduced by Representative 
Sessions, which would allow the diversion of payroll taxes into 
private accounts would simultaneously worsen trust fund 
solvency and jeopardize benefits for current retirees, as chief 
actuary Steve Goss testified at the last hearing, and 
jeopardize not only the retirement benefits for workers who 
choose accounts, but disability and life insurance protections 
for their families.
    I hope this--I recognize that it is important to make 
adjustments sooner than later, but this committee has the time 
to make those adjustments right, so that people don't get hurt. 
Thank you.
    [The statement of Ms. Entmacher follows:]
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    Chairman JOHNSON. Thank you, ma'am.
    Dr. Blahous, you are recognized.

STATEMENT OF CHARLES P. BLAHOUS, PH.D., RESEARCH FELLOW, HOOVER 
                          INSTITUTION

    Mr. BLAHOUS. Thank you, Mr. Chairman, Mr. Ranking Member, 
and the subcommittee for the honor of testifying today. Owing 
to the time constraints, I am going to bypass most of the 
background information in my written testimony, and just offer 
the subcommittee nine suggested rules of thumb for you to 
consider as you contemplate changes in Social Security 
benefits.
    The first is very simple. Act soon. Obviously, the balance 
of any benefit or tax changes is a very important value 
judgement. But whatever the balance chosen, we are going to be 
better off if that solution is enacted sooner. The longer that 
you delay action, the more any changes are going to be 
concentrated on a smaller number of birth cohorts, and that is 
going to increase adverse effects on vulnerable populations 
within those cohorts.
    Second rule of thumb. On the threshold question of whether 
we should change the growth of benefits at all, my 
recommendation would be yes, simply because to do otherwise 
means that younger generations are going to face far higher 
Social Security tax burdens than any previous generation has 
tolerated. Program costs were about 11.5 percent of worker 
wages in 2008, before the Baby Boomers began to retire. And 
under the current benefit formula, that would rise to over 17 
percent by the mid-2030s. And what would happen is we would be 
trying to pay benefits that are rising very dramatically, in 
per capita terms, relative to inflation.
    Today, a typical medium-wage retiree gets a benefit of 
about $18,000 a year at the normal retirement age. The current 
formula is trying to pay the beneficiary of 2050 a benefit of 
about $29,000 a year, and that is after adjusting for 
inflation.
    So, if we adjust the rate of growth now, benefits can still 
rise in real terms. They don't have to be cut from today's 
levels. But if we leave the current formula in place, I fear we 
run the risk of actual real future benefit declines, as voters 
rebel against the high tax rates required to sustain current 
payment schedules.
    Third rule of thumb is simply that we need to recognize 
demographic realities. Our population is aging rapidly. 
Meanwhile, what has happened is that we have enacted various 
benefit increases over the years, and we have established early 
retirement. So now what is happening is people are retiring 
earlier, and claiming earlier than when FDR established the 
system. They are getting higher annual benefits, and they are 
living longer.
    Something there has to give. We would actually have to 
raise both the early and normal retirement ages by at least 
three years, just to get back to the starting point, where the 
typical beneficiary was claiming at 65, let alone to adjust for 
longevity gains since the program's inception.
    Fourth rule of thumb: phase in any changes that you want to 
make as rapidly as you can, to be fully effective before 2035. 
The vast majority of cost growth in the system will play out by 
2035. That is when we hit the 17 percent cost rate. And then, 
after that, costs are relatively flat until they rise higher, 
only after the 2070s. So, any benefit changes that you postpone 
to occur only after 2035 are not going to do that much to 
address the looming tax burdens facing younger workers.
    Fifth rule of thumb: repair the system's flawed work 
incentives. The current system is basically designed to drive 
seniors out of the workforce, which may have been an attractive 
policy in 1935. But in the 21st century, we have the opposite 
problem. We have future economic growth jeopardized by the 
withdrawal of millions of skilled Baby Boomers from the 
workforce. In my judgment, we should stiffen the penalty for 
early claims. We should increase the reward for delayed claims. 
We should perhaps offer a lump sum option to make the delayed 
retirement credit more attractive.
    We should redesign the benefit formula. Right now, the way 
it currently works is that the longer you work, and the more 
your average earnings rise, the lower your incremental returns 
on your Social Security contributions. And I believe we should 
redesign that formula so that it delivers proportional 
additional benefits for every year of further work by seniors.
    The sixth rule of thumb: protect the vulnerable by 
constraining benefit growth on the high-income end. Obviously, 
the faster the benefits grow on the high-income end, the less 
there is left over for vulnerable populations within a given 
level of tax revenue. I think it is financially and politically 
inefficient to have higher tax burdens driven, in large part, 
by benefit growth above and beyond inflation for upper income 
workers.
    Seventh rule of thumb: maintain the contribution benefit 
link. Don't means test. I think there is an important 
conceptual distinction to be drawn between a more progressive 
benefit formula, which I favor, and a true means test, which I 
don't. The former requires no new administrative capabilities 
from SSA. It doesn't penalize individuals for the saving they 
do outside of Social Security, and it doesn't sever the vital 
link between contributions and benefits that distinguishes 
Social Security from welfare.
