    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                     SOCIAL SECURITY'S SOLVENCY CHALLENGE:
                   STATUS OF THE SOCIAL SECURITY TRUST FUNDS

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

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON SOCIAL SECURITY

                                     OF THE

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 14, 2017

                                   __________

                              Serial No. 115-SS05

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                       U.S. GOVERNMENT PUBLISHING OFFICE
    33-480                  WASHINGTON : 2019

                          COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
    DEVIN NUNES, California              SANDER M. LEVIN, Michigan
    PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
    DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
    PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
    VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
    ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
    LYNN JENKINS, Kansas                 RON KIND, Wisconsin
    ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
    KENNY MARCHANT, Texas                JOSEPH CROWLEY, New York
    DIANE BLACK, Tennessee               DANNY DAVIS, Illinois
    TOM REED, New York                   LINDA SANCHEZ, California
    MIKE KELLY, Pennsylvania             BRIAN HIGGINS, New York
    JIM RENACCI, Ohio                    TERRI SEWELL, Alabama
    PAT MEEHAN, Pennsylvania             SUZAN DELBENE, Washington
    KRISTI NOEM, South Dakota            JUDY CHU, California
    GEORGE HOLDING, North Carolina
    JASON SMITH, Missouri
    TOM RICE, South Carolina
    DAVID SCHWEIKERT, Arizona
    JACKIE WALORSKI, Indiana
    CARLOS CURBELO, Florida
    MIKE BISHOP, Michigan

                         David Stewart, Staff Director

                     Brandon Casey, Minority Chief Counsel

                                     ______

                        SUBCOMMITTEE ON SOCIAL SECURITY

                          SAM JOHNSON, Texas, Chairman

    TOM RICE, South Carolina             JOHN B. LARSON, Connecticut
    DAVID SCHWEIKERT, Arizona            BILL PASCRELL, JR., New Jersey
    VERN BUCHANAN, Florida               JOSEPH CROWLEY, New York
    MIKE KELLY, Pennsylvania             LINDA SANCHEZ, California
    JIM RENACCI, Ohio
    JASON SMITH, Missouri

                                C O N T E N T S

                                   __________

                                                                       Page

    Advisory of July 14, 2017, announcing the hearing................     2

                                    WITNESS

    Stephen C. Goss, Chief Actuary, Social Security Administration...     5

                            QUESTIONS FOR THE RECORD

    Questions submitted by the Subcommittee on Social Security of the
      Committee on Ways and Means to Stephen C. Goss, Chief Actuary,
      Social Security Administration.................................    30
    Questions submitted by Representative Jim Renacci, of Ohio, to
      Stephen C. Goss, Chief Actuary, Social Security Administration.    31

                           SUBMISSIONS FOR THE RECORD

    Michael G. Bindner, Center for Fiscal Equity.....................    33
    David Barnes, Director of Policy Engagement, Generation
      Opportunity....................................................    39
    Strengthen Social Security Coalition.............................    41

                     SOCIAL SECURITY'S SOLVENCY CHALLENGE:
                         STATUS OF THE SOCIAL SECURITY
                                  TRUST FUNDS

                                  ----------

                             FRIDAY, JULY 14, 2017

                 U.S. House of Representatives,
                           Committee on Ways and Means,
                               Subcommittee on Social Security,
                                                        Washington, DC.

        The Subcommittee met, pursuant to call, at 9:56 a.m., in
    Room 2020, 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) 225-1721
    FOR IMMEDIATE RELEASE
    Friday, July 14, 2017
    SS-05

                     Chairman Johnson Announces Hearing on

                     Social Security's Solvency Challenge:

                   Status of the Social Security Trust Funds

                                  * NEW TIME *

           The new hearing start time is 10:00 a.m. as noted below.
                      All other details remain unchanged.

        House Ways and Means Social Security Subcommittee Chairman Sam
    Johnson (R-TX), announced today that the Subcommittee will hold a
    hearing entitled ``Social Security's Solvency Challenge: Status of the
    Social Security Trust Funds.'' The hearing will focus on the status of
    the Federal Old-Age and Survivors Insurance (OASI) and Federal
    Disability Insurance (DI) Trust Funds and the effects of delaying
    action to address Social Security's future insolvency. The hearing will
    take place on Friday, July 14, 2017 in room 2020 of the Rayburn House
    Office Building, beginning at 10:00 a.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 Friday, July 28, 2017. 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.

        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.

        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.

        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 at
        http://www.waysandmeans.house.gov/

