[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE 2016 ANNUAL REPORT OF THE
SOCIAL SECURITY BOARD OF TRUSTEES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SOCIAL SECURITY
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
JUNE 22, 2016
__________
Serial No. 114-SS05
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan
DEVIN NUNES, California CHARLES B. RANGEL, New York
PATRICK J. TIBERI, Ohio JIM MCDERMOTT, Washington
DAVID G. REICHERT, Washington JOHN LEWIS, Georgia
CHARLES W. BOUSTANY, JR., Louisiana RICHARD E. NEAL, Massachusetts
PETER J. ROSKAM, Illinois XAVIER BECERRA, California
TOM PRICE, Georgia LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida MIKE THOMPSON, California
ADRIAN SMITH, Nebraska JOHN B. LARSON, Connecticut
LYNN JENKINS, Kansas EARL BLUMENAUER, Oregon
ERIK PAULSEN, Minnesota RON KIND, Wisconsin
KENNY MARCHANT, Texas BILL PASCRELL, JR., New Jersey
DIANE BLACK, Tennessee JOSEPH CROWLEY, New York
TOM REED, New York DANNY DAVIS, Illinois
TODD YOUNG, Indiana LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
ROBERT J. DOLD, Illinois
TOM RICE, South Carolina
David Stewart, Staff Director
Nick Gwyn, Minority Chief of Staff
______
SUBCOMMITTEE ON SOCIAL SECURITY
SAM JOHNSON, Texas, Chairman
ROBERT J. DOLD, Illinois XAVIER BECERRA, California
VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska EARL BLUMENAUER, Oregon
MIKE KELLY, Pennsylvania JIM MCDERMOTT, Washington
JIM RENACCI, Ohio
TOM RICE, South Carolina
C O N T E N T S
__________
Page
Advisory of June 22, 2016 announcing the hearing................. 2
WITNESS
Stephen C. Goss, Chief Actuary, Social Security Administration... 6
SUBMISSION FOR THE RECORD
Michael G. Bindner, Center for Fiscal Equity..................... 39
THE 2016 ANNUAL REPORT OF THE
SOCIAL SECURITY BOARD OF TRUSTEES
----------
WEDNESDAY, JUNE 22, 2016
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Social Security,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:05 p.m., in
Room B-318, Rayburn House Office Building, Hon. Sam Johnson
[Chairman of the Subcommittee] presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON SOCIAL SECURITY
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Wednesday, June 15, 2016
No. SS-05
Chairman Johnson Announces Hearing on the
2016 Annual Report of the Social Security
Board of Trustees
House Ways and Means Social Security Subcommittee Chairman Sam
Johnson (R-TX) announced today that the Subcommittee will hold a
hearing on the 2016 Annual Report of the Social Security Board of
Trustees. The hearing will focus on the findings in this year's report
and the cost for workers and beneficiaries of delaying actions to
address Social Security's fiscal challenges. The hearing will take
place on Wednesday, June 22, 2016, in Room B-318 of the Rayburn House
Office Building, beginning at 2:00 p.m.
In view of the limited time to hear witnesses, oral testimony at
this hearing will be from invited witnesses only. However, any
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consideration by the Committee and for inclusion in the printed record
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Chairman JOHNSON. Good afternoon, and welcome.
Today the Social Security Board of Trustees finally
released this year's annual report on the financial health of
Social Security.
Now, we all know Social Security is in trouble, and the
first step to solving a problem is to know what you are up
against. So today we are going to hear from Social Security's
Chief Actuary about the findings in this year's report, which
was just released this morning.
We all know how important Social Security is to the
millions of Americans receiving benefits, and given the
challenges facing Social Security, you would think these annual
reports would be released on time. Unfortunately, that has not
been the case.
As you can see on the screens, for each year of President
Obama's Administration, the Trustees Report has never been
released on time. On average, they have been delivered around
75 days late, and this one is 82 days late. And that is not the
latest it has ever been released. Let's be thankful that this
year's report is not as late as the 2010 report was, which was
126 days late.
The Trustees Report is not a new thing. In fact, it was
created as part of the 1939 amendments. Its original due date
was the first day of each regular session of the Congress. In
the early 1950s, the Congress extended the date to March 1st.
Then, in the mid-1960s, the Congress shifted the deadline
forward by one more month to give the trustees more time.
The current April 1 deadline has been in place since 1968.
It is not a suggested deadline. It is a mandatory deadline. The
American people have a right to expect that the deadline will
be met, period.
Pat Tiberi, whose Subcommittee oversees Medicare, and I
wrote to the Treasury Secretary, Secretary Lew, twice this year
asking why this year's report was late. However, the Secretary
did not think it was necessary to personally respond to our
letters, and that is unacceptable and the American people
deserve better.
It is clear this Administration is not serious when it
comes to Social Security. This year's budget didn't even
include the President's usual empty words about fixing Social
Security.
Earlier this month, the President spoke about his plan for
Social Security, but he forgot one important thing: The first
rule when you are in a hole is to stop digging. During his
recent speech in Indiana, the President suggested we should
increase Social Security benefits and just ask the wealthiest
Americans to pay a little more.
Sounds easy, doesn't it? Well, even taxing every dollar of
earnings wouldn't make Social Security solvent, let alone give
the program enough money to pay higher benefits. President
Obama's tax hike rhetoric doesn't add up and neither does his
math.
Make no mistake, we should look to improve benefits for
lower-income individuals who work their entire lives paying
into Social Security and don't receive that much back in
return. But we have to talk about this in the context of real
Social Security reform, reform that gets the program on a sound
and sustainable financial footing. That means making sure that
it is there for our children and our grandchildren, just like
it has been there for seniors and individuals with disabilities
today.
Look, I have said this before and I will say it again, the
longer we wait, the tougher it will be to get Social Security
fixed. So the sooner we act, the better.
I thank our witness for being here today.
Thank you so much for giving the latest update on Social
Security's finances. I now recognize Mr. Becerra for his
opening statement.
Mr. BECERRA. Thank you, Mr. Chairman.
Today, Social Security is strong and it continues to be
critically important to the American public. In fact, the need
to expand and improve Social Security is growing, because fewer
and fewer workers in America today have traditional pensions to
count on and it is increasingly difficult for the majority of
Americans to save adequately for retirement.
In more than 80 years, Social Security, despite the worst
recessions we have seen in this country since the Great
Depression--and certainly the one in 2008 was the worst--but in
those 80 years, Social Security has never failed to pay
benefits in full and on time.
So let's be clear, Social Security is not now and never
will be broke. Social Security currently has $2.8 trillion--not
million, not billion--$2.8 trillion dollars surplus in its
trust fund. That exists because of working Americans making
contributions through their paychecks to the trust fund.
Even without the trust fund, Social Security's incoming
payroll contributions from American workers would still cover
about three-quarters of the benefits Americans have earned and
expect to receive. But no one wants to get three-quarters of
what they expect, and that shortfall coming in the next decades
is a challenge, one we need to address.
