[Senate Hearing 118-84]
[From the U.S. Government Publishing Office]


                                                         S. Hrg. 118-84

                  PROTECTING SOCIAL SECURITY FOR ALL:
                         MAKING THE WEALTHY PAY
                            THEIR FAIR SHARE

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

                                HEARING

                               BEFORE THE

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION
                               __________

                             July 12, 2023
                               __________

           Printed for the use of the Committee on the Budget
           
           
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                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
53-231 PDF               WASHINGTON : 2024                               
                            
                            
                            
                        COMMITTEE ON THE BUDGET

               SHELDON WHITEHOUSE, Rhode Island, Chairman
PATTY MURRAY, Washington             CHARLES E. GRASSLEY, Iowa
RON WYDEN, Oregon                    MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan            LINDSEY O. GRAHAM, South Carolina
BERNARD SANDERS, Vermont             RON JOHNSON, Wisconsin
MARK R. WARNER, Virginia             MITT ROMNEY, Utah
JEFF MERKLEY, Oregon                 ROGER MARSHALL, Kansas
TIM KAINE, Virginia                  MIKE BRAUN, Indiana
CHRIS VAN HOLLEN, Maryland           JOHN KENNEDY, Louisiana
BEN RAY LUJAN, New Mexico            RICK SCOTT, Florida
ALEX PADILLA, California             MIKE LEE, Utah

                   Dan Dudis, Majority Staff Director
        Kolan Davis, Republican Staff Director and Chief Counsel
                   Mallory B. Nersesian, Chief Clerk 
                  Alexander C. Scioscia, Hearing Clerk

                            C O N T E N T S

                              ----------                              

                        WEDNESDAY, JULY 12, 2023
                OPENING STATEMENTS BY COMMITTEE MEMBERS

                                                                   Page
Senator Sheldon Whitehouse, Chairman.............................     2
    Prepared Statement...........................................    37
Senator Charles E. Grassley, Ranking Member......................     4
    Prepared Statement...........................................    40

                    STATEMENTS BY COMMITTEE MEMBERS

Senator Ron Wyden................................................     1
Senator Patty Murray.............................................    18
Senator Ron Johnson..............................................    20
Senator Jeff Merkley.............................................    22
Senator Roger Marshall...........................................    24
Senator Alex Padilla.............................................    26
Senator Mike Braun...............................................    28
Senator Chris Van Hollen.........................................    30
Senator Rick Scott...............................................    31
Senator Ben Ray Lujan............................................    33

                               WITNESSES

The Honorable Phillip Swagel, Ph.D., Director, Congressional 
  Budget Office..................................................     9
    Prepared Statement...........................................    43
Mr. Stephen C. Goss, Chief Actuary, Social Security 
  Administration.................................................     7
    Prepared Statement...........................................    49
Ms. Kathleen Romig, Director of Social Security and Disability 
  Policy, Center on Budget and Policy Priorities.................    10
    Prepared Statement...........................................    61
Ms. Amy Hanauer, Executive Director, Institute on Taxation and 
  Economic Policy................................................    11
    Prepared Statement...........................................    68
Dr. Andrew G. Biggs, Senior Fellow, American Enterprise Institute    13
    Prepared Statement...........................................    79

                                APPENDIX

Responses to post-hearing questions for the Record
    Hon. Swagel..................................................    93
    Mr. Goss.....................................................    99
    Ms. Romig....................................................   111
    Dr. Biggs....................................................   113
Questions as submitted to the Record for Hon. Swagel.............   115
Documents submitted to the Record by Chairman Sheldon Whitehouse.   118
Document submitted to the Record by Senator Ron Wyden............   141
Statement submitted to the Record by the Alliance for Retired 
  Americans......................................................   147
Statement submitted to the Record by the National Down Syndrome 
  Congress.......................................................   151

 
 PROTECTING SOCIAL SECURITY FOR ALL: MAKING THE WEALTHY PAY THEIR FAIR 
                                 SHARE

                              ----------                              


                        WEDNESDAY, JULY 12, 2023

                                           Committee on the Budget,
                                                       U.S. Senate,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:02 
a.m., in the Dirksen Senate Office Building, Hon. Sheldon 
Whitehouse, Chairman of the Committee, presiding.
    Present: Senators Whitehouse, Murray, Wyden, Merkley, 
Kaine, Van Hollen, Lujan, Padilla, Grassley, Johnson, Marshall, 
Braun, and R. Scott.
    Also present: Democratic staff: Dan Dudis, Majority Staff 
Director; Dan Ruboss, Senior Tax and Economic Advisor and 
Member Outreach Director; Sion Bell, Tax Policy Advisor.
    Republican staff: Chris Conlin, Deputy Staff Director; 
Krisann Pearce, General Counsel; Erich Hartman, Director of 
Budget Policy & Review; Nic Pottebaum, Professional Staff 
Member.
    Witnesses:
    The Honorable Phillip Swagel, Ph.D., Director, 
Congressional Budget Office
    Mr. Stephen C. Goss, Chief Actuary, Social Security 
Administration
    Ms. Kathleen Romig, Director of Social and Disability 
Policy, Center on Budget and Policy Priorities
    Ms. Amy Hanauer, Executive Director, Institute on Taxation 
and Economic Policy
    Dr. Andrew G. Biggs, Ph.D., Senior Fellow American, 
Enterprise Institute
    Chairman Whitehouse. Good morning everyone. Welcome to this 
session of the Senate Budget Committee. We will proceed with 
opening statements by myself and the Ranking Member, and then 
hear from our really terrific array of witnesses here, but I 
have offered our distinguished Chairman of the Finance 
Committee, who has an enormous role in all of this, the 
opportunity to give a short opening statement before I proceed, 
and Senator Grassley proceeds, so Senator Wyden please make 
your statement.

               OPENING STATEMENT OF SENATOR WYDEN

    Senator Wyden. Mr. Chairman, I want to thank you and 
Senator Grassley for this courtesy, and I'm going to be very 
brief. Consistently our colleagues on the other side of the 
aisle are writing tax legislation that gives billionaires a 
free pass. You don't have to take my word for these billionaire 
opportunities because they get outlined on the front pages of 
the Wall Street Journal.
    For example, Republicans consistently offer proposals that 
they state will protect Americans with under $400,000.00 in 
income from audits and bureaucratic hoops. We Democrats 
strongly agree--strongly agree, that those with incomes of less 
than $400,000.00 shouldn't face those burdens.
    What Republicans don't tell the billionaires, that as I say 
is again, on the front page of the Wall Street Journal, is that 
billionaires often don't report income close to $400,000.00 
because they live off their borrowings. So this can exempt them 
from bureaucratic hoops like audits, can exempt them from taxes 
for years on end, and they've got a number of finance members, 
all of whom I like very much.
    Unfortunately, Republican response has been who cares? Well 
I'll tell you, and I'll close with this, and I thank my 
colleagues all for their courtesy. The people who care are 
firefighters and nurses and teachers because they pay taxes 
with every single paycheck. And Social Security recipients, you 
know, care, which is why what Senator Whitehouse and Senator 
Grassley are doing is so important. So we are going to keep 
fighting for a billionaire income tax.
    We're going to do it in a way that ensures that the 
billionaires can continue to be very successful, have wonderful 
lives. We all support that. Every one of us supports that, but 
we also believe that there ought to be some fairness. And I 
thank you for your courtesy, Senator Whitehouse, to all of my 
colleagues for letting me do this.
    We've got lots of finance members, and I'm looking forward 
to having a real debate with my colleagues on the point that I 
made. Thank you.

          OPENING STATEMENT OF CHAIRMAN WHITEHOUSE \1\
---------------------------------------------------------------------------

    \1\ Prepared statement of Chairman Whitehouse appears in the 
appendix on page 37.
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    Chairman Whitehouse. Thank you Chairman Wyden, and thank 
you Ranking Member Grassley, for affording Chairman Wyden that 
courtesy. Since the start of this Congress, my distinguished 
Ranking Member, and many of the Republican members of this 
Committee have insisted we should focus only on rising debt and 
deficits.
    Because of what they portend for debt and deficits, I have 
looked at the enormous, well-documented costs and economic 
risks associated with climate change. These risks to our 
economy are deadly serious. But we have also held hearings on 
common sense proposals to reduce debt and deficit with raised 
revenue from large corporations and wealthy individuals who too 
often skate in our rigged system.
    Today I welcome a conversation with Republican colleagues 
about how to protect Social Security, which according to the 
Congressional Budget Office (CBO), along with Medicare, will 
make up more than half of spending growth over the next decade.
    With Social Security and Medicare accounting for so much 
future spending growth, you cannot have a serious conversation 
about our nation's fiscal situation if you only focus on non-
defense, discretionary spending, which represents less than 15 
percent of total federal spending.
    Without new revenue, Social Security will only cover 80 
percent of its projected benefits by 2035, that's only 12 years 
away. This hearing will therefore examine how to close that 
revenue gap to preserve the promise of Social Security for our 
kids and grandkids, working adults, and current retirees, who 
will still be alive in 2035.
    Our promise to them is one we must not break. Social 
Security is the bedrock of retirement security, and the 
nation's most effective anti-poverty program. It's a lifeline 
for millions of seniors, their children, and people with 
disabilities. In February of this year that lifeline reached 20 
percent of the entire U.S. population.
    Almost every senior in this country will receive payments 
from Social Security, benefits that they have earned, that let 
them retire in dignity. One of my constituents, Robert of 
Pawtucket, said I rely on my Social Security as my only source 
of income. I find it impossible to continue to live 
independently if Social Security were changed, reduced or 
eliminated.
    Social Security benefits were a contract between the 
federal government and its citizens. And to Noah, of North 
Providence, said I would be very sad and depressed if there 
were any cuts to Social Security. I just get by as it is. And 
Laurel, also of Pawtucket, said that without Social Security 
she would have to go back to work, and probably have to work 
until I die.
    For years, Republicans proposed slashing Social Security 
benefits, letting Wall Street gamble with seniors' retirement, 
or even sunsetting Social Security altogether. Then, at the 
State of the Union, President Biden received a bipartisan 
standing ovation from Republicans and Democrats alike, when he 
proclaimed that cutting Social Security and Medicare was off 
the table.
    As he said that night, we got unanimity. So, this hearing 
proceeds under the premise that Republicans wants to extend 
Social Security solvency, and will stand by their commitment 
not to cut benefits. That of course leaves only one option, 
raising revenue.
    Fortunately, there are win/win common sense solutions that 
would both extend Social Security solvency indefinitely, 
without benefit cuts, while also making our rigged tax system 
fairer.
    Right now the cap on Social Security contributions means a 
tech exec making a million dollars effectively stops paying 
into the program at the end of February, while a school teacher 
making far less, contributes their share through every single 
paycheck all year. That's not fair, and my Medicare and Social 
Security Fair Share Act would fix that by requiring 
contributions to Social Security on wages above $400,000.00.
    People living off income from their wealth make no Social 
Security contributions. That's not fair either, and my bill 
would also fix that. Those making more than $400,000.00 in 
investment income would contribute just like those who are 
earning wages. And right now, some wealthy owners have pass-
through businesses like hedge funds and private equity firms, 
avoid paying Medicare taxes entirely on much of their income.
    My bill would close this loophole. These reforms raise 
enough revenue to make Social Security solvent indefinitely. 
According to a new estimate from the Social Security actuary, 
Mr. Steve Goss, who is our lead witness here today. Further, 
that legislation would extend Medicare solvency by 20 years.
    We can protect Social Security for all without cutting 
benefits, and we get to end unfair tax dodges, that let those 
at the top play by a different set of rules than everyone else.
    Now we could do even better, and actually strengthen 
benefits, and I'm an original cosponsor of Senator Sanders' and 
Warren's Social Security Expansion Act, which would expand 
benefits by $2,400.00 each year, while fully funding the 
program indefinitely.
    I welcome the bipartisan commitment not to cut Social 
Security, but it's not rock solid. MAGA Speaker McCarthy wanted 
Social Security cuts during debt ceiling negotiations, and has 
pledged to explore them. The House Republican Study Committee 
released a plan to cut Social Security by 718 billion dollars 
over 10 years.
    The plan would also raise the retirement age to 69, which 
would effectively cut benefits by 13 percent every year, and 
especially harm low-income workers. Raise revenue or cut 
benefits. These are the only two options. If Republicans stand 
by their commitment not to cut benefits, they must safeguard 
Social Security solvency by raising revenue.
    There is no other way to honor our promise to older 
Americans to retire with dignity. Over to you, Senator 
Grassley.

