[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
SOCIAL SECURITY FUNDAMENTALS:
A FACT-BASED FOUNDATION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON SOCIAL SECURITY
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
APRIL 26, 2023
__________
Serial No. 118-13
Printed for the use of the Committee on Ways and Means
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__________
U.S. GOVERNMENT PUBLISHING OFFICE
53-013 WASHINGTON : 2024
COMMITTEE ON WAYS AND MEANS
JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas DANNY DAVIS, Illinois
DREW FERGUSON, Georgia LINDA SANCHEZ, California
RON ESTES, Kansas BRIAN HIGGINS, New York
LLOYD SMUCKER, Pennsylvania TERRI SEWELL, Alabama
KEVIN HERN, Oklahoma SUZAN DelBENE, Washington
CAROL MILLER, West Virginia JUDY CHU, California
GREG MURPHY, North Carolina GWEN MOORE, Wisconsin
DAVID KUSTOFF, Tennessee DAN KILDEE, Michigan
BRIAN FITZPATRICK, Pennsylvania DON BEYER, Virginia
GREG STEUBE, Florida DWIGHT EVANS, Pennsylvania
CLAUDIA TENNEY, New York BRAD SCHNEIDER, Illinois
MICHELLE FISCHBACH, Minnesota JIMMY PANETTA, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio
Mark Roman, Staff Director
Brandon Casey, Minority Chief Counsel
----------
SUBCOMMITTEE ON SOCIAL SECURITY
DREW FERGUSON, Georgia, Chairman
MIKE CAREY, Ohio JOHN LARSON, Connecticut
DAVID SCHWEIKERT, Arizona BILL PASCRELL, New Jersey
RON ESTES, Kansas LINDA SANCHEZ, California
BLAKE MOORE, Utah BRIAN HIGGINS, New York
RANDY FEENSTRA, Iowa DAN KILDEE, Michigan
GREG STEUBE, Florida
DAVID KUSTOFF, Tennessee
C O N T E N T S
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OPENING STATEMENTS
Page
Hon. Drew Ferguson, a Representative from Georgia, Chairman...... 1
Hon. John Larson, a Representative from Connecticut, Ranking
Member......................................................... 2
Advisory of April 26, 2023 announcing the hearing................ V
WITNESSES
Barry Huston, Analyst Social Policy, Congressional Research
Service........................................................ 126
Stephen Goss, Chief Actuary, Social Security Administration...... 139
Phillip Swagel, Ph.D, Director, Congressional Budget Office...... 151
PUBLIC SUBMISSIONS
Public Submissions............................................... 217
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SOCIAL SECURITY FUNDAMENTALS:
A FACT-BASED FOUNDATION
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WEDNESDAY, APRIL 26, 2023
House of Representatives,
Subcommittee on Social Security,
Committee on Ways and Means,
Washington, DC.
The subcommittee met, pursuant to call, at 10:05 a.m., in
Room 1100 Longworth House Office Building, Hon. Drew Ferguson,
[chairman of the subcommittee] presiding.
Chairman FERGUSON. The meeting will come to order.
Good morning, everyone, and thank you for being here today.
It is my privilege as the chairman of the Social Security
Subcommittee to welcome everyone to our first hearing.
I would like to thank Ranking Member Larson, Chairman
Smith, and the other members of the Social Security
Subcommittee for being here today. I would also like to thank
Mr. Smucker for joining as a guest of the subcommittee and I
think we may have a couple of other people that may join as
well. We will recognize those as they come in.
Also I want to express our continued support and prayers
and thoughts for our colleague, Mr. Kildee, who is still
recovering from surgery. We look forward to his return as he is
a valuable member of this subcommittee as well.
I am excited to begin the work of this subcommittee in this
Congress to get to a point where we actually solve one of the
tougher challenges that Americans are facing, and that is the
solvency of Social Security, making sure that our seniors,
those that are in retirement and those that are near
retirement, receive the benefit that they have certainly earned
and deserved.
I think that there are a lot of times over the past decade,
it has been my observation that Social Security is used more as
a political tool in many ways, and what we hope to do with this
subcommittee is to remove the politics from what we are doing
and actually find real bipartisan solutions to this.
There is a number of ideas that have been floated around
out there, but today's hearing is about making sure that we all
start at the same spot. My colleague, Mr. Larson, you have done
a tremendous amount of work in this space, and we look forward
to debating many of the ideas that you have spoken about in the
past.
But we also hope to come up with many new ideas in a
collaborative fashion. I think there are a couple of things
that I want to constantly talk about and I want us to be aware
of.
Number one, I want us to be intellectually honest about our
conversations. In order to do that, we must have a thorough
understanding of where we are in the timelines, and to make
sure that we understand from our witnesses today, the facts and
the numbers. I think that is important.
The other thing that I think is really important is to
understand both from a Republican and a Democrat standpoint
that there are going to be many ideas floated out by many
different groups. There are going to be different entities
within each conference that are going to float ideas out there.
That does not mean that is where this committee will go. I
think that this committee has the opportunity, number one, to
work together in a bipartisan way because we ultimately believe
that the solution to Social Security and the insolvency and to
making sure that the beneficiaries receive their benefits will,
in fact, be a bipartisan solution.
It is the only way forward and we look forward to working
with our colleagues to reach that.
As we go through this discussion today, today is about
understanding where we are. Today is about making sure that we
are on solid footing as a subcommittee. It is about
understanding the history of Social Security, when it started,
how it started, and how we got from there to where we are now
because there is a lot that has happened.
And I think if we do that, and we reach a common ground on
our understanding, then we will be able to take steps forward
together.
So with that, I thank you all for being here.
Chairman FERGUSON. And I would like to recognize the
gentleman from Connecticut for an opening statement.
Mr. Larson, you are now recognized.
Mr. LARSON. Well, thank you, Mr. Chairman, and I especially
appreciate the esprit de corps that you have started the
committee hearings with, and I also am delighted that Chairman
Smith is here as well.
I want to compliment him as well for taking time to both be
here and also meet with members individually. I think that
bodes well for an opportunity for us, as you stated, to be
about solutions.
And I think that is what Social Security is all about. What
we are dealing with here quite frankly is congressional
neglect, or better stated, congressional malpractice. In terms
of especially the committee of cognizance, in this case, Ways
and Means not having adjusted Social Security and certainly
enhanced any of its benefits in more than 52 years, 52 years.
A lot has changed since then, and people will recall what
happened 40 years ago with President Reagan and Bob Dole and
Tip O'Neill, and that did provide additional solvency by making
cuts into the future, last of which took place just last
January in 2022, where now the age for Social Security is 67.
I do appreciate also, as well, Mr. Chairman, your focus on
let's cut to the chase and get to the facts, and then get to
probably the most important thing that we can do and where
Congress is negligent: voting. And that is both parties,
Democrat and Republican, but it is long overdue.
For everyone today we want to pass out the cards, and if I
could show, because of our guest of honor here today, we took
the liberty of, if you will look over my shoulder.
But every individual is going to receive a card because,
Mr. Chairman, you are right. This is about the numbers, and
those numbers though are more than numbers. They are people.
And on average, every one of our districts has 145,000
Social Security recipients, some more than others, and many on
this committee have some of the highest numbers in the entire
country.
And that is why it is vitally important that we know those
numbers as well because at the end of the day, it is
beneficiaries and people.
And in our discussions, Mr. Chairman, I appreciate your
commitment to doing other hearings as it relates to
beneficiaries and, as you pointed out, to the solutions.
Let's be clear. We have legislation. We have proposals. We
think it is long overdue and these need to be with the Congress
and the committee being a place where the vitality of ideas is
exchanged.
This is the opportunity to do it. We want to lay out those
plans side by each. The venerated Sam Johnson had a great plan,
but it was never put forward and never taken to a public
hearing. It should have been.
The Republican Study Committee has come out with proposals
as well.
Now, I appreciate, and we clearly take everybody at their
word in terms of saying, ``Listen. We are no longer interested
in holding Social Security or Medicare hostage.'' That is not
going to be the case.
That is, however, if you will forgive our skepticism, not
what the Republican Study Committee says in their report, and I
would like to submit that for the record.
But, again, taking the chairman at his word in wanting to
make sure that we get to the vital statistics with 10,000 Baby
Boomers a day becoming eligible for Social Security. There is
no more important thing that we can do.
Within the next two years, there will be more than 70
million fellow Americans relying on Social Security, five
million already in terms of statistics who get below poverty
level checks.
Social Security is the number one anti-poverty program for
the elderly. It is the number one anti-poverty program for
children, and more veterans rely on it than they do the VA for
disability.
Congress needs to act. We are the committee of cognizance.
We need to act on behalf of the people we are sworn to serve.
Mr. Chairman, I thank you for holding this hearing and look
forward to the future hearings on beneficiaries as well.
Chairman FERGUSON. Thank you, Mr. Larson.
Without objection, the RSC report you mentioned will be
entered into the record, without objection.
[The information follows:]
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Chairman FERGUSON. Now, I am pleased to recognize the
distinguished chairman of the Ways and Means Committee, my
colleague from Missouri, Mr. Smith.
Mr. Smith, you are recognized.
Chairman SMITH. Thank you, Chairman Ferguson, Ranking
Member Larson.
This is an extremely important hearing, one that, as you
pointed out, Mr. Larson, 189,000 of my folks are affected by
Social Security, including my momma. And you have got to make
Mom happy or no one is happy.
So I appreciate that we have this conversation and that we
are here.
You know, Social Security is vital to the retirement
foundation of millions of Americans. Preserving this program
for future generations as well as benefits for current retirees
is one of the most important issues that we must address in
this committee.
And we must do so together, absent political gamesmanship.
The American people, they deserve that. An issue of this
importance can only be accomplished if both sides agree to work
together to find reasonable solutions to strengthen the
program's long-term finances.
This challenge is not getting easier. In the most recent
Social Security Trustees report, the date the retirement Trust
Fund hits insolvency moved up one year earlier.
Today's rising interest rates and the worst inflation in 40
years is contributing to this challenge. Last year, higher
inflation resulted in an 8.7 percent cost-of-living adjustment,
Social Security's highest since 1981.
This was not a windfall for seniors. It was needed to keep
up with prices. Unfortunately, that high COLA has also resulted
in many lower income seniors paying taxes on their benefits for
the first time.
Perhaps this is an issue this committee could also further
examine. Social Security pays cash benefits to over 65 million
people each month, the majority of whom are retired workers.
