[Congressional Record Volume 141, Number 59 (Thursday, March 30, 1995)]
[House]
[Pages H4016-H4023]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                              {time}  1530
                             GENERAL LEAVE

  Mr. GUTKNECHT. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days in which to revise and extend their remarks 
on the subjects of my special order this evening.
  The SPEAKER pro tempore (Mr. Fox of Pennsylvania.) Is there objection 
to the request of the gentleman from Minnesota?
  There was no objection.
   [[Page H4017]] Mr. GUTKNECHT. Mr. Speaker, I think it is appropriate 
that, as a freshman, the gentleman from Arizona [Mr. Shadegg] and the 
gentleman from New Hampshire, also a freshman, are here to talk a 
little bit about some of the problems confronting our government.
  Mr. Speaker, last year in the November campaigns many of us talked 
about the fiscal problems confronting the Federal Government. As a 
matter of fact I remember talking to my constituents and saying 
directly that there is time to turn this country around but there is 
not much time.
  Since I have come to Washington the last 3 months, I have recognized 
that those words were even more true than I thought. As a matter of 
fact, as we began to look at the problems we face relative to the 
national deficit, relative to the various Federal trust funds, as a 
matter of fact, I have learned in the last several weeks when we had a 
debate earlier about the balanced budget amendment and people talked 
about the Social Security trust fund and how we had to preserve the 
integrity of the Social Security trust fund; but the unvarnished truth 
is if you take the Social Security trust fund and look inside it, what 
you will find essentially is IOU's from the Federal Government.
  In fact, I am told now there is something like 160 different trust 
funds and essentially in each of those trust funds you will find 
exactly the same thing: IOU's from the Federal Government.
  I would like to show some charts we have made. I will go to the one 
on the national debt itself. This chart indicates just how serious the 
problems that this government and ultimately our people confront.
  Now, this first chart I want to show, and I think it is important for 
the American people to understand exactly where we are right now and 
where we are going.
  Now, the numbers that you see on the chart are from the Clinton 
administration themselves. What they show is the actual accrued 
national debt today of approximately $4.6 trillion. That is in 1994.
  Now, using their own numbers and their own budgets, they are 
projecting that the national debt will be $5.3 trillion in 1996, $5.6 
trillion in 1997, and it continues to increase to $6.7 trillion by the 
year 2000.
  Mr. Speaker, we said it before, but I think it bears repeating, we 
are literally mortgaging our children's future, and I think we know 
they will not be able to make the payments.
  Now, the next chart shows the year 2001, if we do not get control of 
our national debt, if we do not stop spending more than we take in. As 
a matter of fact, I think this year if you take the on-budget and the 
off-budget items--in fact, I carry it with me--taking both of those 
items, one of the things I have learned since I came to Washington is 
that we have gotten ever more creative in taking some things off 
budget.
  But if you take both the off-budget and the on-budget items and put 
them together, this year we will spend, if you divide it by the number 
of days, hours, minutes, and the number of seconds, it works out, if my 
calculator is correct, to $9,195.84. That is how much this government 
will spend each second more than it takes in. That is how serious the 
problem is.
  You can see by the second chart, if we do nothing by the year 2001--
again, these are not our numbers, they have either come from OMB or 
Congressional Research Service--if we do nothing by the year 2001,
 the Medicare plan, the Medicare trust fund, if you will, will be 
insolvent. If we do not take action by the year 2012, we will only be 
able to pay for interest and entitlements. If we continue to delay 
action, by the year 2015 the Social Security disability income program 
will be insolvent.

  Worst of all, if we take no action by the year 2029, the Social 
Security fund itself will be out of funds.
  That gives you some idea of how serious those problems are.
  Now, on the next chart we want to talk a little it about this item: 
The principal thing we want to talk about is the Federal pension plan. 
Let me say from the outset, Mr. speaker and Members, we are not here 
today to blame the Federal employees. As a matter of fact, as freshmen, 
we start with this whole issue with clean hands. But I think the 
American people and even the Federal employees need to understand how 
serious the problem is.
  Currently, the Federal Treasury is spending $19.8 billion per year 
just to fund the pension promises of previous Congresses. It works out 
to $1.6 billion per month, or $553 million per day. Mr. Speaker, this 
is a serious problem.
  I became interested because in my time that I spent in the Minnesota 
Legislature, I had an opportunity to serve on the Minnesota pension 
commission. I do not think there is anything worse than promising 
pension benefits and then refusing to fund them. I think it is the most 
hollow of all promises and, in fact, the cruelest of hoaxes.
  With that, Mr. Speaker, I yield to my colleague, the gentleman from 
the State of New Hampshire [Mr. Bass].
  Mr. BASS. I thank the gentleman for yielding to me.
  Mr. Speaker, I appreciate this opportunity to demonstrate, in effect, 
what term limits is all about, by working example. we have here a group 
of freshmen, some of us have experience in working in retirement 
systems in our own home States, others of us have experience in other 
areas relating to pension systems either in our business or elsewhere.
  But we come to Washington with a certain set of principles and 
understandings about finances and how financial retirement systems are 
supposed to work.
  As a freshman member of the Committee on Government Reform and 
Oversight, I was proud to be appointed the vice chairman of the Civil 
Service Committee. One of the first issues we took up in the course of 
these duties was to look at the Federal retirement system. As my able 
colleague from Minnesota so perceptibly stated, we have a serious 
financial problem in this country. But what we have also is a hidden 
problem, and a very serious hidden problem, in our Federal retirees 
pension program.
  As the gentleman from Minnesota pointed out a minute or two ago, this 
Federal retirees pension program is losing, or the Federal Government 
is shelling out on a monthly basis $1.6 billion. That is cash being 
shelled out to pay for Federal retirees.