           OPENING STATEMENT OF SENATOR GRASSLEY \2\
---------------------------------------------------------------------------

    \2\ Prepared statement of Senator Grassley appears in the appendix 
on page 40.
---------------------------------------------------------------------------
    Senator Grassley. Well, before I start my statement, I was 
listening to Senator Wyden, and I don't ever pick a fight with 
Senator Wyden because he and I work together on so many pieces 
of legislation, but I keep thinking about both what you said 
about taxing billionaires, and what he was talking about. It 
keeps reminding me of something that Russell Long said many 
times. His last six years in the United States Senate, was my 
first six years of the United States Senate.
    And he was a predecessor of Chairman Wyden. I think 16 or 
so years Chairman, of the Finance Committee. And I remember him 
saying so many times about the tax policy you ought to have. He 
kind of likened it to some bird or fowl. He said you need to go 
where you can get the most feathers with the least squawk.
    That's what his tax policy was, and it hasn't changed a lot 
in the last 50 years either. So, and I guess starting out my 
statement I can say praise the Lord, we're finally talking 
about something about money and things the Budget Committee 
ought to be working on. Thank you, Mr. Chairman, for holding 
today's hearing.
    Social Security solvency is exactly the kind of subject the 
Budget Committee ought to be reviewing. I hope we use today as 
an opportunity for thoughtful and constructive dialogue, 
because when it comes to Social Security, our constituents 
deserve more than partisan scare mongering. I'm glad that you 
agreed to invite Director of the Congressional Budget Office, 
Dr. Swagel, to testify. It's the first time a CBO director has 
testified before the Committee that's got the proper name, the 
Budget Committee on our nation's long term fiscal challenges, 
since way back September 2020.
    Social Security is part of the social fabric of America, 
and every Republican agrees with that as well. Social Security, 
we all know is in trouble, but when you have candidates for 
President on the Republican side, and you have a Democratic 
President in office today say we're not going to touch Social 
Security, how do you get anything done?
    You know, it's not Reagan, Tip O'Neill approach to things 
where in 1983 this program was in trouble, and they said we got 
to get together. We got to save it. And they did. And maybe 
they thought they were doing something for ten or 20 years, but 
it's worked out now for 50 years before you get cuts to Social 
Security, when it's only going to be about 75 or 76 percent of 
what people receive today.
    So, we don't argue about maintaining Social Security, and 
we resent anybody saying we want to do away with Social 
Security when you want to save it for the next 75 years. We 
have both a non partisan Congressional Budget Office, and the 
Biden administration's own Social Security trustees saying in 
about ten years the program will be able to pay only 75 cents 
on the dollar.
    Doing nothing means cuts for everyone. Congress and the 
President consequently need to act. The longer we wait, the 
tougher it will be to fix the problem. Back in 1983 as I just 
said, we had two outstanding people, one a Republican, one a 
Democrat, struck a deal to save Social Security.
    And that was with a combination of tax increases and 
benefit changes. While I hope we won't wait until the last 
minute, the only way to reach a deal on Social Security is to 
follow the Reagan-O'Neill model. That means Congress and the 
President working in a bipartisan fashion, and keeping a range 
of options on the table.
    In fact, when I get asked by Iowans what are you going to 
do about Social Security? I don't want to talk about the 
substantive issues because unless you overcome the process 
issue dealing with Social Security that we're going to get both 
the President and the Congress, and within the Congress the 
Democrats and Republicans sit down at the same table, nothing 
is going to get down.
    And then when you sit down at that table everything is on 
the table. Unfortunately, President Biden has refused to 
provide any leadership on this issue. His budget includes four 
and 7/10ths trillion in tax hikes, but not a single proposal to 
extend the solvency of Social Security trust fund.
    While some Congressional Democrats have put forward their 
own proposals, these are tax heavy messaging bills, and not 
real solutions. These proposals would push the marginal tax 
rate above 50 percent, and many would break the President's 
promise not to raise taxes on anyone making less than 
$400,000.00.
    And look at the unrealistic aspect of raising marginal tax 
rates. In World War II, and for a few years afterwards, it was 
93 percent. But we didn't have anybody paying 93 percent of 
their income on taxes because they found ways to avoid.
    In other words, there's enough people in this country that 
are smart enough to know that I'm not going to work my lifetime 
and give all the money to the government. They're going to 
either choose leisure, or they're going to have rewarding 
productivity.
    The truth is that taxes on the rich alone won't save Social 
Security for our children and grandchildren. If Democrats have 
a plan that you believe will permanently fix Social Security 
solely by taxing the rich, send it to CBO. They'll prioritize 
requests from the Chairman of the Committee. However, you're 
going to be disappointed on the non-partisan answer you get 
back.
    One final point, since the program's inception Social 
Security has been financed primarily by dedicated payroll taxes 
paid by workers and their employers. That's because President 
Roosevelt wanted the program to have its own dedicated funding 
source, and not be a welfare program, and resemble a private 
pension plan where benefits you receive reflect the 
contributions you would pay in.
    These twin principles of self-financing and earned benefits 
have been an integral part of Social Security for the last 88 
years. But now Democrat proposals would break that tradition by 
introducing new revenue sources with no links whatsoever to 
benefits, just like income taxes or a carbon tax.
    I'm not convinced we should abandon long-standing Social 
Security principles that have served well for 88 years, but if 
we do decide to look at new revenue sources, new taxes on 
family farms and small businesses aren't the answer, a better 
option would be to instead repeal the Manchin-Schumer 
reconciliation law's, expensive and regressive new tax 
subsidies, and credit the savings to the Social Security trust 
fund. I look forward to hearing from our witnesses.
    Chairman Whitehouse. Thank you, Senator Grassley. Our first 
witness today is Mr. Steve Goss, the Chief Actuary of the 
Social Security Administration, who with his team, is 
responsible for evaluating the Social Security trust fund's 
solvency and the solvency effects of Social Security proposals.
    Mr. Goss has worked in the Social Security Administration 
for over 30 years, and has served as Chief Actuary since 2001. 
After him, we will hear from the Honorable Dr. Phillip Swagel, 
who is Director of the Congressional Budget Office, where he 
served as Director since his appointment in 2019.
    Prior to that, Swagel was a member of the Council of 
Economic Advisors during the Bush Administration, and served as 
Assistant Secretary of the Treasury for Economic Policy from 
'06 to '09.
    Ms. Kathleen Romig is the Director of Social Security and 
Disability Policy at the Center for Budget and Policy 
Priorities. Her work focuses on the need to expand Social 
Security benefits, and the importance of the program in poverty 
alleviation. Romig previously served at the Social Security 
Administration, and on the Social Security Advisory Board.
    Ms. Amy Hanauer is Executive Director at the Institute on 
Taxation and Economic Policy, and Executive Director at 
Citizens for Tax Justice. She is also Board Chair of the 
American Prospect Magazine. Previously, she founded Policy 
Matters Ohio, which provided research that helped drive Ohio's 
increase to the minimum wage, and establish it's state earned 
income tax credit.
    Last, Dr. Andrew Biggs is a Fellow at the American 
Enterprise Institute, where he studies Social Security, state 
and local government pensions, and public sector pay and 
benefits. Previously he was Principal Deputy Commissioner of 
the Social Security Administration where he oversaw the 
agency's policy research efforts.
    He also served as an Associate Director of the White House 
National Economic Council, where he worked on Social Security 
reform. And in 2022 he was nominated by President Biden to 
serve on the Social Security Advisory Board. I welcome all the 
witnesses, and invite Mr. Goss to begin with his statement.

 STATEMENT OF STEPHEN C. GOSS, CHIEF ACTUARY, SOCIAL SECURITY 
                       ADMINISTRATION \3\
---------------------------------------------------------------------------

    \3\ Prepared statement of Mr. Goss appears in the appendix on page 
49.
---------------------------------------------------------------------------
    Mr. Goss. Chairman Whitehouse, Ranking Member Grassley and 
members of the Committee, thank you very much for the 
invitation to come and talk to you today about Social Security 
past, present and future. We are now within ten years of 
potential trust fund reserve depletion, which in the absence of 
legislative action, would make it impossible to continue to pay 
in full benefits as they are scheduled in the law.
    More on this later. Under the intermediate assumptions of 
the 2023 Trustee's Report, Old-Age and Survivors Insurance 
Trust Fund reserves are projected to become depleted in 2033, 
so that continuing income would be sufficient to pay only 77 
percent of scheduled benefits at that time.
    Even if we combine this fund with the Disability Insurance 
Fund, which is better financed, the combined fund would 
depleted in 2034, with only 80 percent of scheduled benefits 
then payable. This current situation should come as no 
surprise, as the Trustees have been projecting combined fund 
reserve depletion between the years 2033 and 2035 ever since 
2012, and very close to that prior.
    We have been here before. In 1982, the Old-Age and 
Survivors Insurance Trust Fund faced an immediate crisis. The 
trust fund's reserves were depleted, requiring temporary 
borrowing that was provided by law from the Disability 
Insurance Fund and the Medicare Hospital Insurance Fund to 
continue the payment of benefits.
    In 1983, the Social Security Amendments of 1983 quickly 
followed, making changes needed to address the immediate 
shortfalls and to begin addressing the impending shift in the 
age distribution of the U.S. population that was already clear 
to all, based on the drop in the birth rate that occurred after 
1965.
    By the year 2000 we had 20 people over 65 for every 100 
people age 20 to 64 working ages in our population. By 2040, we 
project we will have close to 40 people over 65 for every 100 
people ages 20 to 64, working ages, in the population. While 
the 1983 amendments were a good start, it was well understood 
at the time that they were not a permanent solution to Social 
Security's long-term projected shortfalls.
    The payroll tax rate was increased in that legislation, to 
create excess income, while the large baby boomer generation 
would be still working. In 1983 we knew this generation, those 
born in 1946 through 1965, would begin retiring in 2008 and 
would gradually be replaced at working ages by subsequent lower 
birth rate generations.
    Excess annual income from that period prior to 2008 was 
anticipated through 2020, that would accumulate to cover 
shortfalls through the mid 2050s, based on what we were 
estimating for the 1983 amendments. It was known that further 
action would be needed by that time. So why are we now facing a 
need for action to avert trust fund reserve depletion in the 
mid 2030s, 20 years sooner than expected back in 1983?
    In the 1983 trustee's report we assumed an increase in 
average real earnings of about 24 percent between 1983 and 2000 
over that 17 year period, and that the increase would be 
similar for workers at all earnings levels. Overall, average 
real earnings actually increased by 28 percent in that period, 
even more than expected, increasing the taxable maximum by that 
same amount.
    However, the real increase for those over the taxable 
maximum, the top 6 percent of workers, was 62 percent over that 
period. While it was only a 17 percent increase for the 94 
percent of workers who were having earnings below the taxable 
maximum, a massive shift in the earnings distribution.
    As a result the share of covered earnings that fell below 
our taxable maximum, and therefore subject to payroll tax, 
dropped from 90 percent in 1983 to 82 and \1/2\ percent in 
2000. Other than temporary effects from recessions since, this 
taxable ratio has remained at about the same level since 2000, 
and we expect it to remain there in the future.
    The other major unexpected change since 1983 was the 
performance of the economy, and particularly the deep recession 
of 2007 to 2009. In that period average real earnings grew by 
only 0.8 percent per year on average as opposed to the 1.4 
percent that had been expected.
    The chart on page 3 of my testimony illustrates the impact 
of these two major unanticipated events that have occurred 
since 1983. The drop in the share of earnings subject to the 
payroll tax increased the program cost as a percentage of 
taxable payroll, to about the level now projected in the 2023 
trustee's report, so it's the primary driver.
    The recession of 2007 to 2009 with the gradual recovery 
that followed also increased cost in the period 2007 through 
2020. Thus, the challenge before us is to, one, complete the 
work started in the 1983 amendments, addressing the effect of 
the changing age distribution of U.S. population. And two, make 
further changes needed to address the redistribution of 
earnings between 1983 and 2000.
    In order to address these effects, we need changes to 
either reduce scheduled benefits by about one quarter, or to 
increase scheduled income for the program by about one-third, 
or some combination of these two. The ultimate cost of the 
program at the end of this century is projected to be about 6 
percent of GDP. Currently scheduled revenue will amount to only 
about 4.5 percent.
    I very much look forward to any questions and discussion of 
Chairman Whitehouse's recently scored bill, and in all other 
aspects. Thank you very, very much.
    Chairman Whitehouse. Thank you very much for being here Mr. 
Goss. We're appreciative. We're grateful to you. Dr. Swagel, 
please proceed with your testimony.

