[Senate Hearing 113-661]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-661
 
              SOCIAL SECURITY: IS A KEY FOUNDATION OF ECONOMIC 
                 SECURITY WORKING FOR WOMEN?

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

                                HEARING

                               BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            DECEMBER 9, 2014

                               __________
                               
                               
                               
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                          COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
CHARLES E. SCHUMER, New York         MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan            PAT ROBERTS, Kansas
MARIA CANTWELL, Washington           MICHAEL B. ENZI, Wyoming
BILL NELSON, Florida                 JOHN CORNYN, Texas
ROBERT MENENDEZ, New Jersey          JOHN THUNE, South Dakota
THOMAS R. CARPER, Delaware           RICHARD BURR, North Carolina
BENJAMIN L. CARDIN, Maryland         JOHNNY ISAKSON, Georgia
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania
MARK R. WARNER, Virginia

                    Joshua Sheinkman, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)



                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

                                                                   Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee 
  on Finance.....................................................     1
Hatch, Hon. Orrin G., a U.S. Senator from Utah...................     3

                               WITNESSES

Perrin, Barbara, Social Security beneficiary, Eugene, OR.........     5
Dodd, Catherine J., Ph.D., R.N., chair, board of directors, 
  National Committee to Preserve Social Security and Medicare, 
  Washington, DC.................................................     7
Slavov, Sita Nataraj, Ph.D., professor of public policy, George 
  Mason University, and visiting scholar, American Enterprise 
  Institute, Washington, DC......................................     8
Barr, Janet, actuary, American Academy of Actuaries, Chicago, IL.    10

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Barr, Janet:
    Testimony....................................................    10
    Prepared statement...........................................    21
    Responses to questions from committee members................    34
Dodd, Catherine J., Ph.D., R.N.:
    Testimony....................................................     7
    Prepared statement...........................................    46
    Responses to questions from committee members................    52
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement...........................................    57
Perrin, Barbara:
    Testimony....................................................     5
    Prepared statement...........................................    60
Slavov, Sita Nataraj, Ph.D.:
    Testimony....................................................     8
    Prepared statement...........................................    63
    Responses to questions from committee members................    68
Wyden, Hon. Ron:
    Opening statement............................................     1
    Prepared statement...........................................    79

                             Communications

AARP.............................................................    81
American Association of Univeristy Women (AAUW)..................    82
Strengthen Social Security Coalition.............................    88
Women's Institute for a Secure Retirement........................    93

                                 (iii)


                       SOCIAL SECURITY: IS A KEY

                    FOUNDATION OF ECONOMIC SECURITY

                           WORKING FOR WOMEN?

                              ----------                              


                       TUESDAY, DECEMBER 9, 2014

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 9:40 a.m., 
in room SD-215, Dirksen Senate Office Building, Hon. Ron Wyden 
(chairman of the committee) presiding.
    Present: Senators Stabenow, Cantwell, Brown, Casey, Hatch, 
Grassley, Crapo, and Thune.
    Also present: Democratic Staff: Kara Getz, Senior Tax 
Council; Tom Klouda, Senior Domestic Policy Advisor; Jocelyn 
Moore, Deputy Chief of Staff; and Kelly Tribble Spencer, 
Detailee. Republican Staff: Jeff Wrase, Chief Economist.

   OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM 
             OREGON, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. The Finance Committee will come to order. 
Beginning our session, I would first like to congratulate 
Senator Hatch, who will be the upcoming chairman of the Senate 
Finance Committee. I am going to have more to say about Senator 
Hatch when we have the tax bills on the floor of the Senate.
    Senator Hatch. That is what I am worried about. [Laughter.]
    The Chairman. Yes. It is certainly an ominous time for you. 
[Laughter.] Suffice it to say, Senator Hatch is going to 
continue the long tradition of bipartisanship that has been the 
hallmark of the Finance Committee, and the Finance Committee is 
going to remain the go-to place for developing economic 
policies that make people's lives better, in both Oregon and 
Utah and across the country.
    Senator Hatch, as I said, I will throw some more bouquets 
on the floor, but I wanted you to know that as we begin.
    Senator Hatch. I think that is enough bouquets.
    The Chairman. Okay. Well, you will have to take a few more.
    Today we are going to examine, in particular, the question 
of retirement and the gap between what sort of retirement 
people would like to enjoy and what, unfortunately, is the 
reality for so many Americans, and particularly older women. 
People who had dreams of well-earned relaxation and travel to 
visit loved ones in faraway destinations, instead of having 
that, are walking on an economic tightrope trying to balance 
the food costs against the fuel costs, and the fuel costs 
against the medical bills. And any unexpected occurrence can, 
in effect, push them off of that tightrope.
    According to the Census Bureau, retired women are nearly 
twice as likely as retired men to live in poverty. Data from 
2011 shows that women are falling deeper into poverty much more 
quickly than men. Instead of that worry-free ideal that I 
mentioned, those women are, in effect, simply trying to find a 
way to pay for the essentials, and their experiences stand in 
stark contrast to the national trend of seniors living a 
middle-class life.
    So this is a growing crisis fed by a confluence of factors, 
a number of which do not begin at age 65. Employed women earn 
about 78 cents on the dollar compared to men, and they are more 
likely to leave a job or cut back on hours to care for children 
or older parents. So in many instances, they have little or no 
savings.
    According to the Social Security Administration, millions 
of women--far more than men--depend on Social Security for 
nearly all of their income when they retire. Because women live 
longer on average, their savings accounts get squeezed at both 
ends. So the real question that we are going to pursue today is 
this: is the Social Security safety net, which keeps 15 million 
older people, including 9 million women, from tumbling into 
poverty, strong enough? Are there holes in the safety net? Are 
there ideas that, on a bipartisan basis, this committee can 
pursue to strengthen the economic hand of so many vulnerable 
older women?
    To help illustrate how the crisis impacts women nationwide, 
we are very fortunate to be joined by Barbara Perrin of Eugene, 
OR. She worked hard. She planned for her retirement, did her 
best to save, and, as we talked about a little bit ago, she 
really just got hit by an economic wrecking ball. She was in a 
situation where her mortgage was underwater, where she was 
divorced, and she had been raising a child who I gather is now 
grown. Her industry changed, literally, under her feet.
    What I like so much about Barbara is, she is a real 
fighter. We got together in Eugene on a retirement discussion 
program, and I just walked away and said, she is something 
else. That is why we wanted to have her come today, and she is 
going to talk about what women are faced with.
    So we are going to kick this discussion into high gear now 
to look at how women can have greater financial security. We 
have an expert panel of witnesses who are going to shed light 
on several ways to strengthen the safety net.
    One proposal that will be discussed is boosting the Social 
Security benefits for women who outlive their spouses.
    Another would give caregiver credits for individuals who 
leave their jobs to take care of children or disabled or 
elderly family members. With those credits, caring for a loved 
one would no longer come at the cost of a reduced Social 
Security benefit later in life.
    A third idea would close the gap between disabled widows or 
widowers and others who receive Social Security Disability. 
That concept would look at ending benefit reductions, time 
limits, and other restrictions.
    And finally, there has been interest in revising student 
benefit rules and removing gender bias from Social Security, so 
that couples and their kids, regardless of gender, could get 
equal benefits.
    So this is an important hearing. This will be my last 
hearing as chair, and I want our panel members to know that the 
reason why I thought this was so important is, this really goes 
back to my roots. I was co-director of the Oregon Gray Panthers 
for many years. Barbara and I were talking about that 
beforehand.
    What this election was about is talking about people, real 
people, not polls and theories and the like, but talking about 
what it is like for real people. And we are going to have a 
chance to do that today because of all of you, and we are going 
to tackle these issues in a bipartisan way.
    [The prepared statement of Chairman Wyden appears in the 
appendix.]