  As the gentleman from Minnesota mentioned, this is not to say or to 
cast aspersions upon any Federal retiree. What we say as freshmen is 
that something went wrong in this Congress when we were planning for 
the Federal retirement system, how to run it, and so forth. I do not 
know of a retirement system that would run $540 billion in deficit and 
be able to say it works correctly. This is Washington mentality, that 
is ``inside inside the beltway'' mentality; $19.8 billion a year is 10 
percent of our entire operating deficit in this one program alone.
  Ladies and gentleman, I think we have to look at this program, we 
have to look at it now. It is not easy working on Federal retirees 
pension, Social Security, and so forth, because you are affecting good 
people who put in years of service to their country and deserve a fair 
pension. But if we do nothing about this, we are going to be talking 
about significant increases in Federal liability over the coming 
months.
  The Committee on Government Reform and Oversight has proposed, its 
Subcommittee on Civil Service, one part of the solution is raising the 
employee contributions to this program across the board by 2.5 percent 
over a period of 3 years. That would have raised approximately $11.5 
billion over 5 years.
  Bear in mind that we are talking about over $100 billion deficit, 
probably more than that over 5 years, but we are trying. There has been 
a lot of controversy associated with this piece of legislation. But we 
need to understand, whether you are a Federal employee, whether you are 
a citizen of this country, or whether you are a Member of Congress, 
that the time has come for us to make priorities and
 make rational financial decisions about systems in the U.S. Government 
that are out of whack. This is certainly one of the worst.

  I might make a couple of references here. Of the $1.5 trillion annual 
budget that this Government operates, 10 percent of it, or $150 billion 
a year, goes into Federal salaries and benefits.
  Now the Federal employees, if we can take a look at another chart 
here, 
[[Page H4018]] their contribution to retirement benefits has been 
steady and is projected to do so for the next 30 years.
  But look what happens to the Treasury Department contribution. It 
skyrockets. That spells disaster. I would hope that this country will 
rally behind each and every Member of Congress, especially those of us 
who are concerned about the long-term financial viability of this 
Government, about being able to, as has been said over and over again, 
give to our children a Government that is as good as the Government 
that we have been experiencing, the way of life we have experienced for 
the last generation, and you will help us make these difficult 
decisions to bring programs such as the Federal retirement system that 
is so dreadfully broken at this point, that will generate--we will have 
to pay in 30 years over $160 billion a year to fund it--to help us make 
these corrections now. Otherwise they are going to be 10 times worse in 
future generations.
  These are not easy decisions. These are not easy decisions. There is 
nothing great or wonderful about having to deal with these difficult 
problems. Nobody is made popular by this.
  But as freshmen, we Members of Congress feel that the time has come 
for the rubber to hit the road and for us to get to work in solving 
these problems.
  Mr. GUTKNECHT. I thank the gentleman for his comments. I wonder if we 
can talk for a minute about this graph because I was never particularly 
good in math. But you can see the geometric progression here. If we do 
not get control of this program soon, it is going to get just 
completely out of control. That is one of the things that concerns me.
  We can again come to this whole issue with clean hands as freshmen 
Members of the Congress. But I say to you previous Congresses just made 
promises which are going to be next to impossible for us to keep in the 
future.
  I want to correct the record because I think there is a misplaced 
decimal point in this particular chart. At the bottom it should be 
53.3. There should be a decimal behind the first 3. It should be 53.3, 
not 533.
  Now, while that does change the nature of the numbers, it does not 
change the nature of the problem.
  I yield to our distinguished colleague, the gentleman from Arizona 
[Mr. Shadegg].
  Mr. SHADEGG. I thank the gentleman for yielding.
  Mr. Speaker, I compliment the gentleman from Minnesota and his 
colleagues from New Hampshire and Florida for bringing this matter to 
the attention of the American people. It is indeed a serious problem.
  Mr. Speaker, I rise to add my voice to those who are calling for us 
to reexamine the Federal retirement programs.
  I also would like to reiterate what my colleague from Minnesota said 
at the outset, that this is not a blame exercise. It clearly is not the 
fault of Federal employees. If it is the fault of anyone, it is the 
fault of prior Congresses that we are in this situation. But again, 
this is not a fault exercise but rather an exercise in determining what 
America needs to do now, indeed what the Congress needs to do now about 
this problem.
  Regrettably, the story is not good. It is a difficult problem, 
growing much worse over time, as we will talk about. It is, sadly, a 
very familiar parallel with many other Federal benefit programs and 
entitlements programs.
  Now, if you look at welfare, regrettably, look at Social Security, 
and a wide array of entitlement programs, prior Congresses have made 
promises about benefits and indeed have allowed benefits to grow and to 
grow over time, but they have failed to be responsible in a fiscal way. 
We have failed to require that the other side of the equation be funded 
or balanced. They have failed to provide the funding necessary.
  Let us look, for example, at the Social Security system.
                              {time}  1545

  As we know, as is common knowledge, the Social Security system in 
America will run out of funds early in the next century. Why? Because 
we have ever increasing benefit levels without proper funding without 
the revenue to pay for those. If Congress continues to ignore that 
problem, it will threaten our freedom, it will threaten the solvency of 
this Nation, and it will be irresponsible, and the Federal retirement 
program, which we are here talking about today, is very much like that. 
It is a similar pattern where the Congress has added benefits and given 
out payments and then not provided a funding mechanism.
  If we take a look, we will find that we have promised not only 
increased benefits, but also COLA's, or cost of living adjustments, 
without footing the bill. Let us stop for just a minute, however, and 
take a look at history.
