[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
HEARING ON THE WINDFALL ELIMINATION
PROVISION AND GOVERNMENT PENSION OFFSET
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HEARING
BEFORE THE
SUBCOMMITTEE ON SOCIAL SECURITY
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
APRIL 16, 2024
__________
Serial No. 118-SS07
__________
Printed for the use of the Committee on Ways and Means
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__________
U.S. GOVERNMENT PUBLISHING OFFICE
56-435 PDF WASHINGTON : 2024
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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 TERRI SEWELL, Alabama
LLOYD SMUCKER, Pennsylvania SUZAN DelBENE, Washington
KEVIN HERN, Oklahoma JUDY CHU, California
CAROL MILLER, West Virginia GWEN MOORE, Wisconsin
GREG MURPHY, North Carolina DAN KILDEE, Michigan
DAVID KUSTOFF, Tennessee DON BEYER, Virginia
BRIAN FITZPATRICK, Pennsylvania DWIGHT EVANS, Pennsylvania
GREG STEUBE, Florida BRAD SCHNEIDER, Illinois
CLAUDIA TENNEY, New York JIMMY PANETTA, California
MICHELLE FISCHBACH, Minnesota JIMMY GOMEZ, 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 DAN KILDEE, Michigan
RANDY FEENSTRA, Iowa GWEN MOORE, Wisconsin
GREG STEUBE, Florida
DAVID KUSTOFF, Tennessee
C O N T E N T S
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OPENING STATEMENTS
Page
Hon. Drew Ferguson, Georgia, Chairman............................ 1
Hon. John Larson, Connecticut, Ranking Member.................... 2
Advisory of April 16, 2024 announcing the hearing................ V
WITNESSES
Jason Fichtner, Ph.D., Chief Economist, Bipartisan Policy Center. 3
Rachel Greszler, Visiting Fellow in Workforce, Economic Policy
Innovation Center.............................................. 15
Nancy Altman, President, Social Security Works................... 28
Charles Blahous, Ph.D., J. Fish and Lillian F. Smith Chair,
Senior Research Strategist, Mercatus Center at George Mason
University..................................................... 40
QUESTIONS FOR THE RECORD
Member Questions for the Record and Responses from Jason
Fichtner, Ph.D., Chief Economist, Bipartisan Policy Center..... 75
Member Questions for the Record and Responses from Rachel
Greszler, Visiting Fellow in Workforce, Economic Policy
Innovation Center.............................................. 78
Member Questions for the Record and Responses from Nancy Altman,
President, Social Security Works............................... 81
Member Questions for the Record and Responses from Charles
Blahous, Ph.D., J. Fish and Lillian F. Smith Chair, Senior
Research Strategist, Mercatus Center at George Mason University 88
PUBLIC SUBMISSIONS FOR THE RECORD
Public Submissions............................................... 93
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WINDFALL ELIMINATION PROVISION AND GOVERNMENT PENSION OFFSET
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TUESDAY, APRIL 16, 2024
House of Representatives,
Subcommittee on Social Security,
Committee on Ways and Means,
Washington, DC.
The subcommittee met, pursuant to call, at 3:02 p.m., in
Room 2020, Rayburn House Office Building, Hon. Drew Ferguson
[chairman of the subcommittee] presiding.
Chairman FERGUSON. Good afternoon, everyone. We will call
this subcommittee hearing to order.
Pursuant to House rule XI, clause 2(g) and consistent with
the committee precedent, the gentleman from Louisiana, Mr.
Graves, is authorized to attend this hearing. And I would like
to thank the gentleman for being here and all the work he has
done to bring awareness to this important issue.
And, to my ranking member, thank you for your consideration
of having him here on the committee today.
We are here today to talk about fairness in the Social
Security system related to the Windfall Elimination Provision
and Government Pension Offset. The WEP and GPO, as they are
known, were intended to make Social Security more fair, but,
for millions of Americans, they have fallen far short.
These two policies were put in place decades ago to prevent
unfairness by addressing a flaw in the Social Security's
formulas that results in unintentionally generous benefits for
some people with earnings that were exempt from Social
Security's payroll tax. Under Social Security's normal rules,
those individuals or couples could receive substantially more
generous benefits from Social Security than individuals and
couples who spent their careers paying into Social Security.
But the WEP and GPO share the same flaw that they were
meant to address in Social Security's benefit formulas: They
can't factor in earnings from outside of Social Security
because only a few years of non-covered-earnings data was
available to them. As a result, they rely on ad hoc adjustments
that, in some cases, unfairly reduce the benefits and, in
others, still provide those with non-covered earnings an
unintended advantage over those who spent their whole careers
in jobs covered by Social Security.
So what is going to be our path forward? We believe that
all beneficiaries deserve fair treatment from Social Security,
and workers and their families shouldn't be disadvantaged by
Social Security simply because they chose a career in public
service. However, while WEP and GPO were flawed, removing them
results in the same unfairness that they were intended to
address.
Since Social Security itself is a self-financed system,
every dollar spent on the unintentional generous benefits is
one less dollar that can be used to keep the trust fund afloat.
That is why we are here today: to discuss why these
policies were put in place, how they missed the mark, and how
they can be improved.
We have a responsibility to almost 70 million current
beneficiaries and more than 150 million workers contributing to
the system to get this right and identify a path forward that
is fair to all who participate in Social Security.
So, again, I want to thank you for being here.
And now I will yield to my good friend and ranking member,
Mr. John Larson from Connecticut, for his opening statement.
Mr. LARSON. Well, thank you, Mr. Chairman.
And I am glad that we are having a hearing on Social
Security. I think it is the wrong bill, but, nonetheless, I
think we should be talking about Social Security in general--
something Congress hasn't addressed, in terms of enhancing its
benefits, for more than 50 years. Richard Nixon was President
of the United States. Do you think a few things might have
happened since then?
You know, I commend Garret Graves and Abigail Spanberger
and the more than 300 Members who have signed on to H.R. 82.
Why have they done that? They did it because they understand
just how blatantly unfair it is.
But that is only a small segment of what is unfair. No
enhancement in over 50-plus years to the Nation's number-one
anti-poverty program for the elderly and the number-one anti-
poverty program for children? Shame on us that we can't even
have a hearing. We need not only a hearing, but we need a vote.
People ought to know where their Congress stands.
Imagine this: 10,000 baby-boomers a day become eligible for
Social Security, a system that hasn't been enhanced since
1971--10,000 a day. And, with wealth disparity growing even
greater, the genius of Franklin Delano Roosevelt prevails even
to this day--except, they relied on Congress doing its job, a
job that Eisenhower and Nixon did but that has not been taken
up in over 50 years.
Now, my colleagues, I could go down the list here of
everyone on this subcommittee and tell you exactly how many
Social Security recipients you have, how much money comes into
your district monthly for them.
Nobody is getting wealthy on Social Security. For 40
percent of all retirees in this country, it is the only benefit
they have. And Congress, the only body that can change that,
has done nothing--nothing.
So, my good friend, I think it is important that we are
having this discussion. I support the intent to repeal both WEP
and GPO, but I believe it should be paid for, as it is in
Social Security 2100, so that we can also derive and not only
extend Social Security's solvency but address a number of the
issues, including more than 5 million of our fellow Americans
who get below-poverty-level checks--at this time of wealth
disparity, below-poverty-level checks--from their government.
They were told that if they paid into the system, don't
worry, it will be there for you. And you know what? For the
most part, that is true. And we don't have to go back to 1929
anymore; we only have to go back to 2008, 2009, when people
could see their 401(k) became a 101(k), and during that same
time Social Security never missed a payment--not a pension
payment, not a disability payment, not a dependent payment, or
a spousal payment.
It is why Republicans and Democrats and independents
overwhelmingly support its enhancement. Why can't we come
together and say, yes--look, there is no need to study this;
there are only two things you can do: You can either cut
benefits or raise revenue. You can talk about everything you
want, but at the end of the day those are the only two things
that you can do that are going to have a direct impact on
people.
I agree with President Biden; let's lift the cap on people
over $400,000. That not only extends solvency beyond 2066 but
it also pays for a number of enhancements, including letting
nobody retire into poverty, including not taxing people on
their Social Security who continue to work after they retire
because they have to.
Mr. Chairman, we need to bring up Social Security 2100. We
need to debate on that. I welcome all the ideas. We have
adopted every good Republican idea and put it into Social
Security 2100, including most recently Mr. Buchanan's as well.
So, with that, I yield back.
Chairman FERGUSON. Thank you, Mr. Larson.
Next, I have the privilege of introducing our witnesses.
Again, thank you all for taking time to be here with us to
help us work through these issues.
First, Dr. Jason Fichtner, chief economist at the
Bipartisan Policy Center; Rachel Greszler is a visiting fellow
in workforce at the Economic Policy Innovation Center; Nancy
Altman is president of Social Security Works; and Dr. Charles
Blahous is the J. Fish and Lillian F. Smith Chair and senior
research strategist at the Mercatus Center at George Mason
University. That is a mouthful.
Thank you for joining us today. Your written statements
will be made part of the hearing record, and each of you will
have 5 minutes to deliver your oral remarks.
Dr. Fichtner, you may proceed when ready.
STATEMENT OF JASON FICHTNER, PH.D., CHIEF ECONOMIST, BIPARTISAN
POLICY CENTER
Mr. FICHTNER. Thank you, sir.
Good afternoon, Chairman Ferguson, Ranking Member Larson,
and members of the subcommittee. Thank you for inviting me to
testify today.
My name is Jason Fichtner, and, as Mr. Ferguson said, I am
the chief economist at the Bipartisan Policy Center. But I am
also the executive director of the Retirement Income Institute
with the Alliance for Lifetime Income, as well as a policy
fellow with the Stanford Institute for Economic Policy Research
and a research fellow with the Center for Financial Security at
the University of Wisconsin.