  STATEMENT OF THE HONORABLE PHILLIP SWAGEL, PH.D., DIRECTOR, 
                CONGRESSIONAL BUDGET OFFICE \4\
---------------------------------------------------------------------------

    \4\ Prepared statement of Hon. Swagel appears in the appendix on 
page 43.
---------------------------------------------------------------------------
    Dr. Swagel. Thank you. Thank you, Chairman Whitehouse, 
Ranking Member Grassley, and members of the Committee for 
inviting me to testify about the Social Security program, and 
it's a pleasure to participate with the distinguished experts 
on this panel.
    As you set out, the Social Security system faces a 
significant financial challenge as the resources available to 
the system under current law are not sufficient to cover 
scheduled benefits within the next decade. In our projections, 
the Old-Age and Survivors Insurance Trust Fund is exhausted in 
2032, and the Disability Insurance Trust Fund is exhausted in 
2052.
    If the two trust funds were combined in our projections, 
they would be exhausted in 2033. Now after the trust funds are 
exhausted, we project that the resources available to pay 
benefits would be 25 percent less than the amount of scheduled 
benefits.
    Now about 79 million people, which is about one-fifth of 
the population, will receive Social Security benefits in 2033. 
If all benefits were reduced by the same percentage, lower 
income households would reduce their spending by more, and 
increase the amount by which they work by more in percentage 
terms, than households with lifetime incomes.
    Legislative action would be needed to avoid this scenario. 
The imbalance between the systems revenues and scheduled 
benefit payments extends beyond 2033, and it grows over time. 
We projected the actuarial deficit over the next 75 years would 
equal 1.7 percent of GDP, or 5.1 percent of taxable payroll.
    So that is if scheduled benefits could be paid through 2097 
if payroll taxes were increased from the current 12.4 percent 
to 17.5 percent. That's a relative rise in the tax rate of 41 
percent. Now alternatively, a reduction in scheduled benefits 
of 27 percent would permit full payment of those smaller 
benefits through 2097.
    And of course, a combination of changes to taxes and 
benefits could also suffice, and policymakers can have 
different changes apply to people of different incomes, and 
people of different ages. Now additional changes would be 
needed though to insure solvency beyond 2097.
    The aging population is a key factor affecting the finances 
of Social Security. In our projections the number of people age 
65 or older, who are less likely to work and pay payroll taxes, 
and who are generally eligible for Social Security benefits, 
that share grows faster than the number of people age 25 to 54, 
who are more likely to work and to pay payroll taxes.
    The population growth is determined by births, deaths, and 
net immigration. Fertility in our projections remains lower 
than replacement. We project that life expectancy continues to 
increase, yet even with what's happened with COVID, and with 
overdoses and other things affecting younger adults.
    Immigration becomes an increasingly important part of 
overall population growth. Now all of these demographic changes 
affect the financial status of Social Security. Let me say a 
feature of CBO's work on Social Security is that the 
demographic and economic projections we use in our Social 
Security analysis, are the same as we use in our budgetary 
analysis, so everything is consistent between what we do in 
Social Security, and what we do for other purposes.
    In closing, let me note that any projection over a horizon 
of seven decades or more is uncertain, but it's clear that 
action is needed to make Social Security financially 
sustainable. Thank you very much, and I'll be happy to answer 
questions.
    Chairman Whitehouse. Thank you very much Dr. Swagel, and 
Ms. Romig, if you would please proceed with your statement. 
Thank you.

 STATEMENT OF KATHLEEN ROMIG, DIRECTOR OF SOCIAL SECURITY AND 
  DISABILITY POLICY CENTER ON BUDGET AND POLICY PRIORITIES \5\
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    \5\ Prepared statement of Ms. Romig appears in the appendix on page 
61.
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    Ms. Romig. Good morning, Chairman Whitehouse and Ranking 
Member Grassley, and members of the Committee. Thanks so much 
for having me. Social Security, the nation's most effective, 
poverty reduction and social insurance program faces a funding 
gap in about a decade, as we've heard from the previous 
witnesses.
    Policymakers must fill the gap in a way that keeps the 
program's promises, and does more to protect people with low 
incomes. Social Security is critical for millions of seniors, 
and people with disabilities because it is the largest source 
of income for most retirees.
    For four in ten, Social Security provides at least half of 
income, and for one in seven it provides at least 90 percent. 
Benefits are much more modest than many people realize. The 
average retirement benefit is about $1,800.00 per month, or 
$22,000.00 a year.
    Social Security lifts more than 22 million people out of 
poverty, including one million children. Without Social 
Security 38 percent of older adults would be in poverty, all 
else equal. With Social Security, only 10 percent are, and we 
have a chart showing that I think.
    Social Security also provides important life and disability 
insurance protection. One in five beneficiaries receive either 
disability benefits, or are young survivors of workers who died 
prematurely. Social Security is especially important for 
seniors of color, who are more likely than white seniors to 
face financial security--sorry, financial insecurity in 
retirement, due to persistent economic barriers.
    We must preserve Social Security for future generations by 
addressing its real, but manageable shortfall. As the Chairman 
noted, there are really only two primary ways to close the gap, 
cutting Social Security benefits while increasing contributions 
to its trust funds.
    Senator Whitehouse's Medicare and Social Security Fair 
Share Act, shows that it is possible to shore up Social 
Security without benefit cuts. Cutting Social Security would 
hurt millions, and it could even force many beneficiaries into 
poverty because most retirees have modest incomes, cuts would 
harm the middle class too.
    About one in four older households lives on less than 
$20,000.00 a year, and about half live on less than $50,000.00. 
Any proposal to raise Social Security's retirement age would 
mean benefit cuts for all new retirees, and they would impact 
lower and middle income beneficiaries most. Instead of harmful 
cuts, policymakers should increase Social Security's tax 
revenues, especially from those who can afford to contribute 
more.
    Since policymakers last addressed Social Security financing 
in 1983, inequality in the U.S. has skyrocketed. In longevity, 
in earnings, and especially in wealth. Higher earners now enjoy 
significantly longer retirements, while longevity for the 
bottom half has stagnated, as shown in my second chart.
    Or even in some cases, has reversed. Longevity gains among 
high earners do not justify raising the retirement age, and 
cutting benefits for all. Over the last 40 years as Steve Goss 
noted, wages have grown far more rapidly among the high earners 
than middle and lower earners.
    This inequality should be addressed by expanding Social 
Security's payroll tax base. While the vast majority of people 
get most of their income from their paychecks, a large and 
increasing share of income for the wealthiest comes from non-
wage income, like investments, which enjoy many tax advantages.
    Policymakers should ensure that wealthy people pay a fair 
amount of taxes each year, and some of that revenue could be 
used to shore up Social Security. When policymakers update 
Social Security they should also improve benefits for those who 
need them most. While Social Security lifts millions from 
poverty, significant hardship remains among the older and 
disabled people that Social Security is designed to help.
    Benefits are often too low for people who face career 
interruptions due to care giving, poor health or job loss. And 
policymakers should target these beneficiaries for more 
support. Now is the time to generate ideas to strengthen Social 
Security. Senator Whitehouse's new bill shows that raising 
revenue is key to protecting Social Security without making 
devastating cuts. Thank you.
    Chairman Whitehouse. Thank you very much. Ms. Hanauer, you 
are recognized. Thank you for being here.

  STATEMENT OF AMY HANAUER, EXECUTIVE DIRECTOR, INSTITUTE ON 
                TAXATION AND ECONOMIC POLICY \6\
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    \6\ Prepared statement of Ms. Hanauer appears in the appendix on 
page 68.
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    Ms. Hanauer. Chairman Whitehouse, Ranking Member----
    Chairman Whitehouse. Your microphone please.
    Ms. Hanauer. Chairman Whitehouse, Ranking Member Grassley, 
and members of the Committee, thank you for the invitation to 
testify. I will make two major points today. First, our tax 
system raises far too little from those with the most. And 
second, the Medicare and Social Security Fair Share Act would 
raise needed revenue for Social Security and is extremely well 
targeted to the very wealthy, raising taxes on just 2 percent 
of taxpayers.
    So first, the United States is a very wealthy country, but 
income and wealth are increasingly concentrated in the hands of 
a tiny few. The richest 1 percent of Americans took in 22 
percent of our country's income in 2020, more than $1.00 out of 
every $5.00 as my first chart shows.
    Income inequality within that top 1 percent is even 
greater, and wealth inequality is worse still. Just a quarter 
of 1 percent of households own nearly $1.00 in every $3.00 in 
this country. Despite these riches, we fail to deliver many of 
the basics to keep our families and communities strong. Taxes 
are one of the most powerful tools to rein in growing 
inequality, while raising resources for shared needs, including 
Social Security and Medicare.
    Our economy is possible because of what taxes pay for, from 
schools to roads to financial systems. It is only reasonable 
that we ask the wealthy people who benefit most to pay into the 
society that makes that economy possible. In the middle of the 
last century corporate tax rates, estate tax rates, and top 
income tax rates were much higher, but policymakers cut all 
three, all in ways that exacerbate inequality, and reduce our 
ability to meet our obligations and stay solvent.
    We ran surpluses from 1998 to 2001, and were on course to 
fully keep pace with rising spending from the baby boomers 
retiring. But the Bush tax cuts, the bipartisan extensions, and 
the Trump tax cuts reversed that trajectory, and created 
deficits every year since.
    Policymakers cut the corporate tax rates from over 50 
percent in the 1950's to just 21 percent today, and enabled 
more businesses to organize as passthrough entities to 
completely avoid that tax. Policymakers cut the top individual 
income tax rate to 37 percent, less than half its former rate. 
And policymakers have cut the estate tax dramatically, so today 
an heir can inherit 24 million dollars from his parents 
completely tax free, and can inherit still more tax free 
through use of trusts.
    In short, we have directed repeated tax cuts towards the 
nation's most privileged. By contrast as my next chart shows, 
policymakers have increased the Social Security tax, already a 
regressive tax, and made it more regressive by letting more 
earnings creep above the earnings cap.
    This means an increasing portion of our government is 
funded by a tax that poor and middle income families pay more 
of, and I do have a third chart demonstrating that. So my 
second major point, the Medicare and Social Security Fair Share 
Act would require the richest Americans to pay taxes on nearly 
all of their income to fund these programs, just as most middle 
class Americans already do.
    It does this by applying the Social Security tax to earned 
income over $400,000.00, increasing the top rate of the 
Medicare tax, and treating investment income of the richest 
Americans the same as their earnings from work.
    Finally, the bill would close the infamous Gingrich-Edwards 
loophole, which allows certain wealthy business owners to claim 
that their profits are neither investment income, subject to 
the investment tax, nor earned income subject to the earnings 
tax. The bill would raise taxes on just 2 percent of taxpayers, 
virtually all of those would be within the richest 5 percent, 
and 93 percent of the total increase would be paid by the 
richest 1 percent alone--households with average annual income 
over 2.5 million dollars a year.
    I'll conclude by saying Social Security has been a major 
triumph of American policy. Before its establishment, many 
elderly Americans were in abject poverty. This vital part of 
our social contract represents a promise we've made to American 
working families, that you will pay in, and in return you will 
be supported with dignity in retirement, or in disability.
    Today's proposal would raise more from the very wealthiest, 
keep benefits intact, and shore up Social Security and Medicare 
for the next 75 years. Other proposals out there instead cut 
benefits, further cut taxes on the wealthy and corporations, 
and weaken our social contract.
    These are the two competing visions. In one, we increase 
inequality and do less to make America a good place to work and 
retire. The other, as in the legislation being discussed today, 
makes modest reforms to better tax those who are taking a 
larger share of our wealth and income, and reinforces an 
essential pillar of our promise to Americans. Thank you.
    Chairman Whitehouse. All right. Our final witness is Dr. 
Biggs, please proceed.