  The history in this area was in some way a positive one. From about 
1920 to 1969, Mr. Speaker, our Federal retirement system was properly 
funded. It was on a sound fiscal basis where the moneys that were being 
paid out were adequately being funded by a combination of employee and 
employer contributions, as they should have. The system in that time 
was structured to where the Government and the employees roughly shared 
an equal split 50-50. The employee, Federal employees, paid half the 
cost of the retirement program, and the Federal Government paid the 
other half.
  Unfortunately that remains not the story today. What we have done is 
that we have allowed the system with amendments enacted roughly 26 
years ago, in 1969, to grow dangerously out of balance. What has 
occurred is, where we once had a system with 50-50 funding, employee 
and employer, we now have a system which is closer to 30-70. The 
employee contributes about 30 percent of the cost; the employer, about 
70. The taxpayer of America is shouldering this dramatically increased 
burden.
  But worse then that, Mr. Speaker, we have added another problem on 
top of it, and that is the problem of COLA's. What we have done is we 
have created this concept of automatic, annual COLA's for all Federal 
employees, and beyond that we have established those COLA's at times at 
a rate even greater than the Consumer Price Index. That would be fine 
if we had provided a funding mechanism. Unfortunately we did not.
  Let us take a look, by comparison, to the private system. This 
Congress in past years, taking a look at America and America's 
businesses, has passed very strict laws to govern private pension 
plans. Those laws say that, if you are going to establish in your 
business a private pension plan, you must follow a strict formula and 
fund that pension plan We recently passed on the floor of this Congress 
a bill that my constituents thought was a great idea, and it was a bill 
that said all of the laws that govern America and America's businesses 
also ought to apply to the U.S. Congress and its Members, a great 
concept. If we are going to require it of the American people, we ought 
to require it of ourselves.
  Well, let me tell you, if we took America's pension law, which is 
known as the ERISA law, and applied that to the Federal pension plan 
that we are talking about here today, the taxpayers would have an 
immediate, unfunded obligation to come up with $1 trillion in cash 
today. If we applied the ERISA standards to the Federal pension plan, 
we would have to come up with $1 trillion cash. We cannot do that.
  This chart which my colleague from New Hampshire mentioned and my 
colleague from Minnesota discussed in a little detail I think 
illustrates exactly what is going on, where at one point it was a 50-50 
mix of employee and employer contributions, it now has grown to what 
you see. If you follow the path of this chart, you will see that the 
darker blue color at the bottom is the employee contribution. For about 
the next 35 years it stands at a fairly constant level, at about $4 to 
$5 billion a year, but the drama of the chart, what is so shocking in 
the chart, is the red, and that is the proportion paid out of the 
Federal Treasury, and let me just highlight those numbers for a minute. 
It grows from $42.9 billion in the year 2000, roughly $43 billion here, 
to $67.9 billion by 2010--I am sorry, by 2030, and to a whopping $160 
billion if we allow the system to go without correction to the year 
2030. What that means is that we have got a serious taxpayer fallout.
  Who pays the burden? Right now the other chart shows it. Last year 
alone, to fund this system, the Federal Treasury had to come up with, 
and this Congress had to appropriate, an additional 
[[Page H4019]] $26 billion from the Treasury to supplement the 
employees contribution. We cannot do that.
  Now let us do another comparison of private to public and get a 
similar idea of our pension plan at the Federal level versus what a 
typical one at the private sector would be. By any standard the pension 
plan we have established for Federal employees is a very generous one. 
Sadly it is one which these charts illustrate is going broke. In the 
private sector on average Federal pensions are smaller and not as 
generous.
  Let me take one typical example. Typically in the private sector 
retirement age is 62, and if some employee chooses to take early 
retirement, they get a reduced pension. By comparison, in the Federal 
system the retirement age is not 62, but is rather 55, and although 
that is a significantly younger age than would be comparable in a good 
private sector plan, they get not a reduced pension at age 55, but a 
full unreduced pension at age 55.
  But perhaps though a shocking comparison is the one between COLA's at 
the Federal level and COLA's within the private system. Federal 
pensioners, as I mentioned, have now gotten into a system where they 
receive, and have become dependent upon, annual, automatic COLA's, and 
they are keyed to the Consumer Price Index at the rate of 100 percent; 
that is, the CPI dictates that the COLA is 100 percent of the Consumer 
Price Index. By contrast, in our committee, the Government Reform and 
Oversight Committee, we recently had testimony from a witness talking 
about the Dupont Corp's COLA's and about their pension plan. In the 
private sector that testimony established that COLA's are given not 
automatically, but rather when called for. They are not given annually 
each year, and they are not given at a level of 100 percent of the 
Consumer Price Index. On average they are much closer to about 50 
percent of the Consumer Price Index, and that is in generous plans that 
go well, and that does not even mention the plan that in many instances 
the private sector employers do not even provide a retirement plan.
  The bottom line here is we have had 26 years of out of control 
Federal spending. The taxpayers cannot be responsible for irresponsible 
planning by the U.S. Congress. We cannot continue to defer our 
responsibilities to future generations. What we have got here 
ultimately is a moral problem, a moral problem of asking our children 
and our grandchildren to pick up the tab for our refusal to pay for 
what we have promised, and that is the bottom line.
  No one is asking the Federal employees to share the burden of solving 
this entire problem. That would not be fair or responsible, but what we 
do need to do is move toward a more reasonable balance between the 
funding of this system and the benefits which are provided, and every 
day that Congress fails to act in that way, every day that we continue 
to allow this kind of irresponsibility to go on in the Federal 
retirement system, we are doing a disservice, a disservice not just to 
the taxpayers, but a disservice to the Federal employees who are going 
to rely and are relying on that. We cannot make changes which would 
dramatically affect those who are close to the age of retirement. We 
cannot ask them to pay for Congress' irresponsibility. But we can begin 
the process of bringing some sense of financial sanity or reason back 
to what is clearly a radically out of balance system, one which is 
improperly funded and would be criminal were it judged by the standards 
we apply to private employers.
