[Congressional Record Volume 141, Number 172 (Thursday, November 2, 1995)]
[Senate]
[Pages S16575-S16584]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  SENIOR CITIZENS' FREEDOM TO WORK ACT

  The PRESIDING OFFICER. By unanimous consent, the Senate will now turn 
to consideration of S. 1372, which the clerk will report.
  The legislative clerk read as follows:

       A bill (S. 1372) to amend the Social Security Act to 
     increase the earnings limit, and for other purposes.

  The Senate proceeded to consider the bill.
  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. I note the presence of the distinguished Senator from New 
York. If it is agreeable to him, I would like to proceed with the bill. 
If he is not ready, we could go into a quorum call.
  Mr. MOYNIHAN. Mr. President, I most assuredly am prepared to go to 
the bill and look forward to the Senator's remarks.
  Mr. McCAIN. I thank the Senator from New York. Before I go into my 
remarks, I want to thank the Senator from New York for his steadfast 
support over many, many years of the principle of lifting the earnings 
test. The Senator from New York was kind enough, in a hearing that we 
had earlier this year, to point out in his own unique, descriptive 
style how unfair this is for working seniors. I am appreciative of his 
understanding of the obstacles that were posed to lifting the earnings 
test but, at the same time, his support of the concept of doing so.
  Mr. President, after 8 years of being involved in this issue of 
raising the Social Security earnings limit, we have arrived at the 
moment when seniors will no longer be punished by their Government for 
being required, often by circumstances beyond their control, to work to 
support themselves and their families.
  We begin debate today on long overdue legislation, the purpose of 
which is best summarized in the legislation's title, the ``Senior 
Citizens' Freedom To Work Act.'' Mr. President, this bill is not 
everything that I wanted it to be. I wanted it to lift the earnings 
test completely. The scoring of that by CBO would have been 
prohibitive.
  What this bill really does is increase, over a 7-year period, the 
present earnings cap minimum from today's level of $11,280 per year to 
$30,000 per year. It is over a 7-year period. I will discuss later the 
factors that motivated us to make it that modest, but primarily it had 
to do with scoring.

  I remind my colleagues that in President Clinton's very important 
statement during his Presidential campaign book entitled ``Putting 
People First,'' the President stated, and a direct excerpt reads:

       Lift the Social Security earnings test limitation so that 
     older Americans are able to help rebuild our economy and 
     create a better future for all.

  That, I think, describes it as well as can be.
  Let me also point out, and I will say this time and time again, as I 
have in the past, this earnings test limitation does not affect wealthy 
seniors who have trust funds, stocks, pension funds, any other outside 
income that is not earned income. The only people that are affected by 
this Depression-era dinosaur are those seniors that go out and work and 
work because, generally, they have to because of either unforeseen 
circumstances or the fact that they just simply do not have enough 
money from their Social Security.
  Mr. President, I do not know of a more onerous and unfair tax than 
that. It would probably astound people to know that if a senior went 
out to work, that as soon as he or she exceeded $11,000 per year, for 
every $3 that person earned over that limit, they lose $1 in Social 
Security benefits. Due to this cap on earnings, the senior citizens, 
many of whom are existing on low incomes, are effectively burdened with 
a 33.3-percent tax on their earned income. If you put in Federal, 
State, and other Social Security taxes, it then mounts up to somewhere 
between 55 and 65 percent, placing these seniors who are low-income 
people in the highest tax bracket in America.
  I do not want to spend a lot of time going through the history of 
this, because I have been fighting it, as I said, since 1987. There has 
always been a reason for not doing it because, one, it was brought up 
on an appropriations bill, there was no offset, it could not be scored 
by the CBO, et cetera.
  I have always, up until now at least, resisted this business of 
accepting CBO scoring because it is clear to anyone that if we lift 
this earnings test, more seniors are going to go to work and more 
seniors will pay more taxes. So the static scoring idea has never been 
revealed as being more fallacious than in this type of scoring that 
goes on.
  On September 10, 1992, we had a vote in the Senate on a motion to 
waive a Budget Act point of order which required a three-fifths vote. 
There were 51 votes in favor and 42 against.
  I want to quote some of those who opposed the motion to waive the 
Budget Act:

       Do not misunderstand us. The idea to raise the earnings 
     test is not a bad idea. We just believe we should pay for 
     raising the limits with offsets or a tax increase.