I am also on the board of directors of the National Academy
of Social Insurance, the FINRA Foundation, and a member of the
Puerto Rico Pension Reserve Trust, where I serve on both the
Pension Benefits Council and the Pension Reserve Board.
Previously, I served in several positions at the Social
Security Administration, including Deputy Commissioner and
Chief Economist.
And all the opinions I express today are my own and do not
necessarily reflect the views of any organization with which I
might be affiliated.
I would like to begin by thanking Chairman Ferguson and
Ranking Member Larson--also for your point--for the leadership
you both provide in ensuring that important public-policy
issues involving Social Security get the attention and debate
they so deserve and that ideas and viewpoints from all sides
are aired in a collegial, productive, and respectful manner.
It is truly a privilege for me to be testifying before the
subcommittee today and with my colleagues here as well.
In my written testimony submitted for the record, I focus
on three key issues.
First, I explain how the current-law Windfall Elimination
Provision, or WEP, is overly complex and unfair.
Second, I discuss how reforming the Social Security benefit
formula would improve the simplicity and fairness of the WEP
while still maintaining the original public-policy purpose.
Though most of my testimony focuses on the WEP, the related
Government Pension Offset, or GPO, has similar complexity and
fairness problems that should be addressed in tandem.
Third, absent legislative changes to the Social Security
benefit formula, I also discuss other potential reforms that
would assist SSA in the administration of WEP and GPO.
The key takeaways from my testimony I would like you to
gather from today are as follows:
One, the original public-policy intent of the WEP and GPO
was to ensure fair treatment between workers whose only
earnings are covered by Social Security and workers with
earnings that are not covered by Social Security. It is
important to maintain equity between covered and non-covered
workers. Fully repealing the WEP and GPO would violate the
principles of fairness and equity that these provisions were
intended to protect.
Two, unfortunately, given data limitations at the time the
WEP and GPO provisions were first established in law, these
provisions create an overly complex structure rife with what
economists call ``perverse incentives.'' This can sometimes
result in higher replacement rates for people with high
lifetime earnings than those with low lifetime earnings.
Further, the complexity and lack of transparency in the
current WEP and GPO provisions can hinder people's ability to
accurately plan for retirement and potentially cause undue
hardship for retirees.
Three, much good can come from a relatively straightforward
change that would make the Social Security benefit formula
proportional or prorated. For workers with non-covered
earnings, this formula would calculate a replacement rate using
the current method of determining the primary insurance amount,
or PIA, taking into account all earnings, covered and non-
covered, but the proportional formula would apply this
replacement rate only to the years of covered earnings.
This change would allow for the use of one benefit formula
for all Social Security beneficiaries, would be simple to
understand, and would be fairer than the current system, while
maintaining the original intent of fairness and equity of the
WEP and GPO provisions.
Four, and finally, absent legislative changes to the Social
Security benefit formula, Congress can legislate some
administrative reporting changes that would better enable the
Social Security Administration to administer the WEP and GPO,
such as mandating that each State provide SSA with a file of
pension recipients and the portion of their pension that is
based on non-covered work, which would address the legal issues
SSA currently faces in getting voluntary agreements with the
States, or, two, require the Internal Revenue Service to
provide a checkbox on the Form 1099-R to indicate that a
person's pension is in whole or in part based on uncovered
earnings and also legislate that the IRS be required to share
that data with the IRS. That is important.
The original intent of the WEP still applies today;
however, we now have an opportunity to get the formula right
for the improvement of the Social Security program and its
beneficiaries. The Bipartisan Policy Center has proposed a
similar proportional policy reform option, as have many others.
I would also like to remind the committee that the
technical name for Social Security is the Old-Age and Survivors
Insurance program. There is also a Disability Insurance
program. The keyword there is ``insurance.'' It was never
intended to be a fully retired program. It is an insurance
program. We could have a conversation of what that means when
thinking holistically about how we should reform.
Mr. LARSON. So, therefore, it is a premium, not a tax?
Mr. FICHTNER. We can talk about that too, Congressman. I
have----
Mr. LARSON. Okay. Well----
Mr. FICHTNER [continuing]. 8 seconds left.
And, with that, thank you for providing me the opportunity
to testify today, and I look forward to your questions.
[The statement of Mr. Fichtner follows:]
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Chairman FERGUSON. Thank you, Dr. Fichtner.
Ms. Greszler, you are now recognized.
STATEMENT OF RACHEL GRESZLER, VISITING FELLOW IN WORKFORCE,
ECONOMIC POLICY INNOVATION CENTER
Ms. GRESZLER. Thank you. Good afternoon, and I am delighted
to be able to be here today.
While my written testimony addresses both the WEP and the
GPO, I would like to focus my remarks on the GPO and how
policymakers can enact a remedy that is consistent with Social
Security's intent.
Social Security's founders designed a progressive and
contributory system that supported the family and the workforce
structure of the time. In 1930, 80 percent of women were
married and only 12 percent of married women were employed. So
Social Security's founders included a spousal benefit equal to
half of the primary worker's benefit. According to Social
Security, that spousal benefit was meant to, quote,
``compensate spouses who stayed home to raise a family and were
financially dependent on the working spouse.''
Today, fewer than 50 percent of women are married and 70
percent of women participate in the workforce, which means the
spousal benefit is less prominent because most women earn their
own benefit.
The Government Pension Offset, which was enacted to prevent
unintended spousal benefits, applies to about 746,000
individuals and 1 percent of all beneficiaries. The current GPO
isn't perfect, but eliminating it would contradict Social
Security's intent.
According to the Social Security Administration,
individuals affected by the GPO receive non-Social Security
pensions of about $30,000. That is 64-percent higher than the
average Social Security benefit of about $18,500.
So consider couples A and B who have identical earnings
histories, with the only difference being that the wife in
couple B was a teacher and didn't pay into Social Security.
Instead, part of her compensation went towards a non-Social
Security government pension.
Without the GPO, couple B would receive 75 percent as much
in Social Security benefits despite paying only 50 percent as
much in Social Security taxes. Moreover, despite having the
exact same earnings, couple B's total government pensions would
be 57-percent higher, an extra $21,000 per year, compared to
couple A.
Not surprisingly, an Urban Institute report estimated that
eliminating the WEP and GPO would not materially affect the
poverty rate because most of the benefit increases would go to
the highest earners.
Eliminating the WEP and GPO would violate Social Security's
intent to treat workers with equal earnings equally, and it
would violate Social Security's progressive benefit structure.
Perhaps most importantly, eliminating the WEP and GPO would
cause Social Security to become insolvent more than 1 year
earlier, meaning that 60 million people would receive an extra
1 year of, average, $5,000 benefit cuts in order for a few
million people to receive windfall benefits.
Instead of further bankrupting Social Security,
policymakers should implement a fair and accurate fix, basing
spousal benefits on an imputed individual benefit that takes
into account a person's earnings both inside and outside of
Social Security.
This fix could be paired with modernizations, such as
shifting to a system of shared benefit credits for married
couples. This would also protect spouses who stay home to care
for children but who get divorced before 10 years of marriage
and therefore don't qualify for a spousal benefit. Policymakers
should also consider a credit for spouses who stay home with
children--something like 2 years of average earnings per child
credited to stay-at-home parents.
While the WEP and GPO are relatively small issues, they
must be addressed within the context of Social Security's $22.4
trillion shortfall. That is $172,000 for every household in
America.
Advocates of expanding Social Security and many other
government programs argue that we can simply tax the rich. This
is mathematically impossible and economically laughable.
The Social Security actuaries and CBO say that payroll
taxes would have to rise between 27 and 41 percent immediately
and for 100 percent of beneficiaries just to prevent benefit
cuts in 9 years. So how would it be possible to not just
prevent benefit cuts but also increase benefits by raising
taxes on just 2 percent of earners? It is not.
The Social Security Expansion Act includes $34 trillion in
new taxes, including massive tax hikes on small businesses and
on people making far less than $400,000. The Social Security
2100 Act is a dishonest gimmick that pairs 75 years of tax
hikes with only 10 years of benefit increases.
In addition to implementing a fair and accurate fix for the
WEP and GPO, policymakers must address Social Security's
imminent insolvency, because failing to do so will, by default,
result in roughly $5,000 benefit cuts for 60 million Americans.
Thank you.
[The statement of Ms. Greszler follows:]
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Chairman FERGUSON. We now have the pleasure of hearing from
Ms. Altman.
You are now recognized.
STATEMENT OF NANCY ALTMAN, PRESIDENT, SOCIAL SECURITY WORKS
Ms. ALTMAN. Thank you.
Chairman Ferguson, Ranking Member Larson, and members of
the subcommittee, you should repeal WEP/GPO as one of the many
ways that you should expand Social Security.
Social Security is the Nation's most important retirement
income, life insurance, and disability insurance, but its
benefits are inadequately low, even for those not subject to
WEP/GPO. Social Security benefits should be increased across
the board, as the 2100 Act, the Strengthening Social Security
Act, and the Social Security Expansion Act all do.
In addition, Congress should repeal WEP/GPO and make the
other targeted expansions that many of you have championed.
They include improvements for women, low-income workers, young
people, people with disabilities, survivors, and others.
All of that is completely affordable, but there is a right
way and a wrong way to cover that cost.
The right way is to require millionaires and billionaires
to pay their fair share. If they contributed just on their
earned and unearned income in excess of $400,000 and they
contributed at simply the same rate that minimum-wage workers
and their employers contribute to Social Security, that,
according to the Social Security actuaries, raises enough
revenue to restore Social Security to balance, repeal WEP/GPO,
and expand benefits in other ways as well.
The absolute wrong way is to cut the very Social Security
benefits that public servants are fighting for. The Republican
Study Committee's budget slashes Social Security by $1.5
trillion in just the next 10 years--by $73 billion in just the
first year alone. Indeed, the RSC's annual budgets will leave
public servants, along with all other working families,
substantially worse off, even if Congress repeals WEP/GPO.