  I thank the gentleman.
  Mr. GUTKNECHT. Mr. Speaker, I thank the gentleman from Arizona [Mr. 
Shadegg], and I think the gentleman from New Hampshire had a question 
that he wanted to pose. I ask the gentleman from Arizona if he would 
stay there for a minute and have a little discussion.
  Mr. BASS. Those of us who have been involved in the private sector, 
as we have, I was intrigued by a comment that the gentleman made. 
Certainly Federal employees are good employees, and they do important 
jobs and do the work of the Government. But I heard you say, and I 
think you should repeat it for everyone's benefit, that most small 
businesses do not have any pensions at all. You have your IRA, you have 
whatever you can save, and you do not know whether you are going to 
have a job next Monday, let alone next year.
  Mr. SHADEGG. I mean indeed that is, in fact, true, and it is not 
something that I think is a great attribute, but in point of fact only 
large employers in America provide pension plans. Many of them do not 
even do that. While we might all wish that the small employers of 
America, which make up the backbone of America, could establish this 
kind of plan, they simply cannot, and in those jobs, and in people 
working for small businesses across America, all too often are, or at 
least in almost all cases, those employees are asked to be responsible 
and to look after their own retirement. They get Social Security,
 but they are expected to look beyond that and to fund it themselves.

  We have done, and I think we should do, the responsible thing by 
Federal employees, to establish a system which assists them in this 
way, a system which is comparable, or should at least be comparable, to 
a private sector system, but we cannot promise them radically better 
than the private sector system especially if we do not fund it, and 
indeed we cannot fairly ask the taxpayers of America to fund a system 
which gives benefits way in excess of what even the best private sector 
employers provide.
  Mr. BASS. Well, I am sure the gentleman from Arizona [Mr. Shadegg] is 
aware of the fact that in the course of our committee hearings we heard 
significant testimony from representatives from the Federal employees 
who represented that it was difficult to exist in many instances as a 
Federal employee, and the pension system is a very necessary and 
important part of a Federal employee's compensation package, which I 
think is certainly commendable. However, we are also made aware of the 
fact that the quit rate for Federal employees is zero, technically 
zero, after 10 years, zero, and it just so happens that the retirement 
system vesting is 5 years. And we know, if you live an any small town 
in this country that when the job opening occurs in a Federal position, 
people in towns and cities across this country fall all over themselves 
to get these positions, and it seems hard for me to believe, and 
perhaps you would agree with me, that this is particularly difficult 
working conditions or tough employee--you know, that the pay and 
benefits is--would create a situation in which there would be a large 
supply, but very little demand. It seems to be the opposite of that, 
and certainly, as I recall, the average pension for Federal employees 
is over $1,500 a year, and a Social Security recipient receives--excuse 
me, over $1,500 a month--and the average Social Security recipient 
receives less than $600 a month. There is certainly a disparity, so I 
am sure the gentleman from Arizona would agree that it is important to 
compare apples to apples here in the way the real world--most of 
America exists in this world, which is in the private sector, working 
for small businesses where there are no pension plans at all.
  Mr. SHADEGG. There simply is no question but that we owe it to the 
Federal employees to create a fair system, and I do not think they are 
asking us for any more than that, but we owe it to them, and we owe it 
to the taxpayers, to make sure that that fair system is comparable to 
what would exist in the private sector and is funded. If we could pass 
a law like ERISA and say to a private employer it is a crime for you to 
underfund your program, and you cannot even establish your program 
without our approval and your proof that it is funded, then we owe it 
to the public sector employers, employees, and to the taxpayers who 
foot that bill to do the same and to live up to that standard.
  Reform is necessary; that is evident. The subsidy of $1.6 billion a 
month, over $18 billion a year, 10 percent of the annual deficit, is 
something simply we cannot ignore, we cannot shut our eyes to it, and 
we have to get down in the trenches and discover a fair--and negotiate, 
come to a reasonable solution to this problem.
  I thank the gentlemen and compliment them.
  Mr. GUTKNECHT. I want to point out just a couple of things before I 
yield to the chairman of the Civil Service Subcommittee about this 
chart. I assume that those numbers are in constant dollars, and if we 
see an inflation 
[[Page H4020]] rate into the future, we could see those numbers 
significantly worse in terms of total numbers than they are, and I 
think that is one of the real scary facts. If this is in constant 
dollars, how bad can things get if the inflation rate begins to pick up 
again into the future? And again, just to stress, this is not about 
punishing Federal employees. The mistakes have been made, but I think 
the Representative from Arizona made such a good point about ERISA.
  You know we have very strict regulations on privately run pension 
plans, and my sense is that whether there would be indictments I do not 
know, but there certainly should be an investigation if Congress had 
been covered by the ERISA laws over the last number of years in making 
these promises without funding them.
  With that, Mr. Speaker, I would like to yield to the chairman of the 
Civil Service Subcommittee, the gentleman from Florida [Mr. Mica].
  Mr. MICA. Mr. Speaker, I thank the gentleman from Minnesota [Mr. 
Gutknecht] for yielding, and I just want to make one comment to the 
Speaker and also to my colleagues in the House.
  You know the regular order of business of the House of 
Representatives has concluded, and we are involved in special orders 
this afternoon. Some of the Members are already on their way to their 
families or back to their districts for the weekend.
                              {time}  1600

  We concluded the normal business, but, you know, sometimes you get 
dismayed about the process here in Congress. But I have to say that I 
want to commend the gentleman from Minnesota [Mr. Gutknecht], the 
gentleman from Arizona [Mr. Shadegg], and the gentleman from New 
Hampshire [Mr. Bass], who serves as vice chairman of the Subcommittee 
on Civil Service which I chair. These are three new Members of 
Congress, and my colleagues, Mr. Speaker, and the American people can 
take heart that we have representatives like this that will stay to 
discuss this issue.