   STATEMENT OF DR. ANDREW G. BIGGS, SENIOR FELLOW, AMERICAN 
                    ENTERPRISE INSTITUTE \7\
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    \7\ Prepared statement of Dr. Biggs appears in the appendix on page 
79.
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    Dr. Biggs. Thank you, Chairman Whitehouse, Ranking Member 
Grassley, and members of the Committee. Social Security is the 
largest federal government program, the largest tax that most 
workers pay, and the largest source of income for most 
retirees. It also is underfunded by about 25 percent, based on 
CBO and SSA projections.
    Any resolution of this funding gap must be perceived to be 
fair, and yet fairness is in the eye of the beholder. Since 
1935, Social Security has framed fairness as a balance of 
individual equity and social adequacy. Equity means that each 
American receives a fair rate of return for their 
contributions. Adequacy tilts the benefit formula in favor of 
low earners to reduce poverty in old age and disability.
    Thus, while Social Security is progressive, it is not 
nearly so progressive as a typical, so-called welfare program. 
This distinction was essential, and most agree it has 
contributed to Social Security's public support. Recent 
proposals would alter the ethos of equity inadequacy, by 
filling Social Security's funding at the significant tax 
increases imposed on high income Americans.
    For instance, the newly introduced Medicare and Social 
Security Fairness Act would phase out the $160,000.00 payroll 
cap ceiling, over about 25 years, and immediately levy a 12.4 
percent tax on investment income for taxpayers with incomes 
exceeding $400,000.00. The Act would raise 10 year taxes by 
about 3 trillion dollars, making it likely the largest 
peacetime tax increase in U.S. history.
    President Bill Clinton said this approach would, 
``Tremendously change the whole Social Security system.'' It 
tells high earners, ``We are going to soak you, and you're 
never going to get anything out of this compared to what you 
were putting in.'' Every developed country has a Social 
Security like pension system. I'm aware of no country that runs 
a retirement plan similarly to how these proposals would.
    In Canada, for instance, the payroll tax extends only up to 
around $49,000.00 in earnings, while the United Kingdom, the 
principal payroll tax is levied up to run $65,000.00, with only 
a 2 percent tax in earnings above that level. France, Sweden, 
and Switzerland have payroll tax ceilings, roughly half those 
of the U.S.
    Finally, I would simply ask whether all these tax increases 
are necessary. Social Security benefits already are at record 
levels. An average new retiree in 2021 received monthly 
benefits that are 36 percent higher than a similar retiree in 
2000, even after adjusting for inflation. A couple made up of 
two medium earners, claiming benefits in a normal retirement 
age in 2023 would receive combined benefits of over $56,000.00, 
almost three times the federal poverty threshold before 
touching even a penny of their own savings.
    And Federal Reserve data show that retirement savings are 
at record levels at every age, income, educational and racial 
or ethnic group. Total retirement plan assets today are six 
times higher than during the 1970s. Retirement incomes are at 
record highs, while poverty and old age have been declining for 
over three decades.
    Retirees have gone from being a disproportionately poor 
group, to a disproportionately rich one. But there are 
approaches to Social Security forums that held both sides. For 
instance, both Australia and New Zealand fund their government 
pension benefits using general tax revenues, not payroll taxes, 
making for a much more progressive source of income for the 
program.
    But these progressive taxes fund a much more targeted level 
of benefits that aim to guarantee against poverty, not provide 
generous benefits to middle and upper income retirees who are 
saving for retirement on their own at record levels. The 
current Social Security benefit, which for a single new retiree 
this year, has a maximum value of over $43,000.00.
    It's between three and four times higher than the maximum 
benefits paid in countries such as Australia, New Zealand, the 
United Kingdom and Canada. No proposal that reflects the 
extreme end of one side of the political and economic spectrum 
will be enacted. Instead, both parties in Congress, Republicans 
and Democrats, should focus on working together to forge a 
compromise. Thank you.
    Chairman Whitehouse. Thank you very much. Mr. Biggs, is the 
point of your comparison with OECD countries that U.S. Social 
Security benefits are too high?
    Dr. Biggs. The comparison is that they are in fact higher.
    Chairman Whitehouse. You believe they are too high?
    Dr. Biggs. I believe the maximum benefit in the United 
States is too high, yes. $43,000.00 per year is far more than 
is needed to protect against poverty.
    Chairman Whitehouse. Too high answers my question, thank 
you. Mr. Goss, my Medicare and Social Security Fair Share Act 
would raise significant revenue for Social Security by ensuring 
that very high income folks are put on the same footing as 
teachers and fire fighters who contribute to the fund on every 
dollar they earn.
    For how many years do you estimate that bill would prolong 
Social Security solvency?
    Mr. Goss. Thank you very much Chairman Whitehouse. We did 
provide yesterday to everybody here I believe, our estimates 
for that, and the revenue sources that you included in that 
bill we indicate will result in Social Security being fully 
financed under the intermediate assumption of the 2023 Trustees 
report throughout the entirety of the 75 years coming forward.
    And more than that, a concept that we actually developed 
back in the mid-90's called sustainable solvency, which 
requires not only the ability to fully pay the benefits during 
the 75 year period, but also to have the trust fund reserves 
stable or rising as a share of annual costs of the program.
    Chairman Whitehouse. And the bill would accomplish both of 
those things, but in a 75 year projection window that you use.
    Mr. Goss. Exactly.
    Chairman Whitehouse. Your testimony is that Social Security 
faces a shortfall now beginning in 2034. Is it correct that the 
only ways to ensure Social Security remains solvent is to 
either raise revenue, or cut benefits? Is that not an 
arithmetic truth?
    Mr. Goss. That is exactly correct, thank you. Under current 
law the sources of income to Social Security are the payroll 
taxes, and the small amount of tax on people's benefits that 
come to Social Security. And in order to continue to pay the 
scheduled level of benefits we have to either increase the 
amount of revenue coming into the system through taxes 
presumably, or to alter the law to lower the level of benefits 
that are scheduled. There really are no options.
    Social Security does not have----
    Chairman Whitehouse. Mr. Swagel do you agree that's a 
simple arithmetic truth?
    Mr. Goss. Social Security has never had the ability to 
borrow from the general fund of the Treasury. It is not in the 
law to be able to do that, so there's no expectation of that. 
So you would either raise taxes, on or the other.
    Chairman Whitehouse. Mr. Swagel do you agree, one or the 
other?
    Dr. Swagel. I believe growth, better growth demographics 
would help, but ultimately yes. You need, you know, either 
more, you know, new more taxes, or to reduce benefits from the 
one that's now scheduled.
    Chairman Whitehouse. Thanks. Ms. Hanauer, what are the ways 
that a million dollar earner can contribute a smaller share of 
their income to Social Security than a teacher or a fire 
fighter?
    Ms. Hanauer. Thank you, Senator. A million dollar earner 
contributes less because there's an earnings cap that kicks in 
at about $177,000.00 next year, and nobody pays taxes on their 
earnings above that cap. And because investment income, which 
makes up a disproportionate share of the earnings of those 
million dollar earners, is not taxed at all for Social 
Security.
    Chairman Whitehouse. Investment, that the investment income 
issue, who are the primary beneficiaries of that exemption?
    Ms. Hanauer. The wealthiest Americans benefit most from the 
exemption of investment income.
    Chairman Whitehouse. Now both you and Ms. Romig have talked 
about income inequality. Is it accurate to say that as American 
income inequality has worsened, more and more of Americans' 
national income has moved to high income earners, and therefore 
has moved beyond the reach of the existing Social Security 
revenue system?
    Ms. Hanauer. Yes. Yes.
    Chairman Whitehouse. That's a function of income inequality 
as much, and it's had a direct effect on Social Security 
solvency.
    Ms. Hanauer. Income inequality, and we have also cut taxes 
on those earners for other parts of our budget.
    Chairman Whitehouse. Ms. Romig, do you agree?
    Ms. Romig. I do.
    Chairman Whitehouse. So income inequality has a pernicious 
effect on Social Security solvency unless we take steps to 
address both income inequality and Social Security solvency, 
which I contend my bill would do. Do you agree with that 
contention Ms. Romig?
    Ms. Romig. I do agree with that. Yeah, and I would add as 
Steve Goss said, that this level of rising inequality was not 
anticipated in 1983 when we last addressed Social Security 
solvency.
    Chairman Whitehouse. And it's done wonders for high-income 
folks in America, which is terrific until you have a Social 
Security problem, and paying a fair share from the most 
successful and privileged Americans, and then becomes an 
obvious place to bring the system back to solvency, and with 
that, let me turn to my distinguished Ranking Member, Senator 
Grassley, who will be followed by Senator Murray, our 
distinguished Chairman of Appropriations.
    Senator Grassley. Dr. Swagel, when the Budget Committee 
wants to know how much a bill costs or saves, it's supposed to 
ask the Congressional Budget Office in order to move the bill 
forward. Has CBO analyzed the effects of the Whitehouse Bill on 
Social Security finances?
    Dr. Swagel. No Senator, we have not.
    Senator Grassley. Also for you Dr. Swagel, when it comes to 
Social Security the only way to determine if someone is paying 
their fair share is to look at both the taxes they pay, and the 
benefits they receive in return. How much in benefits are the 
highest earning workers scheduled to receive for every dollar 
in taxes they pay?
    And contrary-wise, how does that compare to lower earners?
    Dr. Swagel. Okay. And thank you, and we've analyzed that, 
so I'll talk about that for the different household incomes. So 
for the lowest quintile, so the lowest 20 percent, people with 
the lowest incomes over their lifetime have about a two and a 
half to one ratio of their lifetime benefits against their 
lifetime taxes, so two and a half times their benefits to 
taxes.
    The middle 20 percent of that ratio is about one and a half 
to one. The top, the people at the top 20 percent of lifetime 
incomes it is about one to one, which means that that's on 
average for the top 20 percent. Someone at the very top, you 
know, the top 1 percent like we saw on one of the charts, they 
would have a ratio of less than one, so their lifetime benefits 
would be less than their lifetime contributions.
    Senator Grassley. Dr. Biggs, some Democrat proposals would 
give extra benefits to wealthy people who don't use them, or 
need them, and then they ask future workers to pick up that 
tab. Do you think that these proposals are well targeted, or 
fair to younger generations?
    Dr. Biggs. When we think about fairness we want to think 
not just within generations, across generations. Proposals that 
would increase benefits for current retirees, in particular for 
middle and higher income retirees, would grant benefits to 
retirees that they had not paid for themselves over the course 
of their careers.
    In other words, it would give benefits they had not earned. 
Of course, the bill has to be paid, which means the taxes on 
younger generations have to be higher to finance that, so 
generationally that is inequitable, in particular because 
younger generations get a poorer deal from Social Security than 
older workers in the first place.
    Senator Grassley. And Dr. Swagel, changes affecting Social 
Security can have unintended consequences for the rest of the 
federal budget. How would higher payroll taxes, or new 
investment taxes dedicated to Social Security trust fund impact 
on-budget revenues?
    Dr. Swagel. Okay. And our analysis of any Social Security 
program would look at those effects. So higher payroll taxes, 
for example, would mean lower take home pay for workers, and 
that would affect workers work effort, the labor supply. That 
in turn would affect the amount of income in the economy, and 
then the income generated by, you know, the income taxes and 
payroll taxes, and that would affect the overall economy.
    There have been many other effects, and we can do a full 
dynamic analysis. One other possible way that changes in taxes 
could affect, you know, the non-Social Security part of the 
budget would be if there's a transfer of revenue. So say 
there's a tax stream that now is going into general revenue if 
that is--in some sense it's moved into a trust fund instead, 
that would affect the overall budget as well.
    Or I'm sorry, that would affect the non-Social Security 
part of the budget as well.
    Senator Grassley. Dr. Swagel, the insolvency date of the 
Social Security trust fund tends to get the most attention, but 
is that the only metric that Congress should look to, to gauge 
the program's financial health?
    Dr. Swagel. Yeah, I agree that that gets the most 
attention, and we're very close on that with the actuaries. 
There's many other things you could look at. I mean one would 
be--in some sense--the cash flow of the system. You'll see the 
primary deficit today the day of the system of the benefits 
paid against the revenues coming in, the non-interest revenues.
    Today it's a deficit of 145 billion dollars that's rising 
above 500 billion over the next 10 years, so that's you know, 
resources that need to be generated by the Treasury elsewhere 
to pay those benefits. You can look at distributional impacts. 
We've heard a lot about that. And then about sustainability as 
well, which other witnesses have talked about as well.
    Senator Grassley. Dr. Biggs, we all know that demographics 
is a key driver of Social Security growing deficits, but is it 
the only driver, or are there other factors contributing to 
rising Social Security costs? That's--you'll probably have to 
give a short answer because my time is up, but go ahead.
    Dr. Biggs. Sure. The rate of growth of the economy matters 
because that affects wages and the taxes that are paid, and 
also under current law the real level benefits, even adjusted 
for inflation, increases from year to year. That means the 
costs will also increase.
    Demographics are the big driver, but there are other 
factors there as well.
    Senator Grassley. Thank you Mr. Chairman.
    Chairman Whitehouse. Senator Murray is recognized, followed 
by Senator Johnson and Senator Merkley.