           OPENING STATEMENT OF HON. ORRIN G. HATCH, 
                    A U.S. SENATOR FROM UTAH

    Senator Hatch. Well, thank you, Mr. Chairman, and thank you 
for your kind remarks earlier. We do have a good relationship, 
and I believe we can work in a very good, bipartisan way and 
hopefully bring both sides together to get more done than we 
have in the past. We will at least be trying, you and I 
together.
    The Chairman. We will get it done.
    Senator Hatch. And we are grateful to have Senator Grassley 
here, who used to chair the committee, and who is, of course, 
tough to beat around here.
    Senator Grassley. Well, thank you.
    Senator Hatch. And also Senator Crapo, who is a big deal on 
Budget and Banking----
    The Chairman. I am running with the right crowd.
    Senator Hatch [continuing]. And certainly a big deal here 
as well.
    I think today's hearing is important, and we want to thank 
all of you witnesses for appearing and joining us today and 
helping us to understand this better. Much of the structure of 
the Social Security system was designed long ago, when the 
labor market and life experiences of women were far different 
than they are today and what they will be in the future.
    I believe there is room for modernizing Social Security to 
better address modern family situations, though any such effort 
must acknowledge that Social Security's promises, as currently 
structured, are unsustainable. Given the existing structure of 
benefits, Social Security already faces a gaping $10.6-trillion 
financial shortfall over the next 75 years.
    Given that reality, we have a choice. Either we responsibly 
work to modernize benefits while also addressing Social 
Security's financial challenges, or we can kick the can down 
the road and place the burden on future generations. Alas, that 
has kind of been what has happened over the years.
    There are some reform proposals out there, though many of 
the proposals I have seen would expand benefits here or there 
using trust fund revenue from higher taxes, all while largely, 
if not entirely, ignoring the program's financial realities. To 
provide some context to those realities, the Congressional 
Budget Office says that, given existing benefit promises, we 
would have to raise payroll taxes by more than 25 percent to 
put Social Security in financial balance over the next 75 
years.
    That would clearly mean significant increases in taxes on 
lower-wage earners as well as the middle class. Or, if you 
wanted to close the financial gap by raising the earnings cap 
on Social Security taxes to 90 percent of covered earnings--an 
approach that many of my Democratic colleagues prefer--you 
would have to raise the cap from next year's scheduled $118,500 
to around $242,000. And, even if you did that, you would still 
have to increase overall payroll taxes on everyone by more than 
18 percent.
    So, no matter how you look at it, if we are going to shore 
up Social Security solely on the revenue side, middle-class 
workers will be hit with a massive tax hike, even though their 
real incomes have barely gone up at all in recent years. I do 
believe that there are ways for us to improve and modernize the 
Social Security system while also responsibly attending to the 
finances. We can and we should work to provide better 
protection against old-age poverty, which is disproportionately 
experienced by women, especially never-married and divorced 
women.
    For example, the President's chained CPI proposal in one of 
his past budgets, which the Social Security Administration 
supported, provided such a focus by including protections for 
vulnerable populations, including Social Security beneficiaries 
facing old-age poverty. Meanwhile, there are a number of 
avenues of redistribution within Social Security, between 
singles, two-earner couples, and one-earner couples.
    For example, a high-income one-earner couple generally gets 
higher returns from Social Security than a low-income two-
earner couple, despite the progressivity of the basic benefit 
formula. And the incredibly complicated number of possible 
claiming strategies for Social Security beneficiaries makes it 
mind-numbingly difficult for recipients to figure out their 
best benefit claiming and retirement decisions.
    One of our witnesses today, Professor Slavov, has 
identified that Social Security benefit claimants could be 
making retirement decisions costing them large amounts of 
potential retirement wealth. Many of those affected are women. 
Those costly choices are fine if made with full understanding 
of their implications. They are not fine if they are made 
unwittingly because of unnecessary complexity in the Social 
Security system.
    The Social Security Administration tells us that, ``Social 
Security is neutral with respect to gender or race or 
ethnicity. Individuals with identical earnings are treated the 
same in terms of benefits.'' That is true in that every worker 
has equal access to the same benefit determination formula. 
However, despite the neutrality in the determination of 
benefits, outcomes vary significantly across genders, races, 
and ethnicities.
    Social Security benefits earned by women are influenced by 
their labor market experiences which generated the wages that 
get fed into the benefit determination formula. Benefits for 
women also depend on marital status, lifespans, and other 
factors, all of which have been subject to significant changes 
over time, which has affected how women experience Social 
Security.
    Mr. Chairman, I am happy to work with you or with anyone to 
examine these issues, and work to modernize how Social Security 
deals with modern family situations. Of course, dealing with 
these issues, as with all issues relating to Social Security, 
will require both sides to work together.
    If we are going to get anything done, it will require that 
the President engage. Unfortunately, to date, the President has 
been largely silent regarding Social Security, saying only that 
he does not wish to increase taxes, including payroll taxes on 
the middle class.
    Yet, as I stated earlier, if Social Security reform is 
going to come only on the revenue side, he likely will not have 
a choice but to raise taxes on everyone, and raise them 
significantly in order to shore up the system. As you can see, 
Mr. Chairman, we have a lot of work ahead of us when it comes 
to Social Security, and I want to thank you again for holding 
today's very important hearing.
    The Chairman. Thank you, Senator Hatch. I know we are going 
to work together on these issues, and let us get on with the 
good ideas.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. In addition to my inspiring constituent, Ms. 
Perrin, who comes from Eugene, we have Dr. Catherine Dodd, 
chair of the board of directors for the National Committee to 
Preserve Social Security and Medicare; Dr. Sita Slavov, who is 
a professor of public policy at George Mason University and a 
scholar at the American Enterprise Institute; and our final 
witness, Ms. Janet Barr, who is chair of the Social Insurance 
Committee for the American Academy of Actuaries. Thank you all 
for coming.
    We are going to make your prepared statements a part of the 
hearing record in their entirety, if you could just take 5 
minutes or so to summarize. We are going to have votes, I know, 
in a little bit, so you are going to see Senators coming and 
going.
    How appropriate to start with Oregon. Ms. Perrin, please go 
ahead.