Millions of retirees already face tough choices on how to
afford their day-to-day expenses, their medications and food.
We owe it to every working family, to today's seniors and
tomorrow's retirees, to make sure that this program is working
properly and it is strengthened.
Like many Americans, my own mother is one of those 65
million on Social Security. For her and the many other
Americans relying on their benefit check, promises made should
be promised kept.
I applaud the work of the Social Security Subcommittee
today to not avoid this conversation, but to instead lead the
way on setting a fact-based, bipartisan foundation for future
discussion. Agreeing on a common set of facts is the first of
many steps to working together to find a path forward to
protect and strengthen these programs.
I yield back, Mr. Chairman.
Chairman FERGUSON. Thank you, Mr. Chairman. And, again, we
are grateful for your presence here at the hearing.
I want to acknowledge that I have heard Chairman Smith say
on many, many occasions the things that we must do on this
subcommittee are to, number one, make sure that we are united
in the facts, and make sure that our first goal is to always
protect the benefits of the people that have earned those
benefits and paid into the system.
I thank you for your leadership on that, Mr. Chairman.
Now I will introduce our witnesses. First, Barry Huston is
an Analyst of Social Policy at the Congressional Research
Service.
Thank you for being here, Mr. Huston. I look forward to
your testimony.
Stephen Goss, the Chief Actuary of the Social Security
Administration, again, thank you for your willingness to be
here.
And Phillip Swagel, maybe the busiest man in D.C. over the
last 48 hours, Director of the Congressional Budget Office.
Mr. Huston, your written statement will be made part of the
record. You are now recognized for five minutes, sir.
Thank you.
STATEMENT OF BARRY HUSTON, ANALYST, SOCIAL POLICY,
CONGRESSIONAL RESEARCH SERVICE
Mr. HUSTON. Chairmen Smith and Ferguson, Ranking Member
Larson, and members of the subcommittee, thank you for inviting
me to testify on Social Security fundamentals, a fact-based
approach.
My name is Barry Huston, and I am an Analyst in Social
Policy for the Congressional Research Service.
Social Security is a Federal social insurance program that
protects workers and their families against a loss of income
due to old age, death, or disability. Workers become insured
for benefits by working in covered employment and earning wages
subject to the Social Security payroll tax.
In 2023, the program will cover about 94 percent of the
workforce and will pay benefits to over 66 million
beneficiaries.
Although Social Security's original purpose providing
economic security for older workers remains, the program
experienced by Americans today is different from the one that
was created in 1935. Originally, the program covered about 56
percent of the workforce, and benefits were payable only to
retired workers age 65 and older.
Benefits were based on a worker's total cumulative wages
and there was no mechanism to automatically adjust benefits for
changes in wages or prices. Absent future legislation, retirees
would receive the same amount of benefits for the rest of their
lives.
The next three decades saw expansion of the program. In
1939, lawmakers changed the focus of the program from single
workers to families by extending benefits to certain dependent
family members of insured workers.
Congress also revised the benefit formula to increase
benefit levels for most workers and to compute benefits based
on average monthly wages.
In 1950s, Congress expanded coverage to more groups of
workers, provided ad hoc benefit increases, created disability
benefits, and allowed for early retirement.
In 1972, Congress passed legislation that made three major
changes to the program. First, it provided an ad hoc benefit
increase.
Second, to preserve the purchasing power of benefits, it
provided for automatic cost-of-living adjustments, or COLAs.
Third, to finance the automatic COLAs, it established
automatic increases in the annual amount of earnings, subject
to the Social Security payroll tax.
In the mid-1970s, the program experienced significant
financial difficulties when economic conditions caused
financial imbalance and program costs began to exceed its
revenues. To address these challenges, Congress passed a series
of measures aimed at mitigating program costs and increasing
revenues.
In 1977, Congress revised the benefit formula for new
groups of retirees to stabilize the replacement rate of pre-
retirement earnings. This revision created the current law
benefit formula by establishing a formula that indexes workers'
initial benefits to wage growth and future benefits to price
growth.
The legislation also provided for increases in payroll tax
revenues.
Economic conditions after the 1977 legislation put further
pressure on the program. In 1981, President Reagan established
the bipartisan National Commission on Social Security Reform,
or the Greenspan Commission.
In the same month, Congress passed legislation that allowed
for the Retired Worker Program to temporarily borrow from
certain other funds. This borrowing authority was exercised in
late 1982 and gave lawmakers a short, six-month window to
address the financial imbalance of the program before the
system would be unable to pay full scheduled benefits on time.
In 1983, the final report of the Greenspan Commission
provided recommendations to eliminate about two-thirds of the
projected financial shortfall. All of the recommendations were
included in future House and Senate bills.
Key provisions were to include newly hired Federal
employees in the program; tax a portion of Social Security
benefits; delay the 1983 COLA; and accelerate scheduled
increases in the payroll tax rate.
A House amendment to gradually increase the full retirement
age from 65 to 67 was also included in the final legislation to
eliminate the remaining financial shortfall.
This legislation, the Social Security Amendments of 1983,
are generally considered the last major reform to the program.
With the legislation, the program's average projected cost and
revenue rates were relatively close over the long-term, 75-year
period.
That said, the end of that 75-year period remained a
projected imbalance. Over time, as the program advanced toward
the end of this period, it has moved further out of actuarial
balance.
Thank you, and I look forward to your questions.
[The statement of Mr. Huston follows:]
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Chairman FERGUSON. Thank you, Mr. Huston.
Mr. Goss, you are now recognized.
STATEMENT OF STEPHEN GOSS, CHIEF ACTUARY, SOCIAL SECURITY
ADMINISTRATION
Mr. GOSS. Thank you very much, Chairman Ferguson, Ranking
Member Larson, Chairman Smith, and members of the committee.
Thanks for the opportunity to come and speak to you today
about Social Security, past, present, and future, and thanks to
Barry for covering the history.
Social Security started paying monthly benefits in 1940,
and the 84 years through 2023, all scheduled benefits have been
paid in full and on time, thanks to timely congressional action
when needed, based on the annual Trustees reports, which have
been produced each year starting 1941.
We are approaching another time for action. Under the
intermediate assumption of the 2023 Trustees report released
last month, combined research of the OASI and DI Trust Funds
are projected to become depleted in 2034, at which time 80
percent of scheduled benefits would still be payable.
The OASI Trust Fund alone is projected to deplete reserves
in 2033 if no action is taken, with 77 percent of scheduled
benefits then payable.
While both of these dates are one year earlier than
projected in last year's report, we note that the year for the
combined trust fund reserve depletion has been projected to be
between 2033 and 2035 for the last 12 years. We have simply
been getting closer to that date.
In order to avert reserve depletion and an ability to pay
benefits on time in 2034, we need legislation to raise future
scheduled revenue for the program by about a third or to reduce
scheduled benefits by about a fourth or to agree on a mix with
some portion of each of these changes.
We are committed to work with you, as in the past, in
developing and assessing the implication of potential changes
to meet this goal.
So why are we facing this challenge? Many things have
changed since the 1983 amendments were enacted, with
expectation of combined trust fund reserve depletion then being
extended to around 2060.
Growth in average earnings for the top six percent of
earners outpaced that for lower earners between 1983 and 2000,
reducing the share of all covered earnings subject to the
payroll tax from 90 percent down to about 82 and a half percent
at that time.
This lowered payroll tax revenue to the trust funds by over
eight percent, and this was not expected in 1983.
In addition, average real wage growth has been slower than
had been assumed by the trustees back in 1983. It was then
assumed to be about 1.44 percent in the ultimate period.
However, the changing age distribution of the population
was understood at the time, with birth rates already reduced
after the year 1965, at the end of the Baby Boom period, and
life expectancy at age 65 was then projected in 1983 to rise to
19.1 years by 2015, a level that actually was realized.
The COVID-19 pandemic and the ensuing recession of 2020
have had tremendous effects on all of our lives. The recession
was fortunately short-lived and recovery in GDP and employment
was remarkably swift and complete.
Some elevation in prices was about matched by elevation in
wage levels to this point, having relatively small effects on
the OASI actuarial status. The number of beneficiaries has not
increased as in past recessions due to continued high demand
for workers in the economy, the unfortunate loss of over 1.1
million of our population, largely older individuals, and
reduced levels of applicants for retired worker and disabled
worker benefits.
The projected shortfall of revenue for the program compared
to the cost of providing current law scheduled benefits over
the next 75 years or the unfunded obligation amounts to a
seemly large $22.4 trillion in present discounted value over
this period as a whole.
But this is much better understood to represent 1.2 percent
of GDP over the period.
We note that this shortfall does not contribute to any
increase in Federal debt for the future as the Social Security
Program has no borrowing authority and can only expend the
current and past accumulated revenue that has been dedicated to
the program.
So our challenge is to find a solution that will eliminate
the shortfall, providing the future level of retirement
survivor and disability income desired by our population at a
cost we are willing and able to pay.
Again, we look forward to working with you, Chairman
Ferguson, Chairman Smith, Ranking Member Larson, and all of the
members of the committee and very much look forward to
questions and comments you will be having.
Thank you very much, again.
[The statement of Mr. Goss follows:]
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Chairman FERGUSON. Thank you, Mr. Goss.
Dr. Swagel, you are now recognized.
STATEMENT OF PHILLIP SWAGEL, PH.D., DIRECTOR, CONGRESSIONAL
BUDGET OFFICE
Mr. SWAGEL. Thank you. Thank you, Chairman Ferguson,
Ranking Member Larson, and Chairman Smith, and members of the
subcommittee. Thank you for inviting me to testify about the
Social Security Program.
And it is a pleasure to be here with my distinguished
colleagues who have contributed so much to the analysis of the
system.
As the others have said, Social Security faces a
significant financial challenge in the coming decade. Its two
components, the old age and survivor's insurance and the
disability insurance, are financed by revenues from payroll
taxes and income taxes on benefits. Those are credited to
separate trust funds.
In our projections the OASI Trust Fund is exhausted in
fiscal year 2032, and the disability trust fund is exhausted in
2050. If the two trust funds were combined, they would be
exhausted in fiscal year 2033.
Economic growth is a key source of uncertainty in these
projections. If the economy grew faster than projected, annual
revenues would be greater and the trust funds would be
exhausted later than projected, or the opposite if growth were
slower than projected.
Now, by statute, our baseline projections for Social
Security are required to reflect scheduled benefits. We
projected if Social Security benefits were paid as scheduled,
the program's actuarial deficit over the next 75 years would
equal 5.2 percent of taxable payroll, or equal to 1.8 percent
of GDP.