    Eighth rule of thumb, maintain the link between retirement 
and disability benefits. The fact that the disability benefit 
formula is based on the retirement formula is, in my judgment, 
important. It limits gaming of the system, and it provides for 
a smooth transition once a disabled individual reaches 
retirement age.
    And the ninth and final rule of thumb I offer for your 
consideration is just to avoid unnecessary complexity, if you 
can. It is important to remember not every part of the Social 
Security benefit formula can do everything, and you are going 
to have distributional goals. You are going to have goals for 
targeting benefits. But you cannot ask the retirement age to 
handle that for you. You cannot ask the CPI to handle that for 
you.
    My recommendation would be just set the retirement age for 
the general case that reflects population aging, set CPI for 
your best measure of overall inflation, and do your benefit 
targeting through the basic benefit formula.
    And, with that, I would be happy to answer any questions 
the subcommittee may have.
    [The statement of Mr. Blahous follows:]
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    Chairman JOHNSON. Thank you. We can't tell people to stop 
getting older.
    [Laughter.]
    Chairman JOHNSON. Thank you.
    Ms. Bovbjerg, you may proceed.

 STATEMENT OF BARBARA BOVBJERG, PH.D., DIRECTOR FOR EDUCATION, 
WORKFORCE, AND INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY 
                             OFFICE

    Ms. BOVBJERG. Thank you, Mr. Chairman, Mr. Becerra, Members 
of the Committee. Thank you for inviting me today.
    You have heard others speak about ways to stabilize Social 
Security's financial future, but you have asked me to address 
one of the most important vehicles for explaining Social 
Security programs, and that is the individualized Social 
Security statement.
    The statement is the Federal Government's main document for 
communicating with more than 150 million workers about their 
Social Security benefits. As such, it also serves as a key 
financial literacy tool to educate the public about Social 
Security, and its provision is mandated in law.
    Should changes to the Social Security programs take place, 
the statement would take on added importance as a means to 
explain them. My testimony today will address both the current 
status of the statement and SSA's plans to improve its 
usefulness. My remarks are based on interviews we have 
conducted in the last month with SSA officials, documents they 
have provided, and our prior work on the statement's 
understandability.
    With regard to status, the statement is not currently being 
distributed. SSA used to mail the statement to virtually all 
American workers annually, until a few months ago when, for 
budgetary reasons, the Agency chose to suspend the mailings. 
SSA is, instead, preparing to make the statement available 
online, and has begun developing a new web portal for this 
purpose.
    But both the portal and the online version of the statement 
are currently in the initial phases of development, and once 
developed, will need to be fully tested. As a result, SSA 
officials are uncertain when the statement will once again be 
available to the public, although they are hoping for early 
next calendar year.
    And, in the meantime, copies of the statement are not 
available. And SSA staff and the website instead direct 
requesters to SSA's retirement estimator--we have a little 
picture of that web page on the front of our testimony--which, 
although useful, does not fill the same function as the 
statement.
    SSA's focus on getting the statement online and securing 
the personal information it contains is really important. But 
these elements of the statement should not be the only concerns 
of the Agency.
    For example, SSA will need plans in place for publicizing 
the availability of the statement online. An internal SSA 
working group is currently considering options for the public 
roll-out of the online statement, but they have not yet 
developed a plan for carrying it out.
    They will also need to consider how best to provide this 
information to people without Internet access. Even the 
relatively few computers available in selected field offices 
will not necessarily permit access to the online statement 
itself if individuals without computers will even know to go 
there to look for it. And while Agency officials have said they 
would also like to make the online statement available in 
Spanish, the initial version will be English only.
    Let me turn now to improving the usefulness of the 
statement. SSA officials have told us that they believe the 
electronic format has advantages for individuals, including 
immediate access when it is needed, and not simply when it 
arrives in the mail. The officials also note that, with an 
electronic statement, they can provide links to related 
documents, and thereby provide complete information, but 
minimize the lengthy description in the statement itself.
    SSA has also told us they plan to draw an industry best 
practices for screen design and 
layout, to make the system more user-friendly.
    And although they are planning such changes, the first 
publicly-released version of the online statement some time 
next year will be nearly identical to the current print 
version. This means sticking with the limited graphics and 
layout that we at GAO and the Social Security Advisory Board 
felt should have been modernized years ago.
    Officials told us they also did not plan to change the 
statement's content, because so much of it is statutorily 
required. However, we noted in our 2005 report that the 
statement contained descriptions and concepts that focus group 
participants found confusing. This is the same content that SSA 
plans to roll out online.
    SSA's own financial literacy initiative offers detailed 
ideas for improving the statement's usefulness, but it is 
unclear what role staff from this office have played in the 
design or content of the online statement, thus far.
    In conclusion, SSA's decision to suspend statement mailings 
this year may negatively affect millions of Americans now, but 
could ultimately have the positive result of modernizing 
delivery of this important information. Yet, because this 
decision to suspend was made so abruptly, SSA faces pressure to 
take quick action to restore the statement's availability, 
which means there is little or no time to redesign the 
statement to take advantage of the new electronic platform.
    But that is not even our greatest concern. The lack of 
preparation for providing all American workers, including those 
without computer resources and those without English 
proficiency, with an understandable version of the statement 
risks leaving a significant portion of our population without 
information about Social Security at a time when changes to the 
programs could make such information more crucial than ever.