                 STATEMENT OF BARBARA PERRIN, 
            SOCIAL SECURITY BENEFICIARY, EUGENE, OR

    Ms. Perrin. Thank you, Chairman Wyden. Good morning, 
everyone, Ranking Member Hatch, and members of the committee. 
Thank you for inviting me to testify today. My name is Barbara 
Perrin. I am a mother, a grandmother, a resident of Eugene, OR, 
and an AARP volunteer. I was born in 1946, the same year as 
President Bill Clinton, President George W. Bush, Steven 
Spielberg, and Susan Sarandon, the leading edge of the baby-
boom generation.
    Our generation has witnessed great transformations. We came 
of age in an era of amazing technological transition, from 
black and white television to downloaded movies, from rural 
telephone party lines to social media that span the globe, and 
from typewriters to personal computers.
    Equally great have been the societal changes my generation 
has experienced: the civil rights movement, the women's 
movement, changes in laws regarding the institution of 
marriage, and now even legal possession of marijuana. As a 
child of the 60s, this still astonishes me.
    One thing that has not changed, though, through the years 
is the importance of Social Security, especially for women. It 
has reliably provided retirement, disability, and survivor 
income to generations of American workers, even as the American 
workplace and family have changed.
    My father, born at the turn of the last century, was a 
self-
educated blue-collar worker who had no retirement income beyond 
Social Security. He gratefully collected his modest benefit 
because he had survived the Depression and understood the value 
of having any retirement income, no matter how small. My mother 
also worked her whole life, but never earned as much as my 
father did to benefit from the contributions that she had made. 
Instead she lived for years on the widow's benefit she received 
after my father died.
    Like many women of my generation, I imagined my life would 
resemble that of generations of women who came before: marriage 
and children, and perhaps some meaningful work as well. 
However, many of us were swept along with the changing times 
and found ourselves leading lives different than the ones we 
had envisioned.
    As a divorced, single parent with no child support and only 
a liberal arts degree and very few resources, I cobbled 
together a series of low-paying, flexible jobs on which to 
survive while caring for my family, my two children. All along, 
while I worked, I paid into Social Security, but, as a single 
mother raising a family on my own, saving money for my 
retirement was not possible.
    Eventually, I worked my way into a professional career in 
educational publishing with a middle-class income, but by the 
time I was earning a better income, I was in my 50s and had 
very few years left in which to build up savings for my 
retirement. Thankfully, a lifetime of frugal habits had enabled 
me to start a small nest egg and to buy a modest home, which I 
had always been taught was a safe and reliable investment.
    In early 2010, I moved from Colorado back to Oregon to be 
with my daughter and grandson. I left with some savings, my 
hope to sell the home in Colorado that I owned there, and a 
plan to start a publishing consulting business. Unfortunately, 
the housing market dropped, and I had to rent out my home. I 
could not find reliable tenants. They failed to pay their rent 
and would not leave.
    I also began to look for employment in addition to clients, 
but the print/publishing world was also in great transition, 
and, combined with the slow job market and perhaps my age, I 
was not successful in finding either a job or clients.
    Eventually I had to use up my savings to pay the mortgage 
on my home until those funds ran out. The house recently went 
into foreclosure while I waited for a lender to approve a 
buyer. Thankfully, my home finally closed 2 weeks ago. While I 
am relieved that I no longer have that burden, my savings have 
been depleted.
    I had always planned to continue working and to supplement 
my income with my Social Security, my savings, and my home 
equity. Instead I am living on Social Security alone. My 
benefit, while reliable, is also low, and I need food stamps 
and energy assistance to make ends meet. It was really hard for 
me to sign up for these, and I want to move off them as quickly 
as I can, but my Social Security is not enough to live on.
    Four years ago, this was not what I envisioned for myself. 
I know that many were affected by the recession, some far worse 
than I, losing their health, not just their savings. But like 
my own parents, I am at least grateful that I have my Social 
Security, and I appreciate the value of having any retirement 
income, no matter how small. Thank you.
    The Chairman. Ms. Perrin, thank you. As I said, some 
colleagues have come in. Ms. Perrin--if I think of her, I think 
about fighting, and I think about fighting back and looking at 
plans and speaking up for others, as I saw you do in Eugene. So 
I am just very pleased you are here. I will have some questions 
in a moment, and thank you for coming.
    [The prepared statement of Ms. Perrin appears in the 
appendix.]
    Dr. Dodd?

 STATEMENT OF CATHERINE J. DODD, Ph.D., R.N., CHAIR, BOARD OF 
 DIRECTORS, NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY AND 
                    MEDICARE, WASHINGTON, DC