In other words, trust fund balances would be sufficient to
pay scheduled benefits through 2097, through the 75-year
horizon, if payroll tax rates were increased immediately and
permanently by 5.2 percentage points.
Now, that does not include the impact of those higher taxes
on the economy. So there would be some negative effects of
those, but setting those aside, so doing a static or
conventional estimate, an increase in the payroll tax rate from
12.4 percent to 17.6 percent would equal a relative rise in the
tax of 42 percent.
So alternatively, a corresponding reduction in benefits of
38 percent would be sufficient to pay scheduled benefits. And,
of course, a combination of changes in taxes and benefits could
also suffice.
Now, a challenge is that those changes would be good for 75
years but would not ensure Social Security's sustainability
after 2097, and the challenge is that doing the changes I
mentioned, raise the higher taxes permanently, immediately and
permanently or the lower benefits immediately and permanently,
would create annual surpluses over the next 25 years, but then
there would be growing annual deficits after that, and that is
why it does not give you sustainable solvency.
You know, under current law Social Security outlays are
limited to amounts payable from the annual revenues, and after
a trust fund's exhaustion, the Social Security Administration
would no longer be able to pay full benefits when they are due.
The payable benefits of the OASI side would be about 25 percent
smaller than scheduled starting in 2032.
Now, we project about 78 million people, roughly one-fifth
of the population, would receive those benefits in 2032. So
that is the number of people who would be affected, and the
impacts of these lower benefits in 2032 within the budget
window would affect those households with lower lifetime
incomes more heavily than households with higher lifetime
incomes.
Now, our long-term projections for Social Security are
based on a detailed microsimulation that examines data about
the individuals from a representative sample of the population.
We project economic and different graphic outcomes over time.
The projections we use in our Social Security model are the
same projections that we use in the budget.
So, in our ten-year budget numbers, our 30-year budget,
long-term budget, Social Security, everything is the same.
There is consistency for our estimation of legislation on
anything.
Population growth is determined by demographic factors, by
birth, death, net immigration. In our projections, we have
fertility rates remaining lower than the rate required for a
generation to replace itself, and so even though we have
mortality rates declining, the share of the population who are
working is declining relative to those who are receiving
benefits.
So thank you very much. I look forward to working with the
subcommittee as you address Social Security finances, and I am
happy to take any questions.
[The statement of Dr. Swagel follows:]
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Chairman FERGUSON. Thank you, Dr. Swagel.
And to each of our witnesses, we will now begin the
question-and-answer session of this hearing, and I will start
this.
Mr. Huston, when the retirement program was first
established, about how many months of benefits, on average, did
the beneficiary receive?
Mr. HUSTON. As originally enacted in 1935, the Social
Security Act made benefits payable only to retired workers age
65 and older. The average life expectancy at that time was
about 12 years for men and 14 years for women.
This would correspond to about 144 months for men and 168
months of benefits for women, on average.
Chairman FERGUSON. So how does that compare to where we are
today?
And maybe, Mr. Goss, I mean, if you want, either one of you
all who would like to answer that would be helpful.
Mr. HUSTON. I will say quickly our average life expectancy
has increased since 1935. Using the 2023 projections from the
actuaries, the average life expectancy at age 67, which is the
new full retirement age, for men is about 18 years, on average,
and 20 years for women. This would correspond to about 216 and
240 months of benefits, respectively.
Chairman FERGUSON. Okay. All right. Thank you.
Dr. Swagel, the average person retiring today, kind of walk
through what their average benefit is going to look like today,
and what does that look like compared to, say, 20 years ago?
Or actually, let's go back to, say, the early 1980s, the
last time we had this crisis that we are feeling now.
Mr. SWAGEL. Thank you, Mr. Chairman.
A feature of the system is that benefits are indexed to
wages. So as the economy expands and workers today have higher
incomes, the benefits are adjusted upward.
The initial benefits are adjusted upward, and then benefits
keep pace with inflation.
So the average monthly benefits for retirees today are
about $1,900, $1,911. We project that to rise up to $2,700 in
2033.
So benefits are rising, and similarly, that has risen over
the comparison with the past as well.
Chairman FERGUSON. And that is reflected in some of, I am
assuming, both of your projections about when the trust fund or
when benefits potentially there would be a shortfall there.
Part of it is just not only the demographics, but also the fact
that, you know, the benefit will continue to go up and a
combination of you have got people living longer and receiving
a greater benefit, which is a great thing, obviously. It is a
great thing.
So another question. Mr. Huston, if you could, if you could
talk a little bit about the fact that for the eighth
consecutive report, it was released without public Trustees.
And explain how the Advisory Board is different than the
Trustees and the impact that that potentially has.
Mr. HUSTON. Excuse me. Public Trustees, as you may know,
are nominated by the President and confirmed by the Senate, and
they must be from different parties.
One of the recommendations that was made in the Greenspan
Commission that was included in the 1983 legislation, that was
the last time there were major reforms.
One of the reasons they were included, the congressional
intent for that inclusion was to take a hard look at the
assumptions that were made in the projections moving forward.
Part of the reason was coming out of the 1977 legislation.
We thought there was about 50 years of solvency, and Congress
had to return and address the situation in the early 1980s.
So, the inclusion of public Trustees in the reports was
something that Congress intended to help avoid coming back and
having to deal with the situation again.
Since 2015 or I should say 2015 was the last Trustees
report that included public Trustees, and those positions have
been vacant since.
Also, there is the Social Security Advisory Board that was
created in 1983. The boards consist of seven members in
staggered six-year terms. Three members from different parties
are appointed by the President and confirmed by the Senate, and
four members are appointed by the Speaker of the House and
Senate pro tem with consultation to Chairmen of the Committee
of Ways and Means and Senate Finance.
One of the main congressional intents for creation of the
Advisory Board is, I think, in this context is to make
recommendations to the President and Congress on policies to
ensure solvency.
Chairman FERGUSON. Quick question. Has that been an
effective tool in your opinion?
Mr. HUSTON. I do not think I should actually answer that
question, sir. I think that is more of a question that you
could answer.
Chairman FERGUSON. Very good. One final question for the
panel. Dr. Swagel, CBO has a role to play here. The actuaries
have a role to play here. The one thing that you all have
gotten pretty close on is the date where things head South.
But there are also differences between each of your
projections. Again, one of the goals of this subcommittee is to
understand the numbers. Can you briefly talk about the
differences that may exist between CBO's numbers and the
actuary numbers?
And how should we as members of this subcommittee view that
difference?
Mr. SWAGEL. Okay. No, thank you.
I mean, I think the big picture is, as you said, the system
has financial challenges in the near term with the exhaustion
date, within the ten-year budget window and in the long term,
right, the long-term solvency of the system.
So that is the big picture, and it seems that our
calculations are similar. We differ in two fundamental ways.
One is the modeling technology. We have a different approach to
modeling as usually with economists, on the one hand, and
actuaries, on the other hand.
They are both valid modeling technologies. They have
advantages and disadvantages.
And then we have differences on the projections. I was
about to say data, but it is really projections because we are
looking at 75 years. It is really hard to know, and so
differences in fertility, the demographics for fertility,
immigration, retirements can matter.
What also matters is the economics. So we have a lower
interest rate than the Trustees. That makes a really big
difference because, you know, we both have deficits in the
system out into the future. A higher interest rate discounts
those deficits.
So, we see the size of the hole as deeper, in part, because
of differences like that, that we have a lower long-term
interest rate than they do.
And so, Mr. Chairman, again, the big picture though is
overwhelmingly the same.
Chairman FERGUSON. Thank you, Dr. Swagel.
Yes, very briefly, and then we are going to move to other
members.
Mr. GOSS. Yes, thank you very much, Chairman, for the
opportunity to also speak.
Yes, there are some differences between the Trustees'
projections and CBO's projections. We are very similar now in
terms of the near term for the year of Trust Fund reserve
depletion.
Over the longer term, there are some differences, but you
might want to refer back to there was a committee hearing on
2016, I believe, where I and the then Director of the CBO put
forth where we were on our assumptions and where we had been
over the historical period.
I think our projections are borne out very well, as I
mentioned earlier in the oral testimony that, for instance, our
projection of life expectancy increase since 1983 has actually
has been spot on.
There are clear differences of opinion about what real wage
growth and real interest rates might be in the future, but the
trustees stand by where we are at this point.
And there is some difference in the long term, but that is
a long way off, but the main question really is the reserve
depletion, and I think CBO is now within the three-year window
that we have been at for the last 12 years.
Chairman FERGUSON. Okay. Thank you for that.
Next, I will recognize the ranking member, the gentleman
from Connecticut, Mr. Larson.
You are recognized.
Mr. LARSON. Thank you, Mr. Chairman.
First and foremost, let me thank all the panelists, for
your professionalism. Having served on this committee for a
while, it gives me great pride to say how circumspect you are
especially in putting forward the facts because of your
nonpartisanship and even resisting opportunities when they
present themselves, but always being professional. That is a
credit to the congressional process as well.
Martin Luther King coined the phrase ``the fierce urgency
of now.'' And, again, let me applaud the chairman because that
is what is so important about this meeting, and that is what is
so important about getting the facts.
And here are the facts. The facts are we are in the worst
global pandemic that we have witnessed since the world's
creation.
We also find ourselves in a situation where we are dealing
with inflation, and the fierce urgency of now impacts people
over the age of 65 more than any other group. Of the 1.1
million who have perished in this country because of this
pandemic, over 834,000 are over the age of 65, and people over
the age of 65 are the ones who tend to be on fixed incomes.
And people on fixed incomes are the ones that are most
ravaged by inflation.
And the congressional negligence that has taken place,
there had been nothing done to enhance the benefits of the
Nation's number one anti-poverty program, Social Security,
anti-poverty program for the elderly. Without Social Security
more than 40 percent of our current elderly population would be
living below the poverty level.
Yet Congress still does not act or vote.
Social Security, as the chairman knows and people on this
committee also, is the number one anti-poverty program for
children, and especially the child tax credit and its need to
come back and be put in effect, but childcare, spousal care,
and more veterans rely on Social Security disability.
More than 300 in 50 separate groups have come out, and John
Fitzgerald Kennedy back in 1963 designated the month of May as
the month that we should pay attention to our elders. He was
not around long enough to see that transpire, but President
Johnson put that into effect.