  Another argument was:

       We would support Senator McCain's amendment if it were not 
     being offered to an appropriations bill. The Senator is 
     right, we should stop using static models and analysis for 
     economic forecasting. We agree that this amendment would 
     bring additional revenue to the Treasury. Further, we agree 
     with all of the other arguments made by those who favor this 
     bill and who would support this bill if it were freestanding 
     or an amendment to a bill that was not an appropriations 
     bill. Unfortunately, we must urge our colleagues to oppose 
     the motion to waive the Budget Act since it is being offered 
     to an appropriations bill.

[[Page S 16576]]

  So the objections to this legislation in the past were twofold: One, 
we did not have an offset and, two, it was offered as an amendment to 
an appropriations bill. I will not go into the obvious reasons why I 
had to offer it as an amendment to the appropriations bill, but the 
fact was, I could not get it up as a freestanding bill which I wanted 
to very much.
  Under the static scoring model, which I just described in my view as 
fallacious, one used by the Congressional Budget Office, this amendment 
would be scored as costing $9.92 billion. I disagree with the CBO's 
determination. However, to rectify this perceived problem, the bill 
does the following: It would mandate that the interest paid to Social 
Security funds be increased by 0.25 percent each year for the next 7 
years. This would ensure the integrity of the trust funds.
  To reimburse the General Treasury, which would make this increased 
payment, the bill then mandates all nonprotected discretionary programs 
be cut across the board by a uniform percentage equal to an amount 
necessary to pay the increased interest.
  By using this mechanism, the trust funds are made safe and the cuts 
necessary to pay for the bill, consistent with CBO's position, are 
spread fairly across the board. Indeed, CBO has informed us that this 
legislation's overall impact on the deficit is zero.
  The bill also mandates that GAO and the Comptroller General engage in 
an analysis of the actual effect on the Treasury of raising the 
earnings test and report to the Congress their findings no later than 2 
years after the date of enactment of this act. This study will enable 
the Congress to react to what actually occurs, not to what CBO analysts 
speculate.
  There is not a shred of doubt in my mind that 2 years from now the 
GAO will report that there is a greater inflow of revenues to the 
Treasury as a result of lifting the earnings test. There is no doubt 
about that in my mind; I have talked to too many seniors. I have 
talked, interestingly enough, to the CEO of Disney who came to my 
office one time on another issue and, on the way out, said, ``Senator, 
I understand you are trying to lift the earnings test. Please do so. We 
want to help you in any way, because the best employees we have at 
Disney World and Disneyland are''--guess what--``senior citizens.''
  The people of the McDonald's franchise came to my office and said, 
``Senator, our best employees--our best employees--our most dedicated 
employees are senior citizens, but there is no reason for them to work 
in our establishment because $1 out of every $3 they earn is taken away 
from them, not to mention the additional taxes,'' as I mentioned.
  Mr. President, this issue has been ventilated by me and others for a 
very long period of time. I want to point out that there may have been 
an argument during the Depression when 50 percent of the American work 
force at least was out of work. It might have made sense to have 
disincentives for seniors to go to work.
  All you have to do is pick up today's newspaper and you will find 
that there are lots and lots of jobs available all over America. We 
should not preclude people by virtue of age, and by virtue of age only, 
from being able to take advantage of those opportunities in our 
society.
  In 1935 when Social Security was created, we lived in a far different 
country. It is clear that our situation is not the same now. I want to 
point out, again, seniors who are without private pensions or liquid 
investments which are not counted as earnings or affluent children to 
support them often need to work to meet their most basic expenses, such 
as shelter, food, and health care costs.
  I am sure my colleagues all heard warnings that America will confront 
in the future a labor-shortage. Why should we discourage our senior 
citizens from meeting that challenge as the U.S. Chamber, which 
strongly supports this legislation, has pointed out:

       Retraining older workers already is a priority in labor-
     intensive industries, and will become even more critical as 
     we approach the year 2000.