    We are, therefore, recommending that the SSA commissioner 
take steps immediately to address these access issues, and thus 
assure that the statement remains an important tool for 
communicating with all workers.
    And that concludes my statement.
    [The statement of Ms. Bovbjerg follows:]
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    Chairman JOHNSON. Thank you very much.
    Ms. BOVBJERG. Thank you.
    Chairman JOHNSON. I appreciate that. We are struggling to 
meet a vote deadline here this morning, so I would like 
everyone to have a chance to ask questions. And I will limit my 
time to five minutes, and ask the ranking member to do the 
same.
    Mr. Terry, your testimony makes very clear and compelling 
case for raising the retirement age. When the actuaries endorse 
working longer, that is not risk-taking, according to you. It 
is not to me, either. Everyone ought to be listening carefully 
to what you and the experts have to say on this issue.
    So, we cannot force people to work longer, but we can 
encourage them. And it makes no sense to me to tax someone who 
wants to work, and, who we, as a nation, need to have to work. 
In other words, we may not want to tax them as they get past a 
certain age. And why not encourage older workers by freeing 
them of their Social Security payroll tax that taxes the very 
first dollar of income? Makes sense to me. Must make sense to 
you, because you mentioned it in your remarks.
    How much would this boost older workers' willingness to 
work? And do you think it would encourage, or we should 
encourage employers to create jobs for them? And finally, how 
would this benefit our country? Mr. Terry?
    Mr. TERRY. Well, it is an excellent--I like the way you 
posed the question, because I think you are suggesting that it 
is not simply a matter of forcing people to do something they 
don't want to do, that we, in fact, may have impediments 
inadvertently set up to--sort of preventing people from working 
longer.
    If work is thought of as drudgery from which people must 
escape, and that Social Security is the savior for that escape, 
then I think that is a flawed--that is probably a flawed 
premise. And I think the premise of your question is that, in 
fact, there may well be removal of disincentives to work. They 
could very well encourage the sort of increasing productivity 
out of the workforce that we all could benefit from.
    The Academy doesn't have a, per se, position around the 
elimination of payroll taxes, or the--you know, the cutting 
back of payroll taxes for older workers. That can and should be 
something that is on the table, obviously, and we would be 
happy to take a look at that and sort of examine it, from an 
actuarial perspective. We haven't done that yet, but we would 
be pleased to do so.
    Chairman JOHNSON. Why don't you do it for us?
    Mr. TERRY. Yes, will do.
    Chairman JOHNSON. Thank you. The Social Security statement 
is one of the few government publications that reaches nearly 
every working-aged American. The statement reminds workers how 
much of their hard-earned wages they have paid in taxes for the 
promise of future Social Security benefits, and gives an 
estimate of what those benefits might be.
    Dr. Bovbjerg, can Social Security choose not to provide a 
statement to workers, or is it required by law?
    Ms. BOVBJERG. The law says that the Social Security 
Administration must provide a Social Security statement to 
individuals aged 25 and over. How that statement is provided, 
and whether it is mailed, or whether it is online, is something 
that Social Security is considering right now.
    Chairman JOHNSON. So you don't think they violated the law 
when they didn't send one in the mail.
    Ms. BOVBJERG. We do not have an opinion on whether they 
violated the law. We prefer to let courts make those decisions.
    Chairman JOHNSON. Come on.
    [Laughter.]
    Ms. BOVBJERG. We do think that it is very important that 
people get this statement. And when the decision was made back 
in the spring not to mail the statement any more, to cancel 
that contract, it was made for budgetary reasons. But it did 
not, I believe, consider the fact that there could be a full 
calendar year in which statements are not going out.
    Chairman JOHNSON. Yes. Well, what does the law require----
    Ms. BOVBJERG. One hundred and fifty million people.
    Chairman JOHNSON.--Social Security to include in that 
statement?
    Ms. BOVBJERG. Oh, there are many things. It is----
    Chairman JOHNSON. And did they do it online?
    Ms. BOVBJERG. Well, we haven't seen----
    Chairman JOHNSON. Did they put everything in it?
    Ms. BOVBJERG. We haven't seen what they are putting online 
yet. But what they have in the current statement, which we have 
reproduced in the back of my written testimony, is they show 
what your earnings record is, they estimate your future 
benefits, they talk about the offsets that apply to public 
employees and some in the railroad industry.
    There are many things that Social Security must include 
there. And we don't dispute that. I think we are concerned 
about how those things are explained.
    Chairman JOHNSON. Thank you very much. Mr. Becerra, you are 
recognized for five minutes.
    Mr. BECERRA. Thank you, Mr. Chairman. And thank you all for 
your testimony. I suspect we will be calling on all of you for 
your ideas, whether it is nine points or one point into the 
future, because I do believe that there is an appetite to 
discuss how we get to a solution on Social Security. So thank 
you very much.
    Ms. Entmacher, let me ask you something, because the story 
you recounted of the woman in Oregon sounds eerily familiar to 
the story I hear from too many seniors in my congressional 
district in Los Angeles, where the costs are probably even 
higher than the costs of the woman you mentioned in Oregon.