It is important for a number of reasons that we put this
information out there. We do have legislation on our side to
put out there, and it should endure the test of public hearings
and, like all ideas, should be debated side by each.
We are waiting to see the legislation from the other side,
and what is so encouraging about this is the desire of both the
chairman and the chairman of this subcommittee to get to a
solution.
I dare say that the solution is something that is going to
require not just protecting Social Security but enhancing it.
Ten thousand Baby Boomers a day become eligible. Over the
course of a year that is 3,650,000 new Social Security
recipients.
A lot has changed since 1971. A lot has changed even since
1983, but what has not changed is Congress' inability to take
action. This is not anything the President of the United States
can do through executive order or that the Supreme Court is
going to act on. It is going to take Congress and this
committee to do what it is elected by its constituents to do,
and that is vote.
I commend the chairman for starting and saying we need
facts, and part of those facts is the human infrastructure, the
very beneficiaries that we need to hear from, and what they are
going through and what they are enduring.
They are your mother and father, your brothers and sisters.
They are your churchgoers. They are your neighbors. This is
what we are talking about.
This is America's number one insurance plan. This is the
number one committee to deal with it.
I yield back.
Chairman FERGUSON. Thank you, Mr. Larson.
Mr. Schweikert, you are now recognized for five minutes.
Mr. SCHWEIKERT. Thank you, Mr. Chairman.
And look. This is one of those subjects I find fascinating.
I wish we did it more academically. I mean, at some point the
math is going to win. The math always wins.
The only thing I am going to say that is close to being
partisan because you know I love you, but I sat there puckered
up when the President was doing the State of the Union. I
thought he was going to say we need to come together and work
on this, and we sort of made it even harder to work on because
we sort of turned the discussion about shortfalls in Social
Security and Medicare into a campaign issue.
And we, the folks who are seeing the real math, we need to
drag our brothers and sisters back to being willing to have the
morality of this discussion.
Mr. Swagel or Dr. Swagel, I am going to start with this and
work backwards. We were doing a back-of-the-napkin calculation
months ago, and we hit exhaustion. The 23 percent cut is what
the actuaries have given us.
The next check out the door, we were calculating that
senior poverty basically doubles in America. Is that a rational
calculation?
Mr. SWAGEL. I mean, and that is the challenge of the system
within the budget window, that doing nothing means the negative
effects and we have a 25 percent shortfall. They have 23. It is
very similar. The negative effects are the same.
And as I said in my oral statement, the impacts are the
most salient on low income families.
Mr. SCHWEIKERT. Mr. Goss, go ahead and comment on that
because I had warned him I was going to ask this question. So
please, am I within the ballpark?
Mr. GOSS. I think you are likely in the ballpark.
The one thing to keep in mind though is that we have never
in the history of Social Security reached a point for reserve--
--
Mr. SCHWEIKERT. I am not asking the theoretical. I am just
saying if the math hit is this, because I am trying to make the
moral argument why we all have to do something.
Mr. GOSS. But there is this issue. We do not have
experience with what would happen if we hit reserve depletion,
what would happen to benefits.
One theory is that the Commissioner would be required to
reduce benefits across the board for all recipients by 23
percent. That is not necessarily the case. Benefits could be
delayed a month or they could be trimmed to only be reduced for
the highest----
Mr. SCHWEIKERT. That is interesting.
Mr. GOSS. There are options. There is nothing in the law
that indicates the way in which benefits----
Mr. SCHWEIKERT. But there is nothing in the law I think
that gives the Commissioner that type of flexibility, is there?
Mr. GOSS. Pardon?
Mr. SCHWEIKERT. We will come back to that.
Mr. HUSTON----
Mr. GOSS. The law is not specific on how benefit
expenditures would be reduced. It is just we would have to pay
only 77 percent of----
Mr. SCHWEIKERT. Yes, you can only pay what you have.
Mr. GOSS [continuing]. One way or the other.
Mr. SCHWEIKERT. Mr. Huston, if one of the things that we
keep talking about, long-run actuarial accuracy, but if we go
back 50 years, huge variance. Now, I do not know how much of
that is fertility, income growth, population changes.
What do you think were the triggers why the earlier
actuaries, we were so far off?
Mr. HUSTON. Just to clarify, are you talking about coming
out of the 1977 amendment?
Mr. SCHWEIKERT. Out of 1977, and I know that is a long time
ago.
Mr. HUSTON. Sure, sure. So right after the 1977 amendments,
and I think it is important to note that they never eliminated
all of the long-range actuarial balance, but they did think it
accomplished getting everything solvent for about 50 years.
Part of the reason the midterm that 25 to 50-year mark was
in good condition is we knew that there was going to be the
Baby Boomers entering the workforce. That would be met with
higher payroll tax revenues and the system would be good.
What happened right after 1977 is the near-term income and
cost rates were very close, and it turns out that the economic
experience of the late 1970s was not nearly as robust as we had
hoped for after the legislation.
There were two COLAs back to back in the late 1970s that
were approximately ten percent or more, and there was
decreasing wage growth as well. So, this led to a combination
of higher than expect cost.
Mr. SCHWEIKERT. I have seen a paper that talked about the
effects of those COLAs at that time and that inflationary cycle
and how much they just made an impact.
And forgive me. It is the tyranny of the clock.
Mr. Swagel, okay. So, CBO says 25 percent reduction in
functionally nine years. What do you think is the biggest
driver of the difference between you and the actuaries over
here?
Is it fertility? Is it income growth? What drives that
variance?
And I know we are being nitpicky, but I am trying to get my
head around when I give speeches saying is it nine months, is
it ten years or--excuse me--nine years, ten years.
Mr. SWAGEL. Yes. So I mean, it is a number thing, and there
is near term and long term. Long term the demographics and the
interest rate are key.
Mr. SCHWEIKERT. But the window to----
Mr. SWAGEL. And near term, it is a bit of fertility. It is
really near term economic growth. I think we have different
inflation and different growth, and you know, that drives the
difference.
Mr. SCHWEIKERT. Mr. Chairman, thank you for your patience.
One of the back-of-the-napkin math and I think we used a
different discount rate, but we did a 75-year actuarial
shortfall, and it was like $202 trillion at the end of the 75
years, shortfall without changes in the system.
Maybe I used too aggressive of a discount rate, but it
gives you an idea of the scale.
And with that, I yield back, Mr. Chairman.
Chairman FERGUSON. Thank you.
If the chairman could take a moment here.
Mr. Goss, you said something a few minutes ago to this
point about, your all's projections if you go back 20 years, 30
years to where you thought we would be. You said that they were
spot on or pretty close to it there.
Can you provide that? Would you provide that to the
committee to go back and show that in 1985 or 1990 or 1995,
that where your projections were and where we are today?
I think that would be helpful for the committee to see that
in some very simple forms. So if you would do that.
Mr. GOSS. We actually have an actuarial note. We update
every year to indicate the changes in the Trustees' projections
from 1983 all the way up to date. So we actually have that, and
I think it is number nine referring note.
If I may make one other comment though about the 1977
situation, the real problem that we had was the 1972
amendments. Actually, we were working on benefit tables. Barry
might have mentioned this earlier, that when high inflation
came along, we ended up having what was oftentimes then
referred to as double indexing, both the CPI and the wage rates
combined. They added to give extra large increases, and that is
what brought us to the problem, which is why we had to have the
1977 amendments to really fundamentally change the nature of
the benefit formula.
I was really from inflation of the type that we had in the
late 1970s and early 1980s had not been anticipated by anybody,
and when it came, it was a real problem for the program at the
time
Chairman FERGUSON. Thank you.
Next, I will call on the distinguished member from New
Jersey, Mr. Pascrell.
You are recognized for five minutes.
Mr. PASCRELL. Thank you, Mr. Chairman.
Social Security, I think, we can all agree is one of
America's greatest achievements. For 80 years, Social Security
has protected countless widows, families, seniors. It promised
that no family falls into abject poverty because of a
disability or retirement and expected death.
So Social Security has kept the American Dream within sight
for generations of families, and we know there are a lot of
families who subsist on Social Security alone, more and more
each year.
So, this is a great achievement. It is a promise. So, we
had better get it right, whatever changes we are going to have.
Now, each of you brings very special qualities to the
panel. Mr. Huston, you are from West Point.
Mr. HUSTON. Yes, sir.
Mr. PASCRELL. What more could we ask for? You have done
your job. You have done it well, and you have a special
interest in disability insurance. You have a background in
that.
Most Americans and most congressmen do not quite understand
what that is.
Mr. Goss, you are a Chief Actuary. We know your history,
and you bring so much to this panel.
As Mr. Swagel, you are an economist. You have had that
background for many, many years.
I listened to the three of you, and I would say if I were a
traffic controller, that you are holding a pattern. You are in
the holding stage. You do not want to say anything this way;
you do not want to say anything that way.
And that is where we were five years ago, ten years ago. So
both the chair and the ranking member, I believe, are on
target.
So there are nearly 70 million Americans who receive these
benefits that were just talked about every year. In my State,
there are 1,200,000 New Jerseyans who receive Social Security
every month totaling $211 million.
Social Security is this sacred promise with every working
American, and yet there are those people--read this back here.
This guy is a Senator over on the other side, and you all shook
your head when I was saying these nice things about Social
Security.
Ron Johnson, an astute member of the Senate, said this on
April 21st, 2023. ``Social Security is a Ponzi scheme.''
Now, look. We both cannot be right, impossible. A Ponzi
scheme. I am happy to defend that comment all day long.
So this is what we are contending with. This is why we are
in a holding pattern, and if we deny it, we will have another
holding pattern in another five years, and you have seen it
all, Mr. Goss.
Continue your holding pattern. You are doing the right
thing.
Republicans try to mask the plans in dry language. Their
plans are clear. The Study Committee's new scheme would deny
disabled beneficiaries Medicare. I mean this is either true or
it is not true, my brother. They want to deny disabled
beneficiaries Medicare for another 12 months, beyond the
already excruciating two-year wait.
So, I hear that all the time from my neighbors who suffer
from the current two-year period, and I fought and I will
continue to fight. That is easy. That is the easy part of this,
to end the waiting period, and, Mr. Chairman, my time is up.
So, I yield back to you, sir.
Chairman FERGUSON. Thank you, my friend.
And, Mr. Pascrell, two things I can tell you with
certainty. Okay. Number one is a Senator from Wisconsin will
not be taking a vote on this subcommittee. Okay.
And what one member of another body says about their
thoughts on Social Security is not reflective of what we are
trying to do here.
