    [House Hearing, 116 Congress]
    [From the U.S. Government Publishing Office]

                   KEEPING OUR PROMISE TO AMERICA'S SENIORS:
                    RETIREMENT SECURITY IN THE 21ST CENTURY

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

                                    HEARING

                                   BEFORE THE

                            COMMITTEE ON THE BUDGET
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION
                                   __________

                 HEARING HELD IN WASHINGTON, D.C., MAY 15, 2019
                                   __________

                                Serial No. 116-8
                                   __________

               Printed for the use of the Committee on the Budget

                      [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                           Available on the Internet:
                                www.govinfo.gov

                                  ___________

                        U.S. GOVERNMENT PUBLISHING OFFICE

    37-505                     WASHINGTON : 2019

                            COMMITTEE ON THE BUDGET

                      JOHN A. YARMUTH, Kentucky, Chairman
    SETH MOULTON, Massachusetts,         STEVE WOMACK, Arkansas,
      Vice Chairman                        Ranking Member
    HAKEEM S. JEFFRIES, New York         ROB WOODALL, Georgia
    BRIAN HIGGINS, New York              BILL JOHNSON, Ohio,
    BRENDAN F. BOYLE, Pennsylvania         Vice Ranking Member
    RO KHANNA, California                JASON SMITH, Missouri
    ROSA L. DELAURO, Connecticut         BILL FLORES, Texas
    LLOYD DOGGETT, Texas                 GEORGE HOLDING, North Carolina
    DAVID E. PRICE, North Carolina       CHRIS STEWART, Utah
    JANICE D. SCHAKOWSKY, Illinois       RALPH NORMAN, South Carolina
    DANIEL T. KILDEE, Michigan           CHIP ROY, Texas
    JIMMY PANETTA, California            DANIEL MEUSER, Pennsylvania
    JOSEPH D. MORELLE, New York          WILLIAM R. TIMMONS IV, South
    STEVEN HORSFORD, Nevada                  Carolina
    ROBERT C. ``BOBBY'' SCOTT, Virginia  DAN CRENSHAW, Texas
    SHEILA JACKSON LEE, Texas            KEVIN HERN, Oklahoma
    BARBARA LEE, California              TIM BURCHETT, Tennessee
    PRAMILA JAYAPAL, Washington
    ILHAN OMAR, Minnesota
    ALBIO SIRES, New Jersey
    SCOTT H. PETERS, California
    JIM COOPER, Tennessee

                               Professional Staff

                          Ellen Balis, Staff Director
                      Dan Keniry, Minority Staff Director

                                    CONTENTS

                                                                       Page
    Hearing held in Washington D.C., May 15, 2019....................     1

        Hon. John A. Yarmuth, Chairman, Committee on the Budget......     1
            Prepared statement of....................................     4
        Hon. Steve Womack, Ranking Member, Committee on the Budget...     6
            Prepared statement of....................................     8
        Hon. John B. Larson, Member, a Representative in Congress
          from the State of Connecticut..............................    11
            Prepared statement of....................................    18
            letter submitted for the record..........................    21
        Melissa M. Favreault, Ph.D., Senior Fellow, Urban Institute..    46
            Prepared statement of....................................    49
        Anne Marie Cook, President and CEO, Lifespan of Greater
          Rochester..................................................    78
            Prepared statement of....................................    80
        James Dale Hanner, Secretary-Treasurer, North Carolina
          Committee to Protect Pensions..............................    88
            Prepared statement of....................................    90
        Andrew G. Biggs, Ph.D., Resident Scholar, American Enterprise
          Institute..................................................    93
            Prepared statement of....................................    95
        Hon. Janice D. Schakowsky, Member, Committee on the Budget,
          article submitted for the record...........................   106
        Hon. Pramila Jayapal, Member, Committee on the Budget, report
          submitted for the record...................................   135
        Hon. Sheila Jackson Lee, Member, Committee on the Budget,
          statement submitted for the record.........................   231
        Hon. Chip Roy, Member, Committee on the Budget, questions
          submitted for the record...................................   237
        Answers to questions submitted for the record................   239

                             KEEPING OUR PROMISE TO
    		     AMERICA'S SENIORS: RETIREMENT
                         SECURITY IN THE 21ST CENTURY

                                  ----------

                            WEDNESDAY, MAY 15, 2019

                              House of Representatives,
                                       Committee on the Budget,
                                                       Washington, D.C.
        The Committee met, pursuant to notice, at 10:05 a.m., in
    Room 210, Cannon House Office Building, Hon. John A. Yarmuth
    [Chairman of the Committee] presiding.
        Present: Representatives Yarmuth, Moulton, Schakowsky,
    Morelle, Scott, Peters, Horsford, Omar, Jackson Lee, Jayapal;
    Womack, Flores, Stewart, Meuser, Hern, Timmons, Burchett,
    Johnson, Crenshaw, and Woodall.
        Chairman Yarmuth. The hearing will come to order. Before we
    begin I know many of us in the Budget Community are mourning
    the loss of Alice Rivlin, the founding director of the
    Congressional Budget Office, whose groundbreaking career also
    included stints as the director of OMB and Vice Chair of the
    Federal Reserve Board, among many other roles. Alice was widely
    respected and revered by Democrats and Republicans alike for
    her work and vision, her warmth and compassion, and her
    contributions will continue to help frame our debates for years
    to come. I think I speak for everyone in this room when I say
    that Alice Rivlin will be deeply missed, and that we send our
    condolences to her family and loved ones.
        But now good morning, and welcome to the Budget Committee's
    hearing on Keeping our Promise to America's Seniors: Retirement
    Security in the 21st Century. Today's hearing will include two
    panels. I would like to thank our great panelists for being
    here with us today.
        On our first panel, we will be hearing brief remarks from
    our friend, the gentleman from Connecticut, Mr. Larson,
    Chairman of the Social Security Subcommittee for House Ways and
    Means, and for our second panel we will be hearing from Dr.
    Melissa Favreault, senior fellow at the Urban Institute; Mr.
    James Dale Hanner, secretary treasurer of the North Carolina
    Committee to Protect Pensions; Dr. Andrew Biggs, resident
    scholar at the American Enterprise Institute. And I would like
    to ask Mr. Morelle to note our final panelist, who I understand
    is joining us today from Mr. Morelle's district.
        Mr. Morelle, I yield to you.
        Mr. Morelle. Yes. Thank you, Mr. Chairman. I am so pleased
    to welcome to this esteemed Committee my dear friend, Anne
    Marie Cook. Anne Marie serves as the president and CEO of
    Lifespan of Greater Rochester, a local not-for-profit that
    provides critical support services for the aging population in
    my district and across New York State. For over two decades she
    has helped older residents and their caregivers to navigate
    long-term care options, help with health insurance options
    under Medicare, assist in elder abuse situations, and so much
    more.
        I am truly grateful for her friendship, for her
    partnership, and her dedication to ensuring a high quality of
    life for those in their later years. Our Committee will, no
    doubt, benefit greatly from her knowledge and expertise in
    today's testimony.
        And I want to thank you for giving me the opportunity to
    introduce Anne Marie to the Committee.
        Chairman Yarmuth. Thank you, Mr. Morelle.
        Once again I would like to welcome Chairman Larson and our
    witnesses. Thank you all for joining us. And now I yield myself
    five minutes for an opening statement.
        As we know, keeping our promise of secure retirement to
    American workers while maintaining our nation's fiscal health
    is one of our greatest policy challenges. Social Security is
    facing a shortfall. Traditional employer-sponsored pensions are
    disappearing. And due to stagnant wages and income inequality,
    far too many Americans cannot afford to save for retirement.
    Americans are also living longer. Our birth rate is declining,
    and our population is skewing older.
        This perfect storm of changing demographics and its
    inescapable mathematical reality threaten to upend the promise
    of a secure retirement for millions of Americans. And the
    problem grows more pressing by the day. By 2035, Americans aged
    65 years and older will outnumber children under the age of 18
    for the first time in history. More than 63 million Americans
    are already receiving Social Security benefits and every day an
    additional 10,000 baby boomers reach eligibility.
        As a result, this bulwark program is facing serious long-
    term funding shortfalls, with promised benefits facing cuts as
    high as 20 percent as soon as 2035 if Congress does not act.
    Cuts of this level would be devastating for the individuals who
    rely on Social Security. Since its inception in 1935, the
    program has been a pillar of retirement security. But it was
    never meant to be seniors' primary source of income. However,
    today, half of seniors receive at least half of their income
    from Social Security, and one-fifth receive 90 percent or more
    of their income from the program.
        But it is not just those who rely on Social Security who
    are in jeopardy. In today's unreliable retirement landscape,
    even those hard-working Americans who have a pension are now at
    risk of losing their hard-earned benefits. In my home state of
    Kentucky, pensions for teachers and other state employees are
    under attack by our governor, who believes the people who
    educate our children are ``selfish'' for wanting the retirement
    they earned. Multi-employer pension programs throughout the
    country are unable to pay out at their promised rates. I have
    met with truck drivers from my district whose pensions will be
    cut by 60 percent or more if Congress doesn't step in.
        These are all American workers who planned for their
    retirement and contributed to their pensions instead of taking
    home more pay. Now, after working for decades, their planned
    retirements may vanish.
        However, the causes of this problem go even deeper than
    changing demographics and retirement programs. According to
    Federal Reserve economists, on average, the bottom 90 percent
    of American households have been unable to recover the wealth
    they lost during the Great Recession. Wage gaps and systemic
    income inequality are unfairly capping lifetime earnings and
    savings opportunities for millions of American workers,
    particularly women and minorities. White retirees are almost
    twice as likely as black and Latino retirees to have private
    retirement savings, and are significantly more likely to have
    savings through an IRA or a 401(k) retirement account. Longer
    life expectancies and gender pay disparities make women more
    economically vulnerable than men, with women aged 65 and over
    being 80 percent more likely to be impoverished than their male
    counterparts.
        Meeting this fiscal challenge will require a clear-eyed
    acceptance of the demographic realities and a willingness to
    responsibly raise more revenue over time. Immigration reform
    could make significant inroads in alleviating some of our
    demographic challenges. It is also likely the only realistic
    solution for addressing lower birth rates, which slow the
    growth of our labor force and economy and put even greater
    pressure on federal budgets.
        I hope to discuss immigration today, but we will definitely
    review it in detail at an upcoming hearing on the issue.
        It is also important to note that the Trump tax cuts
    enacted last year have made this situation more complicated.
    These tax cuts blew a massive $1.9 trillion hole in our
    deficits. As a result, our Republican colleagues have called
    for extreme cuts to insurance programs, including Social
    Security and Medicare. These proposed cuts and the entire Trump
    budget were dead on arrival to Congress, thankfully, but they
    highlight how far apart Democrats and Republicans are when it
    comes to protecting Social Security and earned benefits.
        Congress has a responsibility to act and honor the promise
    of retirement security. We have a long way to go before we can
    enact the smart and multifaceted approaches that can close the
    retirement gap without sacrificing our nation's fiscal health,
    or harming current or future retirees. It is my hope that this
    hearing will help advance that process.
        Once again I thank our witnesses for helping us with the
    discussion, and I look forward to their testimony.
        [The prepared statement of Chairman Yarmuth follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Yarmuth. I now yield five minutes to the Ranking
    Member, Mr. Womack.
        Mr. Womack. I thank the Chairman and appreciate the
    opportunity to be here today, and to hear from our witnesses.
        Strengthening retirement security for today's seniors and
    families, as well as future generations, is a goal that I think
    we all share. The question is on how we get there, especially
    at a time, as the Chairman so appropriately stated, that we
    have got 10,000 people a day aging into these programs. And
    they are all living a lot longer, which, I think, is a good
    thing.
        But let's start with Social Security. Not only is it one of
    the biggest parts of our federal budget, making up 24 percent
    of all federal spending, it is also a primary source of
    retirement income for millions of Americans. We have all seen
    the data, we have read the headlines. The program is in
    trouble.
        As more Americans become eligible for Social Security
    benefits, and as Americans live longer, fewer Americans are
    entering the workforce and paying into the program. Over time
    that means the money Social Security spends on benefits will
    outpace the revenue it brings in through the collection of
    payroll taxes. At its current rate the program will only be
    able to pay three quarters of the benefits retirees were
    promised by the year 2035.
        I agree with my friends across the aisle that is certainly
    unacceptable. It's our responsibility in Congress to prevent
    these across-the-board benefit cuts, and make sure this
    important program can continue and work better for workers and
    retirees today and for generations to come.
        As America's demographics have evolved, lawmakers on both
    sides of the aisle have worked together on four separate
    occasions to pass structural reforms to improve the program.
    Most recently, in 1983, Congress passed legislation to
    gradually increase the retirement age from 65 to 67. That was a
    common-sense bipartisan idea to address the fact that Americans
    are living roughly 15 years longer today than they were when
    Social Security was first created in 1935. I am committed to
    working together to uphold a history of bipartisan Social
    Security reform.
        One thing is certain: punishing today's workers and job
    creators with enormous tax hikes is not a solution. That
    approach would drag down our economy and penalize Americans for
    working hard, hurting Millennials and small business employees
    the most. When it comes to Social Security we should focus on
    rewarding work while targeting the benefits to help vulnerable
    Americans. We can also strengthen retirement security for all
    Americans by continuing to promote policies that fuel our
    economy.
        While the Chairman took a stab at the Tax Cuts and Jobs
    Act, I think it is safe to say that we would disagree, that I
    do believe that the Tax Cuts and Jobs Act have inspired a lot
    of people to enter the workforce, and that can't be a problem
    for the collection of the payroll taxes that strengthen Social
    Security.
        With more jobs, record low unemployment, record high wage
    gains, and a growing economy, workers and families are able to
    save and invest more for their future. That has not only led to
    record high contributions, it has also led to increased
    optimism. A recent CNBC poll found that a majority of Americans
    are feeling more confident about saving for retirement today
    than they felt three years ago. And in a survey conducted by
    the Federal Reserve, 75 percent of retirees believe they have
    enough retirement income to maintain their standard of living.
        We should focus on solutions that build on this progress
    and help even more Americans save. For example, the Setting
    Every Community Up For Retirement Enhancement Act of 2019,
    known as SECURE, introduced by bipartisan leaders on the Ways
    and Means Committee, would strengthen retirement security by
    encouraging job creators of all sizes to offer full and part-
    time employees more retirement options.
        I look forward to exploring more bipartisan solutions like
    this today.
        Mr. Womack. And with that I thank you again for holding
    this hearing, Mr. Chairman, and I yield back my time.
        [The prepared statement of Steve Womack follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Yarmuth. I thank the Ranking Member. And as you--
    as we usually do, if any other members have opening statements,
    you may submit those statements in writing for the record.
        Welcome, Chairman Larson. The Committee has received your
    written statement, and it will be made part of the formal
    hearing record. You will have five minutes to deliver your oral
    remarks. You may begin when you are ready----