But let's be wary of scare tactics that make it seem like
Social Security is broken or broke and that our only choice is
therefore to cut America's benefits. Remember, last year we
heard the claims that Social Security would have to cut
benefits for disabled workers by 20 percent. But many of us on
the Democratic side fought hard to prevent that kind of a cut
and showed that Social Security had the funds to pay the
benefits those Americans who earned those benefits were
entitled to.
So remember, Social Security has never added one dime to
the debt or the deficit. And you can see from this chart, in
the 80 years of Social Security, more than 80 years, how much
we have collected from American workers and how much we have
paid out to those who are beneficiaries, and you can see how we
make up that $2.8 trillion surplus.
So let's put the Social Security challenge in perspective.
Some people will say you can't count the $2.8 trillion Social
Security has in surplus and you can't count the money that
everyday American workers are putting into Social Security
through their payroll contributions, that it is all funny
money.
Well, here is the truth: Social Security is one of the only
programs in our Federal Government that pays for itself. And
let's take a look at one very important program of the Federal
Government, the defense budget and all our military activities
to protect the American people. We would all agree that that is
something that we must do.
This year our Federal deficit, in part, is due to our
military spending. About $114 billion of our Federal budget
right now is added to the national deficits and debt. And since
the last time we had a balanced budget in fiscal year 2000, we
have added about $2.3 trillion in deficit spending for the
military to our debt.
By contrast, in those same 15, 16 years, what has Social
Security done? Well, in that same time, Social Security's
surplus went from $1 trillion in fiscal year 2000 to the $2.8
trillion of today. So not only did Social Security not add one
single penny to the national deficits over those 16 years, not
only did it not add a penny to the national debt over those 16
years, but it actually increased the size of its surplus in the
trust fund by $1.8 trillion.
That is why Social Security is on such secure footing,
because American workers contribute to it separately and it is
there for them for their benefits into the future.
Moving forward into the future, if someone wants to play
the crystal ball game of forecasting what we will spend on
Social Security or the military or anything else, then Social
Security, with its independent source of funding from
Americans' paycheck contributions, is in far better shape than
any other segment of the Federal Government. We should not
forget that. Social Security has an 80-year track record, as I
said, of paying benefits on time and in full.
Its future we must work on to make sure it is as solid as
always. And I will put my hat and my bet on Social Security
over any other program, private or public, any time of the day.
So, Mr. Chairman, we know that Social Security will face
challenges in the future, but let's not manufacture crises.
Let's make sure we move forward, and let's take care of the
real, immediate crisis that Social Security does face, and that
is a funding shortfall that has seen its budget cut by 10
percent since 2010 while it has seen a 15 million increase in
the number of beneficiaries from the 45 million it had 6 years
ago. That is the real problem, is underfunding the ability of
Social Security to provide good service to the American public.
So, Mr. Chairman, I am glad that Mr. Goss is here. I look
forward to his testimony. And let's make sure that we are all
working to make Social Security sound and secure for the next
generations of Americans who can rely on it as well.
I yield back.
Chairman JOHNSON. Thank you.
As is customary, any Member is welcome to submit a
statement for the hearing record.
And before we move to our hearing testimony today, I want
to remind our witness to please limit your statement to 5
minutes. However, without objection, all the written testimony
will be made a part of the hearing record.
We have one witness today. Seated at the table is Stephen
Goss, Chief Actuary, Social Security Administration.
Please proceed.
STATEMENT OF STEPHEN C. GOSS, CHIEF ACTUARY,
SOCIAL SECURITY ADMINISTRATION
Mr. GOSS. Thank you very much, Chairman Johnson, Mr.
Becerra, Members of the Committee, for the opportunity to come
and talk to you about the 76th consecutive annual report from
the Board of Trustees about the finances in this program.
The statements by the Chairman and Ranking Member have
already done a great job talking about what this program is,
the 60 million people that it is currently serving. One in 6
Americans is receiving a benefit from this program, 49 million
of them from the Old-Age and Survivors Insurance, 11 million of
them from the Disability Insurance. In 2015, the program paid
out $866 billion in benefits to Americans, $743 billion of that
to the OASI side and $143 billion on the DI side.
The asset reserves, as mentioned, are at $2.81 trillion now
for the combined OASI and DI trust funds. That is an increase
of $23 billion over what they had been at the beginning of the
year 2015. Those asset reserves now stand at fully three times
the annual cost of the program, which is actually above what
has oftentimes been thought to be sort of a desirable
contingency reserve level of at least 1 year's cost. So Social
Security in the near term is in good shape at the moment.
Based on intermediate assumptions, let me share with you,
in the Trustees Report--and I apologize that you have not had
more time before this hearing to get to look at this
carefully--but where we had a 2.68 percent of payroll, 75-year
long-term deficit in last year's Trustees Report, we have a
2.66 percent of payroll deficit in this year's Trustees Report.
That is a little bit better. It is a little bit better than it
sounds, because just for the passage of time, change in the
valuation year to 1 year later, we would have expected the 2.68
to rise to 2.74 percent of payroll deficit, but, in fact, it
declined for a number of reasons that we can go into.
The Bipartisan Budget Act that you all participated in
making happen, all who pay attention to Social Security are
much appreciative of that, was a big reason why the Disability
Insurance program has been extended. It has been extended by 6
years, we estimate, as a result of the enactment of that Act.
And, in fact, you see for this report we estimate that the
reserve depletion date will be extended an additional year on
the basis of what has happened in the economy and other aspects
of Social Security.
In fact, on the Disability Insurance side, the number of
applications for disability has continued to decline, as it has
since 2010. It has declined more than we had expected, and that
is one of the components that has contributed toward our having
1 extra year beyond 2022 that we reported to Speaker Boehner
back in November, and so that is a very, very positive
development.
And I would also want to report to you all, this is not
included in the Trustees Report obviously, but even more recent
developments are that our applications for Social Security
Disability benefits have continued to be lower than we had
expected. So we hope a year from now to have more good news for
you.
Beginning in 2020, however, we are expecting the projected
OASDI annual cost to exceed its total current income, which
will mean at that point in time that our nominal dollar, our
total dollar amount of asset reserves in the trust fund will
start to decline. We are projecting on a combined basis the
Old-Age Survivors Insurance and Disability Insurance programs
will deplete the reserves in 2034. That is the same year that
was estimated from last year. So the changes are not dramatic,
the improvement is not dramatic, but it is always good to have
some improvement.
Over the last 20 years, that reserve depletion date for the
combined OASI and DI funds has ranged between 2029 and 2042. We
are at 2034 now. And that really speaks to the variability that
can occur in the economy and the implications for what the
trust funds are and how long they will sustain the ability to
pay the full scheduled benefits on a timely basis in the
absence of action by you all and the President in changing the
law.