So, I can promise you that Mr. Johnson will not be allowed
to take a vote on our subcommittee, which is great news.
As I said before, too, there are going to be plans that
come out from multiple sides. The Republican Study Committee,
Tuesday Group, House Freedom Caucus, just to name a few on our
side. Progressive Caucus on your side.
Again, this committee----
Mr. PASCRELL. What about the Progressive Caucus?
Chairman FERGUSON. They may offer a plan on Social Security
as well.
Mr. PASCRELL. I am not a member of the Progressive Caucus.
Chairman FERGUSON. My point is that I want to continue this
hearing really focused on the numbers and getting it right,
getting our knowledge right, and I want this committee to
remove itself from the politics so that we can focus on the
solutions.
And I do appreciate that, and with that, we will now move
to the gentleman from Utah, Mr. Moore.
You are now recognized for five minutes.
Mr. MOORE of Utah. Thank you, Chairman Ferguson.
And I will echo, all I have seen since I have entered this
committee has been three incredible months. We work on the most
important issues.
Thank you for being here to talk substantly about these.
All I have seen from my leadership on this committee is a
sincere intent to address Social Security in the best way for
our populations.
And to the ranking member, as you have graciously done some
research to find out all of us, what we are, it only confirms
what I have been telling people. Utah is the youngest State in
the Nation, and I love representing that group of people, and
it kind of goes into my next question when I talk about
fertility rates.
So please, no more jokes about Utah at this point on the
fertility rate, but we have got an issue. In 2007, Director
Swagel, as the fertility rate drops after 2007-ish time frame,
can you share with us how that impacts the sustainability of
Social Security, given the financing of the structure?
Mr. SWAGEL. Yes. No, thank you. And it is a key challenge
for the system, which is the declining fertility rate because
it affects the ratio of people paying into the system against
the people drawing benefits.
And we have seen that after the financial crisis of 2008.
The fertility rate dropped, and it did not rise. In the
intervening time, the fertility rate has stayed low.
Now, part of it is a social good. There are fewer teens
having babies. So it is a social good. It is a challenge for
the system, and we are talking about the dollars, but I do not
want to say it is a bad thing.
In our projections, we have fertility rising somewhat
because our view is that the decline in fertility that we saw,
again, during the pandemic will be somewhat reversed as births,
in essence, are delayed, that women will have, you know, births
in their 20s and into their 30s rather than as teens or early
20s.
So there is some of that, but there is still a financial
system because of the declining fertility.
Mr. MOORE of Utah. Absolutely, and it gets to the ratios,
Mr. Huston, that you have discussed with respect to the
beneficiary ratio from worker to beneficiary.
Would you add anything to that assessment?
Mr. HUSTON. I think at the time in 1935, the worker-to-
benefit ratio was much higher than it is today obviously, and
that has been decreasing over time. So that is leading to an
imbalance in the number of workers paying into the system
versus the number of beneficiaries, which are people collecting
from the system.
The further that moves into imbalance puts additional
pressure on the program.
Mr. MOORE of Utah. Thank you.
Mr. Goss, since statistics have highlighted that the
insolvency, Social Security Trust Fund insolvency could even
come a year earlier, and we are seeing a lot of that due to the
reduced levels of GDP, labor productivity over that production
period.
Can you describe why we now expect lower labor productivity
levels and how declining workforce participation may exacerbate
this issue?
Mr. GOSS. Yes, thank you very much.
The Trustees did do a reassessment for this year's Trustees
report, suggesting the possibility that the level of labor
productivity in GDP might be lower in 2023 because of an
economic slowdown and remain lower through the balance of the
75-year projection period.
There is a little bit of good news though, and that is
that, oh, and by the way CBO actually projected an even lower
growth rate in aggregate GDP in 2023 than the Trustees did,
both below one percent.
The good news is that most private forecasters are now
projecting this experience late in 2022, and so far in 2023, we
will be exceeding that and doing better. So it is really not
clear.
There is a lot of uncertainty in these areas, but I might
just mention also in terms of the fertility rate, the fertility
rate in a given year has really no impact on the financing of
the Social Security Trust Fund or its benefits for about 20
years out. That is how long it takes for births to move into
the population.
So the other thing, too, just to be very clear on birth
rates is since 2008, we have had a low birth rate. Of course,
after 1965, we had a low birth rate until 1990 when the birth
rate came back up above 2.0 for 1990 through 2008.
There is something demographers refer to as temple effect,
women deciding to have children at higher ages. That is still
going on to a degree.
Now, the Trustees project that we will have an increase
back to about 2.0. Birth expectation surveys of what women say
they want to have and plan to have is still over two, and our
projection is for that, however, not to be realized until 2056,
a long time out.
Mr. MOORE of Utah. And again, Utah is probably doing their
part there, but you actually emphasize the point if it takes 20
years to take that in consideration, labor participation is so
much more important, and that is such a key aspect to being
sure that we do this.
We have got to come up with innovative solutions, making
sure we get a positive, productive workforce back into our
economy.
And I will just close with on sort of the bipartisan effort
to really consider how we act. We have got to come and work on
together and do something as we approach this calamity up
ahead, and I know that our team is committed to that.
So thank you, and my time has expired.
Chairman FERGUSON. Thank you, Mr. Moore.
Next the distinguished lady from California, Ms. Sanchez,
is recognized.
Ms. SANCHEZ. Thank you, Mr. Chairman. And thank you to
Ranking Member Larson.
Today we are here to discuss the impact that Social
Security has for people throughout the country, and to look for
some commonsense solutions to try to preserve and protect that
benefit.
Social Security was designed to ensure that people who work
their lives could have the opportunity to retire with dignity
and some sense of financial security, and it is an earned
benefit because people pay into the system over the course of
their lifetime.
It has been over 50 years since Congress has passed
meaningful legislation to update this landmark piece of
legislation. Unfortunately, here at today's hearings there is
not one Social Security recipient who is here to testify as to
the benefits of that program.
This is, in my opinion, a way for my colleagues on the
other side of the aisle to look for, quote, unquote, new ways
to slash these earned benefits by raising the retirement age
and privatizing the program.
The Republican Study Committee's most recent budget intends
to cut Social Security benefits by $729 billion, $729 billion
in the first ten years. The Republican plan would also raise
the retirement age to 70 years old, reduce benefits for
everyone earning more than $60,000 a year, and privatize Social
Security.
When you see the reaction in France to raising the
retirement age to 65, it is overwhelmingly unpopular, and to
consider raising it to age 70, I think, is a little excessive.
So I really want to urge everyone who is watching this
hearing to take a look at that plan and see for themselves how
Republicans plan to cut Social Security. I do not want folks to
be mistaken because we have seen the same proposals time and
time again. They are like reheated leftovers that keep making
their way to the table.
During the Bush Administration, Republicans proposed
similar reforms, and the American people flat out rejected
them, and since then Republicans have continued to try to cut
these hard-earned benefits from working class families.
In my district, there are more than 116,000 seniors who
depend on this program just to survive, not to live some lavish
retirement lifestyle but just to survive. Many of those folks
are Latino seniors who depend on their Social Security benefits
as their primary source of income in retirement age.
And without that benefit, that Social Security benefit, 47
percent of Latino seniors would live in poverty, the highest of
any demographic group in this country.
Social Security is remarkably popular because Americans
know that it is guaranteed and that they can count on it when
they need it. Since Ida May Fuller received the first ever
Social Security check in 1940, the program has never missed a
payment.
Today under the guise of modernizing Social Security, what
my colleagues on the other side of the aisle really are
proposing is slashing benefits in a really unconscionable
amount, raising the retirement age and privatizing the program,
and that is just not acceptable.
My colleagues on the other side of the aisle are going to
claim that Social Security is financially unsustainable, and
that Democrats need to come to the table to work to modernize
the program, and I do agree that Democrats and Republicans both
need to come to the table to find common sense solutions.
But a common-sense solution is not slashing the program to
the point that people are left to fend for themselves in their
golden years.
So-called modernization that pushes current and future
seniors past the breaking point is not the answer. Instead, I
am going to urge my Republican colleagues to come to the table
and talk about increasing Social Security benefits by improving
the cost-of-living adjustment formula to better reflect
inflation, to protect widows and widowers from financial
distress after losing a loved one and addressing the program's
solvency.
And I would add that Mr. Larson has a really great bill
that I think would be a great point of reference for
Republicans to see that we can hold on to those values, that if
people worked hard their entire lives and put into the system,
they should be able to receive the benefit when they retire.
And with that I yield back the balance of my time.
Chairman FERGUSON. Thank you.
And to our witnesses, again, I want to thank you for being
here today, not to mask any other plan, but to just simply
present the facts and make sure that members of this
subcommittee are fully educated on exactly where we are in this
process.
Next, I am going to call on the gentleman from Tennessee,
Mr. Kustoff.
Mr. KUSTOFF. Thank you, Mr. Chairman. Thank you for calling
today's hearing, and thank you to the witnesses for appearing.
Mr. Goss, if I could with you first, in your written
testimony in the conclusions you talk about the DI Trust Fund
and essentially how it stabilized and you have seen an
improvement. What do you attribute that to?
Do you attribute that to lower unemployment, better
participation in the workforce, the state of the economy or a
combination thereof?
Mr. GOSS. I think you are right on target--thank you--with
all of the above. We have seen a dramatic drop in disability
incidence rates and numbers of people receiving benefits since
2010 from the Great Recession, down to levels that are very,
very low now, much lower than have been average in the past.
We were expecting by about 2026, some years ago, to have
about ten million recipients for Social Security disabled
worker benefits. We are now projecting it to rise back up to
about eight million, and it is below that now.
So, the experience in disability has been really, really
very positive. Applications and number of people starting
benefits have been much lower. We believe that this is likely
due to the changing nature of work in our economy.
It is also, very importantly, probably related to the fact
of the changing age distribution of our population. When Baby
Boomers first entered the workforce, some might recall or have
heard about there was a large surge of young people coming into
the workforce.
Early out retirements were offered to people in their 50s
and 60s by private companies. We are now seeing the opposite.
With the relative dearth of young people coming into the
workforce, there is now a demand for labor for people to work
longer and to accommodate individuals who have some limitations
to continue and work.
So there have been some very, very positive effects in
terms of employment. By the way, speaking of employment,
employment has been strong. I was just commenting that we
should be careful about looking at labor force participation
rates because labor force is not only the people who are
working that we can count, but also people who in a survey
might say, ``I am actively seeking employment''.