    STATEMENT OF HON. JOHN B. LARSON, A REPRESENTATIVE IN CONGRESS
                     FROM THE STATE OF CONNECTICUT

        Mr. Larson. Well, thank you, Mr. Chairman. I want to thank
    Chairman Yarmuth and Ranking Member Womack for the opportunity
    to come before the distinguished Budget Committee.
        As you indicated, we have written testimony. And what I
    would like to do is deviate from that because of--you know, in
    your both of your opening remarks you covered a lot of the
    ground that I would go over.
        I would add, in fact, that while--and you are right to say
    that this is--keeping our promise to American seniors is first
    and foremost, the Ways and Means Committee has already
    unanimously adopted the SECURE Act that Mr. Womack alluded to,
    and legislation also that would require automatic enrollment
    for employees.
        Bipartisanly, Rich Neal is heading up leading legislation
    addressing multiemployer pension crisis that we face with a
    number of pieces of legislation.
        I would also add that we want to go through these things
    and address them in a bipartisan fashion. And we think we have
    legislation that is increasingly--because we haven't had
    hearings in eight years, we think that legislation here is
    drawing critical masses of the required individuals.
        This is our responsibility at the end of the day. The last
    time that Congress truly looked at this program was 36 years
    ago. And when they did it, they did it bipartisanly with, at
    the time, a reluctant Republican president, but one who became
    a chief advocate. And Tip O'Neill and Ronald Reagan get a lot
    of credit for bringing people together. But I would point out
    also that the Republicans controlled the Senate at that time
    also, and Howard Baker was the United States Senator.
        What's at stake here? What's at stake here is the nation's
    leading insurance program and the nation's leading anti-poverty
    program. Without this program and the direction that we are
    headed in, by 2035 we would find ourselves in a situation where
    people who have earned $50,000 in income throughout their lives
    would face a 20 percent across-the-board cut, and would be
    living below the poverty level. It's our responsibility. We're
    the actuaries.
        It's an insurance program. The public knows this, because
    it says they look at their pay stub and it says FICA. What does
    that mean? Federal Insurance Contribution Act. Whose
    contribution? Theirs. And approximately every one of us has
    approximately 100,000 more in districts, depending on how it
    is, people who are currently on Social Security.
        It is our responsibility to make sure that the program is
    actuarially sound. I don't know how any member can go back to
    their district, look people in the eyes, including your
    mothers, your sisters, your aunts, your uncles, and say, ``With
    our responsibility, when--on our watch, knowing everything that
    we do, and knowing as both the Chairman and Ranking Member have
    outlined, what our responsibility is that we chose not to
    act.''
        This has also become the civil rights issue of the day. It
    has also become a woman's issue of the day, and an economic
    development issue of the day. I talk about that in my
    testimony, but I just want to briefly underscore how we see the
    disadvantages that take place for women of color, for black men
    who have--find themselves with mortality rates and the
    inability to collect on monies that they have put forward into
    this program, and why across-the-board cuts, or hikes by
    raising the age of individuals that just turned 66--it is
    hiked, it will go up to 67. Another hike beyond that for every
    year that we add is a 7 percent cut. And with so many
    individuals depending upon Social Security, it's paramount that
    this Congress, faced with our responsibility, takes the action
    that it needs.
        We have legislation that is out there. We have introduced
    it with more than 200 cosponsors. What we need is now the
    bipartisan support. It will pass the House of Representatives,
    there is no question about that.
        And I want to commend the President of the United States
    for first taking a bold stand in a presidential debate when it
    really mattered, and saying this isn't an entitlement, this is
    an earned benefit. Now it is time for us to all come together
    and work collaboratively, so that we save this program and
    enhance it the way it should be.
        I am happy to take your questions.
        [The prepared statement of John B. Larson follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Yarmuth. I don't--any member want to ask Chairman
    Larson a question?
        Great. We thank the Chairman for his testimony and his
    insights, and we appreciate your being here today.
        Mr. Larson. Thank you, Mr. Chairman.
        Chairman Yarmuth. Thank you very much.
        Mr. Larson. You didn't even give me a chance to go into my
    Starbucks.
        [Laughter.]
        Mr. Larson. These are my stump speech props that I have.
    But I would point out--and like to submit for the record--the
    Chief Actuary of Social Security--we have the only bill that
    has been deemed by the actuary to be sufficiently solvent. That
    meets the requirement by law that is our responsibility to
    sustain the program beyond 75 years.
        [The information follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Yarmuth. Ranking Member has a question.
        Mr. Hern. Mr. Chairman, just a point of clarity. You ask if
    anybody wanted to ask any questions. Well, in addition to our
    five minutes you are going to give us later?
        Chairman Yarmuth. Just one question.
        Mr. Hern. Well, the one question is that--just for a point
    of clarity for the record--the 21 percent that we are going to
    see in 2035 affects all people, not just----
        Mr. Larson. Exactly.
        Mr. Hern. You had mentioned it was a civil rights issue and
    a woman's issue, but it is all people's issues.
        Mr. Larson. It is all people's issues, the 20 percent
    across the board. But currently, under current law, you have 5
    million Americans, there are 62 million Americans who are on
    Social Security currently, 5 million of whom are living below
    the poverty level.
        Part of what we hope to do is to make sure that we both
    create a new floor for Social Security, so that especially
    women who, because they are the primary caregivers, and today
    with 74 percent of them in the workforce find themselves--
    because they were earning $.80 for every dollar their male
    counterparts were, and because they spent less time because
    they were the caregivers, find themselves in poverty. In fact,
    close to 3 million women across this country who have paid in
    all their quarters, worked all their lives, are living in
    poverty in the wealthiest nation in the world.
        And this is an actuarial problem that is easily resolved by
    Congress. I ask any member of this body, have any of your
    insurance premiums gone up since 1983? You have the
    responsibility--if you were a business, if you were an
    insurance company--I happen to be from an insurance capital of
    the nation, and had an insurance business, as well. You know,
    you would make those adjustments and raise those costs. Had
    they indexed it the way they should have in 1983, we wouldn't
    even be having this conversation.
        And Social Security has never missed a payment.
        But thank you for that question. It is a great point
    because this will impact all individuals. But when you look
    currently how this disproportionately impacts women and men of
    color because of their particular financial situation, it is
    time for us to act.
        Mr. Hern. Thank you for the clarity.
        Chairman Yarmuth. The gentleman from California, Mr.
    Peters, has a question.
        Oh, did you have one?
        Mr. Peters. I think you are fishing for me to ask you about
    your Starbucks reference, Mr. Chairman. So I was going to give
    you the chance to do that.
        Mr. Larson. Well, everybody always asks, ``Well, how you
    going to pay for this?'' Well, we pay for it by making sure
    that we do what they should have done in 1983. We create--we
    have incremental funding. We increase it approximately by 1.2
    percent, the contribution. And, as you know, the contribution
    is made by the employee and the employer.
        The employer gets to write it off his taxes. The employee
    not only gets a pension benefit, but also--and we don't discuss
    this enough--a disability payment, spousal and dependent
    coverage. There is no place in the public market, as a former
    insurance agent, that you can go and buy this. It's the full
    faith and credit of the United States government.
        We also lift the cap on people over $400,000, and that is
    where the Starbucks comes in. At every senior's center I go to
    I say, ``How much does this Starbucks cost?''
        And they all will say, ``Is it a latte?''
        And I go, ``Yes.''
        They go, ``Four dollars and fifty cents.''
        I go, ``That's correct. Or, under our plan, if you are
    making $50,000 a year this is nine weeks of Social Security
    payments. And even if you are that poor person at $400,000, it
    will cost you more to buy a latte than it will to fix Social
    Security.''
        We can do this. Had they incrementally phased this in and
    indexed it back in 1983, we wouldn't be having this discussion.
    They didn't. We're the stewards of this program. It's our
    responsibility to do this, and we can fix a major problem.
        Again, I credit the President for sticking his neck out on
    this one, as well.
        Chairman Yarmuth. The Ranking Member has a question.
        Mr. Womack. You know, one of the great frustrations I have
    as a Member of Congress is the fact that the varsity sport of
    Congress is a game called kicking the can down the road.
        Mr. Larson. Exactly.
        Mr. Womack. And we're really good at it. I mean we don't
    have a rival in this notion that, when confronted with a
    problem like we have with Social Security--or even more urgent,
    in my view, is the problem with the Hospital Insurance Trust
    Fund, which is about 10 years ahead of Social Security, in
    terms of insolvency--that it seems as though we do not decide
    to take effective action until we're on the cliff. And need I
    remind anybody of the cliffhanger that we had in 2012 and 2013
    on the Bush-era tax cuts that we waited until the very last
    minute--in fact, beyond the last minute?
        But I digress. I think the people of America, while there
    is anecdotal evidence out there that they understand that we
    have a problem, but the problem is not tomorrow. The problem is
    2035. And it seems as though Congress is okay with deciding we
    are going to deal with this when it becomes a real matter of
    urgency, like 2033 or 2034. And it seems to me that whenever
    you delay the eventual that long, that your options become
    fewer and further between, and they become much more draconian
    in their nature.
        So I don't know if I have got so much of a question, as
    just a comment along those themes that I will throw back at
    you, Congressman Larson, for any response you would care to
    make.
        Mr. Larson. Well, I couldn't agree more with you. And also,
    I would point out--and I do so in my testimony--how it's also
    said, well, you know, this problem, you know, is--you know, we
    are going to be okay until 2035, and also that, well, this is
    just a shifting from one generation to another. No, it is not.
        In fact, Millennials are going to need Social Security more
    than Baby Boomers will need Social Security. It's long overdue
    for Boomers and Millennials to unite and talk about something
    that's within our grasp, and something that we can solve, and
    do so pragmatically, in a common-sense manner, and address it
    in a business-like manner, the same way any actuarial would do
    that.
        Now, the unique feature here is that every single thing
    that we call for in these enhancements has been--the
    independent actuary said not only is it paid for, but it is
    sustainable beyond 75 years. Wouldn't it be great on our watch
    to take this off Congress's plate and to go home and be able to
    look everyone in the eye and say, ``Not only did we fix this,
    we fixed it for--by law, as we were required, beyond 75 years,
    and we enhanced it. We won't allow for anyone who has paid
    their quarters in to retire into poverty. We won't see women of
    color have the--you know, to find themselves impoverished, even
    though they've worked all their lives and paid in their
    quarters?''
        And so it just seems to me that there is ample
    opportunity--and again, it took President Reagan and Tip
    O'Neill coming together. And most people forget that Howard
    Baker was the Senate Chairman at that time. So it is the
    identical situation that we are confronted with here today. Tip
    had a few more Democrats at that time than we do today, but I
    think the situation warrants--especially with the with the
    President being predisposed to do this, and have talked and
    written in his book about this as being an earned benefit.
    Thank you.
        Chairman Yarmuth. Thank you. The gentleman from Texas, Mr.
    Flores, has a question.
        Mr. Flores. Thank you, Chairman Yarmuth and Republican
    Leader Womack, for holding today's hearing.
        Chairman Larson, I appreciate you being here. Mr. Womack
    talked about the blood sport of kicking--or the sport of
    kicking the can down the road that Congress has gotten pretty
    good at. The other thing that we have gotten really good at is
    the blood sport of condemning each other when either side tries
    to touch the third rail----
        Mr. Larson. Right.
        Mr. Flores.--of policy in this town. And Social Security is
    certainly one of those.
        And I remember back in 2011, when I was a freshman member
    of the Budget Committee, we put up a plan to try to save
    Medicare for all generations. And within 36 hours there was an
    ad of somebody pushed a wheelchair that threw granny over the
    cliff, and that somebody was--that looked like--a lot like Paul
    Ryan, who was then the Budget Chair. So I agree with you that
    we are going to have to hold hands and do this in a bipartisan
    manner.
        There are some things about your bill I like. There are
    some things about your bill that I think would--could benefit
    from some bipartisan support. And so I hope that that is
    something that we can do, moving forward.
        You know, as we are all aware, the 2019 Social Security
    Trustee's report offered a grim outlook on the current path.
    Social Security will run deficits of nearly $1.8 trillion over
    the next 10 years, and benefits will face 20 percent reductions
    by 2035. That means today's 51-year-olds will face cuts when
    they reach retirement age. And today's newest retirees will
    face cuts when they turn 78. So it is important to note that
    the average new retiree lives to 85, age 85. And so, if we
    don't do anything, as you were pretty eloquent in saying,
    Social Security is going to become insolvent, and everyday
    Americans are going to hurt.
        So again, I--we have got to grab hands and work on this,
    but it has got to be bipartisan. So I am hopeful that you are
    willing to do that.
        I do have to add some additional context to some of the
    things that the Chairman said in his opening statements.
        One, wage growth is not flat or stagnant now. The last
    quarter's wage growth was up 3.2 percent. And there were some
    comments about income inequality. The bottom 10 percent, income
    in the bottom 10 percent of Americans the last quarter, grew by
    6.6 percent, over double of what the average population did. So
    the tax cuts, the economic reforms that we have proposed, are
    truly lifting all boats and reducing the age--the income
    inequality that exploded over the last several years before
    that.
        So with that I yield back the balance of my time. Thank
    you.
        Mr. Larson. Well, I would just add that--well, thank you
    for the comments.
        I would add also that Tom Reed has been outstanding. And I
    think--let's be blunt about it--I think what people don't like
    about the program is how we pay for it. And--but at the end of
    the day we are faced with two options: either you raise the
    age, which--again, let's be honest about it, that's a cut in
    benefits to people that we are finding--and both the Republican
    leader and the Chairman eloquently stated what the deal is
    here, in terms of these people and what they will receive.
        And you know, for them to be looking at--for many of them,
    for almost 90 percent of people who haven't recovered from the
    2008 recession then to find themselves in a situation where we
    are either going to hike the age where--they get another cut in
    the benefit that, for whatever the reason, their inability to
    save, their companies no longer--I mean there is no such thing
    anymore as defined benefit plans. We all know that. And we
    should be doing everything that we could to encourage all three
    legs of the stool.
        But our primary responsibility is Social Security. And for
    the Millennials, especially, it is not just the wage
    differential or wage stagnation, but it is also enormous
    student loan debt, the gig economy, and everything that that
    is, the lack of high paying labor jobs, the fact that they will
    be a generation that will probably earn less than their parents
    earned, and are going to rely more on Social Security.
        And even--and primarily again, because of the opioid
    epidemic, et cetera, actually, the tables--the death rate
    tables have dropped, and have come down. And so--but even as
    people are living longer, all the more reason that--
    actuarially, where we are responsible that we make the program
    solvent, and that it is able to accomplish its goals.
        But Tom, Mark Meadows--I mean you would think that would be
    strange bedfellows, Mark Meadows and myself, but he talks about
    his mom and everything that she needed in order to make this
    program secure. Tom, Tom Price, who is--both who lost their
    dads, and were raised on Social Security. Rich Neal, the
    Chairman of the Committee, lost his mother and father. And so I
    think everybody understands the importance and significance.
        The issue is can we look in the mirror and say, ``Hey,
    listen, if we raise the age, and that is a 7 percent cut to
    somebody, how do they handle it?'' This is the reality of what
    they will receive. That is--would be my point.
        Chairman Yarmuth. All right. Once again, thank you,
    Chairman Larson. You can take your Starbucks cup and----
        [Laughter.]
        Chairman Yarmuth. I appreciate your testimony.
        Mr. Larson. Thank you, Mr. Chairman.
        Chairman Yarmuth. Once again, absolutely.
        Chairman Yarmuth. I would now like to ask our second panel
    to take their seats.
        [Pause]
        As I mentioned to Chairman Larson, your written statements
    will be made part of the formal hearing record. You will each
    have five minutes to deliver your oral remarks.
        I first introduce Dr. Favreault. Begin when you are ready.

    STATEMENT OF MELISSA M. FAVREAULT, PH.D., SENIOR FELLOW, URBAN
      INSTITUTE; ANNE MARIE COOK, PRESIDENT AND CEO, LIFESPAN OF
      GREATER ROCHESTER; JAMES DALE HANNER, SECRETARY-TREASURER,
      NORTH CAROLINA COMMITTEE TO PROTECT PENSIONS; AND ANDREW G.
     BIGGS, PH.D., RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE

                STATEMENT OF MELISSA M. FAVREAULT, PH.D.

        Dr. Favreault. Chairman Yarmuth, Ranking Member Womack, and
    Members of the Committee, my name is Melissa Favreault and I am
    a senior fellow at the Urban Institute. The views I express
    today are my own, and not those of the Urban Institute, its
    board, or its funders.
        Last month the Social Security and Medicare trustees
    released their annual reports repeating their warning that
    these programs have significant shortfalls. These need to be
    closed by either increased program revenues, reductions in the
    rate of growth of benefits, or some combination. They
    emphasized that earlier action will make it easier to spread
    the costs of change across more generations and to avoid sudden
    changes that could harm beneficiaries and workers.
        Given these programs' broad reach into our economy and
    society, we need sustained discussions about how to meet these
    challenges. My contribution to today's discussion emphasizes
    five points.
        First, our current social insurance programs work well
    providing powerful protection against risk for seniors and
    people with disabilities. They form the foundation of our
    social contract with America--with the working and middle-class
    Americans. Social Security benefit progressively reduces labor
    market risk, annuitization reduces the risk of long life and
    outliving one's assets, inflation protection reduces financial
    risk, disability and survivor's benefits reduce health and
    early mortality risk.
        The program has been enormously successful. Meyer and Wu
    recently estimated that Social Security reduces the overall
    poverty rate by about a third, and age in poverty by three
    quarters, and two-thirds of the benefits go to people who were
    poor prior to transfers.
        In seeking solutions to Social Security's long-run
    financing imbalance, we must bear in mind that economic
    inequality has eroded the program's wage base. Since the mid-
    1970s, typical workers' wages have not kept up with
    productivity, but wages at the very top have grown rapidly.
    Critically for Social Security, the share of total earnings the
    program taxes has fallen from 90 percent to close to 83
    percent. Inequality thus contributes to Social Security's
    fiscal imbalance. Increasing the wage base should be part of
    the solution.
        Large disparities in longevity pose challenges with
    equitable distribution of Social Security Medicare benefits. By
    more than one estimate workers in the highest income quartile
    of the earnings distribution in their early fifties can expect
    to live more than 10 years longer than those in the lowest.
        Social Security's broad support stems from public
    perception that benefits are an earned right, with benefits
    linked to contribution. So long-range solutions must retain the
    society-wide investment by maintaining broad-based financing
    and strong income-related benefits.
        Second, these core social insurance programs have a few
    gaps. Too many seniors, and especially long-term caregivers,
    women--especially if they are unmarried--African-Americans,
    Latinos, less educated workers, and people with health problems
    and disabilities, and the oldest old have incomes that hover
    below or near poverty. Many are vulnerable to very large health
    care bills.
        In part to help account for the importance of health care
    costs, Census Bureau researchers compute supplemental poverty.
    According to this measure, roughly 14 percent of adults aged 65
    or older, or approximately 7 million people, are estimated to
    be poor.
        Some promising ideas for closing Social Security adequacy
    gaps include minimum benefits and caregiver credits. A full
    career of work at the minimum wage does not guarantee a
    poverty-level benefit from Social Security, and long caregiving
    spells are associated with higher risk of low benefits. So
    there is a strong case for bolstering benefits.
        To the extent to which we are concerned with health care
    affordability and health shocks, adjustments to Medicare cost
    sharing or Medicaid eligibility could help, as well.
        Third, the risk of needing long-term services and supports,
    estimated to be as high as 70 percent at age 65 plus in recent
    years, poses enormous challenges for retirees. A year of paid
    home care can cost $40,000. A year in a nursing home can be
    more than double that. Because these costs are unaffordable for
    so many, we rely heavily on unpaid family caregivers. Many
    jeopardize their own retirement security to help their family
    members.
        Fourth, since Social Security's inception it has been
    acknowledged that responsibility for retirement security does
    not fall solely on this program. Employers play a crucial role
    through offering retirement accounts. Behavioral economics can
    teach us how to better structure employee retirement accounts
    to boost participation in contributions. However, access issues
    remain. Nearly 30 percent of workers have no access on the job,
    and about 45 percent are not participating. In the lowest wage
    quartile more than half don't have access, and three quarters
    are not participating.
        Current federal subsidies for retirement savings and
    defined contribution plans overwhelmingly reach those in the
    top fifth of the income distribution. A better approach would
    be to promote saving among those who most need to save, and for
    whom saving is most difficult. Tax credits, for example, would
    work better than deductions at reaching lower savers and
    vulnerable workers.
        Finally, as we seek solutions to our fiscal challenges, we
    need to recognize that inequality in social and economic
    disparities today are deep. They often extend across multiple
    domains and, in some cases, may be growing. The same people who
    do not have good jobs and less access to retirement accounts
    are the same people who are more likely to become disabled.
    When we look at disparities in severe disability and dementia,
    for example, by education and race, the differences across
    groups are stunning.
        These disparities constrain our financing options. Revenue
    increases need to provide a very large share of the solution
    over long-run investments in education, and younger workers
    must also be part of the solution. Thank you for this
    opportunity to testify. I look forward to questions.
        [The prepared statement of Melissa M. Favreault follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Yarmuth. Thank you for your testimony.
        Mrs. Cook, you are now recognized for five minutes.