    If you take a look over the lifetime, and if someone lives 
into their eighties or nineties, that is quite a few years of 
collecting about $14,000, on average, a year----
    Ms. ENTMACHER. $12,000 for women.
    Mr. BECERRA. $12,000 for women--and you are right, we do 
have to address that imbalance for women--and then, when you 
put Medicare in there, it is a good chunk of money.
    But, at the same time, we are finding that health care 
costs are eclipsing any cost of living that seniors are getting 
in their COLA in Social Security. And $14,000, as you 
mentioned, is not much to start with.
    How do you see this going? If we get to the point of trying 
to deal with making Social Security stronger into the future so 
that my kids and their kids know that it will be there the way 
it is for today's seniors--and I hope for me, as well, and I 
expect for me--what should we be doing to try to make sure that 
we can tell the woman in Oregon or my constituent in Los 
Angeles that Social Security will be as strong today--tomorrow 
as it is today?
    Ms. ENTMACHER. Well, I think there are two separate 
problems that need to be looked at separately, although they 
are often talked about together as Social Security and Medicare 
and Medicaid.
    Health care costs are on a trajectory of increase that is 
unsustainable. And it is not just the federal health programs. 
Actually, health care costs in the federal programs are rising 
somewhat more slowly than health care costs in the private 
sector. So there is a real need to control the growth of health 
care costs to see where we can find real efficiencies without 
impeding benefits and the quality of care. And I think my 
expertise is not in health--is not in health care reform. But 
clearly, that is an area where we do see costs continuing to 
escalate.
    If you look at the growth curve for Social Security 
benefits, as the chairman pointed out in his announcement of 
this hearing, they will increase to about 6.2 percent of GDP in 
2035. But after that, they actually decline slightly and stay 
stable for the next 75 years.
    So, when it comes to Social Security, we are really dealing 
with the fact of an aging population. Although, as the chief 
actuary pointed out, it is really more that there aren't as 
many young people as there used to be. So how do we deal with 
that?
    I think there are solutions, fair solutions, on the revenue 
side. I think the wage base for Social Security is very low. We 
tax a much smaller percentage of wages than we have taxed in 
the last several decades. A lot of compensation now is outside 
of Social Security taxes all together. And, of course, we are 
taxing only a small portion of GDP.
    So, I think that there are revenue solutions. And, you 
know, Mr. Goss testified about some of them at his testimony a 
couple of weeks ago. The National Academy of Social Insurance, 
in a paper that I cite in my written testimony, lists other 
ways of raising revenue for Social Security.
    And it is striking--and I mention some of the public 
polling--that across the political spectrum--and this includes 
people who support the Tea Party--they support raising revenue 
to finance Social Security and close the deficit. You wouldn't 
be surprised to find that people across the political spectrum 
oppose cuts to Social Security benefits. But they actually also 
support revenue increases to strengthen the program. So I would 
suggest that as a place to look.
    Mr. BECERRA. Thank you. Mr. Terry, you are a numbers guy. 
You testified how we've got to look at these numbers.
    You mentioned the $2.6 trillion trust fund, and how we 
address the long-term life of Social Security. I pulled out the 
$20 bill, I pulled out the savings bond, and I guess I could 
have pulled out the Treasury certificate that the Social 
Security system has. What is your sense of how we deal with 
this existing debt ceiling crisis? And what is the impact on 
the $20 bill, the savings bond my daughter has, or the Treasury 
certificate for Social Security?
    Chairman JOHNSON. Limit your response, please.
    Mr. BECERRA. Oh, and yes, you have to do it in three 
seconds or less.
    [Laughter.]
    Mr. TERRY. Two things to say. Great question. Number one is 
that we actuaries--and particularly the American Academy of 
Actuaries--are focused on the Social Security system itself, 
okay? So our realm of focus is the system, itself.
    Secondly, we are in the midst of preparing a detailed 
discussion brief, if you will, of the very question you ask 
about the trust funds, the--is the money real, is it not real, 
what are the aspects of it, and what are the attributes of it 
that can inform some of our thinking about the importance of 
that $2.6 trillion.
    So, we are close to putting the finishing touches on that, 
and we will get that to you.
    Mr. BECERRA. Appreciate that. Thank you, Mr. Chairman.
    Chairman JOHNSON. Thank you. Mr. Berg, you are recognized 
for five minutes.
    Mr. BERG. Well, Mr. Chairman, thank you. I really don't 
know where to start.
    I mean, I am extremely frustrated with the rhetoric on this 
issue. We heard today three accusations of Republican plans 
that are going to ruin Social Security. None of those proposals 
have come before this subcommittee. None of them.
    We have a lot of attention today because I think the 
President has recognized this is an issue that should be talked 
about, should be debated. Everyone I talk to back in North 
Dakota is concerned about Social Security. And I think it has 
been used as a political football by different people, 
different interests all along.
    I sit here today and I hear people say, ``Well, we have 2.6 
trillion, nothing to worry about.'' The reality is, to redeem 
those dollars, it comes from the general fund. I mean why are 
we in this debt crisis right now today? We are in it because we 
have got 14.3 trillion in debt, and we don't have any more 
money. So, the money has to come from the general fund.