  Now, this is not the juiciest issue to come before the Congress, and 
it does not have people clamoring in the rafters, but this shows you 
the caliber, the dedication that we have now serving and level of 
responsibility we have serving in the House of Representatives. I, as 
chairman of the Subcommittee on Civil Service, did not initiate this. 
These new Members initiated this because they wanted to bring to the 
attention of the House and the American people one of the things that 
we uncovered.
  You know, we have a new majority here, and we found many things in 
the past month, 2 months that have been swept under the table. This 
clearly is something that needs the attention of this Congress and that 
needs action on a bipartisan basis to resolve.
  I have been told that the good news is I am in the majority and I was 
named chairman of the Subcommittee on Civil Service. The bad news is I 
am responsible for the retirement system for Federal employees. And the 
further bad news is that we have a $540 billion Federal unfunded 
liability to that fund.
  Now, we really have two problems in addition to what I just 
described, and again I have described a half a trillion dollar unfunded 
liability. We have an annual outflow, and I think these charts show it. 
Right now, it is $19.8, between $19.7 and $19.8 billion a year from the 
General Treasury to support not the unfunded liability but to make this 
solvent on a month-to-month and year-to-year basis.
  It would be bad enough if this $19.8 billion was just for this year, 
but the projections you have seen and they have shown you from these 
charts are absolutely startling. In fact, the system, the old system, 
and I will describe that in a second, runs out of money in the year 
2008 by the projections of this administration.
  Now let me back up, if I may, and tell you a little bit about the 
retirement system from a historical perspective. First of all, we had a 
Civil Service Retirement System, and that is known as CSRS, and that 
existed until about 1985. Most of the employees who are in retirement, 
about 1\1/2\ million Federal retirees are in the old CSRS system.
  I will say that the Congress recognized in 1984, 1985 that there was 
a growing problem and an unfunded liability and the program was out of 
control, just as they have recognized from time to time we have the 
same problem with Social Security. So what they did is they created a 
new program, and most of the Federal employees from 1987 forward, about 
the last 8 years, all belong to part of that new program. It is called 
FERS or Federal Employee Retirement System. So we have two systems.
  However, they combined all of the retirement funds into one fund, one 
retirement trust fund. What they did not do in 1985 and what we have a 
difficult time sobering up to do and this Congress will not face up to 
the responsibility right now of is making certain that we meet the 
financial responsibility on a
 year-to-basis and then also do something about this potential unfunded 
liability.

  I proposed, and, you know, we have heard many things commented on by 
public employee groups and others that Chairman Mica has proposed this 
bad thing or this cut or that cut and he is going to cut COLAs. Let me 
tell you what I came up with as a solution and recommended to our 
Subcommittee on Civil Service.
  I said, well, we have this $19.8 billion annual outflow from the 
Treasury, about $20 billion. Why do we not have the employees increase 
their contribution? And we do not do it all at once. We propose to do 
it, I propose to do it, I propose to do it 1 percent, a half a percent, 
then another percent so we get up to, from 7 percent, the current 
contribution, to 9\1/2\ percent in a period of 3 years. I would like to 
have projected it out even further, but be thought that was a 
reasonable approach.
  We did not touch COLAs. We did not touch potential 2 percent pay 
increases. We did not touch locality pay. We did not change the terms 
of retirement.
  Now, what we did was we adjusted this $19.8 billion annual outflow 
from the Treasury. Now, that did not do anything really do adjust the 
unfunded liability. The only thing that we did that affects benefits or 
any calculations in any way is we changed calculating what is now the 
high 3 years of service, the amount that an individual earns, to the 
high 5 years. That does make a small dent in the unfunded liability.
  so we addressed the annual outflow again of the $20 billion. We did 
it fairly. We increased it gradually. We put part of the burden, about 
half of it, on the Federal employer. We put about half of it on the 
Federal employee. That is all we did.
  We did not propose, again, any cuts in COLAs or any other benefits, 
and I am really irritated by some of the employee groups that have sent 
out a message to the contrary. We tried to act as a new majority in 
this Congress in a responsible fashion to get this House in order.
  Now, let me say that I recently saw the opposition circulate, the 
opposition to my proposal circulate a letter from CRS [Congressional 
Research Service], that tried to justify that there was no need to take 
any action, that all this will work out.
  I am taking here, and this is not as fancy as the new Members of 
Congress have proposed, a page from the Office of Personnel Management 
Annual Report. This is 1993, produced by the administration. Now, they 
say here $540 billion unfunded liability.
  Now, we could call this a rose, and by any other name it is still a 
rose. This is $540 billion unfunded liability, no matter how you cut 
it.
  Now, you want to hear the really bad news? They say that there is 
plenty of money coming in and that there is money in reserve. Guess 
what I found out when I checked into where the reserves are? Ninety-
seven percent of the reserves of the employee retirement fund are 
really in nonnegotiable instruments, really instruments of indebtedness 
of the U.S. Treasury.
  So if the public employees look in there or retirees look in there, 
there is no real solid basis for this. And this Congressional Research 
Service report said that there is no problem. That was produced by the 
opposition to our plan, says, well, we do not have to worry because it 
is funded by the taxpayers.
  Well, that is the problem, and this situation is a microcosm of the 
bigger situation. We do not have to
 worry about it. We do not have to worry 
[[Page H4021]] about the debt of this Nation. We do not have to worry 
about waking up tomorrow and having our dollar, like the peso was worth 
60 cents on a dollar, because it is funded by the taxpayers. But this 
bait and switch, this failure to face up to reality, will catch up with 
us.