                  STATEMENT OF SENATOR MURRAY

    Senator Murray. Well thank you very much, Chair Whitehouse, 
for holding this really important hearing, and I think it's 
important to remember that Social Security and Medicare are a 
promise that we make to our families that when you work hard, 
the benefits you earned will be there for you when you retire, 
and then if you have a disability you're not left on your own.
    Social Security and Medicare are really a lifeline to 
people all across our country. People want us to save these 
programs because they know these programs save people. But in 
the long-term they are in danger, as we have heard, if we don't 
take action to shore them up.
    Last year actually Democrats took one of the biggest steps 
to strengthen Medicare in decades by giving it the ability to 
negotiate lower Medicare prescription drug prices, which is 
great news on Medicare for people who need those drugs, and 
it's great news for that program as a whole because it will 
save it billions of dollars each year.
    That should be common sense, and I was disappointed when we 
passed the IRA that so many Republicans stood with big pharma 
and voted against that bill, because it was important on many 
accounts. Now, as we have heard today, there are two 
fundamental ways to save Social Security and Medicare for the 
future.
    First, we could raise revenue and save Social Security by 
simply asking the rich to finally pay their fair share. And 
there's nothing new or radical about that. For decades our 
federal tax code has said if you have a higher income, you will 
chip in more. The radical thing is that right now Social 
Security actually works in the opposite way.
    If you make around $160,000.00 a year, you are paying the 
same amount into Social Security each year as a billionaire. 
Someone can make over 12,000 times your salary, and yet their 
Social Security tax rate is a fraction of a fraction of what 
your rate is. Think about that. Billionaires are putting just 
half a cent of every $100,000.00 they make into Social 
Security.
    It should be totally uncontroversial to suggest that we 
find ways to increase Social Security's revenue in order to 
extend its solvency, and to make the system a little more fair. 
Now, anyone who says that is off the table has only one 
completely unacceptable option left, and that is to cut 
benefits.
    And over the years some Republicans have called explicitly 
for cuts. We saw a plan to phase out Social Security last year. 
We saw House Republicans put forward a road map just last month 
to raise the retirement age. Nonetheless, we do hear 
Republicans act like they don't know why anyone would accuse 
them of wanting to cut Social Security.
    Make no mistake, if you are unwilling to even consider new 
revenue, or making the ultra-wealthy pay their fair share, then 
you are essentially saying that the only option left for Social 
Security are benefit cuts. We're talking about a lifeline 
countless Americans have earned, and they're counting on today 
and for decades to come. So I'm really interested in what the 
panels had today on how we can protect and strengthen Social 
Security, and the families that rely on it.
    I appreciate all of you being here today. And as I said, we 
know millions of Americans are really struggling today to save 
for retirement, or to make ends meet in retirement. In fact, 
you should know that half of the seniors rely on Social 
Security for most of their income. And a quarter of seniors 
rely on Social Security for at least 90 percent of their 
income.
    So my question today is for Ms. Romig. Talk about what 
Social Security benefits mean for our country's seniors, and 
how those cuts disproportionately impact women and communities 
of color.
    Ms. Romig. Yeah. Well first of all, I'd just say, you know, 
most retirees incomes overall are modest, and so they really 
rely on those Social Security benefits to meet their basic 
needs, housing and food, healthcare and bills. And so cutting 
those benefits would really compromise the lifestyles of our 
nation's seniors and people with disabilities.
    And that's especially true for women and people of color. 
Women tend to earn less over their lifetimes, have smaller 
retirement savings accounts, and in addition they tend to live 
longer. And there are features of Social Security that make it 
especially important for women.
    The progressive benefit formula that means they get a more 
generous share of their earnings replaced. The spouse and 
survivor benefits that go almost exclusively to female 
beneficiaries, and the inflation protection that ensures that 
the value of Social Security stays--keeps up with the cost of 
living over even a very long retirement.
    And the same is true for people of color. People of color 
have faced economic inequality throughout all of this nation's 
history, and they're less likely to be offered retirement plans 
at work, less likely to have jobs with a margin for savings, 
and so Social Security is especially important for those 
groups.
    And in fact, without Social Security over half of black 
retirees would be in poverty, and 45 percent of Latino retirees 
would be in poverty.
    Senator Murray. Thank you very much for that answer. Mr. 
Chairman, thank you for having this hearing. I think it's 
really important the discussions about Social Security focus on 
solutions that actually protect our seniors, and make sure they 
receive the hard earned benefits that they worked decades to 
receive. And I really believe that cuts should be off the 
table, but I think this hearing is really important for us to 
really start focusing on this, so I thank you very much.
    Chairman Whitehouse. And we certainly hope that the 
bipartisan expression at the State of Union, that Social 
Security cuts should be off the table was not just theater, but 
was actual truth. And with that, let me turn to Senator 
Johnson.

                  STATEMENT OF SENATOR JOHNSON

    Senator Johnson. Thank you Mr. Chairman, I also want to 
thank you for holding this hearing, but I also recognize we're 
just barely scratching the surface. What's frustrating to me is 
that there's just so much basic fundamental information we need 
to convey to the American public. The misperceptions of the 
Social Security program, that we need to spend some time before 
we can start getting into all the details that have been 
brought up by our witnesses.
    So I will suggest, rather than in this format where we just 
kind of talk by each other. I've got, you know, four and a half 
minutes left to make probably about 20 minutes worth of points. 
We ought to schedule an all day roundtable, and have a 
discussion as Senator Murray talked about.
    Let's get this all out on the table. But in my remaining 
minutes, I'd like to talk about some of these fundamentals. 
When I talked to Wisconsinites, they just have a basic 
misperception about Social Security.
    I mean this was originally sold as okay, we are going to, 
as an anti state, we're going to make sure that you are going 
to have money for retirement, so we're going to extract wages 
from, or taxes from your wages, and we're going to set up an 
account for you, so that we're going to save it for you for 
your retirement, because we don't trust you to save for 
yourself.
    So most people think well that's my money. And in fact a 
part of it is. But as Senator Grassley was talking about, if 
you're in the low-income group, you're getting a lot more in 
return than you ever invested in, so it's really not a savings 
account where you're getting--where the government is saving 
for you, and that amount builds up with the compound interest 
and stuff.
    And then you get that back in return. In fact, there's 
really not anything saved at all, correct Mr. Goss? The money 
is gone. It comes in the Treasury, it's spent, right?
    Mr. Goss. It's a pay as you go system. The money coming in 
basically covers----
    Senator Johnson. It is. It's a pay as you go system. It 
worked when we had 40 workers for every one retiree. Now we're 
less than three workers for every one. This is the Social 
Security trust fund, correct? It's a four drawer file in 
Parkersburg, West Virginia, correct? And it holds U.S. 
Government bonds.
    Mr. Goss. Well it's all electronic. By law the trust fund 
could be invested only in interest bearing securities backed by 
the full faith and credit of the U.S. Government.
    Senator Johnson. Understand. So it is also true that U.S. 
Government bond held in the hands of a U.S. Government entity, 
literally has no value. What happens when, and by the way the 
funding gap began in 2010 when benefits started exceeding 
revenue, correct?
    So now we start dipping into the trust fund. This gentleman 
pulls out a bond, sends it over to the Treasury, and says you 
know, pay us 50 billion dollars. What does the Treasury do? 
They don't have 50 billion dollars. Do you just print it? I 
mean, Mr. Goss, what does the Treasury do?
    Mr. Goss. Well the vast majority of the payments that are 
coming out of Social Security now are from current revenue 
receipts.
    Senator Johnson. Correct. But I mean when we----
    Mr. Goss. We are running----
    Senator Johnson. We're dipping into this, and we're going 
to exhaust this accounting convention, then this thing is going 
to be empty in 2023.
    Mr. Goss. And that was intended in the 1983----
    Senator Johnson. I understand. But again, I just want so 
that the American public understands what's happening.
    Mr. Goss. Yeah.
    Senator Johnson. A bond of this gets turned over to the 
Treasury, and then what does the Treasury do?
    Mr. Goss. The Treasury realizes the fact that Social 
Security has saved up this----
    Senator Johnson. No. Again, what is the actual transaction? 
The 50 billion dollar bond is handed over to the Treasury. What 
does the Treasury do with that 50 billion dollar bond? They pay 
Social Security trustee?
    Mr. Goss. Exactly.
    Senator Johnson. 50 billion dollars. Where do they get the 
50 billion dollars?
    Mr. Goss. From either current revenues, or from borrowing 
from the public.
    Senator Johnson. Yeah, okay. Right now they're borrowing 
because we're running a trillion dollar deficit, so they float 
another bond.
    Mr. Goss. On the margin.
    Senator Johnson. So it's very important for people to 
recognize that fact. Mr. Biggs, talk about again the fact that 
the calculation of what you get in benefits is somewhat tied to 
what you've contributed, but certainly not totally tied, 
correct? And as we talked to the CBO Director, again the lower 
on the income scale, you're getting a lot more than what you 
paid in.
    If you're in the high income, you're not getting what you 
paid in. And wasn't that sort of the deal? This was not a 
general welfare system. This wasn't--this was really designed, 
you know, we're going to make you save for your retirement, and 
then you're going to get back what you paid in. Just address 
that fact.
    Dr. Biggs. Sure. Social Security is set up as a 
contributory social insurance program where everybody pays in. 
People receive back a fair return on their money, and yet it is 
tilted toward low earners.
    Senator Johnson. Again, I think most Americans agree with 
that.
    Dr. Biggs. Sure.
    Senator Johnson. And just my final question, Ms. Hanauer. 
This is a very simple question. Out of $1.00 of income that any 
American makes, how much should be the maximum amount the 
government takes out in total? What is the total maximum tax 
rate on $1.00 of income? Because I always ask, you know, 
progressive witnesses that question.
    What percent is the most that the government ever ought to 
take out of an American's dollar of income?
    Ms. Hanauer. I think we should think about the kind of 
country we want to have, and then----
    Senator Johnson. I just want a percent. I mean if you've 
already thought about that.
    Ms. Hanauer. It's not possible to...
    Senator Johnson. Well how much should we ought to take out 
of $1.00 of income?
    Ms. Hanauer. You know, we had 400 billionaires who paid 
less than 8 percent tax rate, so more than that.
    Senator Johnson. The top 1 percent pays 40 percent of all 
income taxes. Okay. I dont know at what point in time is a fair 
share. It is telling that I can never get a progressive witness 
to tell me what the maximum percentage is they want to tax 
$1.00 of income. And you're not willing to do it either.
    Ms. Hanauer. Senator, when we consider all taxes the top 1 
percent pays about 24 percent of taxes, but receives 22 percent 
of income.
    Senator Johnson. And then they make 22 percent of income. 
That's pretty fair. They're still paying a higher level of tax 
than they get in income. We can argue with that, but again. I'm 
just asking----
    Ms. Hanauer. It occurs to me that in this society where the 
wealthiest are getting more and more of our income, they can 
afford to chip in more to maintain the systems that enabled 
them to build that wealth in the first place.
    Senator Johnson. Mr. Chairman, this is why we need a longer 
discussion, so I don't have to be quite so rude interrupting 
witnesses. We do need, the American public needs to hear this 
conversation. I think there could be all kinds of areas of 
agreement. If you're going to do something on a bipartisan 
basis rather than just, you know, slap a piece of legislation 
on the table there and say you know, you're evil if you don't 
accept this thing, or you want to cut benefits.
    I want to save Social Security. I think everybody here in 
this hearing room wants to save Social Security, but in order 
to do so we need a full fledged discussion where all viewpoints 
could be heard and some of these realities can be laid out on 
the table. Thank you Mr. Chairman.
    Chairman Whitehouse. Thank you Senator Johnson. Senator 
Merkley, I take it the Chairman's prerogative just to note that 
it would make a very big difference to me in how much should be 
taxed on the dollar of income, whether it was the first dollar 
of income of an individual, or their billionth dollar of 
income. So I would just add that to the discussion. Senator 
Merkley.