                      STATEMENT OF ANNE MARIE COOK

        Mrs. Cook. Thank you very much, Chairman Yarmuth,
    Congressman Womack, and Committee Members. I am Anne Marie
    Cook, president and CEO of Lifespan of Greater Rochester, a
    nonprofit in New York State, solely focused on providing
    information, guidance, and services to older adults. In 2018 we
    served 38,000 older adults and family caregivers. Financial
    Management is one of our core services. My remarks today will
    address the state of current and future Social Security
    beneficiaries.
        According to the National Institute on Retirement Security,
    a nonprofit, nonpartisan organization, three-fourths of
    Americans say the nation faces a retirement crisis. Seventy
    percent say the average worker cannot save enough to guarantee
    a secure retirement. And 79 percent say they don't know enough
    about investing to ensure savings last through retirement.
        There may be economists who tell you that America does not
    face a retirement crisis. We and many others disagree with that
    assessment because I see people in crisis every day. As
    president of Lifespan I can tell you that the one quarter of
    current beneficiaries who are relying on Social Security for 90
    percent of their income are not, in fact, living comfortably.
    Neither are the 43 percent in non-married beneficiaries who
    rely on Social Security for 90 percent of their income. And
    neither are the 33 percent of African-Americans who receive at
    least 90 percent of their income from Social Security.
        According to the Government Accountability Office Social
    Security provides most of the income for about half of the
    households 65 and older. And, despite Social Security, 4.6
    million Americans 65 and older, almost 10 percent, lived below
    the poverty line in 2016. That is just $11,800 a year.
        And using a newer supplemental poverty measure, 15 percent
    of older Americans are living below the poverty level. These
    are older Americans who worked low-income jobs without pension
    benefits. These are older Americans who lived paycheck to
    paycheck, who couldn't save. These are older Americans who did
    not plan to live to 80, 90, or even older. Lifespan routinely
    assists older adults who are living on Social Security alone.
    Many are women without a substantial work history who rely on
    survivor benefits.
        Currently we are helping Mary, an 84-year-old widow who
    just has $1,400 dollars a month on Social Security and can't
    pay all her bills. When her husband died in 2018 she lost his
    pension.
        We also know about Sam and Angelica. We are working with
    them, both in their early eighties. Sam's former employer
    folded, taking his pension with him. They counted on the three-
    legged stool. But with Angelica's illness, most of their
    savings are now gone. I received a call from their daughter
    from Columbus, Ohio. She told me the father said, ``I hope we
    just die. This is too stressful.''
        Lifespan is also home to the Upstate New York Elder Abuse
    Center. Older adults who are financially abused all too often
    lose everything but Social Security.
        We are helping Jim. Jim is a 62-year-old contract employee
    who suffered a brain injury. While recovering, his son drained
    his accounts. His only remaining income is Social Security. And
    I wish this was an isolated story, but in New York State alone
    260,000 older adults will be a victim of elder abuse or
    financial exploitation this year.
        The outlook for future retirees is wobbly, at best. The
    three-legged stool of retirement, pensions, personal savings,
    and Social Security is, for many, history. Only 38 percent of
    Baby Boomers expect to have a pension. A 2016 GOA report says
    48 percent of Americans are approaching retirement who have
    nothing saved in a 401(k) or other retirement accounts.
        Profound changes in retirement funding have occurred over
    the last two decades, yet our knowledge of financial literacy
    is woeful. As one retiree recently told me, ``When you had a
    pension, they took care of it. Now they tell you you have to
    take care of it. Then the stock market goes up and down. It is
    very hard to understand, and it is very hard to be sure of
    anything.''
        And finally, of course, I must address the age wave. Today
    about 52 million Americans are 65 or older. In 10 years, 72
    million. And by 2040, 82 million Americans will be 65 or older.
    As president of an organization assisting older adults I can
    emphatically tell you that Social Security is critical. To
    survive is the bedrock of retirement security for older
    Americans. Change must occur. But this change cannot include a
    benefits cut. The retirement crisis is real, both at the
    federal and at a very personal level for older Americans.
        Thank you very much.
        [The prepared statement of Anne Marie Cook follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Yarmuth. Thank you for your testimony.
        I now recognize Mr. Hanner for five minutes.

                     STATEMENT OF JAMES DALE HANNER

        Mr. Hanner. Chairman Yarmuth, Ranking Member Womack,
    Members of the Committee, I want to thank you for inviting me
    to speak at today's hearing on retirement security on the 21st
    century. Hello. I am Dale Hanner, retiree and secretary-
    treasurer of the North Carolina Committee to Protect Pensions.
    I am retired with 36 years of service with four different
    companies and a Central States Pension plan, a multiemployer
    pension plan is--which is facing insolvency within six years.
    This multi-employer plan has allowed me to build and retain
    years of service that would have been lost in a single employer
    plan.
        The purpose of the North Carolina Committee is to educate
    and advocate for the more than 12,000 Central States' members
    retired and active in our state. NCCPP is a member of the
    National United Committee to Protect Pensions.
        I would like to tell you about a few of our survivor
    members and their situation. In their generation Central States
    offered a survivor benefit package requiring retirees to
    forfeit 15 percent of their pension in order to leave 50
    percent of their pension to their surviving spouse.
        One member's husband pension was $1,375 per month. After
    his death her survivor benefit is now $750 a month. She has had
    to forgo two medicines because of high cost. She pays her
    hospital bills and those of her late husband in monthly
    payments.
        Another member's husband's pension was $700 per month.
    After his death her pension is $385 dollars a month. She is
    diabetic and pays $600 for a 90-day supply of insulin. This is
    an out-of-pocket expense for her.
        One 78 years young surviving member draws $318 of her
    husband's $630 pension. She works at least three days a week to
    supplement.
        As you can see, these are not large, hefty pensions that
    are being collected. In fact, the average monthly pension
    payment to a Central States retiree is $1,200. So any potential
    cut in retiree benefits would be devastating.
        In addition to food, property tax, and housing maintenance,
    the North Carolina public utilities and property insurance
    companies intend to petition the state for rate increases this
    year due to damage to the State of North Carolina from two
    hurricanes. Gas has increased 25 percent--$.25 in the last two
    months. The cost of living keeps going up. Once we retire there
    is no cost of living in our pensions.
        Stories have circulated on Capitol Hill that one of the
    conditions for a pension fix is that retirees must have some
    skin in the game. Truthfully, some retirees are being skinned
    alive. Approximately 1,200 Central States retirees die each
    year. A close working colleague of mine has just finished his
    first week of hospice. He is a Vietnam veteran, has 28 years of
    service in Central States. The average age of a Central States
    retiree is 72 years old, with a life expectancy of 81,
    according to Central States.
        My friend is 70 years old, same age of his wife. In 2018 he
    spent 2,200 days in and out of the hospital and rehabilitation
    center after contracting a blood infection he picked up in the
    hospital resulting from a procedure to remove a nerve
    stimulator in his back. Could you imagine dying, not knowing if
    the financial security you planned would be provided for your
    surviving spouse?
        Representative King's bill, H.R. 397, is the best and the
    only real solution to help retirees and protect their hard-
    earned pensions. It will avoid retiree benefit cuts and provide
    improved retirement security for retirees and workers. It will
    not only enable plans to secure the pensions promised to
    retirees and their families, but also direct remaining assets
    and all future contributions to fully protect benefits for
    active workers.
        H.R. 397's legislation would create non-taxpayer loans. Our
    pension fund has decreased from $16 billion to $13 billion
    within 2.5 years, and Central States is only 27 percent funded.
    Very soon Central States will not have enough money to qualify
    for a loan. Our fund will go insolvent, and we will be turned
    over to the PBGC. After paying to ensure our pensions since
    1974, we've been told that the PBGC payout will only be pennies
    on the dollar because the PBGC is broke.
        Please let us work together to find a solution. Time is
    running out for us. Thank you.
        [The prepared statement of James Dale Hanner follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Yarmuth. Thank you, Mr. Hanner.
        I now recognize Dr. Biggs for five minutes.

                  STATEMENT OF ANDREW G. BIGGS, PH.D.