In my written statement, I calculate the impact of just
three of the RSC cuts. Take the example of a public employee
who today gets a benefit of just $649 a month. If WEP were
repealed, the benefit would rise to $1,038. But, if those three
RSC cuts were in effect, that $1,038-a-month benefit would be
just $410. That is $7,500 a year less, and it is nearly $3,000
a year less than the employee gets today even with WEP.
Instead of repeal, if you simply modify WEP/GPO, you should
not do so in a way that results in public employees worse off,
as the Equal Treatment of Public Servants Act does. Once fully
phased in, that bill would cut the benefits of millions of
public servants whose benefits are not affected at all by
current law. For those public employees affected by current
law, one-third of them would get lower benefits under the new
modified WEP.
If Republicans are going to continue to advance these
devastating cuts, they should at least have the courage of
their convictions. Instead, Speaker Johnson and Budget
Committee Chairman Arrington are pushing for the creation of a
commission with essentially the power to enact these unpopular
cuts behind closed doors. This is a thinly veiled effort to
avoid political accountability. President Biden accurately
labeled the commission a ``death panel'' for Social Security.
The Ways and Means Committee, not a closed-door commission, is
the right forum for Social Security legislation.
Overwhelming majorities of your constituents--Republicans,
independents, and Democrats--vehemently oppose all benefit cuts
and strongly support expanding Social Security paid for by the
wealthy. You could act with confidence in the open if you act
in accordance with the will of the people. If you expand Social
Security's benefits, including repealing WEP/GPO, and you pay
for it by requiring the uber-wealthy to pay their fair share,
you will receive widespread praise and the gratitude of the
Nation.
Thank you.
[The statement of Ms. Altman follows:]
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Chairman FERGUSON. Ms. Altman, thank you for your
testimony.
I have wonderful news for you. As chairman of the Social
Security Subcommittee here, we will not be voting on the RSC
budget. And we have said many times----
Ms. ALTMAN. Good.
Chairman FERGUSON. We have said many times, the only way
that this gets solved is in a bipartisan, open forum.
So I just want you to be able to put your head on your
pillow at night and rest knowing that everybody on this
subcommittee is committed to working in an honest and
bipartisan fashion to solve these problems.
Ms. ALTMAN. Thank you, but that won't help me sleep.
Chairman FERGUSON. Well, at least that is one less thing
you have to worry about.
Ms. ALTMAN. No, no. Because--because--I will be worried
about that.
Chairman FERGUSON. Dr. Blahous, you are now recognized.
Thank you again for being here.
STATEMENT OF CHARLES BLAHOUS, PH.D., J. FISH AND LILLIAN F.
SMITH CHAIR, SENIOR RESEARCH STRATEGIST, MERCATUS CENTER AT
GEORGE MASON UNIVERSITY
Mr. BLAHOUS. Thank you, Mr. Chairman, Mr. Ranking Member,
all the members of the subcommittee.
My written statement goes into greater detail than my oral
remarks. I just want to focus on three main points concerning
the Windfall Elimination Provision and Government Pension
Offset.
First point: As long as Social Security has its current
basic benefit design, it needs something like the WEP and GPO
to maintain parity between different participants. That is
because Social Security benefits are calculated as a function
of a worker's earnings subject to the payroll tax. Any earnings
a worker has in non-covered employment, such as certain State
or local government service, the benefit formula effectively
doesn't cede.
So, if a household has one spouse who is covered by Social
Security, has another spouse who also worked full-time but
didn't pay taxes into Social Security because they were in non-
covered employment, without the GPO the benefit formula would
mistake that second spouse for a non-working spouse and it
would give this couple a bonus of a full non-working spouse
benefit. As a result, that couple would have much higher
benefits than a couple with the same earnings who worked
entirely within Social Security.
Other features of Social Security that necessitate
something like the WEP are that benefits are based on a
worker's average earnings over their highest 35 years. And the
benefit formula is progressive; it delivers more generous
returns to lower-income workers.
Now, that works roughly as intended for those who work
their entire careers under Social Security. But, without a WEP,
it would not work properly for those who spend part of their
careers in Social Security and part earning a State or local
government pension. If you only worked half your career in
Social Security, the benefit formula would think your average
earnings are only half what they actually are and would try to
give you a much higher return than it gives to someone with the
same earnings within Social Security.
And these are real problems, because, remember, Social
Security is a self-financing system. The total benefits it pays
cannot exceed the taxes participants contribute. So, if Social
Security gives unintended windfalls to some households, that
money comes straight from other participants. And many of these
unintended transfers would be regressive, giving windfalls to
higher-income seniors at the expense of lower-income
participants.
Second point: While the current provisions fill a clear
need, they are not flawless. In an ideal policy world, you
would have parity; your total benefits would be the same
whether you spent your entire career in Social Security or half
in Social Security and half in an equally generous State or
local plan. But the current provisions don't achieve exactly
that. They under-adjust for many participants and they over-
adjust for others. The WEP tends to hit lower-income
participants harder than an accurate adjustment would, whereas
the GPO is relatively more generous on the low-income side.
The main reason for these inaccuracies is that these
provisions were enacted when Social Security lacked access to
non-covered-earnings records. The provisions do not represent
ideal policy; they simply represent the attempt of lawmakers
four decades ago to address some inequities to the extent
possible within the data limitations of the time.
Third and final point: Lawmakers should bear in mind
certain principles when considering reforms.
One is to distinguish between policy problems and
communication problems. Some of the controversy surrounding
these provisions involves communication problems. The
provisions are poorly understood, and that can lead to
unpleasant surprises when people claim benefits.
Now, where the policy is problematic, the policy should be
changed. But policy adjustments can't fix bad communication,
and policy problems can't be fixed by better communication.
Information from SSA and from State employers should
explain clearly that these provisions are not arbitrary benefit
reductions but adjustments to achieve something closer to
equity. And, certainly, any benefit projections workers receive
should accurately anticipate the operations of these
provisions.
Another important principle is ``the ideal,'' which is
parity between workers who split their careers between Social
Security and a non-covered pension, which the data are now
available to achieve. States have been required to report non-
covered earnings since 1982, making it possible to replace
these provisions with more accurate calculations going forward.
Finally, ``do no harm,'' meaning don't worsen Social
Security's already dire financing shortfall, which would impose
greater income losses on other participants.
Fortunately, some replacement reforms would save money over
the long run, with the amount of savings dependent on the
reform chosen. That would allow legislators to consider
permitting current beneficiaries to receive the greater of the
old formula or the new one, and even to do the same for some
low-income future beneficiaries, all without worsening Social
Security's financing shortfall.
In sum, the WEP and GPO are necessary features in a system
with Social Security's basic design, but their current forms
fail to achieve their intended purposes, in large part because
they are simplified approximations reflecting previous data
limitations.
Appropriate reforms could result in greater parity between
households with equal incomes, increase participants'
understanding of their benefits, and potentially increase
benefits for some current and future low-income households, all
without weakening system finances.
Thank you very much.
[The statement of Mr. Blahous follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman FERGUSON. Thank you, Doctor.
Now we are going to go to the question-and-answer portion
of this.
Dr. Fichtner, I am going to start with you.
As we have heard, the alternatives to WEP and GPO have been
considered in the past, but some of these solutions relied on
data that the Social Security Administration just didn't have.
As a former Deputy Commissioner of SSA, does the SSA have
the data now that it needs to implement a better version of WEP
and GPO?
Mr. FICHTNER. Thank you for the question, Congressman.
The answer, in part, is yes. So we now have at least 35
years of history for everyone's earnings data. So they can do a
better job if we implemented a proportional formula to help
with that better implementation of WEP and GPO and Social
Security.
Where they still fall short, though, is data reporting. So,
for current beneficiaries who are subject to WEP or GPO, they
rely on reporting from the beneficiary, voluntary reporting.
And that is where we get some improper payments. And the only
way to fix that is through data exchange issues--that would
require some legislative intent--or to change the formula to
proportional.
So, when you think about what you want to do with WEP/GPO
if you are not going to do an outright repeal, then one is to
do a proportionary formula so everyone gets the same formula
and Social Security can adjust and modify and administer the
program fairly for everybody, or you have to do something with
data exchanges where the States and pension programs report to
SSA who is covered and how much, and that way they can actually
administer the program.
Chairman FERGUSON. Yeah. Thank you.
Ms. Greszler, given how close the retirement trust fund is
to exhaustion, how important is it to make sure that any
solution not only results in a fair benefit but takes into
account the lifespan of the trust fund and its exhaustion date
later this decade? And would ignoring this issue be fair to
anybody here?
Ms. GRESZLER. No, it wouldn't be fair. And we need to
address the program comprehensively, because it will be
insolvent.
That is under current law. It is not under passing any
budget that cuts benefits; it is under current law. Nine years
from now, across the board, 23-percent cuts. Whether you are 99
years old and you had a low income your whole life or whether
you are a billionaire and you just retired, it is going to be
across-the-board cuts.
It is a closed system, so anything that you do that
increases the cost today--which, the WEP and GPO, repealing
them would be $183 billion in added costs and take another year
off the solvency of the program--that is going to hurt
everyone. And it is going to be the most significant for the
people who are relying on Social Security for the largest
portion of their income.
Chairman FERGUSON. Okay. Thank you.
Dr. Blahous, you did a great job of kind of explaining, you
know, why this was done. And we appreciate that.
We have heard, now, that we either have to deal with data
exchanges or we have to change the formula.
The ultimate goal here has to be able to treat every
American fairly and to equalize what has been going on here. It
is patently unfair for somebody to benefit more than their
fellow American, but it is equally important that we don't
penalize our fellow Americans.