    Dr. Dodd. Thank you, Chairman Wyden and Ranking Member 
Hatch, for the opportunity to testify here today. Thirty-two 
years ago, the National Committee was created by Congressman 
James Roosevelt, the son of President Franklin Roosevelt and 
First Lady Eleanor Roosevelt.
    Through the years, we have focused on protecting their 
greatest achievement, Social Security. And now it is in the 
spirit of our Roosevelt heritage and Eleanor's work on women's 
issues that we have launched ``Eleanor's Hope,'' an initiative 
to focus greater attention on women's retirement issues.
    While women have come a long way since Eleanor's day, 
several inequalities continue to threaten our important 
retirement security. For example, women have been, and continue 
to be, subjected to persistent gender wage discrimination 
leading to smaller Social Security benefits, as you have 
mentioned. Women often give up jobs and paychecks to care for 
children and elderly parents, and this leads to reductions in 
their Social Security benefits. Women are less likely to have a 
pension, and, even if they do have a pension income, it is 
usually less than what men receive. Women live longer than men, 
and consequently are more likely to outlive their retirement 
savings.
    A growing number of older women rely on Social Security for 
all or most of their income in retirement. Without Social 
Security, over half of these women would be living in poverty. 
Even with Social Security, 11 percent of older women still live 
in poverty. For widows, the poverty rate is worse at 15 
percent, which is 50 percent higher than the poverty rate for 
all people 65 or older.
    Although Social Security is gender-neutral, life is not. 
Women pay the price of that inequity as long as they live. As a 
result of lower lifetime earnings, the average monthly Social 
Security benefit of a retired woman in 2012 was $1,103, while 
the average monthly benefit of a retired man was $1,417. These 
facts led to the National Committee's decision to prioritize 
the ``Eleanor's Hope'' vision of retirement equity through 
supporting legislation that rights the economic wrongs 
threatening millions of retired women.
    To that end, we support several proposals that would 
improve benefit equity for women--which are explained in my 
written testimony--and I would like to highlight a few of our 
recommendations.
    First, we support improving Social Security survivor 
benefits, because it would treat one-earner and two-earner 
couples more fairly and would reduce the likelihood of 
survivors falling into poverty. We believe Social Security 
credits should be given to caregivers who must leave the 
workforce to care for children and elderly family members. We 
propose that future cost-of-living adjustments be based on a 
fully developed Consumer Price Index for the Elderly or CPI-E. 
The CPI-E would more accurately measure the rising prices of 
goods and services paid by seniors than the current urban and 
clerical worker index does.
    Seniors age 85 or older, and women in particular, are more 
likely to be financially vulnerable, even with Social Security. 
To ensure additional security, we support a benefit bump-up for 
all beneficiaries 20 years after retirement. To make these 
important proposals affordable, the National Committee supports 
strengthening the financing of the Social Security program by 
eliminating the cap on the Social Security payroll 
contributions.
    Mr. Chairman, 3 decades of stagnant middle-class wages and 
eroding retirement benefits are threatening to put millions of 
retirees on a highway to hardship. Women are on a more 
troubling road, because we face this retirement crisis and bear 
the burden of economic inequality. The proposals I have 
discussed today will address Social Security inequality for 
women and help to ensure a livable retirement for more 
Americans. We applaud Senators Tom Harkin, Mark Begich, Patty 
Murray, and other members who have introduced many of these 
proposals as legislation.
    Eleanor Roosevelt devoted 40 years to gender equality by 
advancing women politically, economically, and socially. To 
continue the work she started, I urge the Finance Committee to 
approve legislation that will ensure women have as much 
protection against retirement, disability, and survivorship 
risks as men do.
    Thank you for the opportunity to testify today.
    The Chairman. Thank you. That was very helpful.
    [The prepared statement of Dr. Dodd appears in the 
appendix.]
    The Chairman. Dr. Sita Slavov, welcome, and please proceed.

 STATEMENT OF SITA NATARAJ SLAVOV, Ph.D., PROFESSOR OF PUBLIC 
POLICY, GEORGE MASON UNIVERSITY, AND VISITING SCHOLAR, AMERICAN 
              ENTERPRISE INSTITUTE, WASHINGTON, DC

    Dr. Slavov. Thank you, Chairman Wyden, Ranking Member 
Hatch, and members of the committee, for the opportunity to 
speak to you today about women and Social Security.
    Social Security's rules are gender-neutral, but they can 
affect men and women in different ways because of differences 
in their work histories. Women have, on average, lower earnings 
than men, and they are also more likely to take time out of the 
labor force. As a result, around half of female beneficiaries 
receive higher benefits as a spouse or survivor than as a 
worker claiming on their own record.
    As many of us have mentioned, one serious concern for 
policymakers is the relatively high rate of poverty among 
unmarried older women. Many of these women are widows who 
receive survivor benefits.
    So I am going to make two points today: first, household 
decisions about when to claim Social Security matter a lot, and 
they especially matter for women; second, Social Security 
spousal and survivor benefits should be modernized to better 
serve today's two-earner families.
    On the first point, Social Security provides a survivor 
benefit that is tied to the primary earner's actual benefit. 
That, in part, depends on when the primary earner claims 
benefits. A primary earner who delays claiming until age 70 
leaves the surviving spouse with a benefit that is up to 60 
percent higher than it would have been if the primary earner 
had claimed at 62.
    However, empirically, if you look at the data, many primary 
earners claim right at age 62, and very few delay beyond their 
normal retirement age. My research with my co-author, John 
Shoven of Stanford University, suggests that most people can 
benefit from delaying claiming.
    Professor Shoven and I have shown that, given today's low 
real interest rates, many couples can increase the lifetime 
value of their Social Security benefits by 14 to 19 percent 
through optimal delay. These delays could be financed by 
tapping into other retirement assets like IRAs and 401(k)s, or 
they could be financed by working longer. The gains from 
delaying Social Security are particularly large for primary 
earners, precisely because delay by primary earners boosts 
benefits for widows.
    Other researchers have used a sample of actual couples, and 
they have shown that, in the event of widowhood, women receive 
benefits that are 17 percent lower over their remaining 
lifetime as a result of early claiming by their husbands. So, 
given all of that, it is somewhat of a puzzle why primary 
earners claim benefits so early.
    Social Security's rules are complex, and the gains from 
delay have increased substantially in the past 15 years or so. 
So individuals may not be fully aware of how much money they 
are leaving on the table by claiming early. Some recent studies 
have shown that people's claiming ages are affected by the way 
in which the claiming decision is framed. So it could be worth 
spending some time carefully considering what information is 
available to individuals when they make their claiming 
decisions, and how that information is presented.
    Now, coming to my second point, reforms that modernize 
Social Security's family benefits would also improve the way 
that Social Security treats women. Many of Social Security's 
family benefits were designed in the 1930s, when single-earner 
families were the norm.
    Social Security's rules allow spouses who stay out of the 
labor force to collect a spousal benefit even if they paid no 
payroll tax. The spousal benefit is paid regardless of 
financial need, and the spouses of higher-income individuals 
qualify for higher spousal benefits.
    This formula gives one-earner couples higher benefits than 
two-earner couples who paid the same amount in payroll taxes 
through their lifetime. It also provides a financial 
disincentive for women who expect to claim a spousal benefit to 
work outside the home, because these women will need to pay 
payroll taxes on their earnings without receiving any 
additional Social Security benefits.
    Researchers at the Urban Institute have examined the impact 
of several expenditure-neutral reforms that would modernize 
Social Security's family benefits. For example, spousal and 
survivor benefits could be replaced with earnings-sharing in 
which half the couple's total earnings are accredited to each 
member of the couple, and that could be combined with a 
provision to protect survivors. Alternatively, a reduction in 
spousal benefits could be combined with a minimum benefit that 
anyone can receive. Finally, spousal benefits could be replaced 
with caregiver credits for those who raise children, or become 
caregivers in other ways. These researchers find that all of 
these reforms would reduce disparities between one- and two-
earner couples and reduce poverty.
    Thank you very much.
    The Chairman. I just wanted to make sure, Doctor, on that 
earnings-sharing concept--which is something I have always 
found very interesting and attractive--you are talking about 
something that would be voluntary, right?
    Dr. Slavov. Not necessarily. I believe some of the 
proposals that have been considered in the past would simply 
replace spousal and survivor benefits with earnings-sharing 
combined with some protections for survivors.
    The Chairman. We will want to hear more from you about 
that, because I have always thought it was a very promising 
idea, and apparently, with the economics, there may be some 
winners and losers.
    Dr. Slavov. Yes, certainly.
    The Chairman. So I am anxious to talk with you about it.
    [The prepared statement of Dr. Slavov appears in the 
appendix.]
    The Chairman. All right. Let us go now to Ms. Barr.