        Chairman JOHNSON. Good morning. I have decided that we are
    going to start the hearing early, and since you all are here,
    is that all right with you?
        Mr. GOSS. That sounds just great.
        Chairman JOHNSON. We all know Social Security provides
    important retirement and disability benefits that millions of
    Americans rely on. Yet, as we will hear again today, Congress
    needs to act so we can be sure that those benefits will be
    there for our children and our grandchildren, just like they
    are for seniors and individuals with disabilities today.
        Today, we will hear from the Social Security Chief Actuary
    about the findings in this year's report. And while the report
    had some good news for the Disability Insurance program, make
    no mistake, Social Security faces serious challenges. The
    Trustees Report tells us the Social Security trust funds will
    be exhausted in 2034. At that point, individuals face across
    the board benefits cuts if Congress doesn't act.
        Once the trust funds are exhausted, Social Security will
    only be able to pay 77 percent of promised benefits. That is
    wrong and simply unacceptable.
        The Trustees also tell us today it would take $12.5
    trillion to make Social Security solvent over the next 75
    years. That is not a little number. And the number gets bigger
    every year. In 2011, when I first held a hearing on a Trustees
    Report, it was $6.5 trillion.
        Fixing Social Security will require tough choices, choices
    that will affect the lives of millions of Americans, and I can
    tell you, they aren't easy choices. And while we all may have
    differing views on how to solve it, not talking about the
    problem won't make it go away. And if we wait until the trust
    funds are exhausted, the choices become more difficult and some
    of the options won't be on the table any longer.
        Last December, I introduced my plan to fix Social Security.
    My good friend from Connecticut, Mr. Larson, also has a plan.
    And I appreciate my friend's recognition that Social Security
    is in trouble and we need to fix it. While our plans are very
    different, they both fix Social Security permanently. I believe
    any plan to fix Social Security should do so permanently.
    Social Security is too important not to give workers and their
    families that certainty. It is not enough to just push out the
    trust funds' exhaustion date by a few years. When Congress
    acts, we need to be sure we finally got Social Security on the
    right track for good.
        In addition, to permanently fix the program, I believe
    Social Security solvency should meet the following principles:
    First, it should modernize Social Security to reflect today's
    workers and their families. Second, it should reward hard work.
    Third, it should protect the most vulnerable. And, lastly, it
    should improve retirement security. Millions of Americans rely
    on this important program now, and millions more pay in with
    the expectation of future benefits.
        Congress has a responsibility to the American people to
    make sure that our children and grandchildren can count on
    Social Security, just like seniors and individuals with
    disabilities do today. We need to take this responsibility
    seriously, and that is why this Subcommittee will continue to
    talk about Social Security's solvency and the cost of delay.
    Americans want, need and deserve nothing less.
        I now recognize Mr. Larson for his opening statement.
        Mr. LARSON. Well, thank you, Mr. Chairman. And we are in
    concurrence. We could give one another's speeches, I think, at
    this particular point. As we like to say often, Congress should
    be about the vitality of ideas. And I commend the Chairman
    because he has been a stalwart in making sure that we address
    this issue. And at this point, his last term in Congress, we
    are especially heartened by the fact of his determination to
    put forward legislation that will meet the test of the 75-year
    requirement.
        While the news that we receive today is better than some
    might have expected, especially on the disability side, it does
    remain, as the Chairman has pointed out, our desire, and I
    believe that to be true of everybody on the Committee, to reach
    a conclusion where we make this solvent into the future for all
    generations. And to the Chairman's point, we do have plans,
    competing, but with the general concept in mind that we want to
    make Social Security solvent into the next century.
        We believe that we have to enhance Social Security along
    the way. We think it is unacceptable for many people,
    especially working women, that they retire into poverty. We
    think it unacceptable that our COLAs have been determined by a
    CPI that doesn't actually reflect what the real costs the
    elderly incur are. We think it unacceptable that we haven't
    really changed Social Security since 1983. It is an insurance
    program. Have any of your insurance premiums gone up since
    1983? Of course they have. And so, we think that it is vitally
    important to make sure, especially with the solvency, that we
    look at this and combine both the old-age and retirement and
    disability together, and then provide the actuarial assistance
    to make sure the program is solvent. We believe to do that, we
    have to increase the contribution to the fund. These are
    difficult choices, as Mr. Johnson has indicated, but if you
    phase that in over 25 years, we would, in essence, be doing
    what should have been done in 1983; indexing this in a way so
    that there were gradually, as it kept pace with the actuarial
    concerns of a population, the modest increases that would be
    necessary. This takes us well beyond the 75-year period by
    following these adjustments, and also, making clear that we
    need to enhance the program on behalf of so many beneficiaries.
        We also believe that many seniors who find themselves in
    the workforce deserve a tax break, and by indexing this
    appropriately from what was done in 1983 to, as Mr. Johnson
    says, what needs to be done today to modernize it, we can
    accomplish that. We have a lot of talent on this Committee, and
    many individuals, as we listen to some of the concerns of
    Social Security, and my colleagues on the other side have been
    leaders in talking about the technological changes that would
    be needed that also could produce from antiquated systems that
    don't provide the best up-to-date information that we could
    have. So I concur with the Chairman. I thank him.
        We are looking forward to having a hearing on this where we
    are able to put the vitality of ideas to the test with both
    competing programs, and what I hope will be a great solution
    for the American people.
        Thank you, Mr. Chairman.
        Chairman JOHNSON. Thank you, Mr. Larson. I appreciate your
    comments. Mr. Schweikert, do you care to make a comment?
        Mr. SCHWEIKERT. I have a dozen questions. Why don't we wait
    until after his testimony?
        Chairman JOHNSON. A dozen questions.
        Mr. SCHWEIKERT. Oh, yeah. I am going to go fast.
        Chairman JOHNSON. Well, we will let you have two. How is
    that? As is customary, any Member is welcome to submit a
    statement for the record. Before we move on to testimony today,
    I want to remind our witness to please limit your oral
    statement to 5 minutes. However, without objection, all the
    written testimony will be made part of the hearing.
        We have one witness today. Seated at the table is Stephen
    Goss, Chief Actuary, Social Security Administration. Mr. Goss,
    welcome to our hearing. Thank you for being here. Please,
    proceed.