                  STATEMENT OF SENATOR MERKLEY

    Senator Merkley. Thank you Mr. Chairman, and thank you all 
for bringing your expertise to bear. And I hold a lot of 
townhalls, one in every county every year, all 36 counties, 
open townhall. And often times somebody will stand up and say 
hey, isn't Social Security been raided? Haven't the funds been 
stolen?
    And I'll give an answer that says no. That essentially the 
funds that are in the trust fund can either do nothing with 
them, in which they earn zero percent, or you could invest them 
in the stock market, and make the risk of the stock market 
crash wiping it out, or invest them in essentially the 
equivalent of Treasury bonds, which isn't the highest return in 
the world, but it has a pretty low risk in the U.S. Government.
    Which is why much of the world invests in them. Is that 
description kind of basically accurate Mr. Goss?
    Mr. Goss. It is exactly. In fact, the law requires that all 
revenues coming into Social Security be invested immediately in 
interest bearing securities backed by the full faith and credit 
of the U.S. Government.
    Just the 2.8 trillion dollars that are held now by the 
Social Security trust funds are 2.8 trillion dollars that have 
not been borrowed from the public to this point because Social 
Security amassed that excess.
    Senator Merkley. Thank you. I'm glad I'm not misleading 
Oregonians, and when I ask people--I'll often ask Questions in 
my town hall on things like would you all like prefer to see it 
invested in the stock fund, and the risk of what having Social 
Security wiped out by a crash, people respond no. And I don't 
think that that has changed.
    So it seems like a pretty stable strategy in place. And the 
rate that is earned on the funds that go from Social Security 
that when they essentially buy bonds, it's basically the same 
as the Treasury bond right?
    Mr. Goss. Yes. The same.
    Senator Merkley. So it would be the same as if you or I 
invested in Treasury bonds, or anyone else. Okay. Great.
    So one feature that has changed a lot in the retirement 
framework that I don't think we've really touched on is a 
tremendous increase in IRAs and 401Ks and so forth as 
alternative strategies for retirement that really affect the 
upper income Americans.
    And I think the stat that I saw on the brief was that if 
you look at like CEOs of Fortune 500 companies, they have an 
average of about 14 to 15 million dollars in retirement funds. 
Now those are generally incredibly tax favored. You put in the 
retirement fund you don't pay taxes on them.
    Why does it make sense that we are providing such a massive 
protection for those levels? Those aren't basic retirement 
levels. That's just a way to escape income taxes for very 
wealthy Americans. Is it considered that possibly we should 
reign that in? Like for example, allow people to put into IRAs 
and 401Ks several million dollars, but not--some people have 
several hundred million dollars by the way in such funds, and 
use the additional revenue to back up Social Security.
    Have any of you looked at that? That type of proposal? Ms. 
Romig?
    Ms. Romig. I think that's a really good point. And often 
when we talk about the way that we do tax expenditures, and 
they are really expenditures of money on retirement savings. 
People refer to it as an upside down system, where the 
wealthiest get the greatest advantages. The tax advantage for 
the wealthiest is much, much higher than it is for lower income 
people who contribute to 401Ks and IRAs because it's based on 
our progressive income tax rates.
    And so you're right. Some of these accounts are enormous. 
Even Peter Thiel has one that's billions of dollars in IRA 
that's billions of dollars. That's really more than he needs 
for his retirement. And so I think we need to look at this in 
the grand scheme about why are we are giving such generous tax 
incentives to these so-called retirement accounts for very 
wealthy people that are really not needed to secure their 
incomes and retirement where we're not asking them to pay a 
contribution to Social Security that is for everybody.
    Senator Merkley. Well thank you, and Ms. Hanauer, did you 
have a comment on that?
    Ms. Hanauer. I would just say we would love to analyze a 
proposal of that sort, and but I certainly agree with Ms. Romig 
that we need to think about the lowest income people making 
sure that we can secure retirement for them.
    Senator Merkley. Mr. Chairman, I'll just note that in the 
past I've introduced legislation on this saying yes, affluent 
people should be able to put significant money into IRAs and so 
forth, but it reaches a point at which there is not a public 
purpose in subsidizing increased, massive increase in wealth 
for the very wealthiest people in America. They clearly have 
enough to retire on. And we might look at that as a source of 
income that strengthens Social Security for everyone else's 
retirement.
    Chairman Whitehouse. Thank you. Particularly if it's being 
used for tax dodging purposes. Senator Marshall.

                 STATEMENT OF SENATOR MARSHALL

    Senator Marshall. Well thank you, Mr. Chairman, and I too 
want to add my thanks for holding this hearing. Assuming the 
people of Kansas sent me here to save and protect Medicare and 
Social Security, if you want me to save Medicare I need a new 
innovative drug to help take care of the healthcare of six 
million people with Alzheimer's.
    Tackling Social Security is even a tougher one as we look 
for solutions out there. Dr. Biggs, would you agree with me 
that inflation disproportionately hurts a person who's living 
from Social Security check to Social Security check?
    Dr. Biggs. Actually no I wouldn't.
    Senator Marshall. And why?
    Dr. Biggs. Because Social Security is adjusted for 
inflation. The rest of your----
    Senator Marshall. You're telling me with 16 percent 
inflation, and your Social Security check went up marginally, 
that that person's not more significantly impacted?
    Dr. Biggs. No. If I received 100 percent of my income from 
Social Security. And Social Security COLA has accounted for 
inflation, my 100 percent of my income is inflation adjusted. 
If I receive half of my income from Social Security, and half 
from somewhere else, my total income is only half protected 
against inflation.
    Senator Marshall. Okay. That's really not one senior 
citizen has told me this. Every senior citizen I talked to in 
the State of Kansas, including my own parents, say groceries 
are up 20 percent. Gasoline prices went from $2.00 to $3.50 a 
gallon. That their utility bills, some of the utility bills 
have doubled, and certainly the Social Security check they're 
receiving is not touching that at all.
    I think that slowing down inflation would be one of the 
solutions to save Social Security. I'll stick with you Dr. 
Biggs, since I hit a home run with that question. Would getting 
seven million healthy American men between the ages of 25 and 
45 back to work, would that help save Social Security? Would a 
strong economy help save Social Security?
    Dr. Biggs. Sure. Higher labor force participation means 
more people working, more people paying taxes. That would 
certainly help. Higher economic growth means the tax revenues 
grow faster than they otherwise would have, that would help 
Social Security as well.
    Senator Marshall. So to save Social Security it would be a 
good idea to stop paying people more to stay home than to go 
back to work. Is there anybody on the panel that would say a 
strong economy would not help us save Social Security? Does 
anybody disagree with that? A strong economy? Is there any 
concern that if we raise the taxes enough that it could 
actually hurt the economy? Dr. Biggs?
    Dr. Biggs. Sure. I think the scores you see, you know, from 
Social Security when they look at these proposals to increase 
taxes would generally not include an effect on how the 
incentives of that would affect the earnings of people in that 
class. So you want if you--in my testimony I point out we're 
getting to a very, very high marginal tax rates.
    We know that people do respond to those. There is some 
disagreement about how much, but you certainly need to bear 
that in mind.
    Senator Marshall. Okay. Going on to my next question here. 
Let's talk about the national debt. 33 trillion dollars, we 
might spend 6-700 billion dollars of interest this year, which 
certainly fuels inflation, and impacts seemingly everything 
else as well. So, Mr. Goss, how does that national debt, and 
paying that much in interest, does it have any bearing, any 
indirect bearing on concern for saving Social Security?
    Mr. Goss. That's a huge question. It has some bearing 
potentially if the debt continues to rise a lot. Could it have 
an effect on interest rates? Higher interest rates actually 
would benefit Social Security for its revenues. But one thing 
to keep in mind is of that 33 trillion dollars, 2.8 trillion, 
almost one-tenth of it is in fact money that is being held by 
the trust funds.
    And if the trust funds had not built up that 2.8 trillion 
dollars-worth of reserves by the excess payroll taxes paid over 
the last 20-30 years, the debt would still have to be 33 
trillion. All of it would then be borrowed from the public. So 
Social Security will indeed spend down its reserves, and spend 
that 2.8 trillion dollars. That simply means that the full 33 
trillion, not all of which has been borrowed from the public as 
yet because Social Security has been helping out. We then have 
to go to the public.
    So we should not say that Social Security is causing an 
increase in debt. It's simply, it's actually covering a portion 
of the debt right now by the excess income that's been----
    Senator Marshall. That's not my question, but I appreciate 
the answer. Dr. Biggs, what solutions would you throw out 
there?
    Dr. Biggs. Things that I've argued for are certainly in the 
long-term slowing the growth of benefits for middle and high 
income retirees. Raising benefits for the bottom third to truly 
guarantee against poverty and old age. But separately and 
importantly, making sure that every employee has a retirement 
plan available to them on the job and automatically enroll them 
in that retirement plan.
    If everybody were saving as they should and could for 
retirement, Social Security's job is much easier. That's how a 
country like Australia has lower poverty in old age than we do. 
While their Social Security costs will be going down in the 
future, and ours are going up. So we need to think a little 
more creatively about this.
    Senator Marshall. Thank you. I yield back.
    Chairman Whitehouse. Senator Padilla.
    Senator Padilla. Thank you Mr. Chair. A couple questions.
    Chairman Whitehouse. Followed by Senator Braun. Sorry to 
interrupt. Just to let Mike know that he's next.