Given the difference between the two--or, if you were in
charge, would you rather see a new formula or better use of
data exchanges? Which one do you think creates parity for our
fellow Americans?
Mr. BLAHOUS. Well, I think you need a new formula, frankly.
And I will say, first of all, big picture, the underlying
problem here is basically how the underlying Social Security
benefit formula works. We were talking about data limitations.
The reason Social Security's benefit formula looks the way that
it does is also because of data limitations, that basically it
is a calculation that is based on your average earnings over
your highest 35 years.
Now, that is an issue that makes this whole State-and-
local-government-employment WEP/GPO issue complex, but that is
not the only place where it arises. It also arises with people
who immigrate halfway through their careers. It also arises
with people who might share a household with a higher earner
and are in and out of the workforce but are making a lot of
money when they are in the workforce but the system thinks they
are a low-income person. So there are a lot of problems that
arise from that.
So, in a perfect world, you would have a different type of
benefit formula, more like in private pensions, where you are
accruing benefits with each annual year of earnings--and you
could have a progressive formula to do that--rather than as a
function of your lifetime average earnings.
So that is the underlying problem, and, if you fix that,
you wouldn't have to worry, frankly, about access to non-
covered earnings and all of that.
Now, short of that type of fundamental reform of Social
Security's benefit formula, the next-best thing you can do is
to treat people equally as a function of their covered and non-
covered earnings, which requires Social Security to have timely
access to your non-covered-earnings records.
In some respects, that is actually easier than what Social
Security has to do now. Because right now, the GPO is a
function of your non-covered pension, right? So you need the
data exchange for SSA to get access to that information. If you
had a properly functioning WEP and GPO, Social Security
wouldn't need that. They would just need timely access to your
non-covered-earnings records, which they have had since 1982.
Chairman FERGUSON. Okay. Thank you.
And thank you all for your answers.
Again, as we move through this, I think the desire here,
again, is to find the fair way through this so that no American
is disadvantaged by this, or by the flaws that are in this
program, and to be thoughtful about how we do this with one of
our most beloved, cherished, and needed programs.
And, with that, I will yield to my colleague, Mr. Larson,
the ranking member, for 5 minutes for questions.
Mr. LARSON. Well, you would make me sleep a lot better if
we were having actual hearings on Social Security and we were
bringing out bills that actually address this and we have very
bright and capable people giving testimony--thank you all for
your testimony--but those of you in the audience should know
that three of those individuals were selected by the Republican
side, one by the Democrat side. That is the way the system
works. That is fair. But if roles were reversed, we would have
three people over here that would present our point of view and
one that would present theirs. That is the way the system is
set up.
So, my Grandfather Nolan used to say it best: Trust
everyone, but cut the cards. And that is our responsibility up
here, is to make sure that everybody gets a fair deal, starting
with a new deal that focuses on what--Roosevelt's intent--I
admire some of the information that we heard, because nothing
has been done in over 50 years. So, for God's sake, yes, there
have to be improvements.
Now, Doctor, you gave very good--do you think the Social
Security Administration is funded well enough currently to
administer a $70 million program?
Mr. FICHTNER. I am sure the agency would love to have much
more additional funding.
And what I am going to do is parrot my old boss,
Commissioner Mike Astrue, who, when before the Ways and Means
Committee and Budget Committees, would say, the agency
definitely needs more money to do its administration, but hold
them accountable to performance metrics. And that is----
Mr. Larson. Well, that is very logical, except that--do you
realize that--we just had Mr. O'Malley in front of us. He said,
``Give me 1.2 percent.''
Do you think the whole country knows that our number-one
insurance program for all the people of the country is
administered for under 1 percent? But, in its heyday, when you
were there, it was 1.2 percent. And that is not nearly enough.
Is there any other governmental agency--how do you think the
Pentagon would do with 1.2 percent?
Come on. Let's get real in terms of what we are talking
about here too. I love the ideas of the reform, but there is
never any mention of what has to go along with that reform in
terms of funding the very agency that could probably come up
with a number of good ideas that would be cost-saving and
constructive. But, if you are gonna dance, you gotta pay the
fiddler. And we are long overdue. We just simply haven't met
our responsibility.
Ms. Altman, you were on the Greenspan Commission, et
cetera. How do you think we have fared since 1983? In your
remarks, you allude to it, but I wanted to give you a chance to
talk a little bit more about what needs to be done.
Ms. ALTMAN. Thank you.
The Greenspan Commission--I was the assistant to Dr.
Greenspan, and they were a blue-ribbon commission. There was no
fast-tracking. They sent their recommendations to Congress.
They went through the full legislative process. And that is
really the way it should happen.
So it was Congress that didn't even have to consider their
recommendations if they didn't want to. They took them up, and,
afterwards, the actuaries found that Social Security was in
full actuarial balance for the entire 75-year valuation period,
which took us to 2057.
So why are the actuaries now projecting the 2030s rather
than 2057? Well, the reason that it is not 2057, the major
unanticipated factor, was the income and wealth inequality that
we experienced in the 1990s. It has been estimated that that
has cost Social Security $1.4 trillion over just the last
decade. That is money that stayed in the pockets of the
wealthiest Americans rather than being contributed to Social
Security.
Which is why I think the right way to address Social
Security's long-range shortfall, repeal WEP/GPO, and do the
other very important expansions that are included in the 2100
Act, is by requiring those with incomes with over $400,000 to
contribute.
And I would go even further; I would have multinational
corporations, I would have a number of the tax loopholes that
are identified in the Biden budget dedicated to Social
Security. And then you could expand benefits beyond what the
2100 Act does.
Mr. LARSON. Thank you.
Chairman FERGUSON. Thank you, Mr. Larson.
Pursuant to committee practice, we will now move to a two-
to-one questioning.
Mr. Carey, you are now recognized.
Mr. CAREY. Well, thank you, Mr. Chairman, and I want to
thank the ranking member for hosting this hearing, following
our successful field hearing in Baton Rouge, Louisiana, back in
November. It is really good to have our dear friend joining the
committee, Congressman Graves, here with us as well.
The subcommittee's field hearing in Baton Rouge clearly
demonstrated how Social Security's Windfall Elimination
Provision and the Government Pension Offset can treat some
public servants unfairly. We heard multiple--multiple--stories
from public servants who are in or near retirement who were
forced to delay their plans or just their quality of life. I
mean, we heard countless stories.
Following the hearing, my office received an outpouring of
inquiries from constituents who are impacted by WEP and GPO.
These constituents served as teachers, postal workers,
firefighters, law enforcement agents.
Dedicated public servants, you know, bottom line, should
not be treated worse by Social Security than their counterparts
in the private sector.
So just as an opening statement.
Dr. Fichtner, I noticed from your bio you went to the
school up north. I will have to treat you as a hostile witness
as a----
Mr. FICHTNER. Well, given that there is a national
championship under our belt, I will take it.
Mr. CAREY. I understand. Okay.
Mr. KILDEE. This might be the one area where----
Mr. LARSON. Go Huskies.
Mr. KILDEE [continuing]. We could find agreement.
Mr. CAREY. I am reclaiming my time.
Mr. KILDEE. Go Blue.
Mr. CAREY. Sir, your testimony provides some examples of
how Social Security benefits are calculated and how WEP further
adjusts those benefits. Can you provide us an example of how
the WEP can unfairly penalize those same public servants with
the non-covered earnings?
Make it quick, because I have a couple other questions.
Mr. FICHTNER. Yeah, I will make it quick.
So, basically, as Dr. Blahous mentioned in his testimony as
well, there is basically an average lifetime earnings that is
adjusted, and then, once you get an average amount, it is taken
over three bend points. And the first one is a 90-percent bend
point that is applied to a lower level of average income. For
the WEP, that can be reduced to 40 percent.
Mr. CAREY. Uh-huh.
Mr. FICHTNER. So, in some cases, depending on the data, it
could over-adjust or under-adjust.
And we have talked about the idea of fairness and the idea
of equity. I think everyone here is trying to find equitable
treatment. ``Equitable'' usually means ``same.'' So you are
trying to find a way to treat like people alike.
And that usually means like income amounts due to both non-
covered and covered earnings so they have a similar replacement
rate when they have total earnings covered. And right now, with
the WEP, we basically readjust it. And we are trying to get it
closer, and sometimes we miss the mark. And that is how some of
those people can be unfairly benefited.
Mr. CAREY. I am going to move to Dr. Blahous.
Is income inequality--cut through all the hyperbole here--
is it the biggest reason Social Security is facing the
financial shortfall that it is within the 10 years?
Mr. BLAHOUS. Well, no, it is not the biggest reason there
is a shortfall. There was a discussion earlier about--if you
look at the projection error that was in the 1983 projections,
it is the biggest source of projection error. That was the
thing they got wrong by the most.
But the projection error and the problem are two entirely
different things. The projection error is actually a small
component of the overall problem. The overall problem is caused
by demographics--increasing longevity, declining fertility.
And, also, there was a series of automatic benefit
increases that were enacted in the 1970s that were more rapid
than could be funded over time within a stable tax rate.
Those things were known in 1983. So, if you look at the
1983 projections, you could see that they were unsustainable
even then. They had 75-year solvency, as was alluded to, but it
was large-and-growing deficits in the out-years. So, within a
year or two, the system was going out of balance again; it was
not a sustainable solution.
So the fundamental problems were the benefit growth enacted
in the 1970s coupled with demographics. Among the projection
error, income inequality was the largest factor that they
missed, but that is a small piece of the overall whole.
Mr. CAREY. Okay. I want to thank you for that.
I am going to go back to you, Dr. Fichtner, real quick. Do
you believe that Social Security now has the data and the
ability to accurately calculate the benefits for those impacted
by the WEP or the GPO?
Mr. FICHTNER. So, again, if we were to go to a proportional
formula, the answer is yes. But if we are going to stick with
the current system, to accurately do that, we are going to need
better data exchanges to avoid having improper payments.