                     STATEMENT OF STEPHEN C. GOSS,
             CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

        Mr. GOSS. Thank you very much, Chairman Johnson, Ranking
    Member Larson, Members of the Committee, for the opportunity to
    come and talk to you again about the Social Security Trustees
    Report and the status of these trust funds. As you all know,
    the Social Security Trustees Reports have been coming out from
    the Board of Trustees every single year, starting in 1941,
    updating you on what the status of the program is, and what our
    challenges are in the future to assure that the scheduled
    benefits will be able to be paid to all future generations on a
    timely basis, and in full.
        This year, we project a combined OASI and DI trust funds,
    as Chairman Johnson indicated, to deplete the reserves in 2034,
    at which point there would be continuing income coming in to
    pay thereafter for essentially the indefinite future, about 75
    percent of scheduled benefits, not what is desired and we're
    looking forward to fixing that. At that time, in 2034, if no
    changes were made, we would be in a position where we would
    have 25 percent lower benefits.
        So the options, really, for changes in the future, are
    either to enact changes that will lower benefits by about a
    third, increase revenues to this program by about--I am sorry,
    lower benefits by 25 percent, increase revenues by about one-
    third, or some combination of those two.
        The two most significant changes in this years' report,
    already alluded to by the Chairman and Ranking Member, are,
    first of all, the DI solvency side. We are happy to report that
    on the DI solvency side, we have a 5-year extension of the
    period over which we are projecting benefits to be fully
    payable under the DI program. This follows on from the
    Bipartisan Budget Act of 2015, where we had the reallocation
    that moved us from 2016 out to 2022. Last year's Treasury
    report gave us one more year, and this year's report is taking
    us 5 more years out to 2028. The reasons for this seemingly
    dramatic extension of 5 years is that we have had continuing,
    ever since 2010, declining numbers of applications coming in
    for disability. This is not just for Social Security, but also
    for SSI. It is really quite remarkable. We are studying hard
    all the reasons for this.
        In addition, we have had a continuing lower disability
    incidence rate. A percentage of people who could be applying
    for and receiving disability, we are having fewer people
    actually start to receive. We have actually had declining
    numbers of beneficiaries under the DI program since 2013. The
    absolute number has actually been coming down.
        So what we are doing this year for our projections is,
    obviously, accepting the reality of what has happened lately,
    and projecting out from that on a somewhat more gradual basis,
    not having the very next year, some applications will come
    right back up, but have it take 2, 3, 4 years. What we have
    done, however, with the Trustees, is we still maintained the
    same ultimate disability incidence rates by the end of the 10-
    year period of the short-range projection period. That is
    obviously under review. We are going to have to monitor very
    closely what continues to happen.
        The overall solvency of the OASDI program, we still have
    the reserve depletion date for OASI and DI combined of 2034.
    For the OASI program all by itself, the retirement survivors,
    that is still 2035, the same as last year. We actually have
    higher reserve levels for the OASDI program through about 2033.
    But the actual deficit for the 75-year period, as a whole, has
    risen from 2.66 to 2.83 percent of payroll. And .05 of that,
    about a third of that, is just from the change in the valuation
    period, bringing in one extra year at the end of the 75-year
    period. Some other things that have contributed to that are the
    more recent data, like somewhat lower birth rates, lower
    immigration flows. Offsetting that somewhat, though, is that we
    have had higher death rates, less improvement in death rates
    than even we had been projecting, and many of them projecting
    much more improvement. Ever since 2009, death rates have not
    been improving in this country, as I think all are familiar
    with at this point.
        We also had a little change that we might talk about more,
    accepting a slightly lower level worker productivity for the
    future. I really do want to comment again, because both the
    Chairman and Ranking Member mentioned this. The real factor,
    the reason we are having this big increase over the next 20
    years in the Social Security cost is not disability anymore,
    but it is in the retirement area. The baby boomers are all
    moving up into the retirement age, and not the working ages.
    And they are being replaced at working ages by the lower birth
    rate generations following, which is fundamentally changing the
    age distribution of our population going forward.
        Finally, I really want to say, once again, that it is
    really a joy and a pleasure working not only with you, but
    really, your excellent staffs. You all have amazing staffs and
    amazing staff work. I can't tell you how lucky you are on that,
    but I am sure you realize it. And we really are looking forward
    to working with you and them to assure benefits will continue
    for the over 60 million beneficiaries we have now, the over 170
    million workers contributing, and all future generations.
        Thank you very much.
        [The prepared statement of Mr. Goss follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman JOHNSON. Thank you, sir. I appreciate your
    testimony. And we will now turn to questions. As is customary,
    for each round of questions, I will limit my time to 5 minutes,
    and ask my colleagues to also limit their questioning time to 5
    minutes as well.
        Mr. Goss, with the Disability Insurance trust fund solvency
    date shifting 5 years later, some folks may think we don't need
    to talk about Social Security right now, and can just wait. I