In 2034, as I think Mr. Becerra already indicated, we are
projecting now that if the reserves were allowed to deplete, we
would still have 79 cents of revenue coming in for every $1 of
scheduled benefits, but that that will decline to about 74
percent of scheduled benefits by 2090. So action clearly is
going to be needed.
As described in the actuarial opinion, and as you all have
stated and well understand, should we reach a point of reserve
depletion without congressional action we simply will not be
able to pay the full scheduled benefits on a timely basis. We
have never reached that point before. We have--maybe I
shouldn't say this--we have absolute confidence that you all
will not allow that to happen.
After reserve depletion, the continuing income for
disability, if we were to reach reserve depletion in 2023, we
would still have 89 cents for every dollar coming in of
continuing income in 2023 for the Disability Insurance program,
and that would change to 82 cents for every dollar of scheduled
benefits by the time we get out to 2090 for DI.
One other thing that I really want to say is that all of
the changes that we have seen happen over the last 20 years for
Disability Insurance costs rising and in the next 20 years for
retirement cost under Social Security rising is really a matter
of the changing age distribution of our population, determined
by the changing birth rates that we had after the baby boom
generation and the lower birth rates that we expect in the
future.
We do need some changes in the future upcoming. We are
looking forward to the proposals that you all will be
developing and we will be working with you in scoring to be
able to make the changes necessary to keep Social Security in
good financial shape for the indefinite future.
Thank you very much.
[The prepared statement of Mr. Goss follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman JOHNSON. Thank you for your testimony.
We will now turn to questions. And as is customary for each
round of questions, I will limit my time to 5 minutes and ask
my colleagues to also limit their time as well.
Mr. Goss, welcome. This year's report happens to be 82 days
late. Can you tell us what caused the delay this year?
Mr. GOSS. Well, first of all, I would give you my apologies
and the apologies of my office on not having gotten this
through earlier. As you all know, whether we have four
trustees, as we had involved in this year's report, because we
did not have Public Trustees engaged, or six trustees, there is
a lot to be done in putting together not only the Social
Security report, but also the Medicare report. Since 1965, we
have had both reports to deal with, and the trustees have
deemed to always have both reports come out at the same time.
There is a lot of complexity in both of these laws, lots of
changes, and it just takes time for the trustees and their
staffs to get together and make the decisions, which sometimes
are difficult. When people get together and they have slightly
different views on things, they have to work it out, they have
to develop their consensus, and it takes time.
The final point that oftentimes occurs and can delay the
timing of the Trustees Report is to find the time when all four
or six trustees can all get in the same room at the same time.
That is not always easy. And I believe earlier today we had all
four of our trustees, all ex officio members were there, and it
is not always easy to get that.
Chairman JOHNSON. Were they going in the same direction?
I will tell you, I had to send two letters to Secretary Lew
before a member of his staff could be bothered to respond to my
asking about the delay with the Trustees Report. I ask
unanimous consent to place these three letters into the record.
Hearing none.
[The submission of the Honorable Sam Johnson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman JOHNSON. In response, the Treasury staff noted
that this year's Trustees Report process was without the
benefit of Public Trustees.
Mr. Goss, briefly, what is a Public Trustee and how do they
differ from other trustees?
Mr. GOSS. Of course, our four ex officio trustees are those
by nature of the job they have within the current
Administration. The two Public Trustees who are put forth by
the President, but with advice and consent from Members of
Congress, are supposed to be of two different parties
representing different views, and they do bring a broader
perspective to the trustees than might otherwise be the case.
So it is a positive thing to have them there. The law
requires that. And when the President does propose Public
Trustees and they get confirmed by the Senate, then we have
them in place. We simply were not in that position this year.
Chairman JOHNSON. Well, some of our Democrats have argued
that one of the most recent Public Trustees, Dr. Blahous,
somehow managed to take over the process and change assumptions
in the report to overstate Social Security's trouble. Is that
true?
Mr. GOSS. Well, I would confess, I have known Chuck Blahous
for a long time and I respect him very much, but in the time
that I have spent working with trustees over the past years, I
have never seen anybody capable of overwhelming five others.
And when the trustees work together, they work toward
consensus, and they all have signed the reports each year. So
what you see, I think, we really have to take, and I would
suggest, it represents the consensus of all the members of the
board.
Chairman JOHNSON. Okay. Well, thank you for the answer. And
in the time remaining, I would like to shift gears and ask you
about Social Security and taxes.
Earnings up to a certain amount, called the taxable
maximum, are subject to Social Security payroll taxes. This
year, what is that amount?
Mr. GOSS. That is $118,500.
Chairman JOHNSON. Some have suggested we should raise that
taxable maximum to cover 90 percent of earnings. If that were
the case, what would this year's taxable maximum be?
Mr. GOSS. It would be a little bit more than double that
level in order to get it back to the same share of all earnings
being taxed as we had back in----
Chairman JOHNSON. Would that be enough to make Social
Security solvent, though, yes or no?
Mr. GOSS. No, in and of itself it would not for the long
run.
Chairman JOHNSON. And if every dollar of earnings were
subject to the payroll tax, would it be enough to make Social
Security solvent, yes or no?
Mr. GOSS. In and of itself, it would not be sufficient. It
would go a long way, but would not be sufficient for the long
run.
Chairman JOHNSON. So we can't tax our way to solvency.
Well, thank you. I appreciate your testimony.
And I will recognize my colleague here for questioning.
Mr. BECERRA. Thank you, Mr. Chairman.
Mr. Goss, thanks for your testimony.
Let me have you refer to the chart that is on the screen
just to be sure we do the simple math on Social Security. This
chart covers the 80-plus years that Social Security has been in
existence.
On the left is the amount of money that American workers
have paid into the system. As you can see, the gray bar
represents the contributions, people's taxpayer contributions,
their taxes paid to the payroll tax. The dark blue bar above it
is the interest that has been earned on all the money Americans
have put into the trust fund, right?
The bar on the right, the red part of it, reflects what we
have paid out, the Social Security Administration has paid out
to millions of Americans who have received their benefits. As
you mentioned, 60 million Americans today are receiving Social
Security benefits. That is how much we paid out in those same
80-plus years.
You can't really see it, but there is a little bar, a dark
bar right on top of the red bar. That represents the
administrative costs, the overhead for Social Security to do
its business, less than 1 percent.
Mr. Goss, you have been doing this business for a long
time. Are you aware of any business in America that does
insurance that operates at an overhead of less than 1 percent?
Mr. GOSS. Unfortunately, no. I think we are unique.
Mr. BECERRA. Yeah. And whether it is your retirement plan
or whether it is your savings accounts, I know of no business
that can tell me that of the money I put in, that company is
only going to take less than 1 percent to operate the business
and charge me for their overhead.
And as we can see, there is a surplus there, $2.8 trillion
in what is being collected through American workers
contributions and what we have had to pay out. I just said that
over its 80-plus years, Social Security has never run a
deficit, has never contributed a penny to the Nation's debt. Is
that an accurate statement?