        Dr. Biggs. Thank you very much, Chairman Yarmuth, Ranking
    Member Womack, and Members of the Committee. Thank you for
    inviting me to speak on retirement security in the 21st
    century.
        Retirement savings is an exceedingly important topic for
    households, for policymakers, and for the U.S. economy.
    Unfortunately, there is a great deal of ignorance with regard
    to the adequacy of Americans' retirement savings. And I mean
    ignorance, literally. There are a great many facts in U.S.
    retirement savings and retirement incomes of which many elected
    officials are simply unaware, in part because the news media
    prefer to run the stories on a supposedly looming retirement
    crisis than articles acknowledging that, in fact, things are
    going fairly well.
        For instance, few readers of a national newspaper would
    know that more Americans are saving for retirement today than
    ever before, or that retirement plan contributions are up by
    nearly one-third, compared to the era of traditional pensions,
    or that retirees' incomes are rising significantly faster than
    incomes for working-age households. Most retirees today have
    incomes well above the 70 percent replacement rate that
    financial advisers say is enough to allow a retiree to maintain
    their pre-retirement standard of living.
        This doesn't mean Americans aren't worried. Yet these fears
    are rarely realized. Vanguard recently polled retirees whether
    they thought the nation as a whole faced a ``retirement
    crisis.'' A majority of them said yes. When asked if they would
    describe their own financial situation in those terms, only 4
    percent did. This isn't being Pollyannaish. Compared to other
    developed countries, Americans have substantially higher
    retirement savings, and U.S. retirees are much more likely to
    say they are able to maintain their pre-retirement standard of
    living.
        There are also things policymakers may believe that aren't
    facts at all. For instance, we hear that more Americans will
    retire into poverty in coming years. In fact, recent Census
    Bureau research has shown that the share of retirees living in
    poverty has dropped by nearly one-third over the past two
    decades. And the Social Security Administration projects that
    poverty will continue to fall through at least the 2030s.
        We also hear that Americans have no retirement savings. In
    fact, total retirement plan assets are six times higher today
    than when traditional defined benefit pensions roamed the
    earth. And recent Federal Reserve research has shown that the
    shift from traditional pensions to 401(k)s has not caused
    greater inequality in retirement savings.
        I point these things out because, unless we come to a
    common base of understanding with what is happening with
    retirement savings, we can't form policies to build on the
    successes of the U.S. retirement system. And that is what we
    need to do, build on our successes.
        401(k)s are already more widespread than traditional
    pensions ever were. And because both employers and employees
    contribute, total retirement savings are higher. 401(k)s have
    introduced automatic enrollment to increase employee
    participation, target date funds to automatically rebalance
    portfolios, and low-cost index funds to reduce fees. As a
    result, no longer do traditional pensions have either a
    management cost or rate-of-return advantage over 401(k)s.
        But we need to spread these successes. I favor making
    automatic enrollment universal, at least for employees earning
    above the poverty line. I also favor legislation like the
    SECURE Act, which would make it easier for smaller employers to
    offer retirement plans. The retirement plan coverage gap is
    smaller than many believe. Nevertheless, smaller employers
    still remain much less likely to offer 401(k)s, which are the
    most effective way to save for retirement.
        We also need to address the risk of high health costs in
    retirement. Note that I focus on risk. Out-of-pocket health
    costs have barely risen as a percentage of retirees' incomes
    over the past three decades, mostly because retiree incomes are
    rising so rapidly. But health costs can vary significantly from
    person to person. While government bears most of that risk
    through Medicare and Medicaid, I would favor having retirees
    bear a larger share of everyday costs in return for greater
    protection against the worst health cost outcomes.
        Finally, government at all levels need to get their
    retirement funding in order. The best research on retirement
    savings, the studies that are published in peer-reviewed
    journals rather than activist groups' websites, show only a
    modest retirement savings shortfall. But underfunding in Social
    Security, federal employee and military pensions, and state and
    local government pensions is estimated at between $14 and $26
    trillion. This is, by far, the biggest threat to retirement
    security, and should be addressed as promptly as possible, as
    fully as possible, recognizing the tough choices that are
    involved, and avoiding gimmicks. Thank you very much.
        [The prepared statement of Andrew G. Biggs follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Yarmuth. I thank all the witnesses for their
    testimony. Now we will start our questioning period.
        And first, the Ranking Member and I will defer our
    questions to the end, so I now recognize the gentlelady from
    Illinois, Ms. Schakowsky, for five minutes.
        Ms. Schakowsky. Well, we could have a war of statistics. I
    don't really want to get into it, although there are some data.
    I know that more than half of Americans can't withstand easily,
    without some sort of financial crisis, even a $500 hit on their
    income. And I have got some data here from--is that Motley
    Fool--that says that the amount of their investment analyst--
    the average amount of money that older Americans have when they
    retire, or something like--was it $7,000?
        You know, you can shake your head, and, you know, you are
    smart, and you have got a lot of statistics. But the real world
    that I deal with too, and my constituents, is a very different
    world than is projected here. Even averages, I think, are
    really skewing toward the wealthiest Americans, because we have
    such a vast income inequality that if you start averaging out
    (sic).
        I just--I want to say that I volunteer at a food bank, and
    at the end of the month who do you see lining up? It's the
    seniors, because they have run out of their Social Security.
    And I think most Americans are wondering, can I retire? And in
    fact, the woman that was bagging my groceries not long ago, I
    am telling you, I definitely want to help her bag my groceries.
    She was clearly working beyond the age that she should be
    working, but not beyond the age that she needed to be working.
        I am the founder and co-chair of the Congressional Task
    Force on Aging and Families--used to be called the Seniors Task
    Force. We have had report after report from organizations,
    including the AARP and the retirement security groups, that
    talk about the challenges that older Americans face. And so I
    am glad that we have a piece of legislation that would deal
    with the issue right now and not try to hide it, I think, in
    some numbers that don't reflect what ordinary Americans--and in
    terms of women, by the way, you know, they are--they carry this
    income--this wage inequality with them into retirement. So many
    of the people--probably, I am sure, most of the people--that
    are living near poverty and relying just on their Social
    Security are women.
        I also wanted to say to the Ranking Member that, you know,
    ``everyone is living longer'' is not true. There is a big
    disparity there, too. We've even seen an increase in white
    working class men, whose longevity has taken a bit of a dive.
    African-Americans, especially African-American men, aren't
    necessarily living longer, or living to see--and that is why
    raising the age of Social Security would be a significant
    problem.
        So, you know, our task force is going to be addressing this
    issue, and hopefully coming up in a bipartisan way with a
    solution.
        I wanted to ask you Mrs. Cook, what are the most common
    financial problems that you are seeing in Rochester seniors?
    What are the expenses that are most crippling to some of the
    people you serve?
        Mrs. Cook. Very clearly, it is health care costs,
    prescription drugs, out-of-pocket costs for copayments. And as
    a result of that, they can't pay the rest of their bills. They
    are making decisions on whether or not to pay their health care
    costs, or buy food, or pay for their utilities. And it is a
    terrible decision that older adults have to make.
        And in fact, we are seeing that really about a third of our
    clients--rather, our clients, about a third of their income is
    going to those health care costs that are rising, that we are
    seeing are rising.
        Ms. Schakowsky. And hopefully we are going to be dealing
    with the cost of prescription drugs also in this session of
    Congress.
        So again, Mrs. Cook, do the seniors' lifespan that you work
    with generally have savings that they are able to rely on? What
    has been your experience in the amount of money that they have
    been able to put away?
        Mrs. Cook. They have tried to save.
        I am going to go back to my story about Sam and Angelica,
    because I recently met with this couple. They put three kids
    through college. They saved $30,000, which was difficult for
    them going into retirement. But Angelica has dementia, and she
    requires home health care aides, and they have gone through
    that money. Their small pension and Social Security isn't
    making it any more. And they honestly do feel that death is
    their only option.
        And so that is what folks are dealing with today, that kind
    of anxiety, that kind of pressure, and all based--because they
    just don't have enough money to survive.
        Ms. Schakowsky. Thank you. I yield back.
        Chairman Yarmuth. Thank you. The gentlelady's time has
    expired. I now recognize Mr. Stewart of Utah for five minutes.
        Mr. Stewart. Thank you, Chairman and Ranking Member, and
    members of the--sitting at the witness table.
        And, you know, I am honored to serve on this Committee. I
    actually asked and pressed for this. I sit on two other
    Committees, Intelligence and Appropriations; they are very
    busy. But I wanted to sit on this Committee because I am
    interested in these topics. It is the reason I ran for Congress
    six or seven years ago, because I thought we are committing
    national suicide with some of our spending and our debt, and
    some of the fiscal policies and decisions that we were making.
    It's the reason that, again, why I ran, and why I wanted to be
    here.
        And my background lends me to sympathy on these. My father
    was an Air Force pilot, a farmer, and a schoolteacher. My
    mother raised 10 kids, if you can imagine. And they were not
    wealthy. They were a family of modest means. But they paid into
    Social Security, and they expected that that would be there for
    them in their retirement. And I think everyone in this room
    wants--and we want to facilitate that same expectation to save
    this program for those people who most need it and are relying
    on it. We want to protect Social Security.
        But I read something recently--and this is well quoted, I
    am sure you all are aware of it--where young people were asked
    if they--what they believed was more likely, UFOs or that they
    would have Social Security when they retired. And more of them
    believed in UFOs than that they would have Social Security.
    And, you know what? They are right. That is not a bad bet,
    because there might actually be UFOs. I don't think there are,
    but it's a possibility. But if we don't fix this, then it is a
    mathematical reality that they won't have the other.
        And so, as absurd as it sounds, it is not foolish for them
    to take what might be at least possible, and taking that over
    something that is mathematically impossible if we don't fix it.
    And that is why these hearings are very important.
        The good news is--and there is good news--and that is we
    can we can fix this. It is not impossible. There is still time
    to fix it. And we can do it without impacting retirees now,
    without those who are relying on it now, which is something
    that I think all of us are committing to do it. But it needs to
    be done on a bipartisan basis.
        And one last thought on this. We have been told this is the
    third rail, as a politician you are foolish to touch it. I
    think that's nuts. That has not been my experience at all. When
    I talk about this with my constituents and others, they are
    begging us to fix it. They are not stupid. The American people
    aren't stupid. And you tell them, ``This is what it is going to
    take to fix it.'' In a bipartisan manner, people like me are
    going to have to consider that we have to look at the tax side
    of it. I am willing to concede that, and accept that. And it is
    hard for me to do. I didn't come to Congress to raise taxes,
    but I recognize that is part of the equation.
        I think we also have to consider raising the retirement
    age, looking at COLA adjustments, looking at means testing. But
    if someone is not willing to consider all of those options,
    then they are not serious about fixing this. And they are,
    frankly, part of the problem now. And it is going to take all
    of those to do that.
        So Dr. Biggs, I could ask you--this is a yes-no question,
    and then I want to get to something that really matters. Do you
    believe that the best and first option and only option is
    raising taxes? Or is it going to take more than that?
        Dr. Biggs. No. It will take both sides.
        Mr. Stewart. Clearly, it is going to take more than that.
    And I want to emphasize something--and this will sound
    dramatic--but I want you to give meat on this bone. What does
    it mean if by--the projections are by the 2030s or so--that we
    actually bankrupt this system, that we are not able to make the
    payments, what does that mean to someone? Help people
    understand. Because I think people generally think, well, you
    know, that is going to affect someone else, or it won't affect
    me. What will that mean to someone who is relying on Social
    Security at that point?
        Dr. Biggs. Well, the kids who think it is more likely they
    will see a UFO are not correct. They will see Social Security.
    If we do see UFOs, I hope they bring money with them that we
    can use. But Social Security, as long as it is collecting
    payroll taxes, can continue to pay benefits. It will not become
    bankrupt in the sense of paying nothing. But once the trust
    fund runs out in 2035, Social Security has no legal authority
    to pay the full promised benefits. It can only pay with the
    money it has on hand. That implies a 20 percent-plus reduction
    in benefits, not just for new retirees, but for all retirees,
    not just for retirees themselves, but for disabled, for
    survivors.
        So this is sort of the worst-case outcome you are trying to
    avoid. You know, we can fix this. But to leave it to last
    minute means the choices get bigger and get more difficult. And
    so it is always better to do it sooner than later.
        Mr. Stewart. Well, then in the 15 seconds I have, would
    that required 20 percent--would that be across the board, or
    would there be--the government have discretion on who that--
    those cuts would be applied to?
        Dr. Biggs. It would probably not have discretion. You would
    need--to do that you would need new legislation.
        Mr. Stewart. So those on the very lowest, as well as those
    on higher income, they would also be impacted with the 20
    percent----
        Dr. Biggs. When I was at the Social Security
    Administration, that was our interpretation.
        Mr. Stewart. All right, thank you. Chairman, I yield back.
        Chairman Yarmuth. The gentleman's time has expired. I now
    recognize the gentleman from New York, Mr. Morelle, for five
    minutes.
        Mr. Morelle. Thank you, Mr. Chairman, first of all, for
    hosting this hearing, which is critically important, as I think
    all of our witnesses have testified to.
        A promise made, in my view, should always be a promise
    kept. However, for too many Americans the promise and assurance
    that Social Security represents is quickly fading away, as we
    have learned this morning. After a lifetime of hard work and
    paying into the system, every person deserves to enter their
    later years in life with the peace of mind and the knowledge
    that Social Security will be there for them. Yet fewer dollars
    are going into Social Security than are being paid out, and the
    program is in danger of being insolvent, as we have heard
    mentioned several times this morning.
        In my view, this is simply unacceptable. It is critical we
    strengthen resources available to older community members,
    protect essential programs like Social Security, and address
    the multiemployer pension crisis which has been talked about
    this morning, so that current and future generations could
    depend on the benefits they have received.
        I am encouraged by our friend and colleague, Representative
    Larson, who is taking meaningful steps to safeguard access to
    Social Security and ensure the long-term viability of the
    essential program for years to come through the Social Security
    2100 Act, which I am proud to cosponsor and support, and I hope
    it comes before the House soon for consideration.
        I did want to go to one of the--what I think I heard. My
    understanding of Representative Larson and those who have
    looked at it actuarially, that a modest increase in the Social
    Security tax for those individuals earning $400,000 or more
    would actually make it not only solvent, but sustainable. And
    that does not involve benefit cuts.
        Dr. Biggs, have you seen that analysis? And do you disagree
    with the actuaries who have looked at that?
        Mr. Biggs. I have read the actuarial memo on the Social
    Security 2100 Act. What it would do would be phase out the
    taxable maximum wage for Social Security beginning at $400,000.
    But eventually all wages would be subject to the tax. That
    implies a 12.4 percent effective marginal tax increase on high
    earners, which means that your top tax rate goes up by 12.4
    percentage points, so then we are in, you know, Scandinavian
    territory.
        So it becomes a question of modesty on that. The--more
    recently, the Penn--University of Pennsylvania Wharton School
    used an economic model to simulate the Social Security 2100
    Act. And they found when you took into account the changes in
    benefits, the benefit increases, and the changes in taxes, it
    would shrink GDP by 2050 by about 7 percentage points, relative
    to a solvency plan that relied on benefit cuts. That's about
    $2.6 trillion in these terms. So the economic effects of
    raising those taxes and increasing benefits are pretty
    significant.
        Mr. Morelle. The benefit----
        Dr. Biggs. And the actuaries don't account for any of that.
        Mr. Morelle. And the benefits you are talking about are the
    benefits that would accrue to people earning more than 400,000
    who would be paying an additional amount in? Those are the
    increased benefits? Or are you are talking about----
        Dr. Biggs. Because the Social Security 2100 Act increases
    benefits across the board, relative to promised levels.
        Mr. Morelle. I want to go back to something, Ms. Cook, that
    you talked about your testimony, which is--dealt with financial
    literacy. And do you have a sense--I ask two things. One is,
    first of all, the relative awareness that people have,
    financial literacy for people who are in the retirement years,
    and then also for younger people.
        And I don't know how much your organization talks to
    organizations that represent schools and universities and
    others that would, hopefully, be in a position to start talking
    about financial literacy to younger people, because, obviously,
    the sooner you start--can you just tell me your sense of
    financial literacy among the retirees that you have, how
    prepared they were for what they now face?
        Mrs. Cook. Congressman, what we see is they are not
    prepared at all, and that they struggle when they have to make
    decisions about investing their own 401(k)s or other accounts.
    They just have not had that kind of training. We are trying to
    figure that out, and help them along the way to give them that
    kind of information.
        In terms of younger people, I don't know, but I think right
    now we are woefully lacking education in financial literacy so
    people can prepare for retirement.
        Mr. Morelle. Well it seems to me strengthening Social
    Security is obviously an imperative here. But to the point that
    you just made, I would argue--I say this to my children all the
    time--I know you are in your early--late twenties, early
    thirties. You should start thinking about this, because it will
    come much sooner than you think it will. Because I feel like I
    am 30 still, and it has come much faster than I would have
    expected.
        But I think this is really important, particularly with
    people entering the workforce, to give serious thought to what
    they are going to do in the out years. So strengthening Social
    Security and making sure they have financial literacy, it seems
    to me, are critical objectives that we ought to achieve.
        So thank you all for your testimony.
        Chairman Yarmuth. The gentleman yields back. I now
    recognize the gentleman from Pennsylvania, Mr. Meuser, for five
    minutes.
        Mr. Meuser. Thank you, Mr. Chairman. Thank you all very
    much for being here with us.
        Dr. Biggs, I would like to first ask you, please, what do
    you think of the Social Security 2100 Act, in broad terms or
    specific terms?
        Dr. Biggs. Well, if you go back--it is worth--Congressman
    Larson talked about the 1983 reforms, where President Reagan
    and the Democratic House and the Republican Senate came
    together to produce a package to fix Social Security. That was
    roughly 50 percent tax increase, 50 percent benefit cuts. I
    mean, you know, you can qualify things that you want, but it
    was roughly half and half.
        The Social Security 2100 Act--and I agree you need to have
    bipartisan cooperation on this, that's how it's going to
    happen. The Social Security 2100 Act is more than 100 percent