    I also think that it is crazy to say we should ignore this 
problem. I am not here to say we want to use Social Security to 
fund our deficit. I mean I am new here; I didn't create this 
problem. But, quite frankly, it has got to be fixed. I mean we 
are spending more in general fund than we are taking in.
    And I came here to honor this promise to our seniors. I am 
here to honor that. And I am very frustrated when I sit here 
and hear, ``You know what? Don't worry. We are good for 25 
years. And at the end of 25 years, it is only going to go 75 
percent.''
    We talked about the O'Linger in Oregon: 25 percent goes 
from 20,000 to 15,000. If we are concerned about these things, 
why are we ignoring them?
    And so, again, I appreciate everyone's perspective. I mean 
the point is they quit doing the statements. Why did they quit 
doing the statements? They are saying for budget reasons. Well, 
everyone I talk to that has looked at this says there is a 
problem.
    And so, really, my question is pretty high-level and pretty 
simple. And that is, I would like each of you to say what are 
the facts. Why should we look at this? Give me a fact that is 
non-disputable on why we should be spending our time on fixing 
Social Security or making it solvent, long-term?
    MR. SCHIEBER. Me?
    Mr. BERG. Absolutely.
    MR. SCHIEBER. The time perspective in which the system will 
run out of money if we don't do anything is within the life 
expectancy, roughly, of people who are retiring today. So it is 
an issue that is going to affect almost everyone who is 
stepping into retirement today.
    It also is----
    Mr. BERG. Solvency?
    MR. SCHIEBER. Solvency. And it is also well within the life 
expectancy of everybody who is working, or the overwhelming 
majority of people who are working.
    The trust fund will be depleted under the projections. 
There will still be tax revenues coming in. The trust funds 
will run out of money. So it's within the life expectancy of 
people today who are going--who are here, participating in the 
program. We ought to fix it before we get to the cliff. You 
don't put the brakes on at the cliff, you put the brakes on as 
you are coming to the cliff.
    Mr. TERRY. I would echo that, and what I think other 
panelists have said this morning, too, about the need to 
address it now, rather than later. And to suggest that there is 
not an issue is to suggest there is nothing to address right 
now. And the Academy believes that, in fact, action should be 
taken now to address the long-range deficit.
    Mr. STEUERLE. Just two quick comments. The first is that 
there are a lot of features of Social Security that are just 
badly targeted. So a lot of low-income women--as I say, 
particularly single heads of households--really suffer 
discrimination in the system. And there are fixes that we need 
to make, regardless of whether there are imbalances or not.
    The fact that so much money is now concentrated so much 
earlier in life--a typical couple is getting benefits now for 
close to 27 years, going on 3 decades. That is not a good 
system. There needs to be more concentration of benefits later 
in life, even if the system was totally imbalanced.
    If you are asking specifically about the imbalances that 
are driving the current debate, what happened in the trust 
funds is while the Baby Boomers were temporarily in the 
workforce, they were paying in about $1 for every $.90 that was 
being paid out. It was still mainly a pay-as-you-go system. 
Today, basically for every $1 coming in, $1 is going out. And 
as you move towards the future, the ratio moves towards roughly 
$1.25 going out for every dollar coming in.
    So that is sort of the simple math that we are dealing 
with, in terms of this largely pay-as-you-go system. And, yes, 
the trust fund had a little build-up when only paid out $.90 
for every dollar that came in the trust fund is going in the 
opposite direction. So that is what is driving the system, 
largely because of the decline in the birth rate, and the 
decline in the number of workers per beneficiary.
    The only ways to address a decline in workers per 
beneficiary are to tax workers more or take something away from 
the beneficiaries. That is the simple math. It is not 
conservative, liberal, Democratic, or Republican.
    Chairman JOHNSON. Thank you. Time has run out. I will let 
each one of you make a short statement, if you desire.
    Ms. ENTMACHER. One of the most popular options for 
strengthening Social Security--and I agree that action should 
be taken. In 1983 Congress waited until Social Security was 
within a few months of exhausting the trust fund, and that is 
an experience that I don't think anyone wants to repeat.
    But right now, people pay Social Security taxes only on 
their first $106,800 of income. And when you explain that to 
people--you know, the vast majority of whom pay taxes on every 
single dollar they earn--they are shocked. And again, across 
the political spectrum people say, ``Well, gee, people, you 
know, should pay Social Security taxes on more of their 
income,'' and that would go a long way to strengthen the trust 
fund, and make sure we can continue to pay benefits that are so 
important in North Dakota.
    Mr. BLAHOUS. Just a couple of very quick points. This is 
important because Social Security has an imbalance. Quite apart 
from anything happening in the larger deficit, Social 
Security's own books are out of balance over the long term. 
There is an imbalance of benefit promises relative to incoming 
revenues. That has to be closed, if you want to have a self-
financing Social Security system. It is best if that imbalance 
is closed sooner, rather than later. That gives you the fairest 
possible outcomes. You get the least fair outcomes if you wait 
until later.
    I would make one final point on this. If we do wait until 
we are close to trust fund depletion, there is no historical 
precedent for closing a shortfall of that magnitude. In 1983, 
when they had emergency surgery to repair program finances, 
income and outflow were still pretty close together. We are 
rapidly getting to a point where they are going to be much, 
much further apart. There simply is no historical precedent for 
closing a shortfall of the size that it will be by the time the 
trust fund is run down.