Mr. GOSS. I would agree with that. Certainly, in the sense
that Social Security, it actually, in effect, absorbs debt from
the rest of the government. Social Security actually makes
loans to the Treasury. When we look at the roughly $19 trillion
of total Federal debt, that is comprised in part of the debt
the Treasury owes to Social Security.
So I think my view is that it would be accurate to say
Social Security does not contribute toward the debt. Actually,
it helps finance some of the debt, which otherwise would have
to be borrowed from the public.
Mr. BECERRA. So now, let's look forward. Let's not try to
deceive anyone. That surplus that we have, the $2.8 trillion,
that is a lot of money. But over the years, because there are
so many Americans, 60 million-plus, and that is going to grow
with the baby boomers retiring, are going to be calling on that
money that is in reserve. And by 2034, if the estimates are
accurate, we will have exhausted all of the reserve. That means
that the only money coming into Social Security will be the
money American workers are paying in through their payroll
taxes, and that would be enough to cover about 79 cents, I
think you said, of what we currently provide in a dollar's
worth of benefits.
No American wants to get 79 cents on what Americans today
are getting at a dollar apace. And so clearly we want to do
something. And so we have the next 20 years or so to resolve
that on a bipartisan basis.
But let me ask you to compare, because you work with Social
Security. American taxpayers are paying into the Social
Security system through their payroll taxes, contributing to
the trust fund. The rest of the Federal budget doesn't operate
that way, or most of it doesn't operate that way.
And I mentioned, for example, that we have a deficit right
now in our Federal operating budget. About $114 billion of that
operating deficit, or that deficit that comes from our
operating budget, is attributable to what we are spending
today, this year, on the military. And if you take a look at
what we spent in the last 15 years, as I mentioned, since the
last time we had a balanced budget in the Federal Government,
we have added about $2.3 trillion in deficit to that national
debt as a result of what we spent on the military.
Now, I don't think anyone here is going to say, oh, let's
not spend that money on our troops. But we have to recognize,
we are deficit spending. In that same time, we have never added
to the deficits of the country through Social Security.
And so as we start to talk about long-term projections
about where we are going, isn't it important to know if you
have a source of funding for the program that you consider
vital, whether it is national defense or Social Security? I
pose that as a question.
Mr. GOSS. I would absolutely agree. And, of course, there
are budget scoring conventions, and I addressed that in the
actuarial opinion of the Trustees Report, and different ways of
looking at things.
But as far as Social Security is concerned, the OASI and DI
trust funds and one of the Hospital Insurance trust funds of
Medicare really do stand different from other programs. As Mr.
Becerra indicated, they are really not allowed to borrow in any
meaningful sense. So we are always in a position of having a
positive accumulated balance from the start of time.
Mr. BECERRA. So let me ask you one last question. In the
last 6 years has your operation been impacted by the cuts to
the Social Security budget, the operating budget for Social
Security? Have you been impacted?
Mr. GOSS. Well, Social Security as a whole certainly has.
And certainly in our office we have gone through the hiring
freezes and restrictions on our ability to hire the number of
people we would like to have to be able to serve you in every
way that we possibly can. So certainly there are issues.
Mr. BECERRA. Thank you very much.
I yield back, Mr. Chairman.
Chairman JOHNSON. Thank you. The time of the gentleman has
expired.
Mr. Renacci, you are recognized.
Mr. RENACCI. Thank you, Mr. Chairman, for holding this
important hearing to discuss the 2016 Social Security Trustee
Report and discuss the challenges facing this program that
plays such a vital role in the retirement income of so many
Americans.
Like many of my colleagues, I often hear from my
constituents in the district talking about the need to preserve
Social Security and ensure that it remains a reliable source of
income for retirees. Also, as a father of three, I believe that
we have a responsibility to leave our children and
grandchildren with a country that is financially stronger than
the country that we inherited.
Unfortunately, though, Washington too often chooses to kick
the can down the road, call things surpluses when they are
truly liabilities, and fails to address the long-term
challenges that face our country.
As you can see from the slide that is shown on the screen,
over the next 75 years Social Security's unfunded liability is
equal to $11.4 trillion. That is a $700 billion increase from
last year's report. This dollar amount represents the present
value of the shortfall and the amount of revenue that the trust
funds will collect compared to what the trust funds owe to
Social Security beneficiaries. That is not a surplus. That is
an unfunded liability.
Unfortunately, the outlook continues to get worse as
Washington delays addressing the problem. In fact, since 2009,
the 75-year shortfall has more than doubled, from $5.3 trillion
to currently $11.4 trillion today. This is a serious problem
that will require difficult decisions to be made. I believe
that we must first start by fully understanding the financial
challenges that we face not only in Social Security, but also
in all unfunded liabilities of the United States.
In the next few days, a bipartisan group that I belong to
will be introducing legislation to bring further awareness to
both lawmakers and the American people of the unfunded
obligations that our country owes on all of our social
insurance programs. Our Nation's finances are one of the most
important pieces of information that lawmakers should consider
when setting the policy agenda for Congress, but too often, I
believe that many here in Washington want to ignore those true
issues.
This bipartisan legislation will simply require the
Comptroller General of the United States to present the
financial report of the United States in a joint session of the
House and Senate. This will be held 45 days after issuance of
an audited financial report to ensure that lawmakers receive
the information in an accurate and timely manner. You see, we
can't just look at Social Security, we have to look at
everything, and I think that is important.
Mr. Goss, you heard a couple words. One of them was
unfunded liability. Can you explain the definition of unfunded
liability?
Mr. GOSS. Thank you very much for the opportunity.
Actually, yes. The liabilities that you described, we
actually refer to per the Federal Accounting Standards Advisory
Board as unfunded obligations. And the distinction there really
is important. A liability is where you have the legal,
contractual basis for having to pay for something in the
future.
In the case of Social Security benefits, there is an
obligation to pay scheduled benefits in the future, but there
is a limitation. We can only pay what we have money to pay. So
those amounts of future benefits are really referred to as
obligations.
And the unfunded portion of scheduled benefit future cost
we refer to as unfunded obligations. Just one small thing on
that. We did have $10.7 trillion, our estimated unfunded
obligations through 75 years in the 2015 Trustees Report. Just
by the simple passage of time, when we start with 2016 for the
then next 75 years, that number would have gone up from $10.7
to $11.2 trillion.
That is mainly because we are calculating these unfunded
obligations on a present value discounted basis. When we move
from 2015 to 2016, it basically just increases the amount by
the interest rate for 1 year. So we have gone to $11.2
trillion.
As it happens, changes that were made in the experience and
the assumptions other than the interest rate assumption in this
report would have taken it from $11.2 down to $10.5 trillion,
which is actually lower than we had last year. The one
assumption that caused it actually to be larger than last year,
even with the valuation period change, was the change in the
long-term ultimate real interest rate from 2.9 down to 2.7
percent.