The way people hear that question changes from time to
time. So the unemployment rate is a little bit tricky, but the
number of people actually employed has rebounded from the most
recent recession to levels similar to 2019 and is continuing to
be very strong.
So, employment-to-population ratio is what we would suggest
we should look at much more than labor force.
Mr. KUSTOFF. Thank you very much.
As it relates to the taxable maximum, so this year it is a
little over $160,000, $160,200. If you go back five, six years,
seven years maybe to 2016, it was $118,500. So, in that time
span, it has gone up a little over $40,000.
I understand we had a big cost-of-living increase with this
past year. What is the significance of the taxable maximum
increasing almost $40,000 as it relates to the depletion of the
trust fund, if that makes sense?
Mr. GOSS. Thank you.
Well, the taxable maximum under the law is increased every
year with a two-year lag based on the rate of growth in the
average wage for all workers in our economy.
So as the average wage of workers in the economy grows, so
does the taxable maximum. With the intent, back in 1983, that
we would stay at 90 percent of the covered earnings being
taxable.
For better or for worse, we have about six percent of
workers, probably many in this room, who earn more than the
current taxable maximum and have ever since 1983. Six percent
have earned above the taxable maximum.
The average earnings levels for people above the taxable
maximum have been rising considerably faster than for the 94
percent below, and as a result, we have had an increasing share
of all covered earnings going above the taxable maximum.
It has dropped our 90 percent taxable down to about 82 and
a half percent taxable, and that has been a major effect,
knocking down the amount of revenue we would otherwise have
been getting had it stayed at 90 percent, by over eight
percent. So that is a very significant effect.
Many proposals have been put forth to raise the taxable
maximum further to get us back to or close to 90 percent. There
is that possibility that I am sure you all will be thinking
about and considering.
But really that has been a major effect. The differential
rate of growth in earnings for the highest versus lower earners
has been a major factor.
Mr. KUSTOFF. Thank you, Mr. Gross.
Dr. Swagel, in the remaining time I have got, which is not
much, the worker ratio to beneficiary today is at three-to-one?
Mr. SWAGEL. It is lower than that. What is it? Two, point,
six. So you have got 2.6 to 1 today, and then it is scheduled
to go down over the next decade, and then further beyond that.
Mr. KUSTOFF. Where do you project that to be in the year
2033 or do you have a projection?
Mr. SWAGEL. We do. I wrote that down. It is 2.6 today,
going to 2.3, and that is the retirement of the Baby Boom
generation which is really like the key there.
Mr. KUSTOFF. And one more question. I know I have run over.
Do you know what the worker ratio was in 1983?
Mr. SWAGEL. Ah, that is a great--it must have been higher.
I do not know. I am looking at my colleague here, the
historian.
I was looking at Barry, but Steve might know also.
Mr. HUSTON. I do not know, but I think one thing to keep in
mind, too, is the program has changed over time, first in the
amount of the people who are eligible for dependent benefits
has increased, but then also the coverage has changed as well.
So, some of the older numbers from the 1940s and 1950s kind
of reflect the different population.
Mr. KUSTOFF. Good. Thank you very much.
I yield back.
Chairman FERGUSON. Thank you.
I will now yield to my friend and colleague from the Empire
State, Mr. Higgins.
Mr. HIGGINS. Thank you, Chairman Ferguson and Ranking
Member Larson.
Dr. Swagel, just the last line of questioning, so 2.6
workers today for every Social Security beneficiary, and where
is that schedule to go over the next three to five years?
Mr. SWAGEL. We have it down to 2.3 at the end of the ten-
year budget window in 2033, again, reflecting the retirement to
the Baby Boom generation.
And then 75 years hence we have it below two, down to 1.7.
Mr. HIGGINS. Did you--sorry. Go ahead.
Mr. GOSS. Thank you.
If I might add, keep in mind that the worker-to-beneficiary
ratio is fundamentally just an outgrowth of what is happening
with the changing age distribution of the population.
The Baby Boom generation, which was large, is in the
process of retiring, between 2008 and 2035, but the real reason
that these ratios are changing is not because the Baby Boomers
are retiring. It is because the successive generations that are
younger than the Baby Boom are relatively smaller. They are
born of birth rates of 2.0. The Baby Boom generation was born
of birth rates during that time 1946 to 1965 at 3.3 children
per woman.
So it is the drop in birth rates from 3.3 down to 2.0 that
is really causing this change, and it is not the pig in the
python as we sometimes talk about.
Mr. HIGGINS. I understand. What is the net effect----
Mr. GOSS. Baby Boomers had a fundamental change in the
distribution.
Mr. HIGGINS. What is the net effect of immigration as it
relates to worker-to-beneficiary ratio?
Mr. Goss. Immigration is truly crucial.
Mr. HIGGINS. How crucial?
Mr. GOSS. Where we have roughly on the order of about four
million births in our country each year, the net immigration
has been and we expect to be upon the order of about one
million. So that basically augments births by about a 25
percent increase.
Without that kind of positive net immigration, we would
have a very different distribution. Immigration tends to be
people coming in in their 20s and 30s. So it is almost like
having had more births 20 or 30 years ago.
Immigration is critical. By the way, immigration, we have
had the same legal immigration limits for quite some time in
legislation now, and that is something that perhaps ought to be
considered for the future.
Mr. HIGGINS. Dr. Swagel, do you concur?
Mr. SWAGEL. Yea. I mean, fundamentally it is a changing
distribution of the workforce. It is the inflows and outflows,
right? It is the births, participation, immigration, the
inflows, retirements, and mortality.
And absolutely, immigration would affect participation and
affect the age distribution of the population.
Mr. HIGGINS. As this has been said, the first Social
Security check went out in 1940 and has never missed a payment,
which speaks to the strength and the resiliency of that
program.
In my district alone 156,000 people receive Social Security
benefits. I am one of 435 congressional districts. Two hundred
and sixty-three million dollars in Social Security benefits
flow into my district every month.
We have a $23\1/2\ trillion economy. What happens with
Social Security benefits historically? Are they saved? Are they
spent? What is the percentage that is spent?
Dr. Swagel, anybody on the panel.
Mr. SWAGEL. Yes. I can talk a little bit about that. And it
depends on the household. Households with low lifetime income,
so people at the bottom of the distribution, when they retire
for them Social Security is the biggest part of their
retirement income, and that money is spent, and there is fewer
savings, and it is spent.
And that is why getting to these in 2032 would have by far
the biggest impact on those lower income households.
Mr. GOSS. If I might add, the level of Social Security
benefits depends very much on what your career average earnings
levels have been. People with very low career average earnings
will have a benefit that is maybe on the order of as much as
two-thirds as much as what their earnings were.
And this is by intent of Congress, which recognizes that
people with very low earnings throughout their career have had
relatively little opportunity to save and are unlikely to have
a good pension from their employer.
Highest earners have a replacement rate of closer to maybe
more like 25 percent, much, much lower because that is the
structure of the program, the benefit formula, and for average
workers it is about 40 percent.
For the lowest earners, as Dr. Swagel indicates, surely
this is pretty much just what people are living on. It has been
indicated that something like about half, maybe a little less
than that, or more than that of Social Security beneficiaries
are receiving benefits and that is their only income.
Mr. HIGGINS. Just to close, Mr. Chairman, there has been a
lot of talk about making changes to Social Security to secure
its long-term viability. Our colleague and the ranking member,
John Larson, have a bill, Social Security 2100. It is
comprehensive. It asks tough questions, and it comes up with
realistic solutions to the long-term problem that we face as a
Nation not only in terms of Social Security, but the issue of
retirement savings generally.
Because as a Nation, we are falling significantly short,
and that is not good for anybody. So, I would ask the committee
to please consider a piece of legislation that is very
thoughtful. It is very comprehensive, and it goes a long way
toward the goal of securing the long-term viability of Social
Security.
And I yield back.
Chairman FERGUSON. Thank you.
I thank the gentleman now. The gentleman from Ohio, Mr.
Carey, is recognized for five minutes.
Mr. CAREY. Thank you, Mr. Chairman.
First, I want to thank both the chairman and the ranking
member for bringing this panel together today. I mean, this is
a bipartisan issue. As somebody who grew up with family members
that Social Security was the only income that they had as they
went into their senior years, I truly appreciate it.
And I just want everybody to understand that whether you
are a Democrat or you are a Republican, we believe in the
importance of this issue and do appreciate the panelists for
being here.
Millions of Americans depend on Social Security each month,
as my family did for many, many years, and it is imperative
that we have a conversation about the current state and the
future of Social Security and that we work together both on my
dear colleagues from the left and our side to preserve and
protect this program.
Tens of thousands of public servants in my home State of
Ohio split their careers between employment, where they
contribute to Social Security through payroll tax
contributions, and jobs where they instead make contributions
to the public pension plans that operate as Social Security
subsidies or as substitutes.
As a result, I often hear from my constituents the subject
of Social Security windfall elimination provisions with LEAP
and the government pensions offset with GPO.
Again, you know, as somebody that just came to Congress 15
months ago, there is a lot of political rhetoric back and
forth, but I think in the end people have to understand, we
truly believe in this program, and on both sides, we want to
make it strong. We want to make it secure for the people that
rely on it, as my family did.
So Mr. Huston, when were these policies enacted that was
the intent of Congress at the time as it relates to, you know,
our discussions today?
Mr. HUSTON. In terms of the weapon GPO?
Mr. CAREY. Yes, yes.
Mr. HUSTON. The government pension offset, or GPO, was one
of the provisions included in the 1977 amendment, and the
congressional intent behind it was to replicate the dual
entitlement rule.
So, under the dual entitlement rule, some beneficiaries
qualify on their own earning records and also for spousal
benefit records. So for those people, the spousal benefit is
offset to account for that, to account for unintended benefits.
The government pension offset applies to people who are
entitled to a pension for noncovered government employment. For
those people, their Social Security spousal benefits are
offset, a certain amount, to account for income received from
that non-government pension.
Mr. CAREY. So let me ask you this. When people who are
affected by WEP and GPO receive their Social Security benefits,
do the amounts reflect their actual individual work history?
And as a follow-up because I am running out of time, why or
why not?
Mr. HUSTON. So for people who take benefits based on their
spouse's earning records, their benefits reflect their spouse's
earnings, and they are entitled to a certain percentage of
their spouse's primary insurance amount of PIA.
In terms of the windfall elimination program or windfall
elimination provision, sorry, that was out of the 1983
amendments, and that is for persons who have their own
noncovered government pension.