                  STATEMENT OF SENATOR PADILLA

    Senator Padilla. Okay. The first is sort of an extension of 
a topic that Senator Murray was talking about earlier in terms 
of equity of the Social Security system. My understanding is 
that even with Social Security there are more than 5 million 
seniors in the United States currently living in poverty.
    Roughly one in seven seniors rely on Social Security for 
more than 90 percent of their income, and the number of 
Americans who are at risk of not being able to maintain their 
standard of living in old age, or retirement age, has increased 
over the past 30 years. And this is particularly true for lower 
income and marginalized communities that have had few 
opportunities to save, earn pensions, et cetera, especially 
among black and Latino elder adults.
    The question is for Ms. Romig. How does rising income and 
wealth inequality affect Social Security financing and benefits 
and what recommendations would you have to make the system more 
equitable?
    Ms. Romig. That's a terrific question. Certainly on the 
financing side, you know, as we've been talking about this 
rising inequality of the last 40 years, since the last time 
Congress addressed Social Security was not anticipated.
    And so we are getting fewer payroll taxes from high income 
earners than we would have if the payroll tax cap was set at 
the same level that it had been 40 years ago.
    And so we've lost a lot of revenue for the system during 
that period over the last 40 years, and that's certainly not 
equitable. And as Amy discussed, also this rise of people 
getting income from other sources that are not taxed by Social 
Security, investment income, and pass-through income, and 
things like that. You know, the highest income people are 
contributing a much smaller share of their total incomes to 
Social Security than regular folks who get their income from 
paychecks.
    And so those are really important factors that we need to 
think about now that we are aware of these trends to make sure 
that Social Security's equitably financed. And the same is true 
on the benefit side. The increase in longevity over the past 40 
years since we last addressed Social Security has meant that 
wealthier people are living significantly longer. That's not 
true for the bottom half.
    And in fact, the reverse is true for some marginalized 
groups. You know we hear about these deaths of despair, 
especially in marginalized communities where life expectancy is 
actually shorter than for their parents or grandparents. So 
that means they're getting the benefits for a shorter amount of 
time, whereas wealthier folks are getting benefits for more 
years, and so we need to address that as well.
    Senator Padilla. That's a troubling dynamic, but on the 
first half of your answer the failure to take away that tax 
rates for the most wealthy and large corporations are not good 
for Social Security.
    Ms. Romig. That's right, mm hmm.
    Senator Padilla. Thank you. Second area, is the following. 
Now since 2010 the number of Social Security beneficiaries has 
increased by 21 percent. And this is the precursor to your 
longevity dynamic that you described. Our nation's age 
dependency ratio is now projected to reach 44 percent by 2040. 
Absent Congressional action, the aging population and a 
shrinking workforce would continue to threaten Social Security 
financing.
    That's a dynamic that I think most of us are very well 
aware of, and are concerned about. Now while not all a solution 
in isolation right, this is not a magic wand, but we know, 
history tells us that higher levels of immigration can improve 
the long-term financial health of the system.
    Immigrants on average are younger than the native born 
population, and have higher labor force participation rates. 
And just to top that by the way, the studies by the Cato 
Institute from 2013 and 2018 also found that Social Security 
eligible immigrants use benefits at lower rates. So this is a 
group of folks that's paying into the system disproportionately 
than what they're taking out of it.
    The question is for Mr. Swagel and Mr. Goss. We already 
know that immigration benefits the economy overall, but can you 
speak specifically to how updating our immigration system could 
support the long-term solvency of the Social Security system?
    Dr. Swagel. I'll say it in a quick word and Steve can 
finish. No, it's absolutely right that more immigration would 
reverse aging, and would reverse the shrinking of the workforce 
that you talked about. That would have a near term impact in 
improving the finances of Social Security. There would be long-
term benefits as well, long-term impacts as well.
    There would be higher productivity growth from immigrants, 
and immigrants start companies, they hire workers, that means 
more payrolls and more revenues into the system. And we would 
analyze both those, the near term and the long-term impacts.
    Mr. Goss. So from a purely demographic point of view, our 
issue as we've mentioned has been the changing age distribution 
because of the drop in the birth rates after 1965. Now birth 
rates are when people enter our population at age zero. 
Immigrants enter our population in general between 20 and 35, 
so that if we have an increase in immigration, and if our 
policy were to change, that would bring more people into our 
population, precisely at the ages at which people begin to 
really enter the workforce and work.
    So it could potentially change our distribution of the 20 
to 64 age group working age, versus the 65 and over and have a 
very positive effect. There's no question about that. And in 
addition immigrants tend by and large, at least in their early 
years in the country to have higher birth rates even, than the 
general population, so it's really a plus all the way around.
    Senator Padilla. Okay. Thank you. Thank you Mr. Chair. Just 
in closing one underscore. At a time where we're seeing 
persistent record low unemployment levels, we're not talking 
about the immigrants coming here to take jobs from anybody 
else. We need the workforce, and I've heard that from leaders 
in every industry across the board. Thank you Mr. Chair.
    Chairman Whitehouse. Talk to a hospital or a nursing home. 
Senator Braun.

                   STATEMENT OF SENATOR BRAUN

    Senator Braun. Thank you Mr. Chairman. Something I hear so 
often about back in Indiana would be the unfairness of Windfall 
Elimination Provision (WEP) and Government Pension Offset 
(GPO). I'm not going to ask a question here, but I want to 
point out that it seems like inherent unfairness, just due to 
the nature of your job, and I want to put it into context that 
some things need to be fixed.
    But when you're doing it in the context of now nearly 
structuralized two trillion dollar deficits annually. I think 
the only budget out there that's been really put there to the 
public would be Biden's, and I think it takes us from 32 
trillion in debt currently up to 52 trillion roughly. Mr. 
Swagel, is that correct generally in terms of blueprints for 
our country?
    Dr. Swagel. Yeah. That would be right.
    Senator Braun. So this is something we probably ought to 
fix. It's an inherent unfairness to a group of people that 
serve our country well, school teachers and police officers. 
But here we're in a mess where we built the system into such a 
terrible long-term business plan.
    Senator Johnson had the most relevant question. You need to 
start asking where is enough enough? I think we've grown over 
the last two years of enterprising with the Biden 
administration to where government in our country is way above 
the historical average of wherever it's been. I believe that we 
need it. We need to save Social Security and Medicare.
    It doesn't seem like a very practical discussion in terms 
of how do we do it when you're hemorrhaging that much year 
after year. So, what it comes down to I'm going to ask you, Mr. 
Swagel, where do you see the total government expenditures 
being? We know where the budget--the Biden budget wants to take 
it. If that's what Bidenomics is about, that's a destiny 
towards a Chapter 11 for the government someday.
    Are these numbers that ominous in terms of the blueprint 
out there currently for the biggest business in the world?
    Dr. Swagel. You know, we analyze the budget under current 
law, and the near term challenge under current law is net 
interest payments, right, which are rising sharply from the 
less than 500 billion a year ago, and are set to triple over 
the next ten years. So that's kind of the near term challenge, 
and then the entitlements. We're talking about Social Security 
today. Medicare is just after that. So once you get to the kind 
of the nine to 10 year horizon, entitlements are really the 
driver of the fiscal calendar.
    Senator Braun. They're the structural drivers. And then 
would you say Medicare is more significant in driving that, or 
Social Security? And which--again you don't like to talk about 
policy, just tell me which of the two is growing in the wrong 
direction most precipitously?
    Dr. Swagel. You know, Social Security is closer, but as you 
look over time, you know, into the sort of far off decades, the 
increase, the increment in Medicare is----
    Senator Braun. And you do why? Because as little as 30-35 
years ago that was 5 to 7 percent of our GDP. Now it's 
approaching 20, and it's another issue it's a part--the biggest 
sector of our economy that hides itself behind free enterprise, 
and there's no transparency. There are barriers to entry. If we 
want to focus on policy that would really make a difference, 
that would probably be the thing we could do, but we'll still 
then be set with a business plan that has to start begging the 
question how much do you want through government?
    Am I correct in saying that revenues over a 50 year period 
have been stubbornly in a narrow bracket?
    Dr. Swagel. That's right. The 50 year average of revenues 
is about 17.4 percent of GDP.
    Senator Braun. Okay. And where has it ever gotten out of 
that stubborn bracket? And that's high tax rates or low tax 
rates? You have less economic growth right when you have higher 
general tax rates. You have a little better economic growth 
when your rates are lower. Do you agree with that?
    Dr. Swagel. In general that's what our analysis----
    Senator Braun. Okay good. We're getting somewhere. So with 
everything we've just talked about we're in a mess because 
revenues have never budged much beyond that. High rates or low 
rates. Economic growth generally gets worse the higher the 
rates are, so you give up something there.
    Isn't this something that should be as simple as how do we 
take the money the taxpayers give us, and just figure out how 
to spend less than we take in and acknowledge that the system 
has never given us more than about 18 percent of our GDP. Is 
that a fair statement?
    Dr. Swagel. I mean of course CBO wouldn't recommend a 
policy. We would say----
    Senator Braun. But just look at their arithmetic.
    Dr. Swagel. Yeah.
    Senator Braun. Is that a fair statement?
    Dr. Swagel. Arithmetically it's a fair statement. It's one 
or the other. It's got to be read.
    Senator Braun. Then I'll go back to what I think besets the 
whole system because we all have priorities for within it. 
Healthcare is actually fixable. I did it in my own business, 
but you're poking the biggest lobbies back home and here if you 
do that. At least, if they want to call themselves free 
enterprise, they've got to start acting like it.
    I think we can accomplish that. But then we're going to 
have to get down to what works in any other place. You don't 
have the benefit of the printing press in the basement, or a 
credit card that gets renewed regardless of your bad behavior. 
You do go to Chapter 11, and you generally end up on the ash 
heap if you don't correct it in a year or two, meaning Chapter 
7.
    We've got to get some political will and backbone around 
this place. Our future generations. It's shameful that we keep 
projecting the Bidenomics, the Biden plan, to where we're 52 
trillion in debt. Bad business plan, never going to end up 
well, and it has no relation to fixing programs we want to 
save. Thank you Mr. Chairman.
    Chairman Whitehouse. Thank you very much, Senator. Senator 
Van Hollen.

                STATEMENT OF SENATOR VAN HOLLEN

    Senator Van Hollen. Thank you, Mr. Chairman, thank all of 
you for your testimony. Mr. Swagel, I just want to ask you a 
question about the share of revenues, the percent of GDP. Isn't 
it the case that the last time we had a balanced budget in this 
country the share of revenue to GDP was approximately 19 to 20 
percent?
    Dr. Swagel. That's right. In the late 90s in the Clinton 
administration.
    Senator Van Hollen. I don't think there's anything 
immutable about 18 percent revenues as a share of GDP. In fact, 
we know mathematically if we increase taxes on very, very 
wealthy people, we will be able to increase our share of 
revenues as a percent of GDP.
    Mr. Goss, you are the undisputed expert when it comes to 
Social Security, and the numbers, and a respected one. Could 
you just--and you may have said this, but for the record, what 
will the cut be if we do nothing to Social Security, and when 
will it happen?
    Mr. Goss. If we do not act, and the trustees intermediate 
assumptions follow through, as of 2033 the Old-Age and 
Survivors Insurance Program will at that point deplete its 
reserves. The trust fund will still be there. It won't be 
exhausted or whatever. It will deplete it's reserves, 
continuing income will be sufficient to at that point continue 
paying 77 percent of benefits.
    That's a long way from running out of money and no 
benefits, but it's far short of what people are expecting.
    Senator Van Hollen. Right. So you're saying it would be a 
23 percent benefit cut?
    Mr. Goss. At that point.
    Senator Van Hollen. At that point in time. And I understand 
that both you and Mr. Swagel have already stated what seems 
like pretty simple math that in order to avoid those cuts, we 
either need more revenue into the program, or you'd need some 
combination of structured cuts and revenue into the program. I 
just want to make sure all of our other witnesses agree that 
that is a mathematical fact starting with you, Ms. Romig.
    Ms. Romig. I agree.
    Ms. Hanauer. I agree.
    Dr. Biggs. Yes.
    Senator Van Hollen. Thank you. So then the question is how 
do we get there? And I think the Chairman pointed out earlier 
that when President Biden gave the State of the Union address 
one of the lines where he got a standing ovation was where he 
said we're not going to cut Social Security benefits. I haven't 
seen any proposal from our Republican colleagues on how to make 
sure that we prevent this 23 percent cut in about a decade.
    I have seen proposals from the Chairman, Mr. Whitehouse, 
Senator Sanders and others, and I support those proposals. But 
just to my colleagues with respect to make tough political 
choices. You can't have a dialogue and debate without everybody 
putting their positions on the table on Social Security, so 
folks may disagree with the proposals that have been put 
forward, but we welcome looking at alternative proposals.
    And I do not believe that assigning this responsibility to 
some commission that acts behind closed doors is the way to do 
it because in my experience that does not avoid the fundamental 
challenge, which is the question of political will ultimately 
to get it done.
    I do agree with points that were made earlier about we need 
a lot of options on the table. Another revenue option that I 
put forward in the past was to take the estate tax back to 
where it was in 2009 as part of the Bush tax cuts. And I would 
propose dedicating some of those revenues to the purpose of 
shoring up Social Security, which is not a revolutionary idea.
    It's an idea that was supported by Bob Ball, the longest 
serving member of the Social Security Commission, supported by 
Nancy Altman, the President of Social Security Works, and 
supported by Thomas Paine, who made this--launched this idea 
even before we had Social Security, saying to quote, ``It is 
from overgrown acquisition of property that the fund will 
support itself being a fund to support seniors as they 
retire.''
    So I would just ask in closing if I could ask you Ms. 
Hanauer just to comment quickly on the estate tax as a source 
of revenue generally, and to debunk the idea that if we go back 
to that proposal that middle class folks would suffer, and in 
fact it would just be folks who are very well off, right?
    Ms. Hanauer. Thank you very much. People can now inherit 22 
million dollars tax free through our estate tax, and they can 
inherit far more than that through clever use of trusts. So I 
would agree entirely that that is a ripe place to look for 
revenue.
    Senator Van Hollen. Thank you. Thank you, Mr. Chairman, 
thank all of you.
    Chairman Whitehouse. Thank you Senator Van Hollen. We next 
have Senator Scott followed by Senator Lujan.