Mr. RENACCI. And I appreciate that. I do understand when
you are doing calculations, you take assumptions, and I could
take assumptions, you could take assumptions. But basically you
show an unfunded obligation, as you call it, unfunded
liability, is coming out of this report.
So we can't keep talking about Social Security's surpluses
when the report issued today reflects a growing unfunded
obligation. I will use your word. I believe that we have a
responsibility to take the information that we have received
today, work to find a way to appropriately address the
sustainability of Social Security so our children and
grandchildren do not need to make even more difficult choices
in the future in order to maintain the program.
Mr. Chairman, I yield back.
Chairman JOHNSON. Thank you.
Mr. Rice, you are recognized.
Mr. RICE. Thank you, Mr. Chairman.
Could you put the slide back up with the surplus that we
have right now?
Everybody agrees that that surplus over time will expire
unless we do something. Is that correct, sir?
Mr. GOSS. Absolutely. These are our projections, no
question. The surplus side is the accumulated amount of
reserves we have. We are using them up.
Mr. RICE. And those reserves will be gone in what year?
Mr. GOSS. Our current statement is that, assuming we look
on a combined basis for the two trust funds, 2034.
Mr. RICE. And that is not long-term solvency, is it? The
year 2034 is 17 years away.
Mr. GOSS. Exactly.
Mr. RICE. And for many people who are currently already
retired or certainly approaching retirement, it will have a
dramatic effect on their retirement income, correct?
Mr. GOSS. If we do not act, if we do not make changes in
the law to avert that.
Mr. RICE. How would you define long-term solvency? How long
do you think we should be planning in advance for expiration of
these reserves? What would be a comfortable margin for you?
Mr. GOSS. That is a really good question. The nature of the
way the program has been financed virtually from the beginning
is a pay-as-you-go current-cost finance system, not an advance
funded system.
Generally, what the trustees and past advisory councils
over decades have said is have a contingency reserve throughout
equal to at least 1 year's worth of----
Mr. RICE. So you don't look for something that will be
maintained for 75 years or 50 years, those aren't objectives
for you?
Mr. GOSS. Oh, no, no, we really do, because of the three
things that are required by the Congress for the trustees to
report on, one of them being the actuarial status of the
program. That has been interpreted most recently and generally
as being a 75-year outlook to make sure that we are, indeed,
solvent, that we are able to pay all scheduled benefits on time
and in full throughout that 75-year period.
Mr. RICE. And right now you are saying we are solvent for
the next 17 years, but we are not solvent after that?
Mr. GOSS. We are not achieving full long-range solvency,
absolutely----
Mr. RICE. Okay. And the problem is this demographic wave
that we face, correct?
Mr. GOSS. Exactly.
Mr. RICE. When will that wave recede? It is not forever. It
is not eternal. Do you have any projections on when that wave
will recede?
Mr. GOSS. This is the perfect question. Thank you very
much.
Many people have thought in the past that the baby boom
generation being large will come in, they will cause us first
disability increased costs, which they already have. Now that
they are moving into retirement they will cause us increased
costs in retirement. One might think that they will move
through and go away and not be causing this increased cost.
Actually, that is not the case. The reason we call it a baby
boom generation is actually because the birth rates dropped
after 1965 and have stayed at a lower level.
Mr. RICE. And they are continuing to drop. So you don't see
this wave receding within the 75-year window?
Mr. GOSS. This wave is not receding. In fact, it is the
reason why we are going to go from a total cost of 5 percent of
GDP up to 6 percent of GDP.
Mr. RICE. Okay. Thank you. I just have very limited time. I
hate to rush you, and I am sorry.
What specific proposals has the Administration made to give
solvency to the Social Security trust fund for the next 75
years?
Mr. GOSS. You know, the Administration, many Members of
Congress have looked at various different options.
Mr. RICE. Well, what specific proposals has the President
made?
Mr. GOSS. We saw early on a proposal relative to the cost-
of-living adjustment. We have seen proposals relative to
immigration.
Mr. RICE. So that is chained-CPI you are talking about?
Mr. GOSS. That was early on in the Administration.
Mr. RICE. That was a specific proposal. What other specific
proposals has he made?
Mr. GOSS. There have been proposals relative to
comprehensive immigration reform. And I think those have been
the primary ones that have been specifically put forward.
Mr. RICE. Comprehensive immigration. That doesn't really
deal directly with Social Security, that deals with
immigration.
Mr. GOSS. Exactly.
Mr. RICE. So the only proposal he has made is to cut the
cost-of-living adjustment? That is it?
Let me ask you this. How long would that make the Social
Security trust funds solvent? How many years would that add? I
know you have run those numbers. How many years would that add?
Mr. GOSS. Oh, wow. We have that available up on our
website. It would probably add 2 or 3 or 4 years to the year of
reserve depletion.
Mr. RICE. Two or 3 or 4. So instead of it being 16 years
from now that the trust funds go broke, we are talking about
20. That is not exactly long-term solvency of the program, is
it?
Mr. GOSS. But we know that a full comprehensive fix is
going to include lots of moving parts.
Mr. RICE. But we haven't seen any proposals from the
Administration other than that one of cutting the cost-of-
living adjustment? Is that right?
Mr. GOSS. Well, there have been other things like the
claiming strategies, the aggressive claiming strategies that
were addressed in one of the budgets.
Mr. RICE. Okay. All right. What would you suggest, do you
have any suggestions for us on how we fix this? I mean, it gets
more expensive every year to fix it, correct? What suggestions
do you have? I mean, you have limited options, because you have
revenues decreasing and you have expenses increasing, and the
expenses are going to pass the revenues by 2020, right?
So you really have limited options. You either have to
increase revenue or you have to decrease expense, right? So
what would you suggest? What specific ways would you suggest to
fix Social Security, besides the chained-CPI?
Mr. GOSS. What I would have to say, and the way we have to
do our job is never really to answer that question, and I
apologize for that, because what we are going to do is work for
people on both sides of the aisle on all of the ideas that they
have for making changes to either increase revenue or alter
benefits or to----
Mr. RICE. Yeah, but you are an actuary. You can do this on
the back of your hand.
Have you seen the AARP marketing about tell the
Presidential candidates to take a stand? Have you seen that?
Mr. GOSS. No, I haven't.
Mr. RICE. It has been on TV a lot. It says tell the
candidates to take a stand.
I want to know what specific proposals you would make for
long-term solvency, solvency for 75 years.
Mr. GOSS. The only thing I could possibly say here--well,
first of all, let me ask you this. Whenever we have dealt over
the decades that I have been around with Members of Congress in
private or in any other forum, we always ask, what precisely is
your goal?
Mr. RICE. Seventy-five-year solvency.
Mr. GOSS. Okay. So 75-year solvency is the goal we want to
achieve. Then the question is, do we want to do that by
lowering the scheduled benefits, staying within the 12.4
percent tax rate we have, or do we want to maintain the
benefits and find more revenue?