    Chairman JOHNSON. Thank you. Ms. Bovbjerg?
    Ms. BOVBJERG. Social Security touches the lives of nearly 
every American. It is a crucially important program. Yet, for 
15 years, GAO has been talking about the structural imbalance 
in the system, and that it will be important to act as early as 
possible to avoid really horrible choices later on that will 
hurt people dramatically.
    And so, we have been arguing that having this discussion--
and I congratulate the subcommittee for having this hearing and 
raising some of these issues--is really important, but that we 
do need to make decisions, and that everything should be on the 
table.
    Chairman JOHNSON. Good testimony. Mr. Smith, you are 
recognized.
    Mr. SMITH. Thank you, Mr. Chairman. Mr. Steuerle, you had 
started to touch on private pension reform toward the end of 
your remarks. Could you elaborate on that?
    Mr. STEUERLE. Yes. In Great Britain a few years ago, they 
undertook a Social Security reform. And when they did it they 
actually--in a typically British way--had a white paper--had an 
outside study on what they should do. And they concluded that 
it would be very useful to try to increase private saving at 
the same time as they did Social Security reform.
    Now their Social Security reform actually increased 
benefits in the public system. But even there, they decided 
that that was not enough. That flexibility was probably because 
they formerly indexed at a much slower rate. They decided that, 
to really help a broad swath of people, they really needed to 
build up private pension saving.
    And so, if you look at our private pension system, it 
covers fairly poorly a majority of the population. An estimate 
I did a few years ago--I haven't quite updated it--basically 
said that for 75 percent of people who retire, Social Security 
and Medicare--the lifetime value of Social Security and 
Medicare is in excess of all of their private assets, their 
home.
    So, we have a larger and larger percent of the population 
dependent upon Social Security and Medicare, which is one of 
the issues that Joan raises. And the question is, how do we 
deal with it?
    Well, one way we deal with it is to try to perhaps, as my 
testimony would argue, increase some of those cash benefits for 
low and moderate-income people. But for the middle-income 
people, I don't think we can just get there by just adding to a 
system that is already out of balance. We need to work on 
things like private saving. And we need to recognize that this 
private retirement system we have set up is really not doing a 
good job of covering the vast majority of people.
    And, you know, we can ask who is to blame. Is it the fact 
that employers aren't doing it correctly, or employees who 
aren't saving enough? It's almost beside the point. Regardless, 
we need to figure out ways of enhancing the saving of middle-
income people as they move towards retirement.
    Mr. SMITH. Thank you. Ms. Entmacher, you mentioned that 
there is public support for revenue increases to fix Social 
Security.
    Ms. ENTMACHER. Mm-hmm.
    Mr. SMITH. Could you elaborate on that?
    Ms. ENTMACHER. Sure. The--raising the cap on taxable wages 
is certainly one option that is very popular. But there are 
also some polls that--you know, in which people say that ``I 
would pay more in Social Security taxes to strengthen the 
benefits that people rely on,'' that this is one area of tax 
where people say, ``I don't mind paying Social Security taxes, 
because I know what I am getting for it, and I would pay more 
to protect Social Security.''
    In the past, Congress, you know, in terms of automatically 
legislating for needs in the future, there have been scheduled 
small increases in the payroll tax way in the future, to make 
sure that Social Security stayed in balance. And this is 
something the public says they support, and particularly if 
some of the proposals for improving and strengthening Social 
Security that Gene has talked about were part of the 
discussion.
    And again, I am not saying wait until the last minute. I 
agree with Chuck. It would be very bad to wait. But I think if 
there was a process of public education about how we are 
strengthening the program, making it better, making it more 
adequate--and, yes, everyone is going to be chipping in a 
little more. People who are very wealthy are going to be 
chipping in a little more. I don't know whether it can be done 
without, you know, increases far in the future, and the payroll 
tax rate, but this is what the American people say they want. 
They want a stronger Social Security system, and they are 
willing to pay for it.
    Mr. SMITH. And when you mention ``very wealthy,'' what 
would determine that?
    Ms. ENTMACHER. Well, I mean, I--certainly, at this point, 
the--everyone above, you know, about $107,000 isn't 
contributing to Social Security. You could raise the----
    Mr. SMITH. They are not contributing to Social Security, or 
that----
    Ms. ENTMACHER. Oh, well, not--on the--you are quite right. 
It is the income above that amount, plus other forms of 
compensation, such as health care benefits that are not, you 
know, part of the Social Security base.
    Mr. SMITH. Okay, thank you. I yield back.
    Chairman JOHNSON. Thank you. Mr. Marchant, you are 
recognized.
    Mr. MARCHANT. Thank you, Mr. Chairman. In the last 24 hours 
we have began to hear a lot about the concept of chained CPI, 
instead of the traditional COLA method. Could each of the 
panelists talk a little bit about that concept? Maybe describe 
to the public that is watching this hearing--describe to them 
this concept, and why it might be an important part of the 
solution to this problem.