    tax increases. It raises taxes to fully pay for promised
    benefits. And then it raises taxes by a greater amount in order
    to increase benefits, to expand Social Security.
        Realistically, that is not going to happen. So people need
    to come together and--as you were talking about, Congressman
    Stewart--say what things you are willing to give on. If your
    starting point is more than a 100 percent tax increase, I think
    that is going to be a difficult bipartisan lift.
        Mr. Meuser. Okay. When you mentioned Scandinavian levels,
    so basically we are talking about 37.5 plus 12.4?
        Dr. Biggs. Plus Medicare taxes. In some states, state
    income tax rates are as----
        Mr. Meuser. Before state income tax----
        Dr. Biggs.--are as high as 10. California is 13 percent. It
    gets to the point where, if you think you are ever going to
    afford Medicare for all or something like that by taxing the
    rich, you will never do it because your top tax rates--you will
    be tapped out on----
        Mr. Meuser. Over 50 percent.
        Dr. Biggs. Well over----
        Mr. Meuser. Scandinavian levels.
        Dr. Biggs. Well over 50 percent.
        Mr. Meuser. So my next question, then. What recommendations
    can you make that would improve the long-term solvency of
    Social Security?
        Dr. Biggs. Well, there is a lot of research that shows that
    middle and high-income folks, the folks who have 401(k)s, are
    financially literate, they trade their personal savings off
    against Social Security. If you raise your Social Security
    benefits, they will, in fact, save less. If you lower their
    Social Security benefits, at least on a kind of long-term
    basis, they will save more and they will work longer. So for
    those folks it is acceptable to slow the growth of benefits
    because they will make it up on their own.
        The same research tends to show that lower-income folks
    aren't as responsive to those incentives. For those folks I
    favor not just maintaining promised Social Security benefits,
    but expanding them, making the safety net stronger. That is a
    way we can make the make the program work for the people who
    need it the most, while letting people who can afford to save
    more and work longer do so. That is the most sustainable route
    to fixing Social Security, but also leaving a little room in
    the budget for the--all the other things the government does.
        Mr. Meuser. The taxable maximum on Social Security
    increases--and that is the question--every year?
        Dr. Biggs. Along with the rate of wage growth. So wages
    grow faster, the taxable maximum grows----
        Mr. Meuser. So how much each year?
        Dr. Biggs. It is--right now it is 132.7, so roughly 4
    percent per year.
        Mr. Meuser. Four percent per year?
        Dr. Biggs. That is the projected nominal rate of wage
    growth.
        Mr. Meuser. Okay. So over a 10-year period, clearly, we are
    going to be 40 percent higher, which is in the neighborhood of
    $165,000 or----
        Dr. Biggs. Sure.
        Mr. Meuser.--where we are today. Okay. So it is increasing
    every year. So all of those at that level, more or less, are
    going to be at a 42 to 43 percent tax range already, with--when
    you add the income tax plus the FICA, the----
        Dr. Biggs. Exactly. So for those folks, eliminating the
    taxable maximum, or phasing it out, as Social Security 2100
    would do, those people are not millionaires and billionaires.
    They are somebody making $150,000, which is a good standard of
    living.
        Mr. Meuser. Right.
        Dr. Biggs. But it is not necessarily who you think you are
    hitting.
        Mr. Meuser. And with state tax, it is near 50 percent. So
    their take-home income is in the neighborhood of $90,000. They
    are paying nearly $70,000 year in federal and----
        Dr. Biggs. Sure.
        Mr. Meuser.----state taxes. What about the age question?
    What are your thoughts on that?
        Dr. Biggs. It is true that Americans are, on average,
    living longer. But there is a wide disparity. The richest
    Americans, as a guess, would live about eight or nine years
    longer past retirement than the poorest ones. The poorest ones
    are much more dependent on Social Security.
        I am not against raising the retirement age as a signal to
    people to work longer. They will. The research shows they will
    accept that signal, and they will work longer. But I would also
    make other changes within Social Security to protect the people
    who are on the bottom, who are the poorest people, who don't
    live as long, to make them whole.
        So raising the retirement age isn't the only thing you do.
    There is other parts of the package, and we can fix it so it
    will not hurt the people on the bottom.
        Mr. Meuser. Thank you. Thank you, Mr. Chairman. I yield.
        Chairman Yarmuth. The gentleman's time has expired. I now
    recognize the gentleman from Virginia, Mr. Scott, for five
    minutes.
        Mr. Scott. Thank you, Mr. Chairman.
        Dr. Biggs, you mentioned the fact that when Social Security
    so-called goes broke they can still make payments. You know
    what percentage payments they can make?
        Dr. Biggs. I think around 80 percent.
        Mr. Scott. And the inflation adjustment, as we go forward,
    is the wage growth. You know what that 80 percent would be,
    compared to just regular inflation?
        Dr. Biggs. The wage growth adjustment is made to the
    taxable maximum. I am not sure I am 100 percent understanding
    the question.
        Mr. Scott. The benefits? The benefits go up, too?
        Dr. Biggs. Yes. Oh, that is correct, yes. Benefits--
    scheduled benefits under Social Security rise roughly with
    wages each year, so about a percentage point faster than
    inflation. So some people say even after that 20 percent cut
    they would be higher than today. I am not 100 percent sure,
    but----
        Mr. Scott. Okay. But you indicated the sooner the better.
    Why is it better to do some--fix it sooner than later?
        Dr. Biggs. Well, it gives people more time to respond. If
    you think about the current increase in the retirement age, it
    was passed in 1983. It didn't even begin phasing in until 2000.
    It is not fully implemented until age 67 until, I think, 2022.
    You don't hear anybody, you know, yelling and screaming about
    the retirement age today because they have had so much warning.
    If we leave it till 2035, then we have to pull the rug out from
    underneath people, and that is very, very hard.
        Mr. Scott. Thank you. Mr. Hanner, you talked about the
    multiemployer pensions and the problems with the failure of the
    multiemployer pensions. What would happen--what effects to the
    federal budget would occur if these pensions failed?
        Mr. Hanner. To the federal government you would have the
    revenue off of, I think it is, 1.5 million workers. You would
    lose that revenue right off the bat.
        Mr. Scott. The taxes they would be paying.
        Mr. Hanner. The taxes they would also lose.
        Mr. Scott. And the increased utilization of food stamps and
    Medicaid?
        Mr. Hanner. They would have to turn somewhere. To eliminate
    your pensions I think you change from a retirement--maybe a
    comfortable retirement--to a survival mode. And there is a big
    difference between a comfortable retirement and a survival
    mode. Like the congressman said, you know, you run out of food
    at the end of the month.
        Mr. Scott. What are your proposals to fix it?
        Mr. Hanner. The Neal bill, H.R. 397. It seems to be the
    best approach to it whatsoever. It seems to be the cheapest
    approach to it whatsoever.
        Mr. Scott. Thank you. Mrs. Cook, there are a lot of
    students with significant student loans. What effect does a
    student loan have on your ability to save for retirement?
        Mrs. Cook. Well, it makes it almost impossible. And, you
    know, I was talking to someone the other day. They had student
    loans until they started helping their children go to college.
    So, I mean, you take all of those earning years in which they
    are paying back their own student loans, and then trying to
    help their children, it makes savings very difficult.
        Mr. Scott. And the fact that you have to start 10 or 20
    years later saving up for your retirement, because you had to
    pay the student loans, what does that have (sic) on the
    ultimate size of the nest egg?
        Mrs. Cook. Well, it makes it almost impossible to have that
    third-legged stool of savings, and anything significant. And
    what we have seen is, even when people have saved, once they
    have a health issue of any kind that savings they go through
    very quickly.
        Mr. Scott. Do you know the effect of immigration reform,
    what that would have on Social Security?
        Mrs. Cook. Sir, I don't know.
        Mr. Scott. Dr. Favreault, do you know?
        Dr. Favreault. Yes. We can think of immigration as akin to
    adding births to the population, in the sense that--except they
    are a little bit older. So you are going to have more workers
    per beneficiary, and that is an excellent thing for Social
    Security's health.
        The Social Security Trustee's report has some information
    in the appendix about immigrants adding, say, roughly 300 or
    330,000, on average. That could have an effect of about nine--
    reduce about 9 percent of the shortfall. So definitely a strong
    labor force is an integral part of----
        Mr. Scott. Essentially, because they would be coming and
    paying, and nobody coming in would be receiving.
        Can you say a word about the effect of the gig economy on
    people's ability to save?
        Dr. Favreault. Yeah. I think it is a really important
    question. Obviously, there are a great diversity in gig
    workers. We see that those who are gig-only often have very,
    very little retirement savings. Very few are participating.
    Those who are both gig and also have an additional full-time
    job are a little bit more likely to be prepared. But those were
    gig-only, again, extremely vulnerable.
        Chairman Yarmuth. The gentleman's time has expired. I now
    recognize the gentleman from Oklahoma, Mr. Hern, for five
    minutes.
        Mr. Hern. Thank you, Mr. Chairman and Ranking Member
    Womack. And thanks to all of you today for being here to
    testify on this.
        You know, as a taxpayer and a person who believes that our
    country's greatest threat is our--I guess it is our 3D problem:
    our deficit, our debt, and our demographics issue.
        And, you know, I appreciate we are having this conversation
    about mandatory spending. I say it is not an entitlement, and
    we have talked about that. You know, a lot of people get that
    wrong. I think it is us taking the good faith and credit of the
    United States, and believing in that promise.
        And you know, according to the Board of Trustees for Social
    Security and Medicare, if Congress does nothing both will be
    insolvent within the next 25 years. Insolvency, as we have been
    describing, is--you know, we can debate that all day long. And
    this is a grim reality for the working-class Americans who have
    spent their entire lives paying into the system with the
    promise that money will be there when they need it.
        I have got to confess I grew up extraordinarily poor: food
    stamps, no running water. I have heard my entire life that
    Social Security would never be there for me. I have never
    counted on it. I think most Americans, truthfully, when they
    are younger and they are working, they don't count on it. They
    work as if it is not going to be there, and some money shows up
    at the end of their lives, and they are appreciative for that.
        My questions today, I have got a multitude of questions,
    but just as sort of a fact-finding mission--and Dr. Biggs, I
    appreciate your outlining here the 13 things you didn't know
    about, or probably wish you knew, or whatever. But let me just
    ask some questions, and maybe just simple yeses or noes. Or if
    you want to expand on them, that would be great. But wage
    growth helps close the gap on Social Security deficits, does it
    not?
        Dr. Biggs. Yes, it does.
        Mr. Hern. Lower unemployment helps close that gap.
        Dr. Biggs. Yes, it does.
        Mr. Hern. And we have, like, the lowest unemployment in
    recorded history, at least in the history that I have read
    about.
        Dr. Biggs. Since the late 1960s. yes.
        Mr. Hern. Legal immigration to replace a scarce resource-
    available workforce would be very beneficial--legal workforce--
    to close this gap.
        Dr. Biggs. Yes.
        Mr. Hern. We have 7.6 million jobs unfilled. If we had
    those filled we would also help replace this need. And we could
    talk about why we also need legal immigration. We have a
    workforce that has been depleted, if you will. And let's talk
    about some facts on that.
        We can talk about our pro-choice conversations that we have
    had, hundreds of thousands of abortions. We could also talk
    about our low birth rate, just described today in The Wall
    Street Journal as the lowest in 40-something years, and not
    getting any better.
        We also could talk about again our aging population, as we
    described, as the Chairman described in his opening comments.
        Could you also help me understand? Because I have heard a
    lot of numbers. What has been the average rate, or ROI or
    return on the investment of Social Security invested dollars in
    the United States?
        Dr. Biggs. There is two ways of thinking about it. One is
    the rate of return on the Social Security trust fund, and that
    is invested in special-issue government bonds. Right now 5
    percent, I would think. Then there is the rate of return that
    the individual gets from the program. They pay money in and
    they get money out.
        Mr. Hern. That is really all that matters to me----
        Dr. Biggs. And you can calculate an interest rate from
    that. That started out extraordinarily high. The early
    generations of Social Security couldn't have done better in
    Vegas. They made a lot of money on it, because the benefits
    were relatively generous. They had a short career of paying low
    taxes. But that's a seesaw, and they gained a lot of money.
    Future generations' Social Security, one way or the other, no
    matter how you fix it, will be a money loser for future
    generations, simply because the early generation got such a
    good deal.
        Mr. Hern. So the argument----
        Dr. Biggs. So whether you raise tax or cut benefits, it is
    going to----
        Mr. Hern. So there might be a viable argument in there, as
    we have heard about since the 1990s certainly, about some self-
    directed ability, if you had the ability to self-direct some of
    that. That is for open debate. We could spend a day talking
    about that.
        Does a growing economy and robust markets help close the
    funding gap?
        Dr. Biggs. It will, but it will not close it by itself.
        Mr. Hern. Would it also--and I am sorry I can't see your
    name there, sir, next to you there, but--we are talking about
    pensions. Would that also--a growing marketplace, robust
    economy, does that help close the pension gap?
        Mr. Hanner. It would seem to be, there would be more people
    hired.
        Mr. Hern. So an investment of your funds into certain
    investments that gets a better return, if there is a return as
    opposed to a loss, if you are--from the investment side of
    your--those dollars you have taken.
        Mr. Hanner. If we were able to invest in the market. Since
    we have gotten so low, dipped so low, our money has been put
    into guaranteed interest. We can't afford a drop in the market.
        Mr. Hern. Perfect conversation. Our national debt and our
    annual deficit are keeping those interest rates really low. The
    day of getting 5 percent returns are gone, because we know for
    every 1 percent we add, that is $200 billion in additional
    deficit every year. And so we know that that is a problem. So
    our deficits and our debts are having problems across the
    board. And having the fallacies of us promising something with
    pensions, defined benefit programs, or our Social Security is
    going to be problematic if we can't figure out how to get a--
    control our deficits, debts.
        And I would just like to say one thing--and I know I am
    over, Mr. Chairman--but in reference to the student loans, I
    think it is safe to say that if anybody in here that had a
    student loan would raise their hand would also not like to have
    ever paid it back or pay it back. So--but that is an obligation
    that you promised and signed upon to take to go get a four-year
    education. And I think we have got to be really careful about
    forgiving student loans because that is an investment in your
    future. And so you should invest wisely. Thank you. I yield
    back.
        Chairman Yarmuth. The gentleman's time has expired. I now
    recognize the gentleman from California, Mr. Peters, for five
    minutes.
        Mr. Peters. Thank you, Mr. Chairman. I was a little
    frustrated by the discussion we had. I felt like people were
    talking past each other. It is pretty obvious that, from Dr.
    Biggs, a lot of people are doing fine, the economy is good for
    a lot of people, people have saved. That is terrific. They
    didn't--that didn't really address the distributional effect of
    people who aren't doing well. We really need Social Security to
    keep them out of poverty.
        And I think what really occurred to me is that, you know,
    we call it an insurance plan, but really, Social Security is
    more like a retirement plan because we pay it out to people
    even if they don't need it. Insurance you call on. You pay a
    premium every year. You call on it when you need it. And we
    don't--that is really not what Social Security is, because
    people who don't need it, like Mr. Biggs or Dr. Biggs
    described, are still getting the payment. And they could adjust
    for that. And to me, that is--that strikes me as an opportunity
    for some discussion.
        We talked a lot about a lot of other issues that we put on
    Social Security that we should be dealing with separately. The
    cost of health care is a separate issue. If the cost of health
    care was cheaper, that would certainly be good for the people
    that I think you are concerned about.
        We talked a little bit about tax policy and deficits. I
    mean, I have got to tell you that I think that one of the
    saddest things we did was the tax cuts we did last year for
    people who didn't need them. They didn't need tax cuts. We
    overshot the corporate tax cut by a good 4 or 5 percent from
    even what Mitt Romney and the Business Roundtable had been
    asking for, and then we talk about deficits here. I opposed
    that, I think that was unwise policy.
        And I do think that student loans is still a burden on
    folks. I think they should be--I don't believe in free college,
    but I also don't believe in gouging people with 6 or 8 percent
    loans, when the cost of money to the federal government is
    something around 3 percent. So we talked a lot, at least
    obliquely, about a lot of issues here.
        But one thing I wanted to raise was that I think we ought
    to have a more direct approach to retirement.
        We have a minimum wage in this country. It is actually--
    when I was working for the minimum wage it was, I think, $2.65
    an hour. I don't think anyone suggests the minimum wage should
    not have been--should not have risen. Even Dr. Biggs probably
    think there is some role for raising that. Now it is at $7.25.
    I think we are due for another increase.
        One part of that increase might be suggested by the Saving
    for the Future Act, which I have introduced in the House with
    Representatives McBath and Blunt Rochester--it has been
    addressed in the Senate by Senator Coons and Klobuchar--which
    would--since we have a minimum wage we don't have a minimum
    contribution to retirement, and this would make a $.50 minimum
    retirement contribution, so that when--over the course of your
    career, if you work the whole time, and just with that minimum,
    it would generate over $600,000 worth of savings for people.
        That could be combined with a minimum wage increase, so
    that if you didn't want to go all the way up to $15, you could
    say, well, $14.50 plus $.50 for retirement, that would be a
    good compromise. Or some other area. I mean, I think there is a
    lot of approaches to addressing the minimum wage, but a minimum
    retirement contribution would make a lot of sense. And it would
    take a lot of the pressure off of Social Security, because
    employers would be paying into it over time.
        Dr. Biggs, does that strike you as a constructive way to
    deal with some of these issues, in terms of making sure that
    everyone has a decent retirement?
        Dr. Biggs. Well, I think I--when I hear the minimum wage,
    the research on the minimum wage, I think, is more nuanced than
    many people today think it--it won't destroy jobs, but if you
    go--I live in southern Oregon, right on the northern California
    border. A $15 minimum wage in those areas would be difficult.
        Mr. Peters. And just so--just to be clear, I favor the--
    Terri Sewell's approach, which is a regional minimum wage. So
    California, $15 is fine for us, but maybe it is different in--
    but as a way to get up to $50?
        Dr. Biggs. My--part of--I think about the Save For the
    Future Act. Part of me says, oh, I don't want to have a mandate
    on businesses to do these certain things. And I understand
    that. On the other hand, though, I would personally much rather
    increase retirement savings for those who need it through a
    personal account-type program that you are talking about than
    trying to do it on the Social Security side, which is--I think
    it is just much more difficult on the tax----
        Mr. Peters. Well, I didn't suggest the Social Security
    side, but three out of 10 workers lack access to a retirement
    plan today. Forty five percent don't participate. That is not
    good for the country.
        Dr. Biggs. Sure. The coverage gap is some--two things I
    point out: close the coverage gap, make auto enrollment
    universal. That solves so many problems, and it does it in a
    very easy.
        Mr. Peters. And finally, I don't want to--I think that the
    response, Mr. Hanner, was a little bit cavalier. My father also
    had his clergy pension cut. He was so careful with his money.
    He depended on that pension. He had every right to depend on
    that pension. And I think speaking in generalities doesn't
    really address the pain that happens in those families, and I
    want to acknowledge that. And I yield back.
        Chairman Yarmuth. The gentleman's time has expired. I now