               STATEMENT OF JANET BARR, ACTUARY, 
           AMERICAN ACADEMY OF ACTUARIES, CHICAGO, IL

    Ms. Barr. Chairman Wyden, Senator Hatch, and distinguished 
members of the Senate Finance Committee, thank you for the 
opportunity to testify today. My name is Janet Barr, and I am 
representing the American Academy of Actuaries.
    The Academy is a nonpartisan professional association 
representing all actuaries in the United States. Our mission is 
to serve the public by providing independent and objective 
actuarial information to help in the formation of sound public 
policy.
    The purpose of my testimony is to, first, provide data on 
the 
gender-related factors that cause differences in the adequacy 
of retirement benefits between men and women; and second, to 
describe the principles of income equity and social adequacy so 
that we can use them in talking about the impact of reform 
options on women. Third, I want to describe the spouse and 
surviving spouse benefits in more detail and provide examples 
of several simplified situations. This is intended to give 
background to help in the discussion of whether Social Security 
is working for women.
    In general, Americans' Social Security benefits are based 
on their average indexed earnings in their 35 highest-paid 
years. Social Security rules are gender-neutral, so that a 
woman who retires with the same lifetime earnings as a man will 
receive the same monthly benefit. However, some of the program 
rules have a different impact on women, because the average 
work history is not the same for a woman as for the average 
man.
    Women are more likely than men to be out of the workforce 
or to have breaks in employment. Women, on average, earn less 
than men. Women live longer, on average, than men and so will 
need more assets in retirement. Women are more likely than men 
to be single, widowed, or divorced in retirement. This 
combination of factors means that the average woman has a 
higher risk of insufficient income and savings in her 
retirement years.
    Switching gears, my testimony explains how Social Security 
was designed based on two competing principles: individual 
equity and social adequacy. The term ``individual equity'' has 
been used to describe the savings or investment aspects of the 
program. The term ``social adequacy'' has been used to 
characterize the benefit adequacy and social insurance aspects 
of the program.
    When evaluating reform proposals and their impact on women, 
it is important to consider the trade-offs between individual 
equity and social adequacy. The social adequacy features of 
Social Security benefit all Americans, since they provide a 
form of insurance against the adverse financial effects 
associated with the uncertainties in life. The individual 
equity features allow the system to be seen as fair by all 
Americans and take away some of the risks of providing 
retirement income.
    Now for my third point, I would like to direct your 
attention to the slide--Table 6 in my written testimony--which 
shows spouse and surviving spouse benefits. When the current 
benefit structure was set up, the traditional roles of men in 
the family as primary wage earners and women as the primary 
childcare providers were well-established.
    As one of the social adequacy design features, the current 
system allocates benefits disproportionately, relative to 
taxes, to one-
earner couples compared with two-earner couples and single 
people. As my slide shows, the single-earner couple on the left 
has higher benefits than the two-earner couple on the right
    In summary, the current Social Security law is gender-
neutral. It contains spousal and other subsidized benefit 
provisions that mitigate, but do not eliminate, the impact of 
gender-related factors that produce lower benefits for women. 
It is worth noting that the present system provides a lower 
level of benefits relative to Social Security taxes paid for 
two-earner families where the second earner has a significant 
income.
    As members of Congress evaluate options to reform the 
Social Security system, you should not only address its 
financial problems, but also consider that Social Security 
remains an even more important source of retirement income for 
many women than men.
    In closing, I want to thank you for the opportunity to 
present some ideas on behalf of the American Academy of 
Actuaries, and I would be happy to answer any questions.
    The Chairman. Thank you very much, Ms. Barr.
    [The prepared statement of Ms. Barr appears in the 
appendix.]
    The Chairman. All of you have been excellent, and we 
appreciate it.
    Let me start with you, if I might, Ms. Perrin. Almost like 
in our earlier conversation in Eugene, you are being very 
modest, and I am just struck by the fact that, through your 
life, you always were doing what was right. You were frugal, 
you supported your spouse, you raised a child, you volunteered, 
you just always were there doing what was right.
    Then retirement comes along and sort of hits you like a 
wrecking ball. The mortgage is underwater, and you had the 
divorce, and the publishing industry changed underneath you.
    So now your income is about $775 a month. I was just doing 
some math and thinking about your own situation with your mom, 
who lived until she was almost 90. So, if you look at your 
genes, you are looking at the realistic prospect of needing 
enough money to get by for more than 20 years.
    Having seen you in Eugene, I know that you have plans and 
that you are out there looking at a variety of ways to increase 
your income, and you are going to stay at it to get that done. 
But you are also talking to other women who may not be able to 
fight back in as powerful a way as yourself.
    Tell me and the committee a little bit about what you are 
hearing from those women, women who might be looking at an 
income of well under $1,000 a month, maybe not in a position to 
fight back like you. What are they telling you?
    Ms. Perrin. Thank you for your support of my experiences. I 
have spoken recently with several women who have expressed to 
me that they do not know how they are going to survive. They do 
not have a clue. You are right. I always have a plan in mind. I 
am always trying to figure things out. That is the way I have 
survived. My daughter even says, ``Mom, I think you should stop 
trying to figure things out. Just let things happen.'' 
[Laughter.] But that does not work.
    I do not know what they are thinking of doing, and some of 
them have serious health issues which I am very thankful that I 
do not have, and that is scary. With Medicare, they do have 
care, but that means they cannot do the things that would 
possibly get them more income.
    I do not think that a lot of women have any plans to work. 
They are kind of in a state of giving up and hoping that 
something will happen. As I was telling people that I was 
coming here, they said, ``Go tell them we need help.'' So I 
cannot do anything on my own except relay that message that 
there is a need for women who have not been able to put aside 
enough money or have resources through a marriage, or family 
resources, or something to be able to survive in the last 
couple of decades of their life.
    The Chairman. So you have been listening over the last half 
hour, 45 minutes to those at the witness table talking about a 
variety of ideas. Do any of the ideas strike you as appealing 
and ones you think we ought to follow up on?
    Ms. Perrin. Well, one of the things that I wrote down 
here--which I did not do myself because of the situation I was 
in--is that the delayed claiming seems to be something that 