The reason for that is the Social Security benefit formula,
under current law, looks at everybody's, all workers' covered
wage. So, somebody who has a long earnings history at low wages
might present to the formula the same way that somebody that
only has ten or 15 years in covered earnings and might have
relatively higher wages.
So the formula, once everything is averaged out, they kind
of look similar even though that second person hypothetically
has a pension from noncovered employment.
Mr. CAREY. So, can you help us understand real quickly why
the WEP and the SPO look like they do today?
Mr. HUSTON. Essentially, the congressional intent was for
each of those people getting noncovered government pensions,
they were receiving benefits higher than Congress had intended,
and this reduces their benefits.
The GPO effects, I believe it is about one percent, and the
WEP effect is about three percent of beneficiaries.
Mr. CAREY. Well, I want to thank the chairman and minority
team here. This is, again, very important issue for all of us
bipartisanly, and we hope to continue to work with you and take
your advice.
And I appreciate the opportunity to have this session with
you today.
So, Mr. Chairman, I yield back.
Chairman FERGUSON. Thank you.
And as I have discussed with my ranking member here, we are
going to continue down and we are going to get through the
members of the subcommittee, and then we will go to those
members that are read in.
So with that I am going to go to the gentleman from Iowa,
Mr. Feenstra. You are now recognized.
Mr. FEENSTRA. Thank you, Chairman Ferguson and Ranking
Member Lawson.
I just want to thank all three of you for being here today.
All three of you are the experts. You are very knowledgeable,
and I have enjoyed reading your testimonies.
Dr. Swagel, I got to know you from last year when you were
in front of the Budget Committee in May, and I appreciated you
then.
With that, I have just got a couple questions that are more
curiosity questions than anything. The CBO's budget and
economic outlook of 2022 through 2032 stated, ``In keeping with
the rules of Section 257 of the Balanced Budget and Emergency
Deficit Control Act of 1985, the CBO's baseline projection
incorporates the assumption that scheduled payments will
continue to be made in full after the Trust Fund has been
exhausted.''
You also mention in your current testimony, Dr. Swagel,
that projections of Social Security are required by statute to
reflect the scheduled benefits. In essence, assuming that
Social Security will be fully funded even though it might start
running into insolvency.
I guess my question is can you explain the reasoning for
that restriction in 1985. Why was that put in that Act? Do you
know?
Mr. SWAGEL. Okay. You know, I will tell you the way that we
think about it. That tells you the obligations. The scheduled
benefits are legal obligations of the Federal Government. At
the exhaustion date in 2032, the Treasury does not have the
legal authority to pay the full benefits if a 25 percent
shortfall.
But showing you the scheduled benefit tells you what is
owed, and then we do payables so you know what we are able to
pay.
Mr. FEENSTRA. So I get that. But I believe that the ability
for the current projections to show a reduced scheduled payment
and show insolvency through the CBO, I mean, it is sort of a
Catch-22, right? I mean, the CBO, we look at the CBO of what is
going on and yet, it is probably not the true picture.
Mr. SWAGEL. Yes, and we follow the rules.
Mr. FEENSTRA. You have to, right? I am just more curious
than anything.
Mr. SWAGEL. And, you know, that is why I focus a lot on
payable benefits, is that you have the understanding of what
the system can afford.
Mr. FEENSTRA. Right, yes.
Mr. SWAGEL. Under current law.
Mr. FEENSTRA. Yes. So, Dr. Swagel, I go again. Social
Security is going to pay out about 1.1 trillion this year or
something like that. Can you discuss how the CBO projects this
to change over time in both present value dollars and
percentage of GDP, meaning, you know, what do you see as we
move forward here?
Mr. SWAGEL. Yes, yes. So as you said, it is over a trillion
this year in nominal dollars. At the end of the ten-year budget
window, it is close to 2.4 trillion. That is of nominal
dollars, and it is rising as a share of GDP. So it is just over
five percent of GDP now.
Mr. FEENSTRA. Right.
Mr. SWAGEL. We have that rising to six percent of GDP in
ten years, and then further over seven.
Mr. FEENSTRA. It is about really, to me it becomes sort of
real. I mean looking at the economics part of this it is like,
all right, when that starts climbing, your GDP, okay----
Mr. SWAGEL. And it is contributing to the deficit challenge
and the fiscal challenge.
Mr. FEENSTRA. Right.
Mr. SWAGEL. It is a big piece of it.
Mr. FEENSTRA. Yes, yes. And then how does this differ when
you talk about scheduled benefits?
Okay. You have got scheduled benefits, and then when you
are also talking about payable benefits, obviously there is a
discrepancy there, too, then.
Mr. SWAGEL. Right, and the payable benefits would start at
about 25 percent less at the end of the ten-year window, that
rises out to, say, about 30. We have not done the calculation
yet, but into the mid-30s by the end of 75 years.
So that payable benefits removes the impact on the long-
term deficit.
Mr. FEENSTRA. That is right, that is right. Thank you for
that.
Mr. Goss, I find this interesting, too. The COLA increase,
obviously was pretty significant this year, 8.7 percent, and I
get it. I assume it is probably due to inflation.
Do you see COLA increases as a significant reason as we
start looking toward insolvency?
I mean, is this sort of a real thing, right? I mean, when
we start looking at COLA continuing to increase, inflation is
increasing, although I would look at wages are increasing.
How do you square that up?
Mr. GOSS. That is really the key issue. If inflation
increases and wages also increase so that we maintain wages----
Mr. FEENSTRA. Are wages keeping up though with inflation?
I guess that is the precursor to this.
Mr. GOSS. Well, in 2021 we did have it, and I believe it
was an 8.9 percent increase in the average wage, and then in
2022--and by the way, that will impart itself on the benefit
levels for people starting benefits in 2023 with the two-year
lag.
We are also having in 2023 a cost-of-living adjustment of
8.7 percent for people already receiving benefits. So as long
as these move in tandem, it is not a problem.
Mr. FEENSTRA. Correct.
Mr. GOSS. And in fact, actually the way the system works is
if we have both wages and prices growing more than normally
expected in a period of time, that is actually a positive for
the program.
Mr. FEENSTRA. It could be, yes.
Mr. GOSS. Because the wages are taxed immediately, but the
increase in prices actually occur with a lag.
Mr. FEENSTRA. That is a good point, and I know my time is
up, but I know late 1970s, early 1980s, I think it was
different. I think it was change reversed.
Mr. GOSS. That was a real problem back then.
Mr. FEENSTRA. Yes.
Mr. GOSS. If I may just mention though, I understand Dr.
Swagel's issue here with having a requirement to indicate what
the cost of the program is, ignoring the fact that reserve
depletion might cause us not to be able to pay it all.
The Trustees do exactly the same thing. The only thing I
would suggest that perhaps you ask of CBO and others if they
are going to project the cost of the program which the Trustees
also do, to be very clear if they indicate per some requirement
that the expenditures will equal what the intended obligation
is.
That would require a change in the law.
Mr. FEENSTRA. That would. That would.
Thank you, and I yield back.
Chairman FERGUSON. Thank you.
Next, the gentleman from Florida is recognized, Mr. Steube.
Mr. STEUBE. Thank you, Mr. Chairman.
Mr. Huston, a growing issue for seniors is the taxation of
Social Security benefits, particularly after the past two cost-
of-living adjustments or COLAs, which caused many seniors to
pay taxes on their benefits for the first time.
I have one of the most elderly districts, if not the most
elderly district in the country. So obviously this is a big
issue to the constituents in my district.
Can you provide us some background on this policy, when it
was established, how many beneficiaries did it affect then, and
how many does it affect now?
Mr. HUSTON. Right. Thank you.
The provision to tax a portion of Social Security benefits
was one of the recommendations made by the Greenspan Commission
and was then included in the 1983 Social Security amendments.
At the time, the Greenspan Commission estimated that about
ten percent of beneficiaries would be affected by it, and as
you know, as wages increase over time, as COLAs are applied to
benefits and made payable, Social Security benefits generally
increase.
So, since the thresholds for someone to be subject to
taxation of benefits are fixed in statute, as benefits
increase, more and more people then become subject to that tax.
The most recent data we have available suggest about 50
percent of beneficiaries are now affected by that, and at the
time that was part of the congressional intent, is that
eventually all people in theory would be subject to that tax
with growth in benefits.
Mr. STEUBE. So as close as you know as we sit here today it
is about 50 percent of beneficiaries.
Mr. HUSTON. Correct.
Mr. STEUBE. Okay. Dr. Swagel and Mr. Goss, both of you guys
can answer.
Can either of you speak to the proportion of program income
that is derived from the taxation of benefits?
Is that proportion expected to grow or shrink over the next
ten years and why?
Mr. SWAGEL. I can say that we have about four percent of
beneficiaries are paying the tax today, and that is rising. We
have up to six percent in ten years and then up to 11 percent.
As you said, the threshold is fixed in nominal terms, and
as real income gains, so it is rising. I do not have the exact
dollars, but as you said, it is becoming a rising share of
people and of dollars.
Mr. STEUBE. Could you get me the exact dollars? I mean, I
do not need it right now.
Mr. SWAGEL. Sure. We will get you the exact.
Mr. STEUBE. Oh, do you have them, Mr. Goss?
Mr. GOSS. Yes. If I may, I believe what Dr. Swagel meant
was the proportion of total income of the program. In 2022, the
proportion of total income to the program from taxation of
Social Security benefits for OASDI was about four percent.
In 2027, we project that will go up to about 5.2 percent;
2033, about six and a half percent; by 2050, about seven
percent.
As Barry indicated, this is really simply because of the
fixed 25,000 for single returns, 32,000 for joint returns
thresholds on AGI plus half of benefits.
Mr. SWAGEL. I should say what Steve has said is not quite
right under current law. He is assuming that the Congress will
take action to change the indexation of tax thresholds. That is
why we have slightly different numbers.
We assume current law, and the Trustees are assuming that
Congress will take certain steps.
Mr. GOSS. If I may Phil, we assume current law for the
Social Security Act. However, by constructive obligation as any
accountant will tell you, we have to take into account other
things that might occur.
The Congress has always made changes to the income tax
structure. If they had not, we would all be in the top bracket,
every single person.
So we expect it. There will not be that kind of bracket
creep indefinitely, and that change will be made over time. We
do reflect that.