Mr. RICE. Okay. See, my friend, here is what I think the
American people are upset about: We keep telling them what the
problem is, but we are not offering solutions for them. The
Administration has offered one, and that is cut the COLA. I am
asking you for solutions.
Mr. GOSS. Okay. Well, we fortunately have up on our web
page, SSA.gov/oact, over 100 individual provisions actually not
that we have come up with, but that Members of Congress have.
And here is a little version of it. I can give you a couple
copies if anybody would like, but it is right up on our web
page. All of your staff already have access to this, well over
100 different provisions that affect Social Security in almost
every way you can imagine. So what we really need now is for
our collective judgment to get together and pick which of these
different provisions we want.
Mr. RICE. You guys are waist deep in the swamp. You know
this better than anybody else.
Chairman JOHNSON. The time of the gentleman has expired.
Thank you.
Mr. RICE. Thank you, sir. Thank you.
Chairman JOHNSON. Mr. Kelly, you are recognized.
Mr. KELLY. Thank you, Chairman.
Mr. Goss, thanks for being here.
I want to go back to what the Chairman started with, a
question about Mr. Blahous being on the Board. And the question
then came up in the Huffington Post with Senator Schumer,
Senator Warren, and Senator Whitehouse, something that says it
was kind of curious--let's see how they said it, because it was
kind of interesting, I thought, the way they stated it.
More or less that it was curious, there was curiously
incorporated a number of assumptions playing up the potential
insolvency of the program, and it had to do with Mr. Blahous.
You would say there is nothing he has done in that time
period that would make you think that somehow this is
politically motivated and that him being reappointed, even
though the President is the one that nominated him, that it
causes a problem, is it? Are you in agreement with that, that
Mr. Blahous is not a problem, you haven't seen anything that he
has done that is curious that could have influenced the
outcomes?
Mr. GOSS. Well, I have been fortunate enough to work with
the trustees all the way back to our very first two Public
Trustees, Mary Falvey Fuller and Suzanne Denbo Jaffe, and it
has really been a pleasure working with all of them. We
understand that they come from different perspectives.
Mr. KELLY. So he is not a problem, you don't look at him as
a problem, you don't look at anything about his behavior or
anything that he submits as being one of the trustees as
curious?
Mr. GOSS. It is really not our place to evaluate whether
someone is a positive or negative. What I would say is really
what I take to be wonderful about this process, is that we get
four, and generally six, different trustees involved with
different views and that we coalesce----
Mr. KELLY. Yeah, but you did say there is none of the
trustees that has an overwhelming influence.
Mr. GOSS. That is absolutely true. There are six. No one or
two can control.
Mr. KELLY. Okay. So I am going to take that that as a body
you don't see any problem.
And I would like to submit this for the record, if I could,
Chairman.
[The submission of the Honorable Mike Kelly follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. KELLY. It comes out of the Huffington Post where the
three Senators seem to be alarmed that somehow Mr. Blahous
would be reappointed.
It doesn't seem to me that is an objective statement, but,
again, we live in such a political environment that we have to
do these things.
All of the things that we talked about--and I am just
trying to think. I come from the private sector, and usually
deadlines actually mean something, and there is a penalty if
you don't reach the deadline. And this is established pretty
much as that is the end line, that is the end time. Why so
late?
Mr. GOSS. Well, again, as mentioned earlier, my office is
not in complete control, obviously, at developing these
reports. We really are doing our work for the Board of
Trustees. And the Board of Trustees, the four ex officio
Members of the present Administration----
Mr. KELLY. But the whole purpose of the report, though, is
that we can get an early indication of where we are going with
this. And if you have to make a correction, I think with
anything in life, the earlier you learn about something, the
better to respond to it. You can change the direction of
something, you can be aware of something and start to move in a
different direction so it doesn't actually crash on you.
I am just trying to understand, and the Chairman spoke
about this very clearly. But the number of days, I mean, 118
days, 112 days, 82 days, 60 days, 128 days, that seems to be
way beyond the pale. But for somebody to say, listen, I know
you missed the deadline, but you only missed it by a couple
hours maybe or a couple days, but when we go into months of not
being able to get that information, what would cause that to
happen?
Mr. GOSS. Again, it is really--it is just the process of
developing consensus----
Mr. KELLY. I get that. So it is a collaborative effort, I
guess. I am just trying to understand how in the world you
would fix something. We look at these things. They seem to be
pretty self-evident to me.
And I look at this a little bit differently than some of
the folks. I know where the actual revenue comes from. This
comes out of people who are working. They are called wage
taxes.
So all the revenue we collect comes out of working people.
And we have seen a very low labor participation rate. So we
have fewer people working, which means there are fewer funds
going in. And I know we can play around with the numbers of
what people are being paid and what the percentage would be,
but it is capped at a certain level.
This program that we say is solvent, we don't have to worry
about it, in over 80 years we have built some type of a
surplus, it is a paper surplus. You don't really have a sense,
at least I don't, that there is some stability in this program
that we can go forward knowing this is going to be okay.
You are an actuary, and I know what actuaries do, and I
don't care what line of business it is, you are calling out
things that you see on the horizon, kind of sending out warning
flags of, look, we are not going to be able to sustain this
kind of program if we don't do something dramatic soon.
Mr. GOSS. Well, there are really two aspects of this. One
is the $2.8 trillion that we have now, it is required by law
that any reserves that Social Security has be invested in
interest-bearing securities backed by the full faith and credit
of the United States Government, which is probably as secure as
it gets anywhere. So I would suggest that $2.8 trillion, we
should really say we can absolutely count on.
Is Social Security fully funded for the long term? It is
not at this point. As mentioned before, we have currently an
estimated $11.4 trillion of unfunded obligation, which, by the
way, is actually a smaller percentage of GDP over the next 75
years than the value that we had in the last report. It is 0.89
percent of the GDP over the same 75-year period. Last year it
was 0.91 percent of GDP over the 75-year period. Because,
remember, $11.4 trillion sounds like an awful lot of money, but
that is a 75-year shortfall. We have to look at it relative to
the 75-year wherewithal to be able to cover that.
Do we have a shortfall? Yes. We do need to, one way or the
other, come up with a way to either increase revenue on the
order of a third or reduce the scheduled benefits on the order
of one-fourth relative to what we have in current law by the
time we get to 2034.
And, again, we are incredibly eager, myself and others from
my office and at the Social Security Administration, to work
with you all and your wonderful staffs on getting there.
Mr. KELLY. And I appreciate it, because we are all in this
for the same reason. But, really, long term, there are only two
things you can look at. When you indulge in deficit spending
for too long a period of time there is no bright light at the
end of the tunnel other than maybe a freight train coming at
you.
You are either able to decrease your spending or increase
your revenue, one or the other, a combination of both would be
great, but we have to get people back to work in an economy
that is actually steamrolling along and not growing at below 1
percent and think that somehow things are going to get better
if we just wait long enough.