                   STATEMENT OF SENATOR SCOTT

    Senator Scott. First of all I want to thank the Chairman 
for holding this, and I agree with Senator Van Hollen. I think 
we all--and similar to what Senator Johnson said, I think we 
all ought to maybe get around the table and come up with all 
the different ideas, and probably I think something Senator 
Johnson was saying. Let's all get all the facts in front of us 
first, because there's a lot of misconceptions about Social 
Security and how it started, and you know, the ways to fix it.
    So we've got a lot of Social Security, Medicare recipients 
in my state, Florida. So I proposed legislation that's called 
the Protect our Seniors Act, that will safeguard the benefits 
of these critical entitlements. It does three important things. 
First, we rescind the funding of 87,000 more IRS agents, and 
put that money in Social Security and Medicare.
    We say any savings if there's a way to come up with savings 
in Medicare, and there clearly is, we keep those in Medicare. 
Last fall there was legislation that was passed that cut the 
spending in Medicare, but unfortunately that money was taken 
outside of the Medicare program instead of just keeping it in.
    Finally when it established a rule to prevent cuts to 
Medicare and Social Security unless you had two-thirds of 
Congress willing to do that. Because I think we all have to 
figure out, like all of us have to say we've got to figure this 
out.
    So, we've had since 2019, about a 1.8 percent increase in 
our population. Dr. Swagel, how much in dollar numbers, how 
much is the--go back to the 2019 budget, Biden's proposed 
budget this year, how much is that? How much increase would 
that be in total spending?
    Dr. Swagel. Total spending from 2019. I don't have 2019 in 
front of me. It's gone up, you know, spending as a share of the 
economy and in dollars.
    Senator Scott. I think it's about 2 trillion dollars. Would 
that be close?
    Dr. Swagel. It's in the trillions, that's right.
    Senator Scott. So Mr. Goss, how much would it cost this 
year to fully fund where there was no deficit in Social 
Security. However you do it. How much dollars are we talking 
about just in this fiscal year?
    Dr. Swagel. Yeah, this year the cash deficit was 100, I had 
it before me, 145 billion is what we have this year.
    Senator Scott. So we've had a 2 trillion dollar increase in 
our budget okay, and to fix Social Security we could have taken 
some of that money from other programs and put 145 billion 
dollars that would have fully funded Social Security.
    Dr. Swagel. That's the primary deficit this year, so 
that's----
    Senator Scott. That is for one year?
    Dr. Swagel. That would be just for one year what we're 
drawing from the trust fund that's the case, it's the cash gap.
    Senator Scott. All right. And I think everybody would agree 
that this is a pretty big issue for every, you know, every 
American thinks about this, whether you're you know, maybe my 
grandkids don't think about it much, but I think anybody who's 
thinking about their retirement.
    So what do you all think of Joe Biden's proposal right now? 
What do you think of his proposal to fix Social Security? What 
do each of you think about it?
    Dr. Biggs. During the Presidential campaign.
    Senator Scott. The one that he would have this right now in 
his budget.
    Dr. Biggs. I don't believe there is.
    Dr. Swagel. I said we analyze the President's budget every 
year, and we do not analyze any Social Security proposals.
    Senator Scott. So he has no proposal to fix Social 
Security. One of the biggest issues he's the sitting President 
of the United States. That's the first question. In the budget 
when they came and talked about the budget, what was the 
response when anybody asked about what they were doing to fix 
Social Security? Did they say what they were doing when they 
came and talked about it? When the United States Office of 
Management and Budget (OMB) came and talked to this Budget 
Committee?
    Dr. Swagel. So I don't know. That's beyond the role of CBO.
    Senator Scott. We've sat here, we've taken, we've increased 
their budget by 2 trillion dollars in five years. Right now we 
could fix Social Security with some of that money. We would 
take 145 billion out, 2 trillion dollars, and there's not one 
thing that Joe Biden has done to fix it.
    Dr. Swagel. And just to make sure the 145 is the one year 
cash balance.
    Senator Scott. The budget is up 2 trillion dollars. Right?
    Dr. Swagel. Yeah. No, and of course we would analyze any 
proposals.
    Senator Scott. All right. So I mean I think what's 
frustrating here is we know this is one of the biggest issues 
we have. We've seen an unbelievable increase in our spending, 
and been nothing by this President to do anything to solve it. 
So, Mr. Chairman, I think we ought to go back to what Senator 
Johnson brought up. Let's all sit down and talk about this and 
our entire budget.
    If the biggest issue we've got is retirement benefits, 
which I think most Americans would say it's one of the top 
three issues they're dealing with. It's inflation, it's 
retirement benefits, and medical bills. And this Committee, I 
think we have every opportunity to solve it, so hopefully we'll 
take that opportunity, but I want to thank each of you for 
being here.
    Chairman Whitehouse. Senator Lujan, let me reassure Mr. 
Goss that we will wrap up after Senator Lujan. I know you have 
a very hard stop. You will be free to exit as I give closing 
remarks. You don't need to stick around for that. But do stick 
around for Senator Lujan's questions.
    Mr. Goss. I would not want to miss those. Thank you Mr. 
Chairman.

                   STATEMENT OF SENATOR LUJAN

    Senator Lujan. Thank you Mr. Goss. My line of questioning 
is for Ms. Romig as well, so I appreciate if someone has to get 
going as well, Mr. Chairman. Ms. Romig, my series of questions 
are yes or no's and it's about Social Security as a program. 
Yes or no, Social Security is an incredibly effective anti-
poverty program?
    Ms. Romig. Yes.
    Senator Lujan. Is it correct to say that Social Security 
keeps 22 million Americans out of poverty?
    Ms. Romig. Yes.
    Senator Lujan. In New Mexico it's about 122,000 people as 
well.
    Ms. Romig. That's correct.
    Senator Lujan. Yes or no, Social Security helps 50 million 
American seniors stay out of poverty?
    Ms. Romig. Yes.
    Senator Lujan. Is it true that without Social Security 38 
percent of seniors would live in poverty?
    Ms. Romig. Yes.
    Senator Lujan. Is it true that Social Security Disability 
and Survivors is one of most impactful anti-poverty programs 
for children?
    Ms. Romig. Yes.
    Senator Lujan. Is Social Security the primary life and 
disability insurance for almost all American children?
    Ms. Romig. Yes.
    Senator Lujan. In fact, Social Security is the primary life 
and disability insurance protection for about 480,000 children 
in New Mexico. Yes or no, Social Security lifts over 1 million 
children out of poverty each year?
    Ms. Romig. Yes.
    Senator Lujan. Social Security is also the most important 
source of income for the over 50,000 children living in New 
Mexico's grand family households. As we know more and more 
grandparents are raising grandkids, just to highlight that. Yes 
or no, with longer life expectancies, is it true that older 
Hispanics benefit greatly from Social Security?
    Ms. Romig. Yes.
    Senator Lujan. In New Mexico over 90,000 Hispanic 
households have received benefits. Is it true that without 
Social Security the poverty rate among Hispanic seniors would 
increase dramatically? The numbers I have are from 19 percent 
to 45 percent?
    Ms. Romig. Yes. That's correct.
    Senator Lujan. And nationwide Social Security lifts 1.3 
million older Hispanics out of poverty?
    Ms. Romig. Yes.
    Senator Lujan. Yes. Lastly, I also want to point out that 
in New Mexico, Social Security provides benefits to one in four 
tribal households, resulting in about 14,000 households 
benefitting. Mr. Chairman, the reason for my line of 
questioning is I appreciate the expertise on the Committee, and 
the questions that were asked before.
    I think often times we fail to impress the importance of 
some of these programs that we're talking about. I certainly 
agree with the assessment from Senator Van Hollen that all of 
us with our observation with the State of Union, that the 
largest applause line, or one of them came bipartisanly 
Democrats and Republicans, not just clapping, but standing and 
clapping when the President said we should not cut Social 
Security and Medicare.
    I agree with that. But it's also important to remember why 
these programs matter. And so as there are evaluations taking 
place associated with this President's budget proposals, many 
packages that we pass bipartisanly to make investments, 
historic investments in infrastructure across America. In the 
previous administration revenues were dramatically reduced.
    There was a tax package that came across then if I remember 
correctly, and I remember a lot of my constituents calling it a 
tax scam because what was promised was not delivered. Well that 
was like 3 trillion dollars, Mr. Chairman, if I remember 
correctly. So that plus where we are today, I mean math is a 
funny thing.
    A statistics professor once told me that numbers don't lie, 
but liars can figure to make the numbers look like whatever you 
want. And I certainly hope that as we get to the bottom of 
this, I always have a simple approach, Mr. Chairman, that if 
indeed we all believe that these programs are better, and that 
we should find solutions that we develop them, put them on the 
table, stipulate a set of facts, and negotiate from there and 
move a package forward that is going to be good for the 
American people.
    And so with that, Mr. Chairman, I want to make sure that I 
am respectful to Mr. Goss. I'll yield back the balance of my 
time. I appreciate everybody being here, what you spent your 
lives doing, and which you continue to do. Let's just go and 
fix it. Let's make it better for everybody. Thank you Mr. 
Chairman.
    Chairman Whitehouse. In response to the comments that have 
been made by a number of senators regarding further 
conversations on this question, I would point out that 
President Biden made a proposal, which is that we solve the 
Social Security problem without benefit cuts.
    That's a pretty significant piece of the overall solution, 
and it received a bipartisan standing ovation in the State of 
the Union, so I think he's had a pretty significant 
accomplishment in that regard. As to how we fill in the revenue 
gap that results, I have a proposal. It is the subject of this 
hearing. Mr. Goss, who was the actuary for Social Security has 
reviewed it, and it's called the Medicare and Social Security 
Fair Share Act.
    It is available for everybody to look at, kick the tires, 
fight about it, do whatever you want. If we are going to have a 
conversation of some kind that is not going to happen unless we 
have a Republican proposal to work with, something that is 
distinct and clear and in writing.
    I've spent enough time in the Senate to think that 
freewheeling chat among Senators is rarely productive. Actual 
bills, actual proposals are the things that lead to actual 
agreements. So if we start getting actual Republican proposals 
to our agreements, I'm more than happy to work with my very 
distinguished Ranking Member and friend, to figure out how we 
conduct negotiations and go forward, but in the meantime I 
think that would be the logical next step.
    I thank the witnesses for appearing before the Committee. 
Your full written statements will be included in the record. 
Without objection, I enter into the record the estimate from 
Chief Actuary Goss of the Medicare and Social Security Fair 
Share Act, showing that the bill would ensure Social Security 
solvency for more than 75 years.\8\
---------------------------------------------------------------------------
    \8\ Statement submitted by Chairman Whitehouse appears in the 
appendix on page 118.
---------------------------------------------------------------------------
    Without objection, I enter into the record the letter from 
the National Education Association in support of raising 
additional revenue for Social Security and strengthening the 
program's benefits.\9\
---------------------------------------------------------------------------
    \9\ Statement submitted by Chairman Whitehouse appears in the 
appendix on page 140.
---------------------------------------------------------------------------
    Questions for the record are due by noon tomorrow, and we 
ask the witnesses if they receive such questions to respond to 
those questions within seven days of receipt. Ranking Member is 
already up and going, so I guess there's no further business 
before the Committee. The hearing is adjourned.
    (Whereupon, at 11:52 a.m., Wednesday, July 12, 2023, the 
hearing was adjourned.)

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