    recognize the gentleman from Texas, Mr. Crenshaw.
        Mr. Crenshaw. Thank you, Mr. Chairman. Thank you for
    holding this very important hearing.
        I am going to talk for a minute to the Millennials in the
    room, and to the many Millennials glued to C-SPAN right now,
    watching this--I say sarcastically--watching this extremely
    important discussion on Social Security. This is going to
    affect my generation. I am a Millennial, albeit an elder
    Millennial. And Social Security is one of the most important
    issues that my generation faces. We all agree it is on a path
    to insolvency. Americans aren't saving enough. We aren't secure
    enough in our retirement. The question is then, what do we do?
    And we have to frame the options, I think, very clearly.
        First of all, let's come up with the realization that
    Social Security is not a retirement program, it is a program
    meant to keep seniors out of poverty--originally its intention.
        And another thing we should point out is that we actually
    generally agree on progressive solutions to fix it. But there
    is two ways to add money into the program in a progressive way:
    one is through taxation and one is through benefits.
        So, let's look at the Social Security 2100 Act. This
    represents the extreme end of using tax increases to achieve
    solvency. Millennials watching C-SPAN should not be very fond
    of this idea. What we are effectively doing is we are
    transferring wealth from the young to the old. It is also the
    least efficient way to redistribute wealth if our goal is,
    indeed, that. And I actually think it is. You are taking money
    out of people's paychecks when they need it most, when they are
    trying to start a family, start a business, buy a home, or save
    for retirement, which I think we all agree is a problem--
    Americans are not saving enough. And according to the 2100 Act,
    this money would be transferred mostly to wealthy retirees.
        I hope Millennials are listening to this. This is deeply
    unfair, and it is bad for economic growth. In fact, according
    to that Wharton study, it decreases economic growth by a whole
    2 percent by 2049. That seems like a small number. But in
    reality, that is an enormous absolute number.
        The other way that we can look to make Social Security
    solvent is, of course, through benefits. How do we do that? We
    have to question does it make sense for the wealthiest among us
    to have an increase in benefits after they have had their
    entire lives to save, their entire lives to create the
    businesses they want to do, and create wealth? Does that make
    sense, or does it make sense to focus on the true purpose of
    Social Security, which is to keep senior citizens out of
    poverty and focus on benefit increases for them?
        If we are going to be progressive about this, it should be
    in the latter parts of life. We should not tax the very people
    who need their money the most, my generation, to transfer that
    to the wealthy.
        Okay. Don't worry, Millennials, we are going to put that on
    YouTube. I know you are not watching C-SPAN.
        [Laughter.]
        Mr. Crenshaw. All right, Dr. Biggs, will you talk for a
    second about the economic differences between the benefit and
    taxation debates?
        Dr. Biggs. Sure. If I could just touch on the generational
    differences first, I think you hit on something very important.
    And this applies to the Social Security 2100 Act. Benefits are
    increased immediately under that proposal. The tax increases
    are phased in. You know, it is--you can say, well, today it is
    only a cup of latte or something. Once those tax increases are
    fully phased in, for an average wage worker it is an extra $50,
    a week or $50 a month they have to pay.
        So it is--when you are increasing benefits immediately but
    phasing in the tax increases, it means that future generations
    of workers, they have to pay for not only their own benefit
    increase, but for the benefit increase that came to today's
    retirees who didn't pay for it. So generationally, this is
    shifting more of the costs to future generations.
        On the economic side it is--you know, people disagree about
    the effect of taxes on, you know, work incentives and economic
    growth. But there is agreement that, in general, if you raise
    taxes people are going to work less. You know, we don't know
    the size, but we know they are going to work less.
        There also is a lot of research finding for middle and
    upper-income folks that if you raise Social Security benefits
    they will save less.
        Now, in a simple textbook economic model, if people work
    less because of higher taxes and they save less because of
    higher benefits, you will in fact have a smaller economy in the
    future. The Penn Morton model projects a 7 percentage point of
    GDP difference come 2049 from the Social Security 2100 Act
    versus kind of a benefit-cuts-only act. That is an enormous
    amount of money that we are we are giving away, essentially,
    which we could avoid. We can protect the poor, but middle and
    upper income folks should, you know, work more, save more, work
    a little bit longer.
        Mr. Crenshaw. I am out of time. Thank you, Mr. Chairman.
        Chairman Yarmuth. The gentleman's time has expired. I now
    recognize the gentleman from Massachusetts, Mr. Moulton, for
    five minutes.
        Mr. Moulton. Thank you very much Mr. Chairman. I want to
    follow up on what my colleague from Texas was saying. He was
    talking about how there are two ways to address the Social
    Security crisis. And he said specifically we can make Social
    Security solvent through tax increases or we can make Social
    Security solvent through benefits. It seems to me that what he
    meant to say was cutting benefits. Is that right, Mr. Biggs,
    Dr. Biggs?
        Dr. Biggs. You are--you would be cutting benefits certainly
    relative to promised levels. You would not necessarily be
    cutting them relative to the benefits that today's retirees
    get, because Social Security promises ever-increasing real
    levels of benefits. So it is just a distinction. It does not
    mean future retirees would have lower benefits than today. It
    is one of these Washington things: slowing the growth equals a
    cut.
        Mr. Moulton. Right. So it is a cut. It is not increasing
    benefits. What sorts of benefits do you think that we should be
    cutting to achieve solvency through this method?
        Dr. Biggs. Okay. Well, for middle and upper-income retirees
    I would slow the rate at which benefits increase. And the idea
    there is they should make up that difference, and the evidence
    suggests they will make up that difference by saving more in
    their 401(k)s, delaying retirement a little bit.
        Mr. Moulton. Saving more in their 401(k)s?
        Dr. Biggs. Correct.
        Mr. Moulton. What percentage of Americans have 401(k)s?
        Dr. Biggs. Right now, among----
        Mr. Moulton. What percentage of Americans have 401(k)s?
        Dr. Biggs. About 55 percent----
        Mr. Moulton. About 55 percent. And would you say those are
    the poorest Americans, who have 401(k)s?
        Dr. Biggs. No, those are the middle and upper-income folks
    who are----
        Mr. Moulton. Those are the upper-income folks, the middle
    and upper-income folks. Okay, but I thought Mr. Crenshaw said
    that Social Security was designed to keep people out of
    poverty. Are upper-income folks in danger of going into
    poverty?
        Dr. Biggs. No, which is why you would slow the growth of
    benefits for them.
        Mr. Moulton. But--so the point is that--you said that, by
    slowing the growth of benefits, you would encourage people to
    put more money into their 401(k)s.
        Dr. Biggs. Exactly.
        Mr. Moulton. But those aren't the people who need Social
    Security. The people who need Social Security----
        Dr. Biggs. I think you are----
        Mr. Moulton.--are the people who are at the lower income--
    is that not right, Dr. Biggs?
        Dr. Biggs. Sure. You are making my case for me.
        Mr. Moulton. So----
        Dr. Biggs. We should retain benefits for the lower end, but
    slow them for middle and upper-income folks.
        Mr. Moulton. So the--so your colleague from--my colleague
    from Oklahoma stated that most Americans aren't counting on
    Social Security right now. Would you say that that is true?
        Dr. Biggs. It is a little hard to say.
        It--I wish----
        Mr. Moulton. It is a little hard to say?
        Dr. Biggs. I wish they were saving as if they were not
    going to get Social Security.
        Mr. Moulton. That is a nice wish. But are they counting on
    it? Would you like to tell my parents that they are not
    counting on Social Security?
        Mr. Biggs. I think he was referring to younger folks who
    say, ``I am more likely to see a UFO''----
        Mr. Moulton. Oh, did he specify younger folks?
        Dr. Biggs. Well, we had a previous reference to a poll of
    younger folks who said they are more likely to see a UFO than
    get Social Security, so I think he was referencing that. Yes,
    sir.
        Mr. Moulton. Okay. So we should just assume that Social
    Security won't be there.
        Dr. Biggs. No.
        Mr. Moulton. Then why don't we just eliminate it?
        Dr. Biggs. I just--in a response to a previous question I
    said that as long as Social Security is collecting 12.4 percent
    of payroll, it can continue paying benefits equal to 12.4
    percent of payroll from now until infinity. It will not run out
    of money, and it is mistaken for younger folks to think they
    will get zero. That is an error on their part.
        Mr. Moulton. That is an error. All right.
        Dr. Biggs. Sure.
        Mr. Moulton. How do you suggest that we deal with the gig
    economy vis a vis Social Security?
        Dr. Biggs. Dr. Favreault touched on this earlier. There is
    a question of people who are gig-only, who--they might work for
    Uber as their only job. And then----
        Mr. Moulton. And, by the way, if they work for Uber--I mean
    we talked about how low employment is--unemployment is right
    now. It seems to me I have met an awful lot of Americans who
    are working two or three jobs, who are just barely struggling
    to make ends meet, teachers who are driving Uber in the
    evenings to put food on the table.
        We just had a court ruling that Uber employees aren't even
    considered employees.
        Dr. Biggs. If you follow the IRS's standards for who is a
    contractor and who is an employee, I mean--you know, this is
    neither here nor there for me----
        Mr. Moulton. Well, neither here nor there for you? It is
    here or there for an awful lot of Americans who are counting--
    --
        Dr. Biggs. What I am saying is----
        Mr. Moulton.--on Social Security because they are
    struggling to make ends meet, Dr. Biggs.
        Dr. Biggs. The status of Uber employees is neither here nor
    there for me. It is not the subject of my testimony, sir.
        Mr. Moulton. Well, maybe it should be.
        Dr. Biggs. Well----
        Mr. Moulton.--because we have got to figure out how to make
    Social Security--well, I am glad you think this is a laughing
    matter, Dr. Biggs.
        Dr. Biggs. I was asked to testify on retirement, not on the
    status of Uber----
        Mr. Moulton. I am not sure it is a laughing matter for an
    awful lot of Americans. I am not sure it is a laughing matter
    for that teacher who doesn't have a pension anymore, who has to
    drive Uber in the evening to put food on the table. I don't
    think that is a laughing matter at all. And I don't think the
    idea that a lot of Americans aren't counting on Social Security
    is something that we should count on here in Congress.
        Thank you, and I yield back.
        Chairman Yarmuth. The gentleman's time has expired. I now
    recognize the gentleman from South Carolina, Mr. Timmons, for
    five minutes.
        Mr. Timmons. Thank you, Mr. Chairman. I am going to yield
    the first 60 seconds of my time to Mr. Crenshaw.
        Mr. Crenshaw. Thank you, Mr. Timmons.
        Mr. Moulton, I will help answer your question since you
    didn't want to direct it at me. I don't think this is as
    helpful to your presidential run as you might think, trying to
    twist words and mix up the numbers here.
        What we are saying is a basic notion of fairness. If you
    have to solve the problem of Social Security in a progressive
    way, which I think we actually agree on, what is the fairest
    way to do it? Do you want to increase benefits for
    millionaires? That is the essential question. And your answer
    to that is yes, you do. Some progressive. It doesn't make
    sense, and it is bad for the economy.
        That is the answer. But I know you were looking for sound
    bites for your failing presidential run. Good luck with that.
        Mr. Timmons. Thank you, Mr. Chairman.
        Dr. Biggs, so I want to begin with 1935. So the average
    life expectancy was around 60 years old, 16 people were paying
    in for every one person taking out, and the retirement age at
    that point was 65. We were coming of the Great Depression, and
    America did what America does, and that is help people that
    needed to be helped.
        Would you say that there was a retirement crisis in 1935?
        Dr. Biggs. There were very, very few retirement plans,
    either in the public or the private sector. At that point most
    retirees, those who lived to retirement age, would depend on
    families. So by today's standards there certainly would have
    been.
        Mr. Timmons. Okay, so let's fast forward to 2019. The
    retirement age is 67, average life expectancy is 80. You have
    three people paying in for every one person taking out.
    Unemployment is at a 50-year low. The economy is doing great.
        Would you say that there is a retirement crisis today?
        Dr. Biggs. There is undoubtedly not a retirement crisis
    today. Retiree incomes are the highest they have been, retiree
    wealth is the highest it has been, retiree poverty is the
    lowest it has been. You can look at surveys. You know, retirees
    will tell you they have enough money not simply to survive, but
    to live comfortably.
        It doesn't mean that we don't have cases where retirees are
    in poverty, or they have health cost problems, or other
    financial problems. But it means that, relative to the past,
    retirees today are doing very, very well. We should acknowledge
    that success and celebrate it, while still preparing for the
    challenges ahead.
        Mr. Timmons. So would you say that Social Security is not
    doing what it was designed to do in 2019?
        Dr. Biggs. Well, Social Security--if you think about the
    decline in the poverty rate among retirees, which we have seen,
    Social Security is playing a role in that, in the sense you are
    boosting benefits for folks at the low end.
        The question is, you know, is it sustainable over the long
    term? Is it focused where it should be? The issue is not that
    Social Security isn't helping prevent poverty. Is it spending a
    lot of money on a lot of higher-income people who are at no
    risk of poverty? And I think that is the question of should we
    be raising taxes to increase those benefits, or should we use
    that money elsewhere?
        Mr. Timmons. If nothing is done to change Social Security
    as it is now, will I receive benefits like my father does
    today?
        Dr. Biggs. You will receive benefits. You will not--they
    may, depending on your earnings, or as your dad--they may be a
    higher in sort of inflation-adjusted terms. You will not
    receive the benefits you have been promised. You would receive
    roughly 20 percent less than you have been promised.
        So could you survive? Probably. Is that a good system to
    have? No, it's not. And so we need to get on top of this
    problem, rather than leaving it to the night before the system
    goes broke.
        Mr. Timmons. And again, what year is--will the 20 percent
    cuts take effect?
        Dr. Biggs. It is currently projected by the Social Security
    Administration for 2035. I think the CBO projects it a little
    bit earlier than that, a year or so earlier.
        Mr. Timmons. I think we can all agree that if we send
    people 20 percent less than they received the previous year, in
    2035 it will be very bad for everyone.
        Dr. Biggs. That will be a crisis.
        Mr. Timmons. And that would indeed be a crisis. So the
    question then becomes what are we going to do that is
    responsible to fix it. And it is--will we change the plan that
    I will have, that I can expect, begin the education process to
    make sure that people in my generation understand how to
    appropriately plan for retirement, and also potentially find a
    way to increase the amount of money that is going into the
    system? So the answer is likely going to be somewhere between
    both of those approaches. Would you agree with that?
        Dr. Biggs. Sure. Americans, workers and retirees, have
    earned benefits under Social Security. We can afford to pay the
    benefits people have already earned. We can fix Social Security
    without cutting benefits you have already accrued.
        But going forward, the terms of the deal have to change. We
    have to tell people going forward, ``You are going to have to
    pay a little bit more, or get a little bit less.'' We can pay
    what people have already earned. We cannot continue an
    unsustainable deal going forward, though.
        Mr. Timmons. Thank you. Mr. Chairman, I really appreciate
    you holding this hearing today, and I look forward to working
    with you to try to fix Social Security for the next generation.
        Chairman Yarmuth. Thank you. The gentleman's time has
    expired. I now recognize the gentlelady from Minnesota, Ms.
    Omar.
        Ms. Omar. Thank you, Chairman. I would like to yield some
    time to Mr. Moulton.
        Mr. Moulton. Thank you, Ms. Omar. I just wanted to follow
    up on Dr.--Mr. Crenshaw's comments. After saying that we could
    solve the Social Security deficit through benefits, while
    conveniently leaving out the word ``cutting benefits,'' he then
    said that what I want to do is raise benefits for millionaires.
    And I assume he is referring to the fact that I support--I am a
    cosponsor of the Social Security 2100 Act that does increase
    benefits for Social Security recipients. So I just have one
    simple question.
        Dr. Favreault, are most Social Security recipients
    millionaires?
        Dr. Favreault. They certainly are not.
        Mr. Crenshaw. Thank you. And I yield back.
        Ms. Omar. Thank you. Let's continue on that thought. Social
    Security was designed to alleviate seniors--to alleviate
    seniors from poverty. Half of our nation's seniors were in
    poverty in 1935, when this happened. And right now, yes, so we
    can celebrate some wins. This is about 8.8 percent. But that
    isn't really the case for women. Do you know what the
    percentage of women is?
        Dr. Favreault. It depends which particular statistic you
    use, but usually women's poverty is substantially higher than
    men's, somewhere between 80 percent and 100 percent higher,
    depending on which statistics you use.
        Ms. Omar. Yeah, and I suppose this is twice as high as men.
    Also, women of color have higher. And what is that due to?
        Dr. Favreault. So predominantly, if you look at the
    statistics--and I cited some in my testimony--it is low
    lifetime earnings, right? We know that women face--first of
    all, African-American women, or women of color, by and large,
    will often face discrimination in the labor market.
        So, in addition to often times working less because they
    are providing care, they may be facing discrimination in labor
    markets. So that compounds over the course of a lifetime, and
    so that one can end up with lower lifetime earnings, and that
    would, in turn, lead to lower lifetime benefits. So it is a
    combination of, often times, caregiving--it can be poor labor
    market experiences. So a wide range of phenomena.
        Ms. Omar. So, I mean, we can focus on trying to fix Social
    Security. But I believe that we also can do some work in trying
    to support other policies that will get rid of this, the kind
    of disparities that exist for many of our seniors in our
    communities. So things like the Family Paid Leave Act would
    certainly be helpful.
        Are there any other policies that you think would be able
    to help fill the gap?
        Dr. Favreault. So one policy that I think is important to
    look at--and this is for people very low on the income
    spectrum--is to look at the Supplemental Security Income
    program, which I think is often referred to as the forgotten
    safety net. That is the backstop to Social Security for those
    folks who have very low incomes and very low assets. That
    program has not been updated in decades, with respect to its
    asset test.
        So that is definitely one area I would look. I think it is
    a forgotten component of our safety net, and it needs some
    modernization. So that is one idea, but certainly----
        Ms. Omar. So Dr. Biggs, I just wanted to get a clear
    understanding on the testimony, the answers you were giving to
    the questions my colleague was asking from Texas.
        You are proposing that we have the wealthiest seniors get
    less in Social Security than those that are in the lower income
    brackets?
        Dr. Biggs. Not necessarily less in dollar terms, but less
    than they are currently promised.
        Ms. Omar. Okay.
        Dr. Biggs. So they are promised some level, and I would
    have them get less.
        Ms. Omar. Right, because--what is the thought process
    around that? They have money, they shouldn't be supplemented
    more?
        Dr. Biggs. The idea is that they--if you reduce their
    future benefits, they will respond by working and saving more.
    Lower-income folks, it is much harder to do that. And so you
    should focus the benefit reductions on the folks who can most
    bear it.
        Ms. Omar. I mean that is quite progressive, I would say,
    and it is fascinating to me, because there is often hypocrisy
    from my colleague when it comes to taxation.
        I seem to think that you should tax people with higher
    income brackets, the millionaires, the billionaires higher, and
    make sure that you are putting more money back in the pockets
    of people who are struggling with poverty, or are in the lower
    income brackets.
        I also believe that we should be helping house people who
    are homeless and are struggling in our communities, that we
    should care for our children and make sure that we are
    providing for education and the such.
        And it's fascinating to me, because none of those things he