Thanks so much for being here. But I do want to stay in
touch with you, because this is a great concern for every
single American.
Chairman JOHNSON. The gentleman's time has expired.
Mr. Smith, you are recognized.
Mr. SMITH. Thank you, Mr. Chairman.
And thank you, Mr. Goss, for your presence here today.
I think it is important to note that the longer we wait to
make changes, the more difficult it will get.
But just to clarify, you just said that Social Security is
not fully funded, and yet, we heard earlier and there was a
graph up there that suggests that there is a surplus. I mean,
that to me doesn't level. Would you characterize that as a
surplus?
Mr. GOSS. Well, it is an accumulated surplus that we have
had up to this point. We do have $2.8 trillion available now. I
hesitate to try an analogy, but, for instance, if we want to
put our child through college for 4 years and we have enough
money available right now to pay for the first year but not the
latter 3, then we do have a nice piece of money here ready to
cover 1 year.
Mr. SMITH. Would you call that a surplus, given the
suggestion of obligation for a 4-year degree?
Mr. GOSS. Well, it is certainly a surplus in the sense that
in that case and certainly in this case, where we have since
the inception of the program, first taxes collected in 1937, we
have accumulated more tax revenue collected than we have paid
out to date.
And, again, looking at it from the point of view as a
current-cost finance or a pay-as-you-go system, which it is, in
that sense we have a surplus. Our real challenge is----
Mr. SMITH. But perhaps a better approach would be to
suggest that it is not fully funded, as I heard from you?
Mr. GOSS. To say it is not fully advance funded over the
long term, there is no question about that.
Mr. SMITH. All right. Okay.
Now, is there any way to quantify, perhaps, that delaying a
decision, that the cost of delay is X? I mean, have you sorted
that out? Is there a way to really quantify that?
Because when I talk to especially younger folks who are
paying in to Social Security and when we tell them that those
dollars won't be there long term if no changes are made, is
there any way to quantify that?
Mr. GOSS. Well, what I would suggest is that we do know
that looking on a combined OASI and DI trust fund basis, we can
pay about 79 cents on the dollar, ultimately about 74 cents. So
we are about 25 percent short on benefits, on the ability to
pay benefits.
Mr. SMITH. On the continuum of time, the longer we wait, I
mean, it only gets worse.
Mr. GOSS. But here is the question. If we were to enact a
proposal today that would lower benefits by about a quarter or
raise revenue by about a third as of 2034, that is exactly the
same 2034 problem as if we enacted 5 years or 10 years from
now.
The real difference in taking longer to consolidate on the
decision that you all will make about how we ought to change
things is that if we wait longer we will probably limit the
options we have available, we will give people less advance
warning, and we may be able to phase in changes less gradually.
The beauty of the 1983 Social Security amendments, which
were the ones that raised our normal retirement age, didn't
start to raise it until 17 years later. It is wonderful to give
the American people that kind of advanced warning. So that is
why I think everybody has been encouraging you all to give us
legislation sooner rather than later.
Mr. SMITH. Sure. And I can appreciate that.
Now, previous messages from Public Trustees have noted that
even if not a single dollar were paid to new beneficiaries once
the trust funds are exhausted, there still wouldn't be enough
money to pay benefits for those already receiving them. Is that
still true?
Mr. GOSS. That is true. That is a rather interesting
notion, though, of saying that every year the number of people
who start to receive benefits is roughly 5 percent of the total
number of people who receive benefits. So I am not sure that
anybody would seriously consider saying let's continue to pay
full, unaltered benefits to all the people who started
receiving benefits a year or 2 or 3 years ago, but new people
coming in will get nothing.
Mr. SMITH. But it helps us reflect kind of the obligations
that are there. And I think it is very advisable for us, on
both sides of the aisle, to acknowledge the realities that are
out there.
I mean, I cannot suggest that there is a surplus, given all
of the obligations long term. And believe me, we need to think
longer term about especially this issue, given what has been
promised over the past and hopefully will in the future.
Thank you, I yield back.
Chairman JOHNSON. Thank you.
Mr. Buchanan, you are recognized.
Mr. BUCHANAN. Thank you, Mr. Goss, for coming. We all
appreciate it.
I am from Florida, Sarasota, and there are 217,000 people
in my district out of 700,000 that count on Social Security.
But I want to go back to the gentleman's point from
California about the surplus. I mean, really, as you mentioned,
there is really no money there. It is an IOU from the Federal
Government. Is that right?
Mr. GOSS. Well, to the extent that any Treasury bond or
savings bond that any of us might hold is an IOU from the
government, that would be true.
Mr. BUCHANAN. So, basically, what you have is that $2.7
trillion or whatever that number is, is Treasuries from the
Federal Government. Is that right?
Mr. GOSS. It is Treasuries, exactly. And it represents, of
course, the excess funds that have been accumulated by Social
Security by having taxes more than what we spent with interest.
Mr. BUCHANAN. When you look at your ability to get repaid,
my concern is, when I ran for Congress, I was concerned about
the $130 billion in deficits when I came in 2007. I remember
back then it was about $130 billion that year. We went from $8
trillion and change to almost maybe $8 to $9 trillion, in that
range. Today, we are at $19 trillion. We have accumulated, in
10 years, $10 trillion in debt.
So I ask you, do you look at the viability, you know, when
you are counting on the government in a sense for their ability
to repay? I mean, you are counting on that $3 trillion to make
sure you can get to 2034, but as they accumulate debt--and
there is plenty of blame to go around. It is not a Democrat
issue, it is both, I will put it that way right up front.
But when you look at the health of the lender, basically,
or the borrower, I mean, how do you factor that in? Or do you
factor that in, the fact that they are almost $20 trillion in
debt? And if you had the normal cost of money today, the way it
has been over the last 40 years, it would be 4 or 5 percent,
you could have interest, $700, $800 billion on that debt if it
got back up to where it has historically been.
So I guess I ask you that question. When you look at this,
you look at your ability to get repaid the $3 trillion, you
ought to look at the U.S. Government and their ability to pay.
Are you confident that 10 years from now, if we keep going down
this track, you are going to ever see your $3 trillion?
Mr. GOSS. Well, I would suggest that if we ever reach a
point where the Federal Government as a whole is unable to
repay the gradual amounts of annual shortfalls that Social
Security is drawing from its trust funds, we will probably have
much more severe problems than just the situation with Social
Security given the level of total Federal debt that we have.
Mr. BUCHANAN. Let me, because we are all limited on time,
let me just say, I was born in Detroit. A great city. I lived
in the Detroit area, my wife and myself. It is the fourth-
largest city in America. It was very viable. It went bankrupt.
And you know what, all the firefighters, the police officers, a
lot of my family members in the Detroit area, I have heard all
the stories--I live in Florida now--but they took a haircut,
all of them. And I never would have imagined for a lot of years
that that would ever happen to Detroit. It is a great area,
great city, but obviously, everybody got a haircut.