And by the way, we projected really since the very
beginning that we would start at about ten to 20 percent. We
are now up to a little less than 50 percent, we believe, of our
beneficiaries for what we hear from the Office of Tax Analysis
to Treasury, and we have been projecting all along that it
would reach up at about 60 percent because, of course, a good
number of the beneficiaries will receive sufficiently low
income that they will not even meet the zero bracket and,
therefore, have to pay taxes on their benefits.
Mr. STEUBE. Okay. So I will open this up to any of you that
want to comment on this.
So how can we give seniors more predictability about the
taxation of benefits so they know what to expect, when to
expect for planning for their future?
I know you may be anticipating Congress to make certain
action. Just I will open it up in the 30 seconds I have back to
anybody to comment on the predictability for the seniors.
Mr. GOSS. Well, I would just say that as long as Barry
indicated people understand the 25,000 and 32,000 thresholds,
and that eventually simply because of inflation over time,
earnings, prices, and benefits will all be rising. Eventually
we are going to have a much greater share of our beneficiary
population with MAGI--that is modified adjusted gross income--
exceeding these thresholds and, therefore, having some
liability on their taxes. So we should do that.
If you all had a desire to stabilize or reduce the
percentage of people who will have income tax liability on
their benefits, that could be done by statute, by simply
raising the 25 and 32,000 levels.
So it is really a choice.
Mr. STEUBE. Thanks.
My time has expired.
Mr. SWAGEL. That is what the baseline is showing you, is
what current laws and our projections are showing you current
law, as opposed to assuming certain changes in the future law.
Mr. STEUBE. Thank you.
Chairman FERGUSON. Thank you.
Next is the distinguished gentleman from Illinois is
recognized. Mr. Davis, welcome to the panel for the day. We are
glad to have you as part of this.
Mr. DAVIS. Thank you, Mr. Chairman, Dr. Ferguson, Ranking
Member, Mr. Larson, and witnesses.
Social Security is a lifeline for Illinoisans living in my
congressional district. Social Security guarantees income
security and health protection, contributes to prevention and
reduction of poverty and inequality and promotes our residents'
social inclusion and human dignity.
Social Security is one of our Nation's most successful
policy accomplishments. Yet inexplicably Republicans have
targeted Social Security for steep cuts that would harm seniors
and those with disabilities.
The Republican Default on America bill on the floor today
would harm Social Security recipients as soon as 2024. The
Republican Study Committee's most recent budget plan would
raise the Social Security retirement age from 67 to 70. This is
a nearly 20 percent benefit cut across the board.
Raising the age is a cut for every worker, no matter their
age or when they retire. Under the RSC plan, every worker who
retires would receive less than under current law.
Those who support this benefit cut often say we are living
and working longer, but they fail to acknowledge that for some
groups, life expectancy has been flat or even declined.
In addition, many people do taxing work that wears out
their bodies. They work on the assembly line, in construction,
waiting tables, in nursing, home health, and other physical
employment. They cannot choose when they retire.
Finally, where are the employers who are now eager to hire
older workers? Age discrimination is a despicable but all too
common reality.
It is clear that raising the retirement age is not only
unfair but would be extremely inequitable. It would simply
leave millions with no job and lower Social Security benefits.
That is why Americans overwhelmingly opposed raising the
retirement age.
And I ask unanimous consent to enter into the record, Mr.
Chairman, a report by the nonpartisan National Academy of
Social Insurance, which conducted an in-depth, multi-
generational survey, which found that 75 percent of surveyed
Americans opposed raising the retirement age to 70.
Chairman FERGUSON. So ordered.
[The information follows:]
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Mr. DAVIS. Thank you.
The Republican Study Committee's most recent budget plan
would cut benefits for the middle class. Specifically, the RSC
plan would cut benefits for everyone whose earnings are more
than $60,000 a year.
In addition, the RSC plan would cut benefits for anyone
regardless of their past earnings who stops working for a time
due to childbearing, family caregiving, education, and
training, layoffs, illness, or injury, or any other reason.
These cuts would have a devastating effect on my constituents.
The Republican Study Committee's most recent budget plan
would lengthen the Medicare waiting period from two years to
five years rather than raising. There should not be a waiting
period at all.
And so, Mr. Chairman, nothing is really more important to
the citizens of my district and millions of other Americans
than Social Security, a plan that is effective, efficient, and
takes care of the needs especially of those who are aged and
ready to retire.
I thank you, Mr. Chairman, and yield back the balance of my
time.
Chairman FERGUSON. Thank you, Mr. Davis.
And once again, I would like to put your mind at ease, that
this committee or this subcommittee will be taking very much a
bipartisan approach to problem solving, and I do not think that
you will have to worry about voting on the RSC plan on this
subcommittee.
So, with that I will now yield to a dear friend and
colleague from the Great State of California. Mr. Panetta, you
are now recognized for five minutes.
Mr. PANETTA. Thank you, Chairman Ferguson. I appreciate
this, and I appreciate calling you chairman personally.
Politically not so much, but personally as a classmate, as a
friend, it is good to say that.
And of course, Ranking Member Larson, thank you for all
your good work on Social Security, and I look forward to
calling you chairman soon.
Today's hearing is obviously critical. I think we all
understand that, and that is why I have been honored to waive
on. So I appreciate this opportunity.
But it is especially critical because given the long-term
solvency challenges of Social Security that we have been
discussing today.
Social Security is critical to my constituents in the 19th
Congressional District there in California on the central coast
and up in the San Jose, where over 100,000 people receive
Social Security benefits, 174 billion worth, billion with a B.
But its promise to pay out benefits for the long-term
obviously, as we know, was threatened according to the Social
Security Trustees report. Social Security is just 11 years from
insolvency, and when today's 56-year-olds reach their full
retirement age and today's youngest retirees turn 73 is when
that is going to happen.
So, we cannot ignore the 2.8 trillion in deficits that
Social Security will run over in the next decade.
Unfortunately, the longer we wait to make adjustments, the more
painful those adjustments will be to our workers and to our
retirees.
And if we do nothing, we are going to be faced with 20
percent across the board cuts, which would be devastating,
devastating to our seniors.
Now, of course, there are some obvious solutions, and yes,
I support Rep. Larson's Social Security 2100 Act, but we should
also be talking about raising revenue in regards to, I believe,
raising that payroll cap, 160,000, and look at some sort of
reduction in benefits, but I think there has to be a
combination of all of the above.
Now, I know that any solution to our Social Security crisis
must be bipartisan. I am a firm believer in that, and that we
have to carefully examine the growth of the program and its
impacts to our long-term solvency.
So obviously I am glad we are here today, glad we are
having this conversation because we do have a lot to talk
about, but more importantly, we have got a lot to understand
when it comes to how we can make our Social Security system
solvent, and that is why I appreciate the testimony of our
experts here today.
One of the solutions that is also out there, and I think is
important and was discussed by my colleague, Mr. Higgins,
obviously is immigration.
And so, Mr. Swagel, if I could, our payroll taxpaying
workforce is obviously not limited to those born in this
country. What impact would an increase to the American
workforce through legal immigration have on Social Security's
finances?
Mr. SWAGEL. Increased immigration would increase the size
of the economy, increase the size of payrolls, and improve the
financial status of Social Security, depending on the age
composition of the immigrants.
But assuming that these are people of working age,
immigrants tend to work at a high rate of working age, and that
would improve the financial status of the system.
Mr. PANETTA. Mr. Goss, same question to you, sir.
Mr. GOSS. It would unequivocally improve the financial
status of Social Security. Generally speaking, legal immigrants
are brought into the country in their 20s or 30s. So they would
have a long time during which they would be contributing to the
system.
And even if we were to bring in some much older
individuals, they would not have been in the country long
enough then to have earned rights to Social Security benefits.
So there is no question.
And one thing we always point out about immigration, that
is just the first order effect. Bringing in younger people who
will be working and contributing to the system, but the more
important thing since we are talking about things like birth
rates, if we bring people into the country, typically, people
who enter the country as immigrants tend to have higher birth
rates, and if we do bring people in in their 20s and 30s and
they have children, that greatly enhances the number of births.
So it would be a multiplicity of positives for Social
Security.
Mr. PANETTA. Thank you, Mr. Goss. I have got to reclaim my
time.
Mr. Huston, and I have got one question for you. In regards
to the Greenspan Commission, are you familiar with that?
Mr. HUSTON. I am, yes.
Mr. PANETTA. Okay. Great. All right. Can you speak to some
of the solutions that Greenspan Commission came up with, which
obviously was followed by and adopted by Congress?
And what would have happened if Congress had not enacted
those recommendations?
And you have got 37 seconds.
Mr. HUSTON. Well, I will answer the last part first. I
think in reference to Mr. Goss' earlier comment is that has not
happened yet, and we are unsure what would happen if revenues
no longer could support full payments, and that was projected
to have happened within weeks or months before the passage.
The key things that I think the Greenspan Commission
recommended were delaying and increasing the COLA, increasing
coverage of the program to newly hired Federal employees, and
something Congress also did later was add the amendment to
increase the retirement age.
So it was a combination of things that increased revenues
and also decreased costs.
Mr. PANETTA. Great. Thank you, gentlemen.
Thank you, Mr. Chairman. I yield back.
Chairman FERGUSON. Thank you, Mr. Panetta.
I now would like to thank our witnesses for being here
today. Thank you for not only your service to this country but,
most importantly, to this subcommittee today.
Again, I would like to thank Ranking Member Larson and,
yes, feel free to make a comment there, please.
Mr. LARSON. Well, thank you, Mr. Chairman.
I want to first and foremost commend you on your
introductory hearing as chairman of the committee, and I want
to thank you for the positive step.
I know you appreciate the skepticism on our side given the
Republican Study Committee's report and its very specific
recommendations.
I further, therefore, appreciated what you had to say about
this, and we look forward. And my question would be when would
the next hearing be and can we count on beneficiaries coming
forward so that, as you heard from a number on our side today,
the concern about the impact on people, and that being very
important in terms of the so-called numbers and statistics that
we are going to have to deal with.
Chairman FERGUSON. So, Mr. Larson, we will give you plenty
of notice as to when the next hearing will be.
And as we go through and analyze the testimony today and
look at the testimony, we will then formulate what we plan to
do at the next hearing.
At some point I agree with you having beneficiaries here
will be an important part of the conversation.
Please be advised that members have two weeks to submit
written questions to be answered later in writing. Those
questions and your answers will be made part of the formal
hearing record.
With that the subcommittee stands adjourned.
[Whereupon, at 11:54 a.m., the subcommittee was adjourned.]
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