there should at least be more education about with members of 
the community, especially through organizations like AARP, to 
let people know that when they are claiming early, just because 
they can, it is not necessarily in their benefit, and bringing 
the idea of what might be on the table, as you said, for them 
later would be something, I think, that would be helpful, at 
least education about it.
    I do not know the intricacies--I am sorry--of all of the 
other possibilities, but I think it is important to be aware 
that Social Security is never going to be enough to live the 
way they had been living when they had income, even if it was 
low. I have given up a lot to be able to just live on very, 
very, very little. I can get by, but it is hard.
    The Chairman. I think most people are going to leave here 
and say there is something out of whack when we cannot figure 
out a better retirement policy to make sure that a woman like 
yourself, with a life expectancy--certainly the prospect of 20 
more years--cannot have more opportunities for a dignified 
retirement than what we are talking about today. That is the 
reason why I asked the question the way I did. I saw that you 
were such a fighter, and I think you are going to find your 
way, but I think there are a lot of others who, whether it is 
for physical or other reasons, are not going to be able to do 
it, and I think we have to figure out a better course, and that 
is why we are glad you could be here.
    Senator Hatch?
    Senator Hatch. This is an extremely interesting panel to 
me. Each of you has helped us to maybe understand this a little 
bit better.
    Ms. Barr, there is a disproportionate number of women 
receiving Social Security benefits who live in poverty. I think 
that has been established. And that is especially so for non-
married women, widows, and divorced women as well. Yet, it is 
also the case that Social Security provides auxiliary benefits 
to spouses, widows, and survivors of retired, disabled, and 
deceased workers, and women are affected by these benefits.
    Now, I wonder if you could provide a summary of those 
auxiliary benefits, including eligibility requirements and 
benefit amounts, and any thoughts you might have on how those 
benefits could be changed to keep women out of poverty in their 
older ages.
    Ms. Barr. Thank you, Senator Hatch, for that question 
regarding poverty and whether Social Security has provisions 
that could help in those situations, and also the chance to 
give a little more detail on the auxiliary benefits. First of 
all, on the auxiliary benefits, there are very detailed rules, 
so I am going to try to paint it with a broad brush. Where you 
have the spousal benefit, it is payable based on the primary 
worker's benefit. So, if you do work, you receive the better of 
your spouse's or your own work record history. So, that benefit 
is 50 percent. You can claim it at age 62.
    Then there is the widow's benefit, payable at age 60 
generally. Then there is the divorced spouse's benefit, also 
payable at 62. If you are caring for minor children, you are 
also allowed a benefit that I think also applies to dependent, 
elderly family members.
    So the American Academy of Actuaries has not done much 
research on Social Security and poverty. I am hearing from this 
testimony that that is something we maybe should focus on a 
little more. Just to kind of point you to some ideas, in my 
testimony on page 9, we have some options that address 
challenges specifically faced by women. This would be more for 
people retiring in the future. I do not know that it can help 
people who are currently retired.
    The first one is modifying the computation period for 
benefits. As I mentioned, there is a 35-year period that is 
used in the average in determining Social Security benefits. So 
what one of the options is, is to allow credits for childcare 
so that maybe if you were out of the workforce for 5 years, you 
could earn a credit, and it is yet to be determined how the 
earnings would be credited. So that is one option.
    You could also, instead of crediting years, just drop the 
number of years. So, instead of doing an average over 35 years, 
you might do an average over 30 years, although it would raise 
the average earnings that the benefit is based on. There is 
also an idea of providing maybe a benefit for low earners with 
long careers, sort of a modified minimum--not a minimum that 
would be payable to everyone, but sort of like Barbara's 
situation of being a long-term worker at lower-paid earnings. 
So those are a couple of options.
    Senator Hatch. That will be fine. You did okay.
    We are running out of time. Let me ask Dr. Slavov--and you 
can augment the record in writing if you care to--as some of 
our research shows, taking the right Social Security benefits 
at the right time can make a huge difference in someone's 
retirement standard of living. Making a wrong decision can 
result in significant losses in retirement wealth. According to 
economist Larry Kotlikoff, ``For an age 62 couple, there are 
over 100 million combinations of months for each of the two 
spouses to take retirement benefits, spousal benefits, and 
decide whether or not to file and suspend one's retirement 
benefits.''
    Are you able to give us a sense of the number of claiming 
options that are available in Social Security? What might be 
the stakes if someone made an incorrect choice because the 
rules seem to be very complex?
    Dr. Slavov. Yes, so the rules are indeed complex. So for a 
couple, just to kind of simplify it, a claiming strategy would 
involve choosing a claiming age for each spouse. For two-earner 
couples, it is also possible for one member of the couple to 
claim spousal benefits at their full retirement age then switch 
to their worker benefit at age 70, after letting it grow. So 
that is a strategy that is not very well-known, but it is legal 
under Social Security Administration rules.
    So I did a calculation, and, according to the sort of 
modeling that I have done, at today's lower real interest 
rates, a hypothetical two-earner couple born in 1953 and 
entitled to roughly average benefits could gain over $100,000 
over their lifetime from optimal delay compared to claiming at 
62. A hypothetical one-earner couple could gain more than 
$80,000 over their lifetime.
    The Chairman. Senator Brown? And with a little luck, we can 
get everybody here in. Senator Brown, then we will have Senator 
Stabenow, and Senator Thune has joined us. So proceed.
    Senator Brown. Thank you, Mr. Chairman. I particularly 
appreciate that Senator Hatch and Senator Wyden appreciate the 
theme of this hearing. The debate over Social Security should 
not be how much we cut from the program to balance the budget. 
It should not be about raising the retirement age. It should 
not be about limiting benefits. It is all about retirement 
security. I think our panelists illustrate that well.
    We know that Social Security fundamentally is social 
insurance that most working families could not afford to buy on 
their own. That is the reason that President Roosevelt, and 
Eleanor Roosevelt obviously, helped to create this, and were 
such strong supporters of this. We know a number of other 
facts: for the bottom two quintiles of Americans over 65, 
Social Security benefits are 84 percent of their income. Even 
in the middle quintile--and I think it is important always to 
look at the middle quintile, meaning half the people are doing 
better, half the people are not--in the middle quintile, Social 
Security represents 65 percent of retirement income.