    want to make sure we are all on the same page. Isn't it true
    that the longer we wait the harder it gets?
        Mr. GOSS. Chairman Johnson, you are entirely correct. The
    one thing we know, and I think you alluded to at least some of
    this, is that a perfect example of what the 1983 amendments,
    the last major change we had, where one of the big factors in
    that was increasing the normal retirement age. That was
    implemented with a 17-year delay. So if we enact something
    relatively soon, even if it is not implemented into the future,
    that gives the people who will be affected lots of advanced
    warning, which is a really good thing. It also allows many more
    options to be considered than if we wait until the last minute.
    And it allows us to phase in changes more quickly. So it is all
    good, when acting sooner, if there is some delay to
    implementation.
        Chairman JOHNSON. Thank you. Mr. Goss, one of the big
    headlines from yesterday's report is the Disability Insurance
    trust fund's solvency date doubling the program's years of
    solvency, which seems like a big change. How confident are you
    that we aren't just going to lose this additional solvency a
    few years from now?
        Mr. GOSS. Well, there is no question that there is a risk
    of that, but our estimates on this point, as with all our
    estimates, we would say we are about equally likely to have the
    solvency date extend further as to come back. The tricky part
    of the Disability Insurance trust fund is that we have a
    relatively low level of trust fund reserve, and also, our
    revenue income, even after we get past the tax rate
    reallocation, compared to our cost of the program, are pretty
    close together. So any significant fluctuation of either one of
    those could cause us to deplete sooner or later. But at this
    point, based on the data we have, the 5-year extension looks
    pretty solid. And, if anything, if applications and incidence
    rates stay anywhere near as low as they have been lately, we
    might very well have a greater extension and have need to
    change our ultimate incidence rates going into the future. But
    time will tell. We just wish we had the crystal ball to be able
    to tell you with any certainty.
        Chairman JOHNSON. Well, thank you. We often hear that if we
    would just raise Social Security taxes, it will solve all of
    Social Security's problems. But it is important for folks to
    understand the facts. Social Security earnings up to a certain
    amount, called the taxable maximum, are subject to payroll
    taxes. What is the taxable maximum this year?
        Mr. GOSS. For this year, 2017, the tax maximum is $127,200.
    So anybody making more than that----
        Chairman JOHNSON. If the taxable maximum were raised to
    cover 90 percent of earnings, what would the taxable maximum be
    this year?
        Mr. GOSS. To cover 90 percent, it would be about double
    that, right around $250,000, to just a little bit less.
        Chairman JOHNSON. Some have suggested we should get rid of
    the taxable maximum, and instead, subject all earnings to
    payroll tax. Mr. Goss, if all earnings were subject to payroll
    tax, would Social Security be solvent?
        Mr. GOSS. It would be solvent longer. It would not be
    solvent sort of into the indefinite future.
        Chairman JOHNSON. Okay. So the answer is no. At what point
    would costs once again exceed income?
        Mr. GOSS. If we were to enact a change with no--let's see--
    if we were to enact a change with no benefit credit for the
    extra, we would actually solve about 80 percent of the long
    term, and we would be good to well into the 2060s for the
    solvency.
        Chairman JOHNSON. Into the 20 what?
        Mr. GOSS. Into the 2060s. Let's see.
        Chairman JOHNSON. Really?
        Mr. GOSS. No, I am sorry. If we gave no benefit credit at
    all and taxed all income, our solvency date would move from
    2034 to 2083. Now, if we give benefit credit tax, if we were to
    tax all earnings and then include in our computation of
    benefits the extra earnings that were going to be taxed, then
    we would extend the solvency date out to 2067 for the program
    as a whole.
        Chairman JOHNSON. Out to 20 what?
        Mr. GOSS. Out to 2067.
        Chairman JOHNSON. Yeah. I was told 2026.
        Mr. GOSS. Pardon?
        Chairman JOHNSON. I was told 2026.
        Mr. GOSS. Oh. Well, 2026 would be the--would be the date at
    which the annual income would then start to fall below the
    annual outgo, but we would still have significant reserves at
    that point that would carry us for solvency purposes out to
    2067, so you are exactly right. So on a cash-flow basis, the
    point at which income would again fall below our cost of paying
    all the benefits, which----
        Chairman JOHNSON. So the income would reduce to where it
    wouldn't cover what we are doing?
        Mr. GOSS. Right. The current income would not be
    sufficient. We would have to draw on the reserves.
        Chairman JOHNSON. So even if we get completely rid of the
    taxable maximum, the program will be running cash flow deficits
    within the next decade. Is that true?
        Mr. GOSS. That is correct.
        Chairman JOHNSON. That sure doesn't get us much. As I said
    before, we clearly can't tax our way to solvency. Mr. Larson,
    do you care to question?
        Mr. LARSON. Oh, absolutely. Thank you, Mr. Chairman. And
    thank you, Mr. Goss. Usually, when I go out to do town halls, I
    carry with me two things: The actuary report on the bill that
    we have submitted, and a Starbucks. And I do so to make a
    point. The first point I make to people, and I think you can
    confer on this. The Social Security is an insurance plan. It is
    not an entitlement. It is an insurance plan. It is an insurance
    plan that you are assessed through FICA. FICA is the Federal
    Insurance Contribution Act. Whose contribution? Yours. The last
    time insurance premiums went up in Social Security was in 1983.
    Is that correct?
        Mr. GOSS. That is correct.
        Mr. LARSON. So has anyone in this audience or anywhere in