  Now, I could ignore this. I do not like being politically unpopular 
with Federal employees or retirees. I do not like the marching on my 
office or saying that Mr. Mica is a heartless individual.
  But the responsible thing for us to do and the responsible thing that 
these new Members have done at this hour, this late hour, is come 
forward on their own and said, we have a problem, we need to face up to 
this problem, we need to resolve this problem. So this is what we have 
done. This the Administration's proposal.
  Even the Administration in its budget submission, and I just got 
through testifying to the Committee on the Budget on this, has stated 
that we need to do something to better reflect this. Now, what they do 
is play a game, and they propose that we shift the $19.7 billion back 
to each agency's budget. Well, we do that, but the $19.7 billion still 
comes out of the taxpayer pockets.
  Now, I said, let us be fair. Let us make sure that we do not make the 
same mistake that was made by our predecessors. Let us put this money 
into a retirement fund and have some actual assets in the retirement 
fund and not play games with it. So we set our house in order from this 
point forward.
  So that was my proposal. That is what we have said. We have not, 
again, proposed any damaging cuts. We felt that there might be an 
opportunity in this Congress, even with the constraints that we are 
under, to keep our commitments on COLAs.
  And no one has advocated stronger than I have in this House that if 
we do anything with COLAs we do it across the board and we limit 
increases. We do not cut COLAs. We do not cut our commitment to people 
who have served this Nation well or who have worked as civil servants 
and deserve to see us keep our commitment. We do not do anything that 
will harm these people or the prior commitments of prior Congresses or 
commitments that we should keep.
  So that is what we have done. I proposes the plan that you heard, 
again, that would help solve a little bit of the unfunded liability and 
the outflow on a reasonable basis, it is now in the hands of the 
Committee on the Budget. They are adopting, I hope, most of our 
proposal, but it is not an easy thing.
  Politically, it is easy to ignore. No one wants to be disliked 
because they are going to increase employee contributions. But I will 
tell you what it is. It is the right thing. It is the responsible 
thing. It is the type of action that has been ignored too long by this 
Congress, whether it is in its entire budget or in this little 
microcosm, the retirement system.
  So I urge my colleagues to act responsibly, to work in a bipartisan 
fashion. And the thing about this is, let me tell you that this is not 
the end of the story. There is more to this story, because we are going 
to still have to come back and address this unfunded liability.
  It is my determination as Chairman of this Subcommittee on Civil 
Service to bring the fiscal house of this retirement fund in order. We 
will bring in actuarials. We will bring in other individuals. We will 
calculate in now the downsizing of the Federal Government which we ask 
OPM that they calculate it in
 that the President is recommending 272,000 cuts.

  In fact, we took some of the funds out of the crime bill to fund the 
crime bill out of the budget, and we must cut those positions. We have 
not calculated in what the other body is saying, cutting half a million 
positions. We have not calculated in what the White House is saying as 
far as further reductions in the scope or other Members of Congress or 
even the freshmen Republican class has come up to abolish four or five 
agencies. They have not calculated in the equation of these additional 
cuts.
  So this is where we are, and this is where we are going, and this is 
what we failed to do.
  But, again, I want to commend each and every one of these new Members 
for coming forward, for organizing this special order, for setting in 
the record of the Congress what the situation is, what our commitment 
is, what we have proposed and what needs to be done.
  So, with that, I commend the gentleman from Minnesota, Mr. Gutknecht, 
and the vice chair of the Subcommittee on Civil Service, Mr. Bass, for 
their action, for their commitment to getting the fiscal house of this 
Congress and this retirement fund in order.
  Mr. GUTKNECHT. I congratulate the gentleman from Florida [Mr. Mica], 
because, as the gentleman said, this is not a particularly popular 
issue. We are really talking about some facts and figures that a lot of 
people do not want to hear and numbers and a program that has been 
swept under the rug for so long.
  In fact, when I went into the first meeting and was briefed on what 
was happening with the Federal pension plan, having served on the State 
pension commission back in Minnesota, I was alarmed. And then when I 
went into the committee room I was angry.
  I will tell you why. Because, first of all, I was alarmed to see how 
big the problem was and how the Congress in the past has just swept all 
of this under the rug. And I was angered because it was clear to me 
when we went into that committee room that this issue was going to be a 
partisan issue. I think that is unfair to the taxpayers, and I think it 
is unfair to the Federal employees.
  The way we dealt with pension policy back in Minnesota was with a 
bipartisan from the house and senate, a bipartisan pension commission. 
I hope that one day perhaps we can look at that for here at the U.S. 
House of Representatives, the U.S. Senate, some kind of a bipartisan 
group that can meet together and work out long-term strategies and put 
these programs on a long-term fiscal solvency basis. Because I think 
what we have been doing or what has been done in the past is wrong.
  Mr. MICA. Will the gentleman yield?
  Mr. GUTKNECHT. Absolutely.
  Mr. MICA. Well, you know, again, I think that we need to approach 
this on a bipartisan basis, that we need a resolution to this, that I 
do not like the other side or anyone going and telling employees that 
we are going to do things that we are not going to do to them.
                              {time}  1615

  Instead, they should be transmitting information that we have a 
problem and we need to deal with it. I am willing, as chairman of this 
subcommittee, and with this responsibility, an I know the gentleman 
from New Hampshire, [Mr. Bass] extends the same invitation to meet with 
any groups at any time if they have a better solution, if they have a 
better way of working this out.
  However, we cannot be in a state of denial. We cannot say this does 
not exist. We cannot ignore this and say it will go away. We have to 
act responsibly.
  I might add also that I saw something from one of the Postal 
Supervisors group that spoke in opposition to what we are doing. We do 
not even affect the postal system. They are taken out, and they do 
have, since they have changed their status, they have created a 
responsible system, a responsible contribution. They are not affected. 