    So we know about whom we are speaking when we do this, and 
we should keep these numbers in front of us. That is why it is 
not the time to discuss cutting Social Security, whether it is 
through chained CPI, through privatization, through any other 
way that people tend to promote that.
    I am proud to pick up, as a result, where my colleague 
Senator Harkin left off and introduce his legislation in the 
next Congress, The Strengthening Social Security Act. I look 
forward to a number of you joining me in both parties in co-
sponsorship of that.
    My question is to you, Dr. Dodd. Under current Social 
Security guidelines--to preface it--we have talked at length 
about the impact of the wage gap on women. We know what it 
means for their standard of living in their work years. We know 
the wage gap means lower income, less savings, and it means 
reduced Social Security benefits. That problem may be worse--
may and is in many cases--for female caregivers. One study said 
that female caregivers risk losing up to $324,000 in wages, 
Social Security benefits, and private pension contributions as 
a result of leaving the workforce or reducing their hours. 
Unmarried caregivers--because they do not have the spousal 
assistance in retirement--obviously are even more vulnerable 
when they give up their work to be caregivers.
    Talk to me if you would, Dr. Dodd. Under current Social 
Security's guidelines, how can a woman who leaves her job, or 
who works fewer hours to care for a dependent family member or 
friend, how can she protect herself against seeing her benefits 
drop as a result? Is it some caregiver credit? Give me thoughts 
on where we go and, under current law, what we can do, and 
under proposed changes, what we should do.
    Dr. Dodd. Thank you for the question, Senator Brown. I 
think that you have heard from all of us that the caregiver 
credits would be an important way to protect her Social 
Security earnings. I do not know that there are other solutions 
to that.
    I think, if we look in the long run, if she is likely, as 
women are, to live more than 20 years after retirement, we 
could look at boosting, giving a boost to people, both men and 
women, who live more than 20 years after retirement, because 
their Social Security COLAs have not kept up with the 
inflationary increases of medical costs and other costs. The 
COLAs do not parallel the CPI.
    Senator Brown. So some CPI adjustment in terms of really 
reflecting the costs of being 70 or 80 years old versus a CPI 
based on the cost of being a 40-year-old?
    Dr. Dodd. As well as a CPI adjustment during the first 20 
years of collection that is based on what the elderly pay for 
goods and services, not based on what the urban clerical index 
is. So you can give credit for caregiver years, and you can 
increase the payment on a CPI-E for the elderly. Then, if they 
do live beyond 20 years, give them a boost, based again on the 
fact that their COLAs have not kept up with inflation over 
time.
    Senator Brown. My understanding, Mr. Chairman, really 
quickly--and, if you could give a really brief answer--my 
understanding is other high-end OECD countries have something 
like this; correct?
    Dr. Dodd. I believe so.
    Senator Brown. All right. Thank you, Mr. Chairman.
    The Chairman. Thank you. Senator Stabenow?
    Senator Stabenow. Well, thank you very much, Mr. Chairman 
and Ranking Member. This is an incredibly important discussion. 
I have always felt that Social Security was the great American 
success story. It is income insurance, and it is disability 
insurance; it is life insurance.
    I will never forget people coming in after the Enron 
crisis, losing everything, people from Michigan coming in and 
saying to me, ``Thank God for Social Security.'' That was it. 
So this is a very, very important discussion.
    I feel like what you are really talking about today is, 
unfortunately, the 1,2,3,4 punch for women. Women in Michigan 
earn 75 cents for every dollar a man earns. So, therefore, they 
are contributing less and are more likely to leave the 
workforce to care for children or parents or other family 
members. That is two. They are more likely to be in a minimum-
wage or low-wage job. That is three. And finally, on top of all 
of that, we live longer. So we are in a situation--and, Ms. 
Perrin, you have clearly laid out the challenge for women, and 
we thank all of you.
    I wanted to ask you about Social Security Disability, 
because one of the things that concerns me is, I am hearing 
now, periodically, these concerns that Disability claims are 
through the roof. When you really look at it, one of the 
challenges is that more women are working, therefore, more 
women are in a situation where they may have a disability on 
the job.
    Therefore, we see Social Security Disability claims going 
up, even though we know that, in fact, they are hard to qualify 
for. It is not a large amount of money, but more women in the 
workforce means that we are changing the demographics of who is 
applying for and receiving Social Security Disability. So I 
wonder if, Dr. Dodd, you might speak to that, and then if 
anyone else would want to as well.
    I think this is very important as we go into next year, and 
we look at the three trust fund buckets, and what we need to do 
to really understand a major driver of the pressure on Social 
Security Disability.
    Dr. Dodd. Thank you for asking that question, Senator 
Stabenow. Indeed, in 2013 the report of the Social Security 
trustees projected that the Disability trust fund would be 
substantially depleted by 2016, which would mean up to 20-
percent across-the-board cuts in Disability pay, and it is a 
heavy burden in the minds of millions of people. I think you 
mentioned that there are over 11 million disabled Social 
Security beneficiaries, workers, and dependents.
    So the time is now to rebalance how that fund is set up and 
to get the revenue flowing into the Disability trust fund. And 
recommendations have been made to take it out of the Social 
Security trust fund. When you spread it across how large our 
Social Security trust fund is now, it is really a very, very, 
very small amount. I think this is an important time to do 
that. So thank you.
    Senator Stabenow. Is this not directly related to, as I 
said, more women coming into the workforce? We are putting now 
more pressure on the Disability part of Social Security because 
of more women in the workforce?
    Dr. Dodd. Absolutely.
    Senator Stabenow. Does anyone else want to respond to that 
particular piece? [No response.]
    I know we are going to be faced with that, Mr. Chairman, 
coming up very soon, and I am concerned about that and making 
sure we kind of look at the reasons why.
    I am wondering if anyone would also want to comment about 
the fact that, if we want to deal with the retirement crisis 
and what is happening to women, raising the minimum wage and 
enforcing equal pay laws would go a long way to help with an 
underlying piece of this, in terms of women being able to 
receive what they should by paying more into Social Security.
    Dr. Dodd. I am happy to comment on that.
    Senator Stabenow. Dr. Dodd?
    Dr. Dodd. The National Committee agrees that raising the 
minimum wage is a good idea. It lifts all of the boats, but, 
even though women are in a lower lock, it raises our boat as 
well. It not only improves living and working conditions now, 
but it improves their contributions to Social Security and, 
hence, the income they would receive from Social Security, 
although it will still be unequal to men's.
    Senator Stabenow. Anyone else? [No response.]