    MR. SCHIEBER. There has been debate about the CPI, which--
what is the appropriate CPI, almost from the time we linked 
benefits to it. There are concerns about what is in the market 
basket that is used to value what is happening to the price of 
the goods that we consume.
    And the argument, basically, between the chained CPI and 
the current CPI is that in the current CPI many people do not 
believe that we considered that when the price of a good--let's 
pick a car. If your--if the price of a Mercedes goes up, then 
maybe you don't buy the Mercedes, you switch and you buy an 
Audi or something, that the current CPI does not take that kind 
of substitution into account. And so it is over-stating what 
the true cost of living is, and it extends to things beyond 
expensive cars. It extends on down.
    So, there is--the argument is that this new CPI more 
adequately reflects, or more closely reflects, the cost of 
living over time.
    The problem with any market basket is you pick any specific 
individual, and they probably don't exactly consume that 
particular market basket. And so, it is an estimation to try 
and get as close as we can to a reasonable rate of increase in 
the cost of living for people.
    And the argument is being made, on technical grounds, we 
should move from the current system to an alternative system.
    Mr. TERRY. The actuarial profession will leave to the 
economists the question about what is the proper mix that goes 
into a basket of consumer goods to accurately measure inflation 
and its impact on indices.
    But I will say that we have--we're aware that a chained CPI 
would likely produce a lower measure of inflation, and lower to 
the point where, if it were to be implemented and used to 
inform the cost of living adjustments, that it could close as 
much as a quarter of the long-term deficit--long-term imbalance 
in the system.
    Mr. STEUERLE. I am--as an economist, I tend to favor coming 
up with a good measure of CPI. But if you do it by itself, I 
think it causes a problem in Social Security. That is because, 
for people who haven't retired yet, the CPI adjustment doesn't 
affect their growth in benefits. So the younger of you on the 
panel, your benefits keep growing by $10,000, $20,000, $30,000, 
$50,000, and that doesn't go down. The CPI hits people once 
they retire.
    And so in the first year of retirement, you have a small 
adjustment--it might be one-third of one percent. That 
compounds. For someone retired for 25 or 30 years--the person 
who is 85 or 90 has a 10 percent cut. So you end up with a much 
bigger cut on the older elderly.
    I have testified, or put in my testimony, I want to make 
the system go in the opposite direction. I want to increase 
benefits at older ages, when it does not have such a negative 
work disincentive, and cut back on the benefits at an early 
age.
    Talking about the poor, or the very low income, I would try 
to maintain their benefits, no matter what. But my problem with 
doing a CPI only, without worrying about that issue, is that I 
prefer to backload the benefits to protect the really old, for 
whom there is not really that much incentive to work, because 
they cannot. This reduces this disincentive up front. On top of 
which, the older people are just more needy. So, that is one 
more of my concerns with the CPI adjustment.
    Ms. ENTMACHER. The problem with switching to the chained 
CPI for Social Security is that this is a program that 
overwhelmingly serves people who are elderly and people with 
disabilities. It also serves some children, but the vast 
majority of beneficiaries are elderly or people with 
disabilities.
    And what is different about them from other consumers is 
that they spend twice as much of their budget on health care. 
That is for all people 65 and older. For people 75 and older, 
they spend 2.5 times as much as consumers generally on health 
care. And the reason that matters when you are trying to figure 
out what is a fair cost of living adjustment is that health 
care costs rise so much faster than everything else.
    So, if you are already spending, you know, a much bigger 
share of your budget on something that is rising much more 
quickly, a cost of living adjustment that might be fair for 
other purposes, or for other people, is really systematically 
unfair to the elderly. In fact, the Bureau of Labor Statistics, 
for----
    Chairman JOHNSON. Close it down, please. The time has 
expired.
    Ms. ENTMACHER. Sorry.
    Mr. BECERRA. Just go ahead and finish off.
    Chairman JOHNSON. Finish your statement.
    Ms. ENTMACHER. Oh. The Bureau of Labor Statistics has a 
special CPI for the elderly. And by that measure, our current 
cost of living index underestimates the cost of living 
increases that elderly people experience.
    Chairman JOHNSON. Mr. Schock, you are recognized.
    Mr. SCHOCK. Thank you, Mr. Chairman, and thank you once 
again for hosting this very, very important hearing on a very 
important topic.
    Once again, it appears that there are some in this room 
that just believe in the policy of the ostrich. If we stick our 
head in the sand long enough, it will go away. The reality is 
we've got a problem.
    And, Dr. Schieber, I think you might be best to answer 
this. We hear about the fund eventually running out. Remind me 
again--and for our listeners--how many years is that estimated 
to be?
    MR. SCHIEBER. The latest estimate, I believe, is 2036. So 
about 25 years.
    Mr. SCHOCK. Twenty-five years.
    MR. SCHIEBER. From now.
    Mr. SCHOCK. And you said earlier that that is likely to be 
assuming somebody is healthy and in relatively good shape, if 
they retire today at 65?
    MR. SCHIEBER. You will be around 50 then.
    [Laughter.]
    Mr. SCHOCK. Lord willing.
    [Laughter.]
    Mr. SCHOCK. So, in 2036, we deplete the assets. And so, in 
2037, if you are a recipient of benefits, and you are to get 
$1,000 a month, what happens?