Mr. CAREY. And for the record, just so we know, he also
went on to do other schools, not just U of M.
Mr. FICHTNER. Thank you, sir.
Mr. CAREY. So, with that, I yield back, Mr. Chairman. Thank
you.
Chairman FERGUSON. Next, we will call on the gentleman from
Arizona, Mr. Schweikert.
Mr. SCHWEIKERT. And thank you, Chairman.
Dr. Blahous, I want to work through just a couple
mechanical things and--off of my good friend and I, we talked
past each other on part of our funding.
So, first, I want to touch on one thing. Would you agree
that the data produced by Manhattan Institute, by the Joint
Economic economists, on the cap--just the cap itself, not the
taxing of, you know, unrealized capital gains and those
things--but if you first do the cap of just $400,000 and up,
you are only covering 30-some percent of the shortfall, and if
you do everyone, you might get half the shortfall.
So removing the cap, you know, so the billionaire income--
everyone gets 12.4 percent no matter what the income is, that
does, at very best, get you half?
Mr. BLAHOUS. Yeah, these details are important, because I
think there is a lot of misunderstanding out there about just
how much you can accomplish by busting the cap.
So, if you simply obliterated the cap, taxed all earnings
in America, every penny, that would eliminate about 37 percent
of the permanent annual deficits. So you would have close to
two-thirds of the problem, the permanent problem, still to
solve, right?
Now, some of these proposals to get rid of the cap would do
something else which is much more fundamentally transformative,
is that they would sever the connection between taxable
earnings----
Mr. SCHWEIKERT. Which----
Mr. BLAHOUS [continuing]. And benefits.
Mr. SCHWEIKERT. Doctor, you have to also----
Mr. BLAHOUS. That is a different policy.
Mr. SCHWEIKERT [continuing]. Make sure that, if you do
that, you also don't get any additional benefit.
Mr. BLAHOUS. Right.
Mr. SCHWEIKERT. So your benefit stays capped, but the taxes
for everyone--and you still only get about 37----
Mr. BLAHOUS. Well, no, that gives you----
Mr. SCHWEIKERT. If you do that----
Mr. BLAHOUS. If you sever those, then you solve more of the
problem and----
Mr. SCHWEIKERT. You would get about half.
Mr. BLAHOUS. It would be about half of the permanent
problem.
But it is important to understand that, because it is not
just the tax increase that makes the amount of progress that is
often cited; it is a transformation of how Social Security
works.
And there was an allusion earlier to, you know, the genius
of FDR. Part of the genius of FDR was creating this system
where there was this tie between contributions and benefits so
people don't look at it as welfare. And so the political
dynamics are very different from welfare. And there is a reason
for that. Now, if we took that step of severing that
connection, it is doubtful that the, sort of, privileged
political status of Social Security would remain what it is.
Mr. SCHWEIKERT. Okay.
So let's use most optimistic; there is no cap at all and no
additional benefit. And let's say--let's use Manhattan or one
of those that said you get close to covering half the
shortfall.
The other half of the shortfall is--in a couple of the
bills out there, that would be a 12.4-percent tax on,
functionally, unrealized capital gains? Or----
Mr. BLAHOUS. Right. There is a----
[Crosstalk.]
Mr. SCHWEIKERT [continuing]. Of assets?
Mr. BLAHOUS. Right. There is a bill that would do two
things----
Mr. SCHWEIKERT. Do you understand how broad that would be?
Is that the value of my real estate going up? Is that the value
of my retirement account going up? What falls into that tax to
get to that number?
Mr. BLAHOUS. See, that part I cannot answer. But what I can
answer as a Social Security analyst is, that piece also would
not be credited towards benefits. So, basically, the essence
of----
Mr. SCHWEIKERT. Yeah. No, it is a true--just tax. It is----
Mr. BLAHOUS. Right. And, again, that is very different from
the way Social Security has operated historically.
If you look, historically, at how FDR designed this and how
bipartisan advisory councils agreed this should be funded,
there was great importance placed on the principle that the
program should be funded by contributions by workers. If we
start subsidizing the program with other forms of taxes, that
is a very fundamental change from----
Mr. SCHWEIKERT. It changes the nature--okay.
A couple other mechanical things just to get our head
around.
I think so far this year, Social Security's spend is up
almost 9 percent. If we are looking at the math, that means we
have the exhaustion of the Social Security Trust Fund in 2033.
Is that fair?
Mr. BLAHOUS. Right.
Mr. SCHWEIKERT. We have had testimony in this committee--
and this, I know, concerns Democrats and Republicans--that if
you were to hit trust fund exhaustion, the CBO's number was a
25-percent cut.
And we did the vetting because the--we double-checked. You
know, there was some inflation that--in that 2033-2034. That
would be a $17,400 reduction for a couple. I should have
brought--I do have the charts on this. But it would be doubling
senior poverty at that time.
Mr. BLAHOUS. Right. I mean, I think it is highly unlikely
that such a severe and sudden cut in benefits would be
tolerated by----
Mr. SCHWEIKERT. Oh, I hope--I hope--it is immoral. But----
Mr. BLAHOUS. Right. So----
Mr. SCHWEIKERT [continuing]. Coming to an agreement on the
actual math--because we were trying to figure out how to model
the economic impact of unrealized capital gains having suddenly
a 12.4-percent tax on it----
Mr. BLAHOUS. Right.
Mr. SCHWEIKERT [continuing]. You know, what does that do to
economic stability.
Mr. BLAHOUS. An important thing people need to understand
about that cliff also, that 20-some-odd-percent sudden cut, is
it is not for new claimants; it is for everybody, for people
already receiving benefits.
Historically, lawmakers have only been willing to change
benefits on a prospective basis, not to cut benefits for people
already receiving. And so, if you look at, well, what if we
only wanted to have benefit changes affect new claimants----
Mr. SCHWEIKERT. Oh. I need to apologize. Sorry, I lost
track of the clock.
And sorry, Mr. Chairman.
It is--as we talk about WEP, I am hoping we do this also in
a more organic fashion where we deal with the stresses in the
system and a number of the other reforms that are there. There
is a path here. All of them are hard. And maybe it would be
interesting if some of us tried to do hard things.
And, with that, I yield back.
Mr. LARSON. Can I just ask a question, Mr. Chairman?
You keep on saying the ``trust fund exhaustion'' as though
it is through.
Mr. SCHWEIKERT. That is the actual language from the Social
Security Act----
Mr. LARSON. The point I am trying to make is simply this:
that that trust fund, in the genius of Roosevelt, is not
exhausted. It will be cut, as the doctor said, by 20 percent
across the board----
Mr. SCHWEIKERT. Twenty-five.
Mr. LARSON [continuing]. For everyone because of Congress's
inaction.
Chairman FERGUSON. All right----
Mr. SCHWEIKERT. Okay.
Doctor, isn't the language in the actuary report
``exhaustion''?
Mr. BLAHOUS. Exhaustion----
[Crosstalk.]
Chairman FERGUSON. The gentleman's time has expired. We
have a lot to cover. And it is now time to move to my dear
friend and colleague from New Jersey, Mr. Billy Pascrell.
Mr. Pascrell, you are recognized.
Mr. PASCRELL. It is a wonderful day in the neighborhood.
You know, I would like to start off, Dr. Fichtner--and each
one of the witnesses is well-qualified and was excellent. I
disagree with a lot of them, but doesn't make any difference.
Well, Mr. Fichtner, you said in your testimony that
provisions can hinder people's ability to accurately plan for
retirement. But you don't have to plan for your retirement if
you are asking people to live longer, live longer, live longer,
and then drop dead. What is waiting at the end for the rainbow?
If you ask them to continue--this is more rhetorical.
Mr. FICHTNER. I was ready.
Mr. PASCRELL. If you are waiting longer and longer for
something you have earned, you paid into--it is insurance. We
all agree on that. Thanks to Mr. Larson and some other people,
both sides, they have clarified this is not simply another
giveaway program. People paid into this. They pay a different
proportion of what they make, but they pay into it.
So, I want you to hold onto that thought.
And then we go to Ms. Altman. And thank you for your
testimony today. But you are talking about how you are going
to--you know, we have always asked about how you are going to
pay for this thing. You haven't worried too much about that,
let's be honest. I mean, you look at your so-called plan. We
will get to that. We don't get to it; we said and we defined
how we are going to pay for this.
But you said, we ought to take a look at what millionaires
and billionaires have to pay into the system. And we are trying
to do that in our whole tax system, which--we will never get
there. We never reform the system. It hasn't been reformed in
40 years. Democrats and Republicans have used that term,
``reform,'' in those 40 years, but they never reform the
system. Now you have a two--leverage of tax systems here, one
for this group and the other for the folks that don't make out
so well.
When I was elected, the first question that was asked of me
at the first meeting I ever went to--it was a meeting in Wayne,
New Jersey. Senior citizens. ``What are you going to''--I never
expected the question. ``What are you going to do about Social
Security, Harry?'' My name is Bill.
I promised this--this was 27 years ago, April of 1996--
1995. I promised this: I would never vote to privatize Social
Security. I have kept my promise there. Imagine if we kept our
promise.
Number two, I would not vote for an increase in age for
retirement. I don't think that is the solution. I really don't.
Three, I would never vote to cut the benefits, particularly
when things increase on the shelf. You need to keep up with
that. That is why there should never be a downturn in your
check year to year.
And last, it has got to be paid for. We have to find a way
to do it. We can't juggle the figures. They put people in jail
for that. You know, government is very good at juggling. They
make you think everything is coming up roses. So protect the--
expand.
Nearly 90 years after its creation, we still fight about
Social Security. Plus, even after almost a century, many do not
accept the program. You realize that? Indeed, a group of 80
percent of my colleagues on the other side have called for
raising the retirement age and tying Social Security to life
expectancy. Eighty percent.