    All right. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Stabenow. In order of 
appearance, it goes Casey, Thune, and Cantwell. And let us see 
if we can get everyone in. We have 10 minutes left on the vote, 
then maybe a 5-minute window.
    So, Senator Casey?
    Senator Casey. Thank you so much, Mr. Chairman. Thanks for 
having this hearing, and I will be probably under my time. I 
will make sure I am quick. I really appreciate the panel's 
testimony. This is an issue, I think, that, no matter where you 
are from, no matter what part of the country, what party, what 
point of view, we all have a concern about it.
    I will submit other questions for the record, but I will 
direct my question first to Dr. Dodd. In particular, I noticed 
that in your testimony, on pages 4, 5, and 6, you have--I think 
I counted 12--policy proposals.
    I want to focus on page 4, number 4, ``Equalizing Rules for 
Widows and Disabled Widows,'' and then, at the bottom of the 
next page, ``Improving Benefits for Adult Children Who Have a 
Disability.'' If you could, just kind of walk through the basic 
problem there, and what you hope would be the policy resolution 
or solution to both of those categories of issues.
    Dr. Dodd. Thank you for the question. In terms of 
equalizing benefits for widows, the concept is that a widow 
gets to claim 50 percent as a surviving spouse. Yet, her costs 
are not changing other than probably her husband's food and 
basic needs. The basic costs of daily living are still the 
same, but her income goes down by 50 percent.
    So the idea is, let us give a bump-up to those, again, 
single women to prevent them from falling into poverty, which 
they are so close to even being on his Social Security 
retirement.
    Senator Casey. And also, in the context of an adult child 
who has a disability, can you explain that difficulty?
    Dr. Dodd. A surviving adult child?
    Senator Casey. Correct.
    Dr. Dodd. So, a surviving adult child, similarly, adult 
children with disabilities are expensive in general, so that if 
their benefits are to be cut by 50 percent when their single 
provider dies, it is just inadequate to cover the costs of 
their care.
    Senator Casey. And finally--and I will end with this--but 
when you set forth your proposals or what you call ``program 
improvements,'' I realize every one of them has a level of 
importance, but if you had to choose, and I am not sure whether 
you outlined them in a priority order, are there several on 
this list that you think are more urgent and more in need of 
early action? Or is it more of a collective set of proposals?
    Dr. Dodd. We have not prioritized them at this point. They 
are a menu, but I think all of them deserve consideration, and 
you cannot balance inequity by just taking action on one of 
them, because the system is so complex and because people's 
situations are so complex. Each one addresses a different kind 
of inequity. So that is why we have been so broad.
    Senator Casey. I apologize to the other witnesses, but I 
want to give back 1 minute and 20 seconds.
    The Chairman. Thank you, Senator Casey.
    Chivalry lives. Senator Thune wanted Senator Cantwell to go 
next.
    Senator Cantwell. Thank you, Mr. Chairman, and thank you 
for this hearing. I know we have a vote going on, so I am going 
to just try to be precise in a few questions.
    I want to be clear: I know my colleague brought up chained 
CPI a little bit, but does chained CPI reflect the realities of 
inflation for many Social Security beneficiaries, Dr. Dodd?
    Dr. Dodd. No.
    Senator Cantwell. So it is really preposterous to say that 
you can do chained CPI and not affect the bottom line of 
beneficiaries?
    Dr. Dodd. Correct. And over time, chained CPI will have an 
even more significant effect, because you will be increasing 
the cost-of-living adjustments at a lower rate and enhancing 
the risk of entering into poverty.
    Senator Cantwell. I wish we could get on the same page on 
these numbers, because I think there is some mysterious thing 
that has been discussed about chained CPI, like it does not 
have an impact on existing and future beneficiaries, and it 
does.
    Second question: I do not feel like we drilled down enough 
on the market basket of goods of seniors, and women 
particularly. What do you think that market basket of goods 
would be that would truly reflect their expenses and costs, 
that would be a better part of a formula?
    I do not know if you know what I am referring to, but I 
look at it and think, for seniors, their biggest cost is 
obviously medication or other healthcare. So here we have this 
index, but it does not really reflect the things they buy. It 
reflects what the rest of us buy. Well, I guarantee you, the 
difference between what I purchase and what my mother purchases 
is very, very great.
    Dr. Dodd. I think you have made an excellent point, which 
is why we wanted to base Social Security on an elderly CPI that 
looked exactly at their market basket and specifically included 
medical costs, copays, prescription drugs, nonprescription 
drugs.
    The other thing I think that is not in there is, many 
seniors stop driving, and the costs of transportation to go to 
and from the doctor, or the hospital, or wherever it is they 
are receiving care, go up. Many adult day health programs no 
longer provide transportation and are relying on the individual 
to pay for it for themselves. So, as you said, their 
expenditures are much different from our expenditures.
    Senator Cantwell. And so it is just--I do not know. I feel 
like we need to put it on a billboard or something. It is just 
wrong to assume that their CPI is the same as everybody else's 
and that they are not going to be negatively affected if we do 
not do something to address it. They are just losing more and 
more market power every year.
    Dr. Dodd. Exactly. And coming closer and closer to poverty 
every year.
    Senator Cantwell. Yes. And well, with a baby-boomer 
population starting to reach that bracket, we definitely need 
to deal with this, not just for seniors. We definitely need to 
help seniors now, but, for the future, it is going to have an 
even more significant impact on our budget if a percentage of 
them do slip into poverty and then are demanding a different 
level of service and care.
    So, anyway, I thank the chairman very much for this 
important hearing.
    The Chairman. Thank you, Senator Cantwell. Senator 
Cantwell, as usual, brings us back to drilling down on the 
numbers. I want you all to know what numbers I am taking out of 
this room, because this has been very constructive.
    Ms. Perrin is a woman who has done everything right--
everything right. Through factors beyond her control, she is 
now, based on her genes, looking at the prospects of living 20 
more years, and her income is now $775 a month.
    Because I know Ms. Perrin, she is going to figure out how 
to turn this around and make more income and deal with it. But 
I think it is very clear that there is a challenge out there, 
because there are going to be many women who are not, for a 
variety of reasons, going to be able to do that.
    So that is our challenge. All of you have been a very, very 
constructive panel. We are going to tackle these issues in a 
bipartisan kind of fashion.
    With that, the Committee on Finance is adjourned.
    [Whereupon, at 10:45 a.m., the hearing was concluded.]
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              Additional Material Submitted for the Record

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                             Communications

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