    agrees with. But when it comes to retirement and talking about
    Millennials, that is where he goes when you yourself have said,
    as Millennials, can still count on getting Social Security
    benefits. We are paying into it. We will be promised that.
        But what we are not promised is that when we take on
    student debt we will not--we are not promised to have a job
    that will be able to pay us enough to be able to pay off those
    student loans.
        We are not promised the kind of future we want in buying a
    home and starting a family and having children, having the kind
    of security and dignity that we deserve.
        We are not promised the kind of health care that is going
    to care for us when we get things like diabetes or cancer.
    Those are the kind of promises that we don't get, and those are
    the kind of promises that people cannot have the income or the
    ability to fill the gap for.
        Chairman Yarmuth. The gentlelady's time has expired.
        Ms. Omar. We cannot show up for ourselves in a different
    way. And so I just, you know----
        Mr. Womack. Mr. Chairman, her time has expired.
        Chairman Yarmuth. The----
        Ms. Omar.----we love to see that kind of hypocrisy.
        Chairman Yarmuth. The gentlelady's time has expired.
        Mr. Womack. Her time has expired.
        Ms. Omar. Thank you. I yield back.
        Chairman Yarmuth. The gentlelady's time has expired. I now
    recognize the gentleman from Georgia, Mr. Woodall, for five
    minutes.
        Mr. Woodall. Thank you, Mr. Chairman. I have missed the
    testimony. But candidly, Mrs. Cook, I came for you. I know
    where I stand on Social Security, it is the easiest and most
    predictable crisis we face. Candidly, I would pick any of the
    solutions you all proffered, rather than none of the solutions
    that you all proffered. It is a great frustration to me that we
    are here.
        I appreciate the distinction you make, Dr. Biggs, between
    providing folks with more benefits that they don't need versus
    taking more money away from them that they might need. I
    consider that a substantially different use of the federal
    power, to give people less as opposed to take more from them.
        The biggest disappointment I have had in Congress was the
    supercommittee back in 2011 that failed to make any substantial
    movement on these issues, Ms. Cook, but the second biggest
    disappointment was the pension Committee last year, a
    bipartisan, bicameral Committee. It had a real shot at being
    able to put folks who are dealing with Central States in a
    place of certainty, going forward.
        What I hear from my pensioners back home is, ``Rob, maybe I
    am going to take a haircut. Maybe it is a big haircut, maybe it
    is a little haircut. But I would rather know today so I can
    take my wife on that vacation before we get too old to do it,
    instead of not knowing.''
        I have served with these two gentlemen on the budget
    bicameral bipartisan Committee, an amazing understanding and
    productive conversation in that way. I didn't hear any of that
    coming out of the pension Committee.
        Tell me what your expectation is. If we can't agree to be
    candid with a small group like folks trusting Central States,
    how do you see us going to even a larger group, like all senior
    citizens, and being candid with them about our Social Security
    challenges going forward?
        Mrs. Cook. Congressman, do you mind if I--it was actually
    my colleague over here that talked about the Central States
    pensions.
        Mr. Woodall. I came all this way for you, Ms. Cook, and you
    are pointing me to Mr. Hanner, instead?
        Mrs. Cook. I would be happy to answer another question.
        Mr. Woodall. I was prepared to trust Ms. Cook's answer. I
    am a little more skeptical now, Mr. Hanner. Go--please.
        Mr. Hanner. Well, when you talk about dealing with them,
    and the small haircut you are talking about, you are talking
    about over 60 percent of that pension. That is not a haircut.
        Mr. Woodall. You have misunderstood what I have said. Today
    there is no certainty, except----
        Mr. Hanner. There is no certainty, you are right.
        Mr. Woodall. Except that folks cannot have the benefits
    that they have been promised.
        Mr. Hanner. Right.
        Mr. Woodall. You and I and the Chairman and the Ranking
    Member, we could create certainty.
        Mr. Hanner. Yes.
        Mr. Woodall. Now, that certainty is not going to be that
    you get everything that was promised, certainly not for the
    next generation of retirees. It is not going to be you got
    everything that the previous generation got. But what we can do
    is promise you that you are going to get something, 90 percent,
    70 percent, 60 percent, whatever it is. We can solve the
    uncertainty if we come together on that issue.
        My question, as someone who is facing that uncertainty, is
    do you value certainty at a cost more than the uncertainty,
    which, while it may not have a cost today, is certainly going
    to have an associated cost tomorrow?
        Mr. Hanner. Yes, we value certainty. We would have to look
    at the cost.
        Mr. Woodall. And that is the conversation I have with all
    my colleagues about Social Security. We should fix it. We just
    have to look and see what that ought to look like.
        And candidly, Mr. Chairman, you are the first one to take a
    serious look at what we can do to come together. It might not
    have been the look I would have taken first, but I will take a
    look over no look at all.
        Mr. Hanner?
        Mr. Hanner. But you also got to remember certainty means a
    lot to us. We paid to insure these pensions. And now you are
    telling us that is broke, too.
        Mr. Woodall. Well, to be fair, the insurance was never a
    full insurance, right? I can sign you--I can connect you with
    the folks in my district who are on pensions that were insured.
    They are not satisfied with the quality of that insurance.
        Mr. Hanner. Exactly, they are not.
        Mr. Woodall. But----
        Mr. Hanner. We were never brought into that. That was that
    was between the company and Congress.
        Mr. Woodall. They--let me ask you a different question. A
    big group in my district, UPS, as you know, paid big, big
    dollars to buy their teamsters out of Central States many years
    ago. Now folks want to come back and say, ``Well, we know you
    paid what you owed, but other folks didn't pay what they owed,
    and so now we want to come back and get some more from UPS.'' I
    think that is a fair concern on the Social Security
    perspective, as well.
        I want to solve the problem, whether it means I pay more or
    I get less, however it is, those the only levers I can pull.
    Let's pull those levers. But I want the certainty that we are
    going to do it once, we are going to agree on what that
    solution is, and now we are going to be actuarially satisfied
    for the next three generations.
        Knowing that everyone here is in favor of solutions, is
    there any upside to a temporary fix instead of a multi-
    generational solve? No benefit for a short-term solution. I
    just share that with you, Mr. Chairman. Not that you advocate
    for short-term solutions, but this Congress does have a
    penchant for solving something for another 60 or 90 days. Zero
    interest across the ideological spectrum for doing something
    that is not going to be enduring. I look forward to working
    with you on an enduring solution. Thank you, Mr. Chairman.
        Chairman Yarmuth. Thank you. The gentleman's time has
    expired. I now recognize the gentleman from Nevada, Mr.
    Horsford, for five minutes.
        Mr. Horsford. Thank you very much, Mr. Chairman, for giving
    us the opportunity to address this very critical issue which
    affects millions of seniors and retirees, and one that will
    affect all of us one day.
        Before I go any further, I want to thank our primary
    witness this morning, Congressman Larson, Chairman of the
    Subcommittee on Social Security from the Ways and Means
    Committee. He recently joined me for a Social Security town
    hall in my district to speak to our constituents about the
    urgent need for Congress to act to preserve, protect, and
    improve Social Security in the future, and to strengthen all
    retirement security.
        Social Security has and continues to be a safety net for
    families across southern Nevada and across the country. Social
    Security provides benefits to 400,000 Nevada retired workers,
    of which nearly 100,000 are in Nevada's 4th congressional
    district, which I represent.
        One of the things that my constituents relate to me is they
    have serious concerns about the future of Social Security. Many
    of them expressed that they fear any cuts to their benefits,
    which they rely on to survive each and every month. And this is
    one of the reasons why I support the Social Security 2100 Act,
    which was introduced by Congressman John Larson.
        To quote Maria Dent, the state director in Nevada for AARP,
    ``Nevadans earn their benefits through a lifetime of hard work.
    As a result, it ensures families against the loss of income
    caused by retirement, disability, or death. Without Social
    Security benefits about four in 10 Americans age 65 and older
    would have incomes below the poverty line, all else being
    equal, according to official estimates based on the 2017
    Current Population Survey.''
        Let me be clear. Social Security is not an entitlement. It
    is a trust fund that people have paid into their entire working
    life. It is a false choice, in my opinion, to have a discussion
    about cutting benefits for current or future beneficiaries. And
    it is time for Congress to take the responsible steps necessary
    to shore up Social Security now for current and future
    beneficiaries.
        Now, the President's proposed budget would drastically cut
    programs that benefit America's oldest, including many
    vulnerable citizens. The President's spending plan calls for
    deep reductions to Social Security disability insurance,
    breaking his promise not to touch Social Security. It also
    includes cuts in Medicare, another program he promised not to
    cut.
        According to the Federal Reserve Board, Social Security
    accounts for a greater share of retirement income for African-
    American, Latino-American, and Asian-Americans than it does for
    the general population. And African-American and Latino
    retirees are about half as likely to have private retirement
    plans, and are significantly less likely to have savings
    through an IRA or a 401(k), which I suppose is the only
    solution my colleagues on the other side are willing to
    support.
        Mrs. Cook, Ms. Favreault--Dr. Favreault, and Mr. Hanner,
    can you confirm that retirement and financial security is a
    stressor for many seniors today? Yes or no?
        Dr. Favreault. Yes, absolutely.
        Mrs. Cook. Yes.
        Mr. Hanner. Yes.
        Mr. Horsford. Mrs. Cook, can you please discuss the impacts
    that any cuts to Social Security would have on the more than 15
    million elderly Americans and 130,000 Nevada residents aged 65
    and older? What would happen to benefits if trust fund reserves
    are depleted?
        Mrs. Cook. It would have a devastating effect, and we
    already see older adults in poverty. From where I--I come from
    Rochester, New York, and we have the highest percentage of
    older adults in poverty in New York state, and I have to say
    you touched upon a group of individuals who are most affected:
    women, people of color, and certainly women of color. And we
    see them barely getting by each day.
        So any cut to Social Security would throw millions, I
    believe, of older adults into poverty.
        Mr. Horsford. Yes, so disproportionately those who live on
    the brink of poverty, with nearly half of all older black and
    Latino retirees at or below the 200 percent poverty threshold.
        Mrs. Cook. That is correct.
        Mr. Horsford. These are the people we are talking about. We
    will not allow those cuts to happen, not on our watch. And it
    is time for this Congress to take the action necessary to pass
    the Social Security 2100 Act so that we can shore up Social
    Security for current and future beneficiaries.
        Thank you, Mr. Chairman. I yield back.
        Chairman Yarmuth. The gentleman's time has expired, and I
    now recognize the gentlelady from Texas, Ms. Jackson Lee, for
    five minutes.
        Ms. Jackson Lee. I thank the gentleman for yielding, and I
    thank you for holding this hearing. It is an important hearing,
    and it is a hearing that we should be committed to doing
    something about.
        One thing is certain--is that we cannot improve our fiscal
    outlook by gutting Americans' retirement security. It
    heretofore has been Social Security, savings, and pension. It
    would be immoral to try to solve our long-term budget
    challenges on the backs of retirees. Our commitment to building
    a new infrastructure--whatever the bells and whistles that we
    would like to do to make America the greatest country that it
    is, nothing should cause us to do it on the back of retirees,
    pensioners, their savings, or Social Security.
        But we have seen in this Administration a constant effort,
    a long and unbroken history of calling for cuts to Social
    Security, along with our friends, the other side of the aisle,
    and other programs vital to seniors' economic well-being.
        I have been here in the Congress when there was a rage to
    do privatization, privatization in the midst of the greatest
    financial collapse, probably worse because of the wealth in
    this country in the Great Depression--though I know that there
    will be stories to try to overcome that. What would have
    happened if we had yielded to the investment of our Social
    Security into private entities?
        I am very pleased to be one of the cosponsors of the H.R.
    2100 (sic), early cosponsor of Mr. Larson's legislation, that
    really focuses on strengthening Social Security, and also a
    sponsor of my own Social Security Dividend Safety Act that
    indicates where there is no COLA it should be a dividend given
    to senior citizens. But we hope that the legislation that Mr.
    Larson has put forward will move in this Congress, both the
    House and the Senate.
        Mrs. Cook, what would an immediate 20 percent cut to Social
    Security benefits mean to retirees? What tradeoffs and choices
    would they be forced to make?
        Mrs. Cook. Well, what I see every single day, because I
    work with older adults, they would have the devastating choice
    of paying for prescription drugs, paying for the utilities, or,
    what we see, paying for food. And earlier, one of the
    congressmen mentioned--and we see this, too--that by the end of
    the month we have to direct older adults to food kitchens and
    pantries because they can't make it right now. So I can't
    imagine they could even survive with a 20 percent cut.
        Ms. Jackson Lee. Like me, you have seen choices of cat and
    dog food being supplanted for real food. You have seen
    parceling out of medicine, not taking the right amount, which,
    obviously, we know is like not taking any at all.
        Mrs. Cook. That is right. That is right. And, you know,
    what ended up happening is many of those older adults end up in
    the hospital, paying more in just a different pocket, because
    they are not taking their adequate prescription drugs.
        Ms. Jackson Lee. Let me ask you both--all of you a
    question, starting with Mr. Hanner--about pension. My union
    friends who have worked and invested and have these pensions
    that they thought and--thought, prayed, and supported that
    would keep them through their later stages, many of them worked
    with their hands, as well as their minds, and--but they worked
    for 30, 40 years, and they worked hard.
        So, Mr. Hanner, what kinds of choices do families at risk
    of losing their pension have to face? Are people worried about
    losing their homes, or not being able to pay for their medicine
    they need, or, as many who are young pensioners worrying about
    what to do about their college-age children wanting to go to
    college, and they thought they had a nest egg and enough to
    protect themselves, could you please tell us more about how the
    widows of pensioners are hurting, as well, and how crucial it
    is to shore up pensions?
        Mr. Hanner. That is really--the key thing you have talked
    about is the worrying part. People are very worried about
    losing their homes. Their homes are probably the biggest assets
    they have. And this is their sanctuary. And when you lose your
    home, you are homeless.
        And this is probably the final straw for most people. This
    is probably the one that they couldn't take. That, yeah, they
    worry about the medical bills, the taxes, being able to look
    after the children and, you know, the stuff that they have been
    promised. You work for 35 years, and they put their part in,
    and they are expecting a return on what they have done. They
    have paid in. These are deferred wages that they are not
    getting back. And there is a big feeling that you are being
    stolen from.
        Ms. Jackson Lee. That is a good equation, if you will. You
    are equating the right kind of feeling that I would have for my
    constituents, that they are being stolen from. And they have no
    way of catching the thief.
        Mr. Hanner. And what you said about the widows, this is our
    most vulnerable section in Central States, is the widows,
    because they only get, you know, half of a pension. If together
    they had made that decision--before you retire you make that
    decision together, that whether you want survivor benefits or
    not. And you give up 15 percent of your pension if you want
    survivor benefits. And there is a lot of cases where together
    they have made the decision to forego the survivor benefits.
    So, upon death, the pension stops.
        Chairman Yarmuth. The gentlelady's time has expired. Thank
    you.
        Ms. Jackson Lee. I thank the witnesses.
        Chairman Yarmuth. I now recognize the gentlelady from
    Washington, Ms. Jayapal, for five minutes.
        Ms. Jayapal. Thank you so much, Mr. Chairman, and thank you
    all for being here on such an important topic.
        Just to your point, I always think that, you know, Social
    Security is often called an entitlement. It really should be
    called an earned benefit program, because that is what it is.
    It is not an entitlement. So thank you for that powerful
    testimony.
        In my state we know that Social Security is crucial for
    older people, as it is across the country. Without Social
    Security benefits in Washington state, an estimated 317,000
    more Washington state seniors would fall below the poverty
    line. And across the country more than 15 million older adults
    stay out of poverty because of Social Security.
        [Slide]
        Ms. Jayapal. I have a graph there that sort of shows all of
    the states--it might have come from one of you, actually--thank
    you, if someone prepared that. And Social Security benefits are
    especially important for black and Latino seniors, and for
    women, as we heard you testify, Mrs. Cook.
        We also know that Social Security would work even better if
    people with high incomes paid their fair share. And that is
    kind of what I want to focus on today. Everyone who works pays
    a percentage of their income into Social Security, but only up
    to the point of $132,900. So people who earn over $132,900 get
    special treatment. Everything that they earn over that amount
    isn't taxed anymore. They get, in my words, a special cap.
        [Slide]
        Ms. Jayapal. And so I thought about two hypothetical
    people: Dana and Donald. And I have got Dana's information
    here. And for those of you can't see the slide, I will just
    show you right here.
        So Dana lives in Seattle. And when she started working, she
    earns the Seattle per capita income, which is $51,872. Then she
    unionizes her workplace, her income goes up to the Seattle
    median, which is $79,565. And then she gets promoted, and she
    eventually earns $132,000. We are so proud of Dana. Does Dana
    pay into Social Security at the same percentage, even as her
    income changes, Dr. Favreault?
        Dr. Favreault. Yes, because she is below the cap.
        Ms. Jayapal. Correct. So she pays that same 6.2 percent
    every step of the way. All right.
        Now let's go to Donald. So now we have Donald. Donald earns
    $150,000. He works at his dad's company. Then he moves over to
    work for a for-profit university, and he--his salary goes up to
    $400,000. And then he works at a company that makes ties and
    stakes, where his pay is about $1 million a year. And again,
    this is just hypothetical. Does Donald have to pay 6.2 percent
    of his income on all of these earnings, the way that Dana does,
    Dr. Favreault?
        Dr. Favreault. No, he only pays to the cap. He only pays to
    the $132,000. So what that means--and you can see it on the
    slide--is that Donald is not paying--when he is earning
    $150,000, he is only--he is not paying taxes on 11 percent of
    that income. As he goes up to $1 million, he is not paying on
    86 percent of his income. Correct?
        Correct, okay. My hypothetical situation is right so far.
    So what that means is that Donald is paying actually .0829
    percent of his total income, versus Dana, who is paying the 6.2
    percent of her total income. Is that correct, Dr. Favreault?
        Dr. Favreault. Can't do the math on the fly, but I am going
    to trust your numbers.
        Ms. Jayapal. And anybody disagree with that
    characterization?
        Okay. So if we were to hypothetically raise the cap, or
    scrap the cap, then people would actually be paying the same
    percentage on their entirety of their income, correct?
        Okay. So, as a national expert on the economic security of
    aging adults, Dr. Favreault, how would our Social Security
    system improve if all of Donald's pay was actually taxed at the
    same rate as Dana? Donald and Dana earn money, they both do
    well, but they get taxed the same way, they pay their fair
    share. How would that change our Social Security system?
        Dr. Favreault. So if you were--if we were to immediately
    and permanently lift the cap entirely, the relative savings for
    the Social Security program, in terms of the reduction in the
    actuarial imbalance, would be between 68 and roughly 83
    percent, depending on whether you paid benefits or didn't pay
    benefits on those additional contributions.
        Ms. Jayapal. So it would have a substantial effect if you
    scrapped it entirely. But you could also raise it slightly. And