And when we are just kind of not paying attention to the
debt and the other liabilities that are out there, we are
kidding ourselves, frankly. And that is why the sooner the
better that we work together on a bipartisan basis to deal with
this.
The second thing, let me just ask you, is the cost of
living. A lot of the seniors, I do a lot of town halls, they
want to know. They didn't get a cost-of-living adjustment for
the last year or two. What are your thoughts on that? And then,
of course, next year, where do you see that going?
Mr. GOSS. The CPI that determined last year's cost-of-
living adjustment, which turned out to be zero, we actually had
the CPI going down by I think it was three- or four-tenths of a
percent. In order to have a cost-of-living adjustment coming up
December of this year, we have to make that up by the rules of
the way the cost-of-living adjustments work and go above.
Our current projection, our estimation in the new Trustees
Report is that we will have a two-tenths of 1 percent increase
for the cost-of-living adjustment. It depends on lots of
factors in the economy. We have all seen the price of gasoline
going up some. So at this point we are expecting we should be
on the order of two-tenths. Could it be more or less? It
depends on what happens between now and the end of September.
Mr. BUCHANAN. So your thought, there might be something
next go around?
Mr. GOSS. Our current expectation and our projection is
that we will have a positive cost-of-living adjustment next
time.
Mr. BUCHANAN. Thank you. I yield back.
Chairman JOHNSON. Thank you.
Mr. Dold, you are recognized.
Mr. DOLD. Thank you, Mr. Chairman.
Mr. Goss, we certainly appreciate you coming in and
testifying before us today.
I think the common theme that you are hearing from
everybody is that we are looking to try to figure out in a
bipartisan way how we can move forward. How do we make this
solvent? And as you were talking to my colleague, Mr. Rice, for
75 years. So when you say, what do we want? We want something
solvent for 75 years.
And as we look out there, you say, well, we are not really
responsible for coming up with ideas. Frankly, you are the ones
that are living it each and every day. You know the ideas that
are going to work, the ideas that potentially aren't going to
work.
So let me put you back on the hot seat for just a little
bit. Out of the 100 proposals that you have seen out there,
there have to be a couple that have risen to the top. And,
again, Mr. Becerra is here representing the other side of the
aisle, I am sure he is interested also in ways that we can try
to make this solvent. Because the one thing that we do know is
life expectancy when Social Security was enacted was
significantly lower than it is today.
Do you know what the life expectancy was when Social
Security was enacted, roughly?
Mr. GOSS. Life expectancy at birth or at 65?
Mr. DOLD. Life expectancy when Social Security actually
came into the fold.
Mr. GOSS. Life expectancy at 65 was considerably less than
it is now, no question.
Mr. DOLD. So we are living a lot longer lives for many
different reasons. And ultimately what that means is it puts
additional pressure on us, largely because, again, we have a
labor force participation rate, which as Mr. Kelly pointed out
to us, is the economic engine that is actually funding Social
Security today.
My question to you, as we look at this--and back in the
10th District in Illinois we have about 105,000 people that are
on Social Security, a little over 83,000 of those are over 65.
And is there a way that we can be focusing, as opposed to an
across-the-board increase, on ones that we can help, perhaps
those that need it most, some of the lower-income earners? Have
you seen some of the proposals that are intriguing out of the
100 that you have listed on the website that might be helpful?
Mr. GOSS. There is no question we have a lot of proposals
in here that would operate for people at different lifetime
earnings levels in very differential ways. We have one proposal
that suggests that, for instance, in our benefit formula, which
now has a weighting to give a higher rate of return, a higher
replacement rate for low-income folks than high-income folks,
to make that tilt stronger.
We have had proposals that would increase the now really
ineffective special minimum benefit that we have for folks at
the bottom end, because it was only CPI indexed, and so it has,
in effect, disappeared in terms of effectiveness, to restore a
minimum benefit. And these proposals can be done in such a way
that they would have an overall savings by lowering the rate of
return for the highest earners and increasing to some degree
the rate of return for the low earners.
So we have lots and lots of different approaches.
I would also mention there is not only the payroll tax,
but, in fact, a former, although fairly brief Chairman of this
Committee and Chairman of the House Budget Committee had at a
point in some of the provisions that we scored proposed having
employer-sponsored group health insurance premiums subject to
the tax that contributes to the Social Security trust fund.
So we have lots of different potential ways we have
indicated here for generating more revenue, lots of different
ways for altering benefits, some of which could be across-the-
board reductions, some would reduce higher earners more than
lower earners. So we have a great variety to the point of what
I could speak is that there are some provisions that we have
probably seen more often than others. And ones to, for
instance, as mentioned here, increase our taxable maximum from
$118,500 to something a little bit more than double, to restore
it back to where we were in 1983 and 1984 where we did have 90
percent of all wage income falling below our taxable maximum.
The changing distribution of earnings in our economy has really
altered that for about 83 percent. That would make a
contribution.
Many people have looked at the retirement age that we have
increased, from 65 up to 67. By 2022, we will be at 67 for the
full retirement age at which you can get the full and unreduced
benefit. Some have suggested indexing it after we get to that
point.
One commission, if I may just mention very briefly, I
believe it was the Simpson-Bowles commission, actually
suggested indexing the retirement age but doing it in such a
way that long-career low earners would not be subject to the
full and possibly not any of the increase in the retirement
age.
So there is an incredible variety of possibilities here
that we hope we can work with you all in considering.
Mr. DOLD. Mr. Goss, you mentioned before in terms of
raising that age from 67 in 2022. What does raising the age by
an additional year do to expanding it from what it is now,
insolvency at 2034?
Mr. GOSS. For 2034, it would really do very little, because
we would be only talking about affecting people who attain age
62 after the year 2022. To affect them by having some lower
level of benefit or asking them to wait another couple of
months or a year to start receiving their benefits, the
cumulative effect through 2034 would be very small, which
really speaks to the notion that we really need to have a whole
market basket of different possible changes put together for
the next conference on reform.
Mr. DOLD. Mr. Goss, we certainly look forward to working
with you in a bipartisan way, because we know that the longer
we wait, the fewer options that we have. And we certainly need
to talk about solvency, because we have too many people that
are relying on Social Security for a vast majority of their
income in retirement.
Thank you. I yield back.
Chairman JOHNSON. I want to thank all the Members who are
here, including my Democrat colleague.
And, you know, Social Security faces serious challenges and
needs serious solutions, not empty words and plans that just
don't add up. I look forward to working with all my colleagues,
and with you too, Mr. Goss, to find ways to make sure Social
Security is a program that our children and grandchildren can
count on, just as seniors and individuals with disabilities do
today.
I want to thank you, again, for our witness, for his
testimony, and also thank all the Members for being here today.
God bless you all.
With that, this Subcommittee stands adjourned.
[Whereupon, at 3:05 p.m., the Subcommittee was adjourned.]
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