Their 800,000, 900,000 postal employees are not affected. We are not 
proposing any change there. This is only current Federal employees.
  Mr. Speaker, again, this has not been changed since 1972. It is not 
like they have been hit every year on this. I know they have taken some 
other reductions, and it may not be fair, but the alternatives, I 
submit, are not very tasteful.
  Mr. BASS. Mr. Speaker, if the gentleman will continue to yield, as we 
well know, on the Committee on Post Office and Civil Service we 
listened to a number of days of testimony, mostly from Federal 
retirement groups. It is amazing to me that we are not in a position 
and we are not willing at this point to all get together, retirees, 
Federal employees, and Members of Congress, to address these issues 
together.
  We are not going to call a system that taxes the Federal Government 
on a monthly basis to the tune of $1.6 billion, we are not going to say 
that that system is fixed. We have to work together, Federal employees, 
everybody who receives a retirement check, and 
[[Page H4022]] those of us who are concerned about this program, 
because one day, as we say from those charts, when the cost of this 
programs reaches $160 billion a year, Uncle Sam just is not going to be 
there to pay it.
  Who is going to pay the price for that in the end? It is going to be 
all of us. It is going to be the Federal employees, Federal employees 
who are entering the work force now. They are going to be the ones that 
will not get a retirement check, because we will not have the money to 
pay for it.
  Mr. Speaker, I want to commend the chairman of the Committee on Civil 
Service for taking on this issue. It is a difficult issue. I's sure we 
all have both retirees and Federal employees in our districts who do 
not like to hear this kind of thing. However, believe me, we are 
working for the future of each and every person who is paying into the 
system now and who will benefit from it in the future.
  Mr. ZELIFF. Mr. Speaker, will the gentleman yield?
  Mr. GUTKNECHT. I yield to the gentleman from New Hampshire.
  Mr. ZELIFF. Mr. Speaker, I thank my colleague from New Hampshire, as 
well as my colleague from Rochester, MN. What a great thing it is to be 
working with the gentleman from New Hampshire, and with the good work 
you are doing on the Committee on the Budget.
  As a businessman, a former businessman that has been involved for the 
last 35 years of my life, Mr. Speaker, not only with the DuPont Co., 
running the Xerox antifreeze business, but in our own small business, a 
country inn up in the White Mountains, I would like to say, Mr. 
Speaker, when we look at government and we look at this monster, we 
look at things like the fact that we are $4.7 trillion in debt, we are 
going to add another $1 trillion to our debt over the next 5 years. We 
look at the fact that the interest on the debt is roughly 16 percent of 
the total available resources. Sixteen percent, as a business guy, I 
could not carry that with my business.
  If we look at the fact that in the year 2003 Medicare is going to go 
broke, in the year 2029 Social Security is going to go broke, in the 
year 2012 we are only going to have enough money to pay for the 
interest on the debt and the cost of entitlements, the red lights are 
going off all over the place. From a business point of view, we have to 
say ``Whoa, what are we going to do about it?''
  What we are going to do about it, we are going to stop the 
hemorrhaging, stop the bleeding. One of the ways to stop the bleeding 
is, hey, why should we have, if we are going to be a citizen form of 
government, we are going to be down here--and I voted for limited 
terms, for the 12-year version, as you all have, as 83
 percent of the Republicans voted for, versus 83 percent of the other 
side voted against--we have to not take as much money out in our 
pensions. Maybe we should not have any pensions at all.

  Last year I joined the gentleman from North Carolina, Howard Coble, 
four of us, that said ``Let's forgive our pension. Let us not take a 
pension.'' That is a good way to start. Let us lead by example. You 
know, how can we possibly justify haveing a special pension program for 
ourselves? We have to get that back in line to start with, to lead by 
example, and then we have to go with the Federal retirement system that 
is costing $1.5 billion a month, $19 billion a year. That is real 
hemorrhaging.
  What we can start out with, Mr. Speaker, is we can at least start out 
with, instead of the best 3 years, go to the best 5 years. We can start 
adding a little bit more, whether we get to the whole $19 billion or 
not. We can at least make an effort to get started.
  Mr. Speaker, this is one great place. Last year I started a little 
concept called A to Z. The gentleman will remember that. That is what 
we asked for. We asked for 10 days to do nothing but cut spending, to 
do it in front of the whole world to watch and judge us, as we did our 
work here.
  Let us take a look at some 1,200 programs. Let us get rid of those 
programs that do not work. Let us keep the programs that do work. This 
is one program we have to get back on track.
  I applaud all of you. I'm sorry I was detained at another meeting. I 
applaud you, Mr. Chairman, for the work, the hard work, that you have 
done on this thing. We look forward to the debate as it now moves 
forward. Hopefully we are going to be able to do some very solid 
pension reform.
  Again, it has to start with us first. We have to lead by example. We 
have to cut ours and make ours more in line with what everybody else 
out there is dealing with.
  Mr. BASS. If the gentleman will continue to yield, Mr. Speaker, of 
course you know, coming from the frugal State of New Hampshire, that we 
have a constitutional amendment that prohibits our State employees 
retirement system from operating with any unfunded liability 
whatsoever. It is not a law, it is a constitutional amendment.
  We also have an independent board that governs the employer-employee 
contribution, the investment policies and so forth, of our State 
retiree system, and the result has been that we have never had a 
problem that even approaches--we never had any problem with an unfunded 
liability.
  $1.6 billion a month, as the gentleman from New Hampshire well knows, 
is just about what the State of New Hampshire receives from the Federal 
Government in an entire year for every service that the State gets: 
Medicaid, food stamps, highway and bridge repair, everything. Yet this 
program, this Federal retirement program, is costing the taxpayers of 
this country more in a month than our home State of New Hampshire gets 
in a whole year from the Federal Government.