    the country's insurance not gone up on actuarial assumption
    since 1983? And the answer, of course, is, of course they have
    gone up, because they keep pace with the assumptions and
    changes that are ongoing, except for Social Security. So had, I
    believe, our predecessors indexed this system appropriately, we
    wouldn't be having this discussion, it would have been taking
    care of itself incrementally.
        So, I ask you, as I go out to these town halls, and you
    have done the analysis on our bill, can you confirm that our
    bill doesn't have any cuts in terms of people's benefits?
        Mr. GOSS. That is correct.
        Mr. LARSON. In fact, we increase people's benefits because
    they also have not kept pace. In fact, we find more people
    retiring into poverty, unfortunately, most of them women,
    because of their time in the workforce, and they--or because
    for every dollar their marital counterparts receive, they
    receive $0.77. Is that accurate?
        Mr. GOSS. No question, but that all wage rates are lower
    for women.
        Mr. LARSON. Also, we wanted to make sure with our program
    that we would offer middle income tax relief for seniors. And I
    know this will interest my colleagues. How is it that you have
    tax relief for seniors? Well, because, again, we haven't made a
    change since 1983. In 1983, we said, if you are single and
    making more than $25,000, your Social Security is taxed. And if
    you are a married couple, then it is $32,000. So we changed
    that to $50,000 and $100,000, thereby giving 11 million seniors
    a tax break. So we think that these are all important things,
    and the differences--and I don't think they are big
    differences, actually. I understand clearly the desire on both
    sides to make sure that the Nation's insurance program is
    solvent beyond 75 years, which, again, by your report, the bill
    that we have submitted does. Mr. Johnson's bill does that, as
    well. It takes--it makes it solvent beyond the 75-year period.
    That is the position we need. The differences are that we
    believe that with a modest tax, and we believe that you should
    increase the fund by 1 percent. You said it very well at the
    outset when you said, well, look, here is your alternatives.
    You can make cuts by about a third, I believe you said.
        Mr. GOSS. By about a quarter.
        Mr. LARSON. By about a quarter.
        Mr. GOSS. Revenue by about a third.
        Mr. LARSON. Revenue by a third.
        Mr. GOSS. Or some of each.
        Mr. LARSON. Or some of each. So we believe that especially
    with so many people finding themselves in the position where
    Social Security is their only retirement--the only retirement
    they have. Now, we can lecture them, and say, you should have
    been wiser. But tell that to people who saw in 2008 their
    401(k)s become 101(k)s through no fault of their own. Yet, the
    one program that isn't going to fail them, that is there, and
    never missed a payment, is Social Security.
        So I believe, with the intelligence we have on this
    Committee, that we have an opportunity to solve this. I thank
    the Chairman, because Rich Neal pointed out to me the other
    day, we have not--and Mr. Johnson says this all the time--
    really taken this on as a Committee in more than 25 years. We
    have postponed any kind of difficult decision as it relates to
    this. And now, as you pointed out, the baby boomers are upon
    us. I think we have a moral obligation to take action, whatever
    that outcome is, whatever this Committee thinks the best
    alternative is, we ought to have that competition, and we ought
    to have a vote. And I thank you, Mr. Chairman.
        Chairman JOHNSON. Thank you, sir. Mr. Schweikert, you are
    recognized.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman. And it is
    actually--don't make fun of me--it was this hearing that was
    one of my primary reasons I wanted to be on Ways and Means. And
    I have a dozen different things that are bouncing in my head,
    and then you always get the things from your really smart staff
    that say, don't ask that.
        But on your team, do you actually have a demographer,
    someone that basically does population statistics?
        Mr. GOSS. We do indeed. We have 57 folks in our office; we
    have about six or seven economists; in addition to actuaries;
    and we have four or five demographers full-time, all the time,
    working on demography.
        Mr. SCHWEIKERT. Would you ever allow me to geek out with
    one of them? There are a couple things in the numbers that have
    always bothered me. And part of this, actually, is where
    everyone on the Committee has been, trying to understand with
    the crash and the birth rates--and you saw what the report
    showed from this first quarter of the year, we have hit an all-
    time low, and a cascade effect of those birth rates for future
    generations. And I am curious because in sometimes reading over
    your documents, I am not sure I am seeing the stressing of
    today's birth rate--if it were to hold in sort of the long-term
    numbers. And I just want to see that is being properly modeled.
        Mr. GOSS. We would love to--we have never been called geeks
    before. I don't think--we would love to geek out.
        Mr. SCHWEIKERT. Oh, I mean that with love.
        Mr. GOSS. We do have a sensitivity section in the Trustees
    Report that actually explores, what if the total fertility rate
    stayed low forever?
        Mr. SCHWEIKERT. Will you ever allow someone to have your
    sensitivity analysis on--I don't know what program you write
    in, but to make it available for one of us who would just like
    to play with it online and move some numbers up and down,
    because we have had discussions here of--as we are doing tax
    reform and other things, would any of those have any influence
    on population growth, or even immigration reform, and the
    ability to also see the cascade benefits or stresses from that?
        Mr. GOSS. Oh, absolutely. The models are pretty
    complicated. We would be really happy to sit down with you,
    your staff, anybody, and work through the implications. We have
