[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.
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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.]
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