What is the most depressing in this whole debacle are the
over 2 million American public servants who paid their dues and
have suffered. Police officers. What? This includes our retired
first responders, firefighters, teachers, have seen a reduction
in Social Security benefits.
Chairman FERGUSON. Dear friend Pascrell, your time has
expired.
Mr. PASCRELL. Really?
Chairman FERGUSON. It really has. We have been thoroughly
informed and entertained, as we always are with you, but I hate
to cut you off, but it is time to move on to the next person.
Mr. PASCRELL. Mr. Chairman, God bless you, but this is not
entertainment. This is about people's lives.
Chairman FERGUSON. It is, sir. Thank you for that.
We will now move to Mr. Estes from Kansas.
Mr. ESTES. Well, thank you, Mr. Chairman. And thank you to
all our witnesses for being here today. I am glad we are
continuing the discussion about WEP and GPO, as I am committed
to make sure that we have a fair solution for all hardworking
taxpayers in Kansas, including our dedicated public servants
who have been adversely impacted by these two provisions.
WEP and GPO were put in place to correct an unfair
advantage for a small number of public servants, but instead,
Congress overcorrected and created an unfair disadvantage for
workers and spouses who dedicated part or all of their careers
to public service.
Even though a small percentage of Kansans are impacted by
these provisions, every instance of WEP and GPO that negatively
impacts a teacher, a police officer, or a public servant is
troubling. Simply because of the profession they chose, they
are bearing the brunt of a policy's negative, unintended
consequences.
But to right this situation, we can't overcorrect again and
land back in the original unfair situation. Simply doing away
with WEP and GPO returns us back to where 96 percent of the
population funding that unfair advantage for 4 percent of the
population. But ultimately, even the 4 percent who would
immediately benefit from a repeal would lose in the long run.
As has been mentioned earlier, as it stands right now, in
the next decade, if no action is taken, Social Security
recipients will start receiving 75 cents on the dollar when the
trust fund, whether we want to call it exhausted or insolvent
or--basically, what it is is the trust fund that has been built
up when the baby boomers were working runs out of money. That
means that 75 cents on every dollar is what all taxpayers,
including those receiving WEP and GPO recipients, receive. Yet
repealing WEP and GPO without providing an alternative reform
would hasten insolvency by a whole year, which would again hurt
all beneficiaries.
At the subcommittee's field hearing in Baton Rouge,
Louisiana last November, we heard from dedicated public
servants affected by WEP and GPO who felt that the Social
Security Administration did not provide them with the tools to
adequately prepare for retirement.
The complexity of WEP and GPO and the lack of clear
communication early in the careers of public servants meant
that there were many Americans who were unprepared for the
lower than expected Social Security payments while they were in
retirement.
As Bernie Piro, a retired firefighter, explained at the
hearing, if you aren't aware of the impact of these policies,
it can undermine your retirement plans when you have little
time to adjust.
Dr. Blahous, absent a change in the underlying policies,
are there ways to improve awareness of these policies so that
workers can better prepare for retirement?
Mr. BLAHOUS. Most definitely. And I would just accentuate
the last problem you were talking about, which is that what we
do with a lot of people is we show them a benefit on their
benefit statements and then somewhere in the fine print it
says, oh, you might not get this amount, and then the amount
they get is substantially less.
We shouldn't be doing that, right? I mean, we have the
ability, since SSA has had access to covered and non-covered
earnings records for a long time, to have a WEP that can be
accurately projected up front the way their nonadjusted benefit
would be, but we most definitely shouldn't be showing them a
benefit that the system is not about to pay them.
So, regardless of what we are doing in terms of the policy
correction, the benefit statement should accurately reflect
what people are going to be paid.
Mr. ESTES. Thank you.
Ms. Greszler and Dr. Fichtner, why are some workers not
covered by Social Security?
Ms. GRESZLER. Mostly because they are working in other
government systems, State and local pensions. It used to be
that Federal workers were also excluded, but they were brought
in. So there are still I believe about 5 million workers who
are in jobs that are not covered by Social Security.
Mr. FICHTNER. And I would add to that, there was an
original constitutional question of whether or not the Federal
Government could mandate a State and local government to
contribute payroll taxes or a premium insurance amount to
Social Security.
And with the benefits and education--I am a big fan of
education. Those who have known me for years know I have been
doing financial literacy for SSA and others. The problem with
the benefit statement we put out today is, even with the
reporting we have, we cannot give an accurate benefit
assumption for those who might be hit by WEP, because it is
based on how many years of nongovernment employment you may end
up having at the end.
You can't project--Social Security can't project, when
someone is 35 with one covered year, will they have 20 more
covered, 15? You don't know until the end. So, unless we do
something with the benefit formula, we are not going to be able
to change the benefit statement.
SSA is doing a better a job now trying to inform people.
Before this hearing was called, a colleague of mine sent me an
email with a note, because he got a note from SSA saying, you
might be covered by WEP. And he was like, why did I get this?
Like, because he spent 7 years working in Japan as a teacher,
and the agency noticed you had foreign employment. But he
didn't know what it meant. So there is still a connection SSA
still needs to do on the education side.
Mr. ESTES. Real quickly, what percent, roughly, of American
workers are currently employed by a job that is not covered?
Mr. FICHTNER. So right now, you have about 5.9 million
Americans out of the 21.9 State and local workers who are not
covered by Social Security. So that comes to about 4.5 percent
of the workforce.
Mr. ESTES. Well, thank you. And I am out of time.
I yield back, Chairman.
Mr. CAREY [presiding]. I now recognize Mr. Feenstra for 5
minutes.
Mr. FEENSTRA. Thank you, Chairman, and thank you, Ranking
Member Larson, for putting this on.
Thank you to our witnesses. I learned a lot about what is
going on. I appreciate you sharing the knowledge and expertise
of WEP and also of GPO.
These were enacted to prevent workers with non-covered
wages from receiving a large benefit rate intended for lower
income workers to replicate dual enrollment.
Dr. Greszler, can you talk about dual enrollment and how
that works compared to what GPO is doing and what the
differences are?
Mr. GRESZLER. Yes. So dual enrollment is for spouses and
survivors and children's benefits. In particular with the
government pension offset, that applies to spouses who have
worked in a job that was not covered by Social Security. And
so, if you were in that non-covered job, for Social Security's
purposes, it looks like you were a stay-at-home spouse. When
Social Security designed this in the 1930s, most married women
were stay-at-home spouses, and so they created that benefit.
But what has happened now is that many people who were not
stay-at-home spouses, who had a full career in a government
job, are also getting a spousal benefit on top of their
government pension.
Mr. FEENSTRA. And I think about it. I mean, so the
implementation, there is an unfair treatment here, right? Is
that a fair statement? I mean, I think about also, you know,
teachers, firefighters, police officers. This is where the
problem comes in. Is that a fair statement?
Mr. GRESZLER. Yes.
Mr. FEENSTRA. Absolutely. And I think you noted, Dr.
Fichtner, that is like 4.5 percent, right? I mean, those are
the people you are talking about, correct?
All right. So, if we start looking at GPO and it is meant
to replicate dual enrollment as a security substitute, I mean,
Dr. Blahous, talk about, what is the intention here? Is this
good or bad? I mean----
Mr. BLAHOUS. Well, it is necessary.
Mr. FEENSTRA. Correct.
Mr. BLAHOUS. And there are--you know, again, we have more
data now that you could do a more accurate calculation.
Kathleen Romig of the Center for Budget and Policy Priorities
has put out a paper where she said, you know, if you wanted to
do an accurate proportional calculation for the GPO similar to
the one that has been proposed for the WEP, she showed how that
would be done.
But the GPO history is actually really interesting
because--and I don't want to take up too much of your time by
going into it, but basically it is an outgrowth of an earlier
day in Social Security when we used to make very different
assumptions about husbands and wives and their roles in the
workforce. And so it used to be that if you were a wife without
employment earnings, it was assumed you were financially
dependent on your husband. But a husband without employment
earnings had to prove in the courts that they were--or they had
to prove to SSA that they were financially dependent on their
wife to get the benefit. And the courts basically said, you
know, that is not fair.
Mr. FEENSTRA. Right.
Mr. BLAHOUS. So then they created the GPO to get rid of
that sex discrimination, basically.
Mr. FEENSTRA. Right. But now we still have the problem.
Mr. BLAHOUS. Now we still have the problem. The original
GPO was a dollar-per-dollar offset, and they reduced it to a
two-thirds offset----
Mr. FEENSTRA. So both of you, Dr. Greszler and Blahous,
what is our solution here? I mean, what is our principal
solution? What can we do?
Ms. GRESZLER. I think for the GPO, you just assume that
that worker had been in Social Security and you calculate what
would your Social Security benefit have been, based on your
earnings levels.
Mr. FEENSTRA. Gotcha.
Ms. GRESZLER. And then if your spousal benefit is greater
than your Social Security benefit, you get it. If not, you
don't, or you have the difference between the two.
Mr. BLAHOUS. That is correct. And that is basically the
proposal that Kathleen Romig has put forward from CBPP.
Mr. FEENSTRA. Yeah, yeah, gotcha. Thank you.
One other question. I am trying to figure out solutions
here. I have got my own solutions in my mind, but we talk about
changes and reforms, and I got about a minute left.
Dr. Blahous, in Social Security in general, what should us
policymakers keep in mind when we are talking about changing
and the principles of change? I mean, what are the sacred cows
that we have got to protect?
Mr. BLAHOUS. I would urge you to think very carefully about
intergenerational effects, because we have a big shortfall and
we have a situation where different generations are treated
really differently by the system. They are either coming out
way ahead or coming out way behind, according to when they were
born.
So, you know, what you definitely should not do is further
increase the gains of the generations that are coming out way
ahead as it is by paying them additional benefits that they did
not themselves pay for, because the other generations who are
already coming out behind would suffer even larger net income
losses. And that would be my big plea.