    scored comprehensive immigration reform plans. There was one in
    the Senate a couple years ago.
        Mr. SCHWEIKERT. But that was in the past 10 years when you
    did that scoring, wasn't it?
        Mr. GOSS. It has been awhile. It was 2011, I think, maybe.
    But we have all these cascading effects built in.
        Mr. SCHWEIKERT. I actually have that in one of my binders.
    Now, can I ask something that is a little uncomfortable. On the
    DI numbers, and please forgive me, because I was doing this
    partially with your information, and partially on my own, the
    mortality statistics on some of the male population who were
    enrolled in DI, how much of the extension and the longevity is
    because we have so many of our brothers, particularly, killing
    themselves?
        Mr. GOSS. That is a really good question. We do have built
    in to our disability projections, mortality is one of the ways
    in which people cease receiving benefits, of course.
        Mr. SCHWEIKERT. But isn't that the point where you saw some
    real noise between last year and this year?
        Mr. GOSS. We saw some noise. It is relatively modest. We
    have been seeing, ever since 2009, small increments of death
    rates being higher than we have been projecting, and we have
    been modifying for that. Those have had very small effects. For
    the program as a whole, I think it was on the order of .03 or
    .04 percent of payroll.
        Mr. SCHWEIKERT. So that is about half of what I thought.
        Mr. GOSS. So for DI it would be much less than that.
        Mr. SCHWEIKERT. Good. It was just one of those--you see
    some of the statistics of the population of the current
    mortality rates, and then sometimes you will come across
    another number set that says how many of those were actually
    enrolled in DI programs. And we have been struggling, saying,--
    is that in the noise? Okay. And I am trying to watch my time.
    On big Social Security, 176 million workers in our society, 60
    million receiving benefits today. So our ratio now is 2.9
    workers?
        Mr. GOSS. Roughly, 172.
        Mr. SCHWEIKERT. Yeah, but 2.9 workers for every
    beneficiary. But, also, even if I take your current number on
    number of years left in the trust fund, so if I am 56, I should
    expect if I take my retirement at, what, 72, I am getting a 25
    percent discount unless we do our job and change the numbers?
        Mr. GOSS. True. But we have total confidence in changes,
    because we never hit that point ever in the past.
        Mr. SCHWEIKERT. But the hard math as of your report today--
    is a 56-year-old or younger----
        Mr. GOSS. Uh-huh.
        Mr. SCHWEIKERT [continuing]. When they go to retirement and
    pull their max benefits, they would be receiving a 25 percent
    reduction in that benefit?
        Mr. GOSS. Yes.
        Mr. SCHWEIKERT. So just to sort of put it in perspective--
    we have a long on-ramp and we need to start getting on that
    freeway now.
        Mr. GOSS. Exactly.
        Mr. SCHWEIKERT. And the beauty of this is whether you would
    be on the right or the left functionings math, with a number of
    levers. This is something we can all do together. Just one
    other idiosyncrasy, could you tell me the formula, just the--of
    the STIF that is paid for the special treasury bills back to
    the trust funds?
        Mr. GOSS. Ah, yes. So every penny that comes into the
    system is required to be invested immediately into interest-
    bearing securities, backed by the full faith and credit of the
    U.S. Government. There are a couple of options, we could
    actually buy marketable securities. Lately, we have been
    getting special issues to the trust fund. Any special issue to
    the trust fund that is provided in a given month, the coupon
    rate on that is precisely what Treasury measures as the average
    effective market yield on all outstanding marketable treasury
    securities as of the prior month, with the remaining duration
    or call or maturity of 4 years or more.
        Mr. SCHWEIKERT. Four years or more?
        Mr. GOSS. Four years or more, so it is a medium- to long-
    term yield rate. The actual effective market yield is--well,
    right now----
        Mr. SCHWEIKERT. Because a year ago----
        Chairman JOHNSON. The gentleman's time is expired. Mr.
    Buchanan, you are recognized.
        Mr. SCHWEIKERT. Do you know what your number is right now?
        Mr. GOSS. The number--I believe it is in--well, for the new
    issues, I believe it is in the 2s.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman. Sorry for going
    over.
        Chairman JOHNSON. Mr. Buchanan, you are recognized.
        Mr. BUCHANAN. Thank you, Mr. Chairman. I appreciate you
    coming back. I have been on the Committee for awhile, so we
    always kind of like your updates. I am from Sarasota,
    Bradenton, Florida. We represent, probably, I think, the top
    two or three most seniors of any district in the country. And,
    of course, Florida in general. I am concerned about all of the
    seniors, but I also am concerned about our children and
    grandchildren. I have four grandchildren under 3, so I am very
    concerned. I am glad we are looking out 75 years. But let me--
    and I do want to--my colleague had mentioned, there is a lot of
    truth, and I see it every day--I did a town hall the other day.
    A third of Americans, when they get 65, I have heard, you know,
    don't have anything but Social Security and Medicare. And
    another third have something, but not enough. And then another
    third got lucky or whatever. So that is why these programs--and
    I agree--are so critical that we do the right thing.
        I want to ask, because this is maybe, you know, a more
    sensitive issue for some people, but the reality--and these are
    things--I do a lot of town halls and these are things that I
    get. The trust fund, in the 1960s, they took all the money out
    of it, so there is an IOU from the Federal Government. Is that
    correct?
        Mr. GOSS. I believe for the entirety of the existence of
    the program, it has been required that we invest.
        Mr. BUCHANAN. Let me ask it a different way. How much money
