[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 
individual or organization may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
written comments for the hearing record must follow the appropriate 
link on the hearing page of the Committee website and complete the 
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for 
which you would like to make a submission, and click on the link 
entitled, ``Click here to provide a submission for the record.'' Once 
you have followed the online instructions, submit all requested 
information. ATTACH your submission as a Word document, in compliance 
with the formatting requirements listed below, by the close of business 
on Wednesday, July 6, 2016. For questions, or if you encounter 
technical problems, please call (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any materials submitted for the printed record, 
and any written comments in response to a request for written comments 
must conform to the guidelines listed below. Any submission not in 
compliance with these guidelines will not be printed, but will be 
maintained in the Committee files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be submitted in 
a single document via email, provided in Word format and must not 
exceed a total of 10 pages. Witnesses and submitters are advised that 
the Committee relies on electronic submissions for printing the 
official hearing record.
      
    2. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. The name, 
company, address, telephone, and fax numbers of each witness must be 
included in the body of the email. Please exclude any personal 
identifiable information in the attached submission.
      
    3. Failure to follow the formatting requirements may result in the 
exclusion of a submission. All submissions for the record are final.

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman JOHNSON. Good 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.]
    [Submissions for the Record follow:]
    
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