    MR. SCHIEBER. You will--the next month you will get $750.
    Mr. SCHOCK. Okay, $750. And that goes for a year?
    MR. SCHIEBER. Well, you would get a monthly check.
    Mr. SCHOCK. Correct. But the first year after the year in 
which we deplete the assets, we go down to 77 percent of being 
able to meet liabilities.
    So, the second year, what happens? We have accrued 
basically 23 percent of last year's liabilities that we haven't 
been able to pay. So now, the second year, what happens?
    MR. SCHIEBER. Under current law, Social Security cannot 
borrow money. So Social Security would be making payments at 
that juncture, most people assume, at the rate at which money 
would be coming in. So--and the rates are projected to be 
relatively constant out there. So it would go along somewhere 
around 75 percent, 78 percent, whatever the--you know, in that 
window.
    Of course, if we have one of the happy experiences which we 
may have some time in the future, like the one we have been 
through the last couple of years, and revenues drop very 
significantly, then it might not be 75 percent. It may be 60 
percent. So no guarantees.
    Mr. SCHOCK. And so, I guess what I am having a hard time 
understanding is why do we continue to send statements to 
people who might be around 50 years from now to tell them to 
expect a certain benefit when we know today the truth to be 
that, under the current system, there--they cannot--they should 
not base their retirement on the current expectation.
    MR. SCHIEBER. The statement does--has included, generally, 
a comment to the effect that the system is under-funded, and 
that Congress is either going to have to do something, or 
benefits could be reduced in the future.
    But the reason that they cannot send out a statement to 
people who are 50 years old today or 40 years old today and 
say, ``Oh, hey, by the way, here is one kind of calculation. 
But, really, your benefit is only going to be 70 percent, 80 
percent of that,'' is because of the letters that those of you 
sitting at this table would get in response.
    Mr. SCHOCK. But isn't that the truth? I mean isn't that 
current--isn't current law say that, based on the current 
assets in 2036, they are only going to get 77 percent?
    MR. SCHIEBER. There are two aspects to current law. One is 
the revenue aspect, defining how much is going to be collected, 
and then there is a benefit formula aspect to it. And the law 
says something right now that is inconsistent in these two 
segments of its corpus. And the general public, I don't think, 
has a complete appreciation of what is going on. But I think, 
generally, they know that something is wrong.
    But, you know, we go off and we propose to them that there 
is some magical simple solution. We hear all the time about 
these surveys. You know, ``The public would like to pay more 
for Social Security, rather than having benefits cut.''
    Mr. SCHOCK. Right.
    MR. SCHIEBER. Oh, and how would you like that done? ``Well, 
tax people who are earning more than $106,000.'' That is not 
the American people. That is not the American workers paying 
for this. And if you look at table two in my presentation, the 
people they want to raise taxes on are already getting back 
less than $.50 on the dollar for what they are contributing.
    FDR thought this was wrong. The early architects thought it 
was wrong. And Robert Ball repeatedly said that these low rates 
of return in this system are wrong. And what they are talking 
about doing is exacerbating it, because the American people, we 
hear, are willing to pay more taxes to support this program.
    Mr. SCHOCK. Well, I see my time has expired. But it seems 
to me that to send out a statement which we know to be false 
under current law--my last statement I had with me--I think at 
the last hearing, for those of you that were hear--and it said 
that when I retire 40 years from now, I should plan, based on 
my current income, to receive $3,000 a month. And then it said, 
``Is your--is Social Security in trouble? No.'' And it went on 
to say that, under current law, it is required to meet the 
obligations, and on and on and on.
    All I am suggesting is, for someone who is not in Congress, 
for someone who doesn't serve on the Social Security 
Subcommittee of Ways and Means, who isn't privy to this 
information, but only privy to the statement by which they are 
sent from the Social Security Administration, I think it is 
disingenuous, I think it is wrong, I think it is 
misinformation, and I think, in many respects, it is similar to 
a Ponzi scheme that we send people to jail for out in the real 
world.
    So, I appreciate the chairman's continuation on this 
subject, and I look forward to working with him and our ranking 
member, here, when he realizes we've got a problem, and tries 
to help us fix it. Thank you.
    Mr. BECERRA. Mr. Schock, I have realized the problem, but 
it is not Social Security.
    Chairman JOHNSON. It seems like all our witnesses think 
Social Security has a problem.
    Listen, I want to thank each and every one of you for your 
comments. I think this has been beneficial to all of us. Thank 
you for being here today.
    We know in 2036, according to you, 75 percent--I am told 77 
percent. Congress and the President need to find commonsense 
solutions to make Social Security secure, sustainable. And the 
sooner we do so, the sooner we can protect those who are most 
vulnerable. With that, I thank you all for being here, and all 
our members.
    And the committee stands adjourned.
    [Whereupon, at 10:25 a.m., the subcommittee was adjourned.]
    [Questions for the record follow:]
                           Sylvester Schieber
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                            Thomas S. Terry
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                           C. Eugene Steuerle
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                           Charles P. Blahous
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                            Barbara Bovbjerg
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MEMBERS SUBMISSION FOR THE RECORD
                           Mr. Xavier Becerra
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[Submissions for the record follows:]
                 Consumers for Paper Options, Statement
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