    is there ideally, in theory, in the trust fund?
        Mr. GOSS. It depends on the way in which you formulate the
    loss the way in which it should be funded.
        Mr. BUCHANAN. My understanding, there is nothing in the
    trust fund other than an IOU from the Federal Government
    because they used those funds. It is my general understanding
    that in the 1960s, that is kind of what I hear. My concern is,
    and I am sure you don't take a look at that, when you look at
    the viability of Social Security to 2032 or 2034, you are
    taking into account the ability of the Government to be able to
    do its part and pay back the trust fund. Is that correct?
        Mr. GOSS. Absolutely.
        Mr. BUCHANAN. So when you are running the last 10 years,
    there is $10 trillion worth of debt in deficits. I have been
    pushing since I have been here, a constitutional balanced
    budget amendment, like 49 out of 50 governors have, that simply
    says you don't spend more than you take in. But if you look 10
    years ago, when I first got here, it was almost $9 trillion in
    debt. Today we are $20 trillion in debt. So when you look at
    the viability of Social Security, you are counting on the
    ability of the Federal Government to meet its obligations. Is
    that correct?
        Mr. GOSS. That is correct.
        Mr. BUCHANAN. Okay. I just want to make sure that is on the
    record. Because I think it is something we have to deal with,
    especially when you look at--and there is plenty of blame to go
    around. This isn't a Democrat or Republican issue, but I think
    it should be something that gets looked at. As a business
    person and the guy that was on bank boards, the ability to pay
    is something we look at seriously.
        Let me get down to one basic--a couple of basic issues. On
    COLA, I get asked by a lot of the seniors, I guess we received
    a little bit of an increase, .3 of 1 percent, the year before,
    nothing. And then there were some increases over the years. The
    argument I hear is, look, our costs in the last couple of years
    have gone up. We are not seeing anything extra in COLA. How are
    you guys figuring this COLA? So maybe you can comment.
        So last year was little or nothing, and the year before was
    nothing in terms of COLA. Where are we at today, or how can you
    explain what has taken place in the last couple of years?
        Mr. GOSS. Well, the latest projection, and very uncertain,
    of course, is for the next COLA, December of this year, of 2.2
    percent. We will see. We determine the COLA based straight up
    on the basis of the material that comes from the Bureau of
    Labor Statistics, they do the survey of urban wage earners and
    clerical workers, a big survey across the country, of how much
    the price of the market basket of things they buy changes over
    time. And when the price of things they buy goes down, as it
    did two COLAs ago, we ended up not having any adjustment. Last
    year we had a small adjustment because the price came back to
    somewhat higher than it had been 2 years prior.
        Mr. BUCHANAN. What are you projecting this year?
        Mr. GOSS. We are projecting this year 2.2 percent.
        Mr. BUCHANAN. So is that fair, if seniors ask me, the
    projection is 2.2, is there a fairly good chance that is going
    to be somewhat a reality?
        Mr. GOSS. Probably somewhere between 1\1/2\ and 2\1/2\
    would be a good guess, because there is a lot of uncertainty.
    And the thing that has really driven the volatility of prices
    in this market basket in recent years is the price of energy,
    in particular, petroleum products. And we continue to see lots
    of fluctuations of that every time we go to the gas pump. So
    that has really been kind of the issue. But we are expecting on
    the order of a couple of percent for this next upcoming COLA.
        Mr. BUCHANAN. Thank you, Mr. Chairman. I yield back.
        Chairman JOHNSON. Thank you. Mr. Pascrell, you are
    recognized.
        Mr. PASCRELL. Thank you, Mr. Chairman. Thanks for putting
    this together and being one of the pioneers to say, let's
    prepare for the future.
        Chairman JOHNSON. Thank you.
        Mr. PASCRELL. I think that is important. I have traveled
    with Brother Larson in many communities to talk about the
    legislation that my friend from Connecticut has talked about.
    But I am alarmed, Mr. Chairman, I am alarmed at the fact that
    the budget that was presented this year, The New Foundation for
    American Greatness, that was the title of the book which
    contained the budget, had a $64 billion cut in disability,
    Social Security Disability. So I know that you don't directly
    deal with that, but that was alarming to me, in view of us
    trying to package something. When they say we have 16, 17 years
    to do this, but I don't know if that is accurate or not. But
    about the COLA, that we can talk about. And what we need to
    understand, in dealing with Social Security issues, is that
    COLA is very important for seniors who live on fixed income.
        Now, that COLA should represent, to me, the actual expenses
    that seniors have to put up with day in and day out. Instead,
    you know, there are so many exceptions to the rule. And it is
    so antiquated, the formula that we use. We never capture what
    that COLA is because we are afraid to deal with the reality of,
    well, how do we address that in terms of cutting checks for
    people every month? Now, they paid into it; I paid into it; you
    have paid into it, and we want a fair return at the end. The
    legislation that the gentleman from Connecticut has talked
    about reflects it. The legislation is right on concerning how
    we will adjust that COLA to be more realistic about what
    seniors get in that check that was cut, wherever it was cut.
    And will you agree with me?
        Mr. GOSS. I believe Mr. Larson's bill would change to the
    CPIE for experimental----
        Mr. PASCRELL. Right.
        Mr. GOSS [continuing]. Some people say. It is based on 62-
    and-over population's market basket approach.
        Mr. PASCRELL. Let me ask you this, Mr. Goss. First of all,
    is Social Security bankrupt?