    because it is such a big system with so many people, even a
    small increase in the cap would make an enormous difference.
        So I would like to--and would women and black and Latino
    seniors who experience disproportionate poverty benefit from
    scrapping that cap?
        Dr. Favreault. So I think, in general, it is important that
    we definitely look at raising the cap for the very reason that
    then folks, particularly more vulnerable retirees, would be
    less vulnerable to benefit reductions subsequently. So yes, I
    think it is an important part of a solution.
        Ms. Jayapal. Thank you, Mr. Chairman. That is why I support
    legislation like Representative Larson's Social Security 2100
    Act.
        And I would like to ask unanimous consent to enter into the
    record this excellent report by Dr. Favreault and Owen G. Haaga
    on validating the longitudinal earnings and dynamic micro-
    simulation models.
        Chairman Yarmuth. Without objection, so ordered.
        [The information follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Jayapal. Thank you, Mr. Chairman. I yield back.
        Chairman Yarmuth. The gentlelady's time has expired. I now
    yield 10 minutes to the Ranking Member.
        Mr. Womack. I thank the Chairman. You know, we have had a
    great hearing. I am sorry that occasionally things get a little
    acrimonious in here. But, you know, this is a very important
    subject, and it has been centric on Social Security today, as I
    anticipated it would.
        But before I get into my questions I want to go to Dr.
    Biggs here for just a minute. Ms. Jayapal, my distinguished
    colleague from Washington, just threw out some hypotheticals,
    Dana and Donald. She kind of left out some important features
    of the purpose of Social Security, what it is designed to do,
    and the relationship between the percentage that is being paid
    on the income, and the benefits that accrue to the recipient at
    some point in time--62, 65, 67, whatever that timeframe is. Did
    I miss something?
        Dr. Biggs. When Franklin Roosevelt and his team during the
    Depression--when they built the Social Security program, they
    were very well aware of this kind of math. And the reason they
    put a cap on the Social Security taxes, 132,000 today, was to
    distinguish Social Security from what they then called relief,
    or what we would today call welfare. We talk about Social
    Security as an earned benefit. If you eliminate the cap, to be
    frank, whether you are paying additional benefits or you are
    not, the financing of the system becomes so redistributive--you
    have people on top paying so much more in than they could
    possibly expect to get back--that it violates what Roosevelt
    thought as people having a reasonable balance between what they
    pay and what they receive. That, in turn--people would start
    calling it welfare.
        Now me, I am personally not against the idea of a highly
    redistributive pension program to focus on the people in need.
    What we need to be aware of is that is, in fact, what you are
    doing. And Social Security--when Roosevelt's Administration
    first looked at Social Security, their original proposal,
    people with earnings above that cap wouldn't even participate
    in the program. There would be no redistribution. Their
    compromise was, well, they will be in, but they will only pay
    up to a certain amount, and they will only earn benefits on
    earnings above that amount.
        So somebody making $1 million gets no more Social Security
    benefits than somebody making one $132,000. So it is not just a
    tax. It would be--think about the program and what it is
    intended to look at on both the tax and the benefit side.
        Mr. Womack. So in Ms. Jayapal's analysis the fact that they
    pay the same amount up to 132.7, whatever that that number is,
    the proportionate amount that they would accrue in terms of
    benefits is basically tied to the amount that they are paying
    in.
        Dr. Biggs. Exactly.
        Mr. Womack. And that--so under her scenario, if we were to
    lift that cap, then what would happen to the accrued benefit of
    the high-income earner? And what would that do to the concept
    of Social Security? I think you have kind of answered that, but
    I want to give you another chance.
        Dr. Biggs. Well, this gets the idea we had earlier of are
    we favoring paying higher benefits to, you know, millionaires
    and billionaires. And if you want to keep Social Security as an
    earned benefit, an earnings-related system, if you eliminate
    that cap you have to pay additional benefits. You will be
    paying higher benefits to those folks.
        The question is how do they view it. Do they think it
    becomes welfare, or do they--does it weaken support for the
    system? And one of the things Roosevelt thought, and which most
    people, I think--still continues to be true is because it is
    not seen as a welfare program, it is seen as an earned benefit.
    Social Security has survived and had political resiliency in
    ways that other programs that are seen as welfare don't.
        So I think it is important to keep that balance. I mean we
    can adjust it, but it is to be--to recognize that it is not
    just a no-brainer that people should pay 12.4 percent of all
    their earnings. Roosevelt was a smart guy, and he didn't think
    you should do that.
        Ms. Jayapal. Would the Ranking Member----
        Mr. Womack. I would be happy to yield, yes, ma'am.
        Ms. Jayapal. This is a good line of questioning, and I
    appreciate it. I was just curious whether, when the program was
    established, whether you think there is any merit to the
    question of what that cap should be. And in those days I don't
    think we had a lot of millionaires and billionaires in the same
    extent that we do today. The wealth inequality today is--hasn't
    been the same since 1920.
        So I just am curious for--I mean, if the Ranking Member
    permits, for anybody's thoughts on this, because we are in a
    vastly different economy today, where you could argue that our
    taxation system and many other factors have created this
    tremendous inequality.
        And so I appreciate the Ranking Member's questioning. I am
    just curious whether there are other factors that you might
    want to consider as you look at this cap, given the dramatic
    difference between today and when it was established.
        Dr. Biggs. When Social Security began, I believe the
    payroll tax ceiling was set so that around--Melissa may know;
    correct me if I am wrong, but--sorry, Dr. Favreault--I think
    around 90 percent of total earnings were subject to Social
    Security payroll taxes. It is now--today it is about 84, 85
    percent. So a common proposal is let's lift the cap to cover 90
    percent again. That might take it to, I don't know, 185, maybe
    $200,000. But they understood. I mean in the 1920s, 1930s there
    was a lot of income inequality, and they got it.
        But it is just thinking about, you know, how you want to
    balance this, and how it is perceived. But it is also--if you
    think there are other uses for federal money, you know, if you
    want to do Medicare for all, if you want to have more money for
    infrastructure, once you eliminate that Social Security tax
    cap--as I joked earlier, but it is, in fact, true--you would be
    at Scandinavian levels of taxation. Top tax rates, my guess,
    including state taxes, would come in around 62 percent.
        Ms. Jayapal. But it is important to understand----
        Dr. Biggs. You are not going to get much----
        Ms. Jayapal.--who is paying that increase.
        Dr. Biggs. Sure.
        Ms. Jayapal. The increase goes to a----
        Dr. Biggs. Yes.
        Ms. Jayapal.----very tiny, tiny, tiny portion, depending on
    how you structure it.
        Mr. Womack. I have been very generous with my time.
        Ms. Jayapal. You have, and I thank you, Mr. Ranking Member.
        Mr. Womack. I am going to reclaim my time, and I know the
    Ranking Member, him being the great guy from the Commonwealth
    of Kentucky that he is, will give me another minute if I need
    it.
        Look, I want to carry this conversation back to the idea of
    Social Security and its origin, and what it was designed to do,
    and how far away from that, particularly with a lot of very
    vulnerable seniors today that we have gotten from that, that it
    is the only source of income for a large number of people.
        Dr. Favreault, why is that? Why do so many people have only
    Social Security as their income?
        Dr. Favreault. So I think a big component of this is low
    lifetime earnings, right? There are a lot of people who just
    aren't able to accrue a lot of earnings over the course of
    their lifetime. It can be for a variety of reasons.
        Mr. Womack. And I am a big fan of asking the question why.
    In fact, when I talk to young people today I challenge them to
    ask why. So why have people been destined to a lifetime of low
    earnings?
        Dr. Favreault. So often it can be a lack of investment in
    education. But often there is just, you know, a distribution of
    skills across the population. So I think the more we invest in
    education, certainly, the more likely people will have higher
    lifetime earnings.
        Also, you know, things happen to people, of course.
    Disability happens, caregiving happens. And we know partly
    women's low lifetime earnings tend to be much lower than men's
    lifetime earnings, by and large, because they are taking care
    of kids, they are taking care of the grandparents when they get
    sick. So there is definitely a lot of reasons why we understand
    low lifetime earnings.
        As I mentioned earlier there is the issues of
    discrimination in the labor market, and those are things that I
    think are really important that we need to consider, as well.
        Mr. Womack. And some of those things we have been able to
    address over time, and so we have been able to fix some issues.
    But we still have an alarming number of people, I think, that
    are relying only on Social Security as their primary source of
    income when they hit retirement age. And I believe that that is
    contributing to the problem. And you are right, some bad things
    happen to good people, you know, health-related issues and
    those kinds of things.
        But we also have a lot of people that are making some very
    poor decisions with their lives, be it things like drugs and
    alcohol or, you know, matters, you know, that involve criminal
    conduct. We have people that are making terrible health-related
    decisions that are contributing to a higher cost to living
    later on in life. And so, I mean, I just think there is a
    cacophony of reasons why we have people that are reliant on
    Social Security.
        I want to go back to Dr. Biggs, because earlier in the
    hearing--and a number of my colleagues were not here to hear
    this--you made a--you discussed how you would be handling this
    issue with regard to the higher-income people and the lower-
    income people, and you were specific about wanting to do a
    better job of handling the people on the low economic spectrum,
    as opposed to the distribution of benefits throughout.
        Dr. Biggs. If I could generalize, the difference between
    sort of conservative Social Security reform plans and
    progressive reform plans isn't in how they treat low-income
    people. Some of the provisions to boost benefits for low
    earners that are contained in Social Security 2100 Act came
    from conservative plans authored by Republicans. The issue
    isn't how you treat the poor.
        The issue is do we want to raise taxes on middle and
    higher-income people in order to pay higher benefits to middle
    and higher-income people, or do we want to hold the line on
    their taxes and tell them, ``You are going to save more on your
    own and work longer.'' I would bet my life, if you were to put
    this question to people and say, ``Would you rather pay more
    money into Social Security to get higher benefits, or would you
    rather pay more money into your 401(k) or IRA to get more money
    from that,'' vast majorities would rather save that money on
    their own.
        So the point here is not do we betray the people at the
    bottom. We have an obligation for them. That is what Social
    Security was created for. But it was not created to be paying
    $40,000 a year to somebody who made 130 every year of his life.
    It is just--it is--we need to refocus our resources.
        Mr. Womack. Yes. And as I conclude, Mr. Chairman, I would
    just say this. So much of what we have facing our country
    involves the education of people. And I believe we are not
    doing as good a job as we could, particularly in some of our
    educational institutions, of helping young people understand
    that they are not going to be 18 or 19 years of age forever.
    There is going to be a day that their hair is going to be the
    color of mine, or maybe even gone.
        The fact is if we all expect to live a long life, and we
    want to live a long life, but at some point in time we are not
    going to be work-eligible any more, and we are going to have to
    retire. And so to think that they would be able to hit those
    ages and only have Social Security and be able to live a
    comfortable lifestyle, I think, is--would be a
    misrepresentation of reality.
        So I appreciate the hearing. We got a lot of work to do,
    and there is some things that we can do on a--and it is going
    to have to be bipartisan if it is going to be successful. And I
    hope to be engaged in those conversations. I thank you, and I
    yield back.
        Chairman Yarmuth. I thank the Ranking Member. I now yield
    myself 10 minutes for questions.
        You know, I am--this relates a little bit to what the
    Ranking Member was just saying. But several years ago my
    pollster was telling me that when she polled voters as to their
    top issue, the issues that they were most concerned about, most
    pollsters, she said, don't put retirement security in the poll.
    They put jobs and the economy, they put so forth and so on--
    health care. But she said, ``When I put retirement security in
    the poll, it always polls number one.''
        And she said, interestingly, it polls most strongly with
    younger voters. And it is not because they don't think that
    they are ever going to get the benefits, it is because they
    don't want their parents moving in with them, which was, I
    thought, quite an interesting perspective.
        But this clearly is an extremely important topic, not just
    because I am now well into past 65, but because we--it is a
    national challenge, and it is an ongoing challenge for our
    fiscal health, as I said earlier.
        We have had some difference of opinion, I think, between
    Dr. Biggs and others about how much retirement security there
    is in the country, and that--as Dr. Biggs contended, there is--
    assets and contributions are higher than ever, and he cited
    that as evidence that most people are secure.
        But total and average assets and contributions can grow,
    even if most Americans are not well prepared for retirement.
    The wealthiest Americans may be skewing those distributions.
        Do you think that the income inequality that we have been
    talking about is playing a role in skewing these statistics,
    and having disparities in retirement security, Dr. Favreault?
        Dr. Favreault. Yes, I think it is absolutely critical when
    we look at these sort of statistics that we look not just at
    the mean, but also at the full distribution. Because--and this
    goes back to the issue of the cap, and why less earnings are
    now being covered by Social Security, is the fact that we have
    had so much explosion at the very top of the earnings
    distribution, and I think it is really important, and we need
    to take a look at that. That does skew the statistics. So it is
    really valuable to look at medians, quintiles, the whole
    distribution.
        Chairman Yarmuth. Thank you.
        Dr. Biggs, several years ago we did something very
    important with Social Security. We corrected what I considered
    to have been a terrible mistake in Social Security, and that
    was that it allowed beneficiaries to defer their retirement, or
    their--taking their benefits to age 70, and they got an 8
    percent a year bonus for that. And it occurred to me--and I am
    not benefiting from that, by the way--it occurred to me that
    that was exactly the wrong incentive, because the only people
    who can afford to do that are the people who don't need the
    bonus, the only people who could afford to retire and not take
    their benefits for four more years.
        We have a system now that allows you to retire earlier. Are
    there--I mean to take your benefits before you are actually
    eligible for retirement. Do you think that causes problems in
    any respect? I haven't thought through that, but I would like
    to know.
        Dr. Biggs. Thanks. If I could first just touch on the issue
    of, you know, using averages, and whether that skews things. I
    know that came up earlier in the hearing.
        I cited recent Federal Reserve research, which came out a
    couple months ago, finding that the shift from defined benefit
    pensions to traditional pensions to 401(k)s has not appreciably
    changed the distribution of retirement wealth or retirement
    savings. It has increased retirement savings. The level of
    savings has increased. The distribution of it hasn't really
    changed very much.
        So this is a case where I am not trying to skew with
    averages. I mean, the rich always do save more, partly because
    they are rich, but partly because they get a lower replacement
    rate from Social Security. But if you have got a higher level
    of savings today, which we do, with a similar distribution of
    savings to what we had in the past, that in fact means the low
    and middle-class people are better off in terms of their
    savings than they were under traditional pensions.
        Similarly, when I cited the Census Bureau research showing
    a significant decline in poverty among over-65 Americans over
    the last 20 years--about one-third, almost one-third decline in
    the share--in poverty--that is not from millionaires and
    billionaires getting richer. That is from poor people having
    higher incomes.
        So it is--I would really encourage people to look at the
    numbers and the data in my testimony. I am not saying there are
    not problems, but it is--those problems are much, much more
    isolated than people think. We are doing a lot of things right.
        Thinking on the retirement age, I am not against the
    delayed retirement credit for older--you know, people who work
    past 65 or 67. I mean, you may be right, in terms of some
    present value sense it compensates them. Where I think we may
    have made an error in the past was lowering the Social Security
    retirement age from 65 to 62.
        If you go back to the 1940s, 1950s, when we had people
    working on farms, factories, mines, the average person didn't
    claim benefits to past 65. If you go back to 1950, I think the
    average Social Security retirement age was 68. So the idea that
    we can't work longer is belied by the fact that we, in fact,
    did work longer. Once we lowered that 65 to 62, so many people
    claimed it. There is research that came out last year showing
    because so many more people claimed those early reduced
    benefits, that increased poverty in retirement by a significant
    amount.
        So I know it is hard to say to people, ``You have to work a
    little bit longer,'' but giving them early benefits with that
    big cut, I think, has been harmful to a lot of folks. So it is
    a tough choice, but I think, on balance, it didn't work out.
        Chairman Yarmuth. Does anybody--any of the other witnesses
    have a perspective on that?
        Yes, Dr. Favreault?
        Dr. Favreault. I would just add, though, I think with
    respect to Dr. Biggs's point on the EEA, that we do see that
    there are significant numbers of people who lose their jobs in
    their fifties. A lot of shocks happen in your fifties, in your
    sixties. So there are a lot of people who are extremely
    vulnerable when they are approaching the cap.
        My colleague, Richard Johnson, recently did a study and he
    saw something on the order of roughly 50 percent of people
    can--are likely to experience a layoff in their fifties. And
    the overwhelming majority of them, when they are re-employed,
    they are re-employed at lower wages. So a lot of things happen
    late career, and not--you know, I think it is important to keep
    the early eligibility age as a safety valve.
        Chairman Yarmuth. Is there any data that anyone is aware of
    about what percentage of people who elect to take benefits at
    62 are doing it because they are out of work or because they
    chose to?
        Dr. Biggs. I can't think of data off the top of my head,
    but there has been a lot of research looking at what causes
    people to retire early, things like job loss, things like
    health problems are the most predominant ones. Even amidst that
    group, though, I don't think that job loss and health issues--I
    don't think that explains the majority of people who retire
    early.
        If you look at early retirees in Census data, the Current
    Population Survey, most of them, even people like aged 60 years
    old, before the early retirement age who consider themselves
    retired, they were asked, ``Do you want--would you take a job
    if it were available?'' The vast majority say no.
        And so I think you do have probably a lot of retired public
    employees, but still it is trying to figure out that end of
    things, it is not just job loss and health. There are a lot of
    people who are voluntarily just choosing to retire early.
        Chairman Yarmuth. Right. They have a sufficient----
        Dr. Biggs. Yes.
        Chairman Yarmuth. They either have a generous enough
    pension, they have the savings, they have the opportunity----
        Dr. Biggs. In their judgment, they do, yes.
        Chairman Yarmuth. Right. Well, I am not going to belabor
    the hearing. You all have been very patient with your time and
    with the questions. And it has been over, well, two hours 20--
    40 minutes, so I am going to conclude now, and just advise all
    the members that they can submit written questions to be
    answered later in writing.
        Those questions and your answers will be made part of the
    formal hearing record. Any members who wish to submit questions
    for the record may do so within seven days.
        Once again, I thank all of the witnesses. And without
    objection, this hearing is adjourned.
        [Whereupon, at 12:41 p.m., the Committee was adjourned.]
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