  Mr. MICA. Mr. Speaker, will the gentleman yield?
  Mr. GUTKNECHT. I think our time is about up, Mr. Speaker. I just want 
to say a few words.
  First of all, I want to thank the gentleman from New Hampshire, Mr. 
Zeliff and Mr. Bass, and the gentleman from Arizona, Mr. Shadegg, for 
joining me today.
  I would just say that I could have been on a plane on my way home 
right now, but I think this issue is so important, and I think it is a 
microcosm of all of the problems we have with Federal spending today. 
The old way that Washington did business was to just sweep all of this 
under the rug and pretend that it did not exist.
  Last November, I think the American people sent a whole new group of 
people here to Washington who would change the way Washington does 
business. I am proud to be a part of that change. And, it would be much 
easier to ignore this problem, to sweep it under the rug, but I think 
the American people and the Federal employees deserve better, because 
as I said earlier, we have mortgaged the future, and our children are 
going to have a very difficult time making the payments with that.
  Mr. Speaker, I'm going to yield for the last word to the chairman, 
the gentleman from Florida [Mr. Mica].
  Mr. MICA. Again, I do want to thank again particularly the new 
Members, and also my colleague, the gentleman from New Hampshire [Mr. 
Zeliff], for their leadership on this issue; for coming forward, for 
taking time to address this.
  This is not kind of the fun thing, it is not the fancy thing that 
will make the headlines, it is not
 the exciting issue, but it is the responsible issue. We came here, I 
think I came here--I have only been here 27 months, from the business 
community, to try to apply some business principles to what I saw here 
in Congress.

  I think you have also set a standard for doing that in particularly 
the freshman class. Again, acting in a responsible manner to try to 
bring our fiscal house in order, we are not here to impose any penalty, 
any tax on our Federal employees, but we want to work with them in a 
cooperative effort to bring their house, their house into order, and 
the fiscal house of this Nation into order, because we can't continue 
to spend the way we are spending.
  We can't continue to sweep these problems aside and ignore these 
problems. We've got to address these problems, face up to these 
problems, and look for sound solutions to resolve these problems.
  I will tell you, I have sat on corporate boards, and in a corporate 
board, if these facts were brought before us it would not take us more 
than 15 minutes to make a decision on how 
[[Page H4023]] to face up to this. Mr. Speaker, the alternative in the 
private sector would be, again, you would go to jail, because you would 
violate the ERISA laws and standards set up by this Congress.
  The only difference is this is a public entity, so we are not here to 
impose any harm, we are not here to impose any tax, we are here to say 
that, you know, the piper must be paid; that we can't continue robbing 
Peter to pay Paul in this fashion, that we must act in a sensible, 
responsible fashion.
  With that, Mr. Speaker, again, I thank you for bringing this to the 
attention of this Congress, and for the Record, that we, and I as the 
chairman, and you as members of this Government Reform and Oversight 
Committee, we saw the problem, we identified the problem, we proposed a 
solution, and we are committed to work with all the Members of this 
Congress to try to bring, again, this important responsibility that we 
have, that we are cast with, into some order, into some fashion, and so 
that people look back and they say, ``You know, what did they do in 
1995? Did they ignore this, or did they find a solution?''
  We propose that solution, we offer it to the Congress. We hope they 
won't play politics, that they will be out there with public employees 
and others stirring up the pot, and saying, ``No, no, no, this will go 
away,'' because I tell you, Mr. Speaker, this will not go away. It must 
be addressed. We must have responsible leaders and responsible actions, 
just as you have outlined here, and just as you present in the fashion 
that you have in this special order tonight.
  I personally thank you. I thank you on behalf of our subcommittee and 
committee, and I thank you on behalf of a future generation of Federal 
retirees and people that are in the system now and counting on us to 
act in a responsible fashion.
  Mr. HOYER. Mr. Speaker, will the gentleman yield?
  Mr. GUTKNECHT. I yield to the gentleman from Maryland.
  Mr. HOYER. Mr. Speaker, I appreciate the gentleman yielding. Frankly, 
Mr. Speaker, I have been in committee and did not know there was a 
special order on this issue.
  Mr. Speaker, the gentleman says he would like to work together. It 
would have been nice if we had had somebody here who perhaps has a 
little different perspective than the gentleman from Florida. As he 
knows, a number of studies have been done within the past few weeks 
which indicate that the problem of which the gentleman has spoken, 
apparently for about an hour, does not exist.
  That is not to say that we don't contribute $19.8 billion a year. We 
do. We contribute that money, as all of you know, for the purposes of 
funding a retirement system for our employees. I understand the 
gentleman has been very concerned about saying we ought to have a fund 
on hand.
  Social Security, of course, is off the table. There is no fund on 
hand, as the gentleman well knows, for Social Security, which is our 
largest unfunded liability, if you will, in certain senses. But I am 
disappointed, Mr. Speaker, that I was unable, given the timeframe, to 
participate in this debate. This is a good debate. This is a debate we 
ought to have. My friend, I understand, mentioned that earlier.
  I am fully prepared to participate in that debate. What I am, 
however, concerned about is that a system that affects 2 million people 
is being rushed to judgment without having the ability to get the votes 
in your committee.
  The markup was adjourned. It now is before the Committee on Rules and 
included in your tax bill to pay for your tax cut.
                              {time}  1630
  I regret that the time has expired, but I look forward to discussing 
with my colleagues this issue. It is an important issue.
  I believe the facts will show that there is not the depth of the 
problem that I think my colleagues perceive and that there are ways and 
means to solving the problem, without getting large sums by putting a 
tax on existing Federal employees, which averages about 10 percent in 
the coming 2 to 3 years.
  I thank my colleague for yielding.

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