        Mr. GOSS. By any normal meaning of the word, I think we
    have to say no. As Chairman Johnson and others have said, even
    if we reach the point of reserve depletion, we still will be
    able to pay initially 77, more or less, on the order of----
        Mr. PASCRELL. And it appears from those same numbers that
    we are not on the verge of bankruptcy. No, we are not bankrupt
    today, but we are going to be bankrupt tomorrow. Now, we can't
    say that right now. Has Congress needed to shore up Social
    Security, the trust fund in the past?
        Mr. GOSS. Numerous times, and it has always stepped up.
        Mr. PASCRELL. Have the actions that the Congress took in
    the past to shore up the trust fund, we hear a lot about that,
    resulted in any substantial benefit cuts?
        Mr. GOSS. It has at times. The principal benefit reduction
    was actually back in the 1977 amendments when there was
    actually a need for a major change in the benefit formula, but
    there were in the 1983 amendments, there was a mix between
    additional revenue and----
        Mr. PASCRELL. Right. Has Social Security ever failed to pay
    anyone's benefits?
        Mr. GOSS. Social Security has never reached the point of
    reserve depletion, and failed to pay the scheduled benefits on
    a timely basis.
        Mr. PASCRELL. What I think your answers are, and I will be
    very quick, Mr. Chairman. It says, to me, that Congress will
    need to take action to extend the trust fund solvency, but we
    do not need to cut benefits or substantially restructure the
    program to do this. Would you agree with that?
        Mr. GOSS. It is certainly possible to extend the solvency
    without benefit reductions.
        Mr. PASCRELL. Mr. Chairman, thank you, and good luck on
    your endeavor.
        Chairman JOHNSON. Thank you, sir. Mr. Rice, you are
    recognized.
        Mr. RICE. Thank you, Mr. Chairman. They called for a vote,
    so I am going to be quick. There are a whole lot of major
    issues that are facing this country that have been over our
    heads for a long time, and I believe are holding our economy
    back: tax reform, healthcare, infrastructure, but none more
    important to more people than Social Security. It affects such
    a large swath of our population, it is so critical to their
    everyday life.
        One question was referred to earlier that I get all the
    time, but I want you to state this in more simple terms for the
    folks back home. I frequently hear, well, Social Security would
    be all right if the Federal Government hadn't robbed the Social
    Security bank. In fact, the money--the money comes in, and it
    is in a trust fund--and I always respond, the only problem with
    Federal trust funds is if they are not funded, you can't trust
    them. That being said, you have to invest that money, you just
    don't leave it in the closet, you have to invest it. When
    dealing with Social Security, you want to invest it in
    something that is rock solid, like something backed by the full
    faith and credit of the U.S. Government, so you loan the money
    to the government. Now, is the government cheating Social
    Security in any way in that transaction?
        Mr. GOSS. The government--there is no way we could say the
    government is cheating Social Security. Every penny that has
    ever gone to the trust fund, when it is needed, it comes back
    with interest.
        Mr. RICE. And I have looked at the rate that the government
    pays Social Security on that trust fund, and in the last
    decades, that rate has averaged higher than the government pays
    on the 10-year treasury bill. Can you confirm that?
        Mr. GOSS. The rate--the whole things we have in the trust
    fund, many of them were issued years ago when the rates were
    actually higher. So we retain those bonds until we redeem them
    at the higher rate. The average yield is higher than the
    current new issue rate.
        Mr. RICE. So the government, in borrowing money from Social
    Security, could borrow it from other places cheaper. The
    government could go and borrow that money on the market for a
    10-year treasury bill cheaper than the rate it is paying to
    Social Security.
        Mr. GOSS. Well, actually, for new money to be borrowed
    today from the trust funds or from the market, they pay exactly
    the same rate for new money that is being borrowed. For older
    existing bonds, they are paying us possibly a higher rate. But
    if somebody in the populace is holding a marketable treasury
    that is 10 years old, they will be getting a higher rate also.
        Mr. RICE. Just to be crystal clear, I don't want to
    complicate this for my folks back home: The rate that the
    government has paid to the Social Security trust fund, to
    borrow that money from the Social Security trust fund, is
    higher for the last two decades than what the government pays
    on the 10-year treasury bill?
        Mr. GOSS. I respectfully would suggest that the rate of any
    new bond issued is issued with a coupon rate exactly according
    to what the current effective market yield is.
        Mr. RICE. That is new bonds. But on the whole pile, the
    average rate----
        Mr. GOSS. The average rate for existing bonds that we are
    holding is higher than the current effective market yield for
    bonds.
        Mr. RICE. Thank you, sir.
        Chairman JOHNSON. As we have heard today, even with the
    improvements in the solvency of Disability Insurance, Social
    Security faces serious challenges. Americans deserve a fact-
    based conversation about the tough choices necessary so that
    Social Security is a program our children and grandchildren can
    count on, just as seniors and individuals with disabilities do
    today.
        I look forward to continuing this conversation and working
    with all my colleagues to strengthen Social Security. Thank you
    to our witness for his testimony. Thank you, also, to our
    Members for being here. With that, the Subcommittee stands
    adjourned.
        [Whereupon, at 10:43 a.m., the Subcommittee was adjourned.]
        [Questions for the Record follow:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                     [all]