I think people talk about a lot of things in Social
Security: benefit levels, progressivity, all sorts of things.
The one thing that keeps getting lost in the shuffle that can't
get lost in the shuffle if the system is going to work is the
effect on different generations.
Mr. FEENSTRA. Thanks.
Ms. GRESZLER. If I can just highlight that, because the
arguments are we can't cut benefits, we can't cut benefits.
Well, at what cost?
Mr. FEENSTRA. Correct.
Ms. GRESZLER. And so, depending on whether you use the
Social Security actuaries or the CBO, you need to increase
taxes by the equivalent of $3,800 to $5,300 for the average
household. And our children are already bankrupt with the
equivalent of a second mortgage.
Mr. FEENSTRA. Thank you. Thank you. I yield back.
Mr. CAREY. I now recognize Ms. Sanchez for 5 minutes.
Ms. SANCHEZ. Thank you.
I want to thank the Chairman and the Ranking Member Larson
for this hearing.
I just want to ask really quickly the panels, would
immigration help with the Social Security Trust Fund? Is there
anybody that disagrees that immigration would help with that?
Mr. FICHTNER. So thank you for the question. The answer is
immigration would help, but you need to have smart immigration.
That is the bottom line.
Ms. SANCHEZ. But the question I asked is, would immigration
help? Because everything that I have seen shows that you bring
more workers into the workforce, because our birth rate is low,
you are going to have more money in the Social Security Trust
Fund. Anybody disagree?
Okay. Thank you.
I just want to make a real brief comment on the--we used to
assume that every woman was a stay-at-home spouse and now more
women are in the workforce. As a working mom, I work and I am
also a stay-at-home mom, because I do both jobs. I cram them
into the 24 hours that I have. So maybe we shouldn't readjust
the Social Security benefit for women. I am just saying.
But this hearing was called to look at two very harmful
Social Security rules, the Windfall Elimination Provision and
the Government Pension Offset. And, instead of proposing
solutions, my colleagues across the aisle have proposed cuts to
Social Security benefits time and time again.
The Republican Study Committee's 2025 budget plan cut
Social Security by $1.5 trillion in just the first 10 years.
And that is nearly double the proposed cuts in their prior
budget. The Republican witnesses have long records of calling
for hiking the retirement age up, cutting the COLA, imposing
across-the-board benefit cuts, and privatizing the system.
Cutting benefits is not the fix here. Public employees
deserve to reap the benefits that they have earned. Because
many employees don't even know these provisions will affect
them, it comes as a complete surprise when their retirement
benefits are so low. I am sure that all of my colleagues on
this dais have constituents with these stories, because I hear
them at every single public event I do.
I am going to give one example. Gwendolyn Jones is the
president of AFSCME Chapter 36 in Los Angeles. She served the
Los Angeles Superior Courts for 27 years and retired in 2015.
When she retired, she found that the Windfall Elimination
Provision took away a substantial amount of her monthly Social
Security check.
Ms. Altman, you spoke to the Republican Study Committee
plan, which includes a significant cut to basic benefit levels.
How would the Republican Study Committee's proposed PIA affect
people like Gwendolyn Jones that I just mentioned?
Ms. ALTMAN. If the RSC annual budgets were in effect, your
constituent, Ms. Jones, her benefits would be decimated. And
not just hers, but all of your constituents, all the working
families.
But it is actually worse, because we are talking about the
cuts that are in those budgets, but those budgets would
literally end Social Security as we know it. We have been
talking about Social Security as insurance, but what the
budgets aim for is a basic flat subsistence level benefit for
all. It would just barely keep people out of poverty.
Ms. SANCHEZ. Thank you. I have limited time, so I am going
to try to squeeze in all my questions.
Ms. ALTMAN. Go ahead. Sorry.
Ms. SANCHEZ. More women are working now more than ever, but
due to wealth gaps, because women still earn less than their
male counterparts for the same amount of work, women still have
to rely more heavily on Social Security benefits than men do.
The average widow sees between a 33 and 50 percent reduction in
Social Security benefits after the death of her spouse.
Ms. Altman, you mentioned my bill, the Protecting Our
Widows and Widowers in Retirement Act, as a potential expansion
for those struggling with the loss of a spouse. Would the
Republican witnesses' proposals allow for these same benefits
for widows and widowers?
Ms. ALTMAN. No. And, in fact, the RSC proposes to actually
eliminate those benefits for those earning over $85,000. So you
are right, your proposal will lift people out of poverty. The
other proposals would push people into poverty.
Ms. SANCHEZ. Republican testimony claims that eliminating
the WEP and GPO would cost $183 billion over the next 10 years,
causing Social Security to become insolvent or exhausted
earlier than expected. Ranking Member Larson's bill, the Social
Security 2100 Act, proposes applying FICA to earnings above
$400,000 a year to offset these costs.
I just want to give people a real-life example.
Professional baseball players--I am a big baseball fan and
player--they make millions of dollars in their contracts. In
their first at-bat of the season, they hit the FICA cap, and on
the rest of their earnings, the rest of the games in the
season, they pay zero into Social Security.
Wouldn't applying FICA to some of the wealthiest Americans
help pay for repealing the WEP and GPO, Ms. Altman?
Ms. ALTMAN. Absolutely. And also, as we were saying, it
should not--that would just make it proportional. But Jeff
Bezos has millions of dollars in investment income every year,
and that should be subject as well. And if you do that, you can
not only repeal WEP, GPO, and enact the POWR Act, but many
other reforms as well.
Ms. SANCHEZ. Thank you.
I appreciate all of our witnesses and their testimony, and
I yield back. Thank you, Mr. Chairman.
Mr. CAREY. I want to thank again the witnesses.
Votes have been called on the House floor. We are going to
take a brief recess and resume as soon as votes have concluded.
So, with that, the committee stands in recess.
[Recess.]
Mr. CAREY. The committee will come to order.
I now recognize Congressman Steube for 5 minutes.
Mr. STEUBE. Thank you, Mr. Chairman.
We are here today because we recognize that all
beneficiaries deserve fair treatment. The Windfall Elimination
Provision and the Government Pension Offset were put in place
over 4 years ago with the intention to prevent preferential
treatment for workers with employment exempt from Social
Security.
This policy impacts about 4 percent of Social Security
beneficiaries, but any changes made by Congress to the Social
Security Trust Fund affects 100 percent of Social Security
beneficiaries. Neither the WEP nor the GPO adjusts benefits
based on a worker's actual earnings and, as a result,
frequently over- and under-correct for the problem they were
intended to address.
When the WEP and GPO were put in place in 1983, the Social
Security Administration lacked robust non-covered earnings
data. SSA has since collected decades' worth of non-covered
earning data it can now use to better tailor benefits. Rather
than using an outdated system, Social Security Administration
now has advanced technology and a lot of data to properly
measure earnings.
I will start with Mr. Charles Blahous. Is that how you
pronounce your--okay. In your testimony, you say that the
current WEP and GPO have a lack of understanding by
participants. What are the consequences of this and what steps
can be taken to help beneficiaries better understand?
Mr. BLAHOUS. Well, I would say the most concerning
consequence is that it leaves people unprepared for their
retirement. And this, by its very nature, reduces their income
security in retirement. People go into retirement thinking they
are going to have a certain level of benefit, and it turns out
they don't have it.
Now, in fairness to SSA, they have taken steps in recent
years to improve the materials that go to participants. And
there are more explanations in these materials that point
beneficiaries to understanding the effects of the WEP and GPO
than previously was the case, but I don't think it is nearly
clear enough.
If you look at the basic benefit statement, it shows
benefit estimates that don't take those provisions into
account. And so people will naturally look at those numbers and
think, well, that is going to be my benefit. And then in the
fine print somewhere else in the statement, you know, they
might not catch the fact that, no, this isn't going to be your
benefit. And so, ideally, they would be sent benefit statements
that make a more accurate projection of what their benefits are
likely to be.
Now, no projection is ever going to be perfectly accurate,
because it always requires anticipating future years of
earnings beyond what has been accrued to that point, but we
could do a lot better than we are currently doing.
Mr. STEUBE. In what ways must Congress be mindful of the
zero-sum effect on all Social Security beneficiaries when
addressing specific formulary issues?
Mr. BLAHOUS. Well, that is a great question, because,
again, this is a self-financing system, right? So it's an
income transfer system. It is not a system that just invents
income out of nothing, right? Any income that it pays to one
person it takes from another person, which means that lawmakers
have to think really carefully about any income redistribution
that takes place within the system. If you are going to give
one person an increase, you are giving someone else a decrease
in their net income. And it is important to be mindful of the
effects of that.
Now, Social Security in the main works roughly as policy
designers intend, right? It is designed to be progressive. It
is progressive, on balance. And it is designed to have a
connection between your contributions and your benefits, and it
does that, but there are glitches and imperfections.
Along with the progressive redistribution, there are a lot
of pockets of regressive redistribution. There are a lot of
places where the connection between earnings and benefits isn't
accurate. So those things should be attended to.
Mr. STEUBE. In your opinion, is the SSA capable of
administering an alternative to the WEP, such as a version of a
proportional formula outlined in your testimony?
Mr. BLAHOUS. Yes. I would say yes, they are capable, and,
again, I think it depends on what type of replacement you do.
If you were to fundamentally redesign the underlying benefit
formula in Social Security so that it was a function of annual
earnings, that would be really easy to administer because you
wouldn't need access to non-covered earning records at all. But
Social Security has had access to non-covered earnings records
since 1982, technically since 1978, but they don't consider the
data from 1978 to 1981 to be reliable.
But they should have enough to do it, at least, you know,
to send people--first of all, to calculate the WEP and GPO to
create greater parity between people who are all on Social
Security and divided between Social Security and a non-covered
pension, but also to better inform people more accurately what
their benefits are likely to be.
Mr. STEUBE. Okay. In my 20 seconds left, Mr. Fichtner--Dr.
Fichtner, you explain in your testimony that the WEP is overly
complex and difficult to administer. What about these policies
is difficult to administer?
Mr. FICHTNER. Have you tried talking to the people sitting
behind me? We were doing that during the break. Trying to
explain to my mother that there is going to be a windfall. And
she's like, you get a windfall from Social Security? And the
conversation went down from there.
The nomenclature we use, the language is very complicated,
even terms like the early eligibility age. No one wants to be
late for government benefits. We should call it what it is. It
is the minimum monthly benefit age.
Changing the nomenclature can do a lot for education.
``Windfall elimination provision'' is a horrible term that no
one understands. And then trying to explain the formula with
the bend points and the 90 percent and how much--if I haven't
lost you already, I am sure people have tuned off.
It is a very complicated thing to do, where it is easier to
explain more of a proportional formula that says, you are going
to get a pension for each year you work in covered employment.
That is a much simpler formula.
Mr. STEUBE. Thank you all for being here today.
I yield back.
Mr. CAREY. We are now going to recognize Congressman
Arrington, who has previously been waived onto the committee.
He is recognized for 5 minutes.
Mr. ARRINGTON. I want to wave back at you, Mr. Chairman,
and say thank you.
And I want to, you know, say some things that, I think we
all agree, Republican and Democrat, this is an important safety
net for seniors. And retirement security, peace of mind that it
has given to seniors for all these years, it is critical that
we prioritize addressing this program, make it more cost-
effective, more efficient, and sustainable for those who are
seniors today, near retirement, and for our children.
We hardly talk about our children, actually, in this town.
It is always about what we are doing for us. The fact is our
children are buried under $34 trillion in debt. That $34
trillion is a deferred tax on our children.
And, by the way, we are going to add another $20 trillion
on top of the 34, and we are already at historic highs, like
record. We are not in a world war, but we are over World War II
levels of indebtedness. I am just telling you.
The people that are seniors in my district care a lot about
their children and their grandchildren, and they don't want to
bankrupt this country. And I am not saying Social Security is
bankrupt. I am just saying there is a reality we have to deal
with.
And in the 30-year out, it is $140 trillion. In the 10-year
out, 60 cents on every dollar goes to interest alone. And in 30
years, interest costs on the debt will exceed what we spend on
Social Security.
So we are in a bad way. But surely we can step back and as
Americans who love this country and want to do right and
recognize that we have different views on how to solve it,
surely we can come together and do something that may have some
things in there that we would prefer not to be in the mix to
solve the insolvency that is in this 10-year window so that you
don't have to suffer an automatic cut. That would be disastrous
and ridiculous and irresponsible for us. And to wait till the
11th hour will actually cost taxpayers more, so it is fiscally
irresponsible to just wait until the roof collapses for us to
have to--we know what is going to happen.
John Larson, with all his passion, and I respect it, and he
has put it on paper, I respect that even more--even if I
disagree and in some cases wildly disagree with his way of
solving it, we are going to have to get in a room and we are
going to have to hold hands and leap off the cliff of those who
criticize us for doing anything to reform the program, because
that is cutting it in the minds of some folks, or revenues,
which is raising taxes.
Let me ask the panel a question. It will be interesting for
me. If we passed the debt commission, a bipartisan commission
to have adult leadership, both parties sitting across the table
trying to work this out, like basically almost every American
family could do at the kitchen table, but we can't seem to do
it. We are in this 10-year window, so maybe we can. Maybe we
can rise to this occasion and make generations of Americans
proud.
Raise your hand if you think that the Social Security more
broadly will be addressed, the problems with it, on a partisan
basis. Raise your hand.
You think the Democrats are going to--where were the
Democrats solving it when they had all the juice for the last
few years when they had the White House and the Senate and the
House, both Chambers?
Larson would have done it if you just gave Larson the
authority, but his party didn't do it and neither did our
party. With all due respect, there is no basis for that, no
historical basis. It took Ronald Reagan and Tip O'Neill to work
together to do it, and that is, I assume, what will happen
again.
Let me ask you this: How many of you think that we will
solve Social Security by purely revenue measures?
Okay. We have got one. Okay.
How many people think it will be purely programmatic
reforms? How many think it will be some number of program
reforms and some number of pay-fors with revenue measures?
Raise your hand.
Yeah. I got 30 seconds, so I am way off my topic here.
Firefighters, police, teachers, they work their butts off. They
serve their community. They save lives. They inspire kids like
Ms. Becky Taylor inspired me to do what I am doing today when I
was a sophomore in high school. And they have been
shortchanged, and it is more complicated than that.
But for 40 years, we have allowed some people to not get
what they have earned. I am not talking about people getting
paid too much, because there is an equity issue there, but for
40 years we can't even fix this issue?
And I know I am over my time, and it is just so hard. I
have got a bill. And Kevin Brady and Richie Neal used to have a
bipartisan bill, and now it is separated, and I got Kevin
Brady's part.
Help us work together to have a solemn moment that is
bipartisan so we can address this inequity for the hardest
working people who didn't get into their jobs to make a fortune
but make a difference. Please help us with that, and put down
your weapons, your political weapons, and let's work. Don't you
all think we ought to do that, solve that one issue?
Maybe we can build some momentum, Mr. Carey, Mr. Chairman.
Thanks for the indulgence. Maybe we can build momentum off of
our fixing this for our good public servants.
Mr. CAREY. The chair now recognizes Mr. Fitzpatrick for 5
minutes.
Mr. FITZPATRICK. I want to thank the chair and the ranking
member for allowing me to waive on the committee today to raise
an issue that is very important to me personally and also the
people that I represent back home, of which one in five of my
constituents have reached retirement age and are eligible to
collect Social Security benefits.
And, for too long, the broken Windfall Elimination
Provision and Government Pension Offset structure has unfairly
treated those who served our country and our communities
working in the public sector.
While I commend the purpose of today's hearing to evaluate
the long-term solutions to this problem, I would be remiss if I
did not highlight that an immediate fix has already garnered
316 cosponsors in the House, including myself, H.R. 82, The
Social Security Fairness Act of 2023.
Congress can, Congress must act on this legislation. It is
overwhelmingly bipartisan, which already has the majority of
support of also the Republican Conference. And I believe the
time to mark up this legislation is long overdue.
I have a few questions for Mr. Fichtner, if I may. How
would you compare the impact of H.R. 82's complete repeal of
the WEP and the GPO on Federal retirees, such as our postal
workers, to its impact on retired State and local public sector
employees, like our teachers, our firefighters, and our police
officers?
Mr. FICHTNER. So I haven't done a comparison by each group,
but what I would point out is, if you do a full repeal of WEP
and GPO, then you go back to the problem you had before 1983,
which is treating different people with like--treating like
people differently and giving some people a different benefit
that they haven't been entitled to based on the formula. That
is something Congress can do, but then you are actually putting
in law back again unfair and unequal treatment.
Mr. FITZPATRICK. And, for Civil Service Retirement System
letter carriers with little or no private sector experience or
a widow, widower, or spousal benefit, it could be significant.
And, unfortunately, the GPO typically eliminates most of the
otherwise payable spousal benefits for retirees who receive a
government annuity.
How would a complete repeal of the GPO impact spouses and
widows and widowers to receive their benefits?
Mr. FICHTNER. So, again, for those who are under non-
covered employment, like the CSRS, which we have now
transferred to FERS for most of us who are here, including
myself, they would get the full repeal. They would get the
benefit from the spouse from Social Security as well as the
pension. So they would be getting an additional pension amount
that they would otherwise not be afforded to under the current
WEP and GPO system.
Mr. FITZPATRICK. And shifting lastly here, remaining with
you, sir, millions of educators, millions of school staff must
take summer and part-time jobs to prepare for their future
retirement. Can you speak to how such non-covered earnings may
work in favor or against these public servants under the
current flawed WEP structure?
Mr. FICHTNER. The current system would allow for some
people if they--you could game the system if you wanted to work
sometimes in covered employment in the summer, but for some
people they actually need the income. And so what they are
trying to do is, because of the education, the complexity of
the WEP, for example, they don't understand they are going to
have an offset, and so they are not able to properly plan for
retirement. And that goes to the very importance of the
education issue that Dr. Blahous also mentioned as well.
Mr. FITZPATRICK. Thank you.
Mr. Chairman, Mr. Ranking Member, H.R. 82, again, it has
316 cosponsors. I hope we get to mark that bill up here in
committee.
And I yield back. Thank you.
Mr. CAREY. Well, I want to thank all the witnesses for
appearing here today. I want to thank the ranking member.
Does the ranking member want to make a closing statement?
Mr. LARSON. Thank you, Mr. Chairman. And I want to thank
the members who came, and I also want to thank the panelists
for being here.
Mr. Chairman, only have this to say: We need to have more
of these. We need to have hearings, and not behind closed
doors. They need to be open to the public and the debate needs
to be robust. You learn something at every one of these
hearings, and I think that is what a democracy is all about.
And, if we are going to move forward, as my good friend Mr.
Arrington says, you know, I don't think we have to jump off any
cliff. I just think we have to do the right thing on behalf of
the American people. And they demand it. And every day we wait
and delay, it only gets more difficult and more costly.
But thank you, Mr. Chairman. And I thank the committee.
Mr. CAREY. Well, thank you.
I want to thank the ranking member. I do want to also thank
all of our witnesses for making the time today.
Please be advised that all members have 2 weeks in which to
submit written questions to be answered later in writing from
all of you. Those questions and your answers will be made part
of the formal hearing record.
So, with that, the subcommittee now stands adjourned. Thank
you.
[Whereupon, at 5:24 p.m., the subcommittee was adjourned.]
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