  A number of our Nation's most prominent senior organizations strongly 
support fully repealing the earnings test. This is a minimal test 
meeting their just, I repeat, just demand. Everybody is in favor of 
totally repealing it. As I said, that would be my first priority. For 
the reasons that I stated before, that is just not possible.
  My family is very close friends with a family that lives in northern 
Arizona near where we live. It is a man and his wife. They have a son. 
They are in the earnings test age bracket. They have a son who recently 
had a serious illness and had to have an operation, thereby losing his 
job. That son has a daughter who lives with him.
  My friend's wife, Lorraine Luke, had to increase her hours at the 
hospital transcribing medical information in order to help their son, 
who is out of work, and their granddaughter. The Luke family sacrificed 
enormously. She went to work on a 6-day-a-week basis, and guess what, 
Mr. President? A couple weeks ago, she received a bill from Social 
Security for $1,200 because she had exceeded the $11,000 threshold, and 
they were demanding that money back--money that they had spent on 
taking care of their son and their granddaughter.

  Mr. President, that story is true throughout America. What happened 
to the Luke family is what happens many times in the lives of senior 
citizens. Why we should do this to them and why we have done it for so 
long, in fact, is a national scandal.
  Mr. President, I would like to name the groups who have supported 
this earnings test reform: Air Force Association, Air Force Sergeants 
Association, American Health Care Association, Association of the U.S. 
Army, Enlisted Association of the National Guard, Fleet Reserve 
Association, Jewish War Veterans, Marine Corps League, Marine Corps 
Reserve Officers Association, National Association of Uniformed 
Services, National Association of Temporary Services, National 
Committee to Preserve Social Security and Medicare, National Council of 
Chain Restaurants, National Military Family Association, National 
Restaurant Association, National Society of Public Accountants, 
National Tooling and Machining Association, National Enlisted Reserve 
Association, Naval Reserve Association, Navy League of the U.S., Sears 
Roebuck and Co., the Seniors Coalition, the U.S. Chamber of Commerce, 
and the list goes on and on.
  I would like to quote from a few editorials because virtually every 
newspaper in America has editorialized on this issue at one time or 
another.
  The Chicago Tribune says:

       The skill and expertise of the elderly could be used to 
     train future workers, while bringing in more tax dollars in 
     helping America stay competitive in the 21st century.

  The Los Angeles Times says:

       As the senior population expands and the younger population 
     shrinks in the decades ahead, there will be an increasing 
     need to encourage older workers to stay on the job to 
     maintain the Nation's productivity.

  The Baltimore Sun:

       The Social Security landscape is littered with a great 
     irony: While the program is built on the strength of the work 
     ethic, its earnings test actually provides a disincentive to 
     work * * * One consequence of this skewed policy is the 
     emergence of a gray, underground economy--a cadre of senior 
     citizens forced to work for extremely low wages or with no 
     benefits in exchange for being paid under the table.

  The Dallas Morning News:

       Both individual citizens and society as a whole would 
     benefit from a repeal of the law that limits what Social 
     Security recipients may earn before benefits are reduced.

  The Wall Street Journal:

       The punitive taxation of the earnings limit sends a message 
     to seniors that their country doesn't want them to work, or 
     that they are fools if they do.

  The New York Times:

       * * * it is not wrong to encourage willing older adults to 
     remain in the work force.

  The Detroit News:

       Work is important to many of the elderly, who are living 
     together. They shouldn't be faced with a confiscatory tax for 
     remaining productive.

  Mr. President, I would like to read a letter from the AARP [American 
Association of Retired Persons]. I will read parts of it:

       Dear Senator McCain: The American Association of Retired 
     Persons commends you for your sustained leadership on behalf 
     of working Social Security beneficiaries age 65 through 69 
     who are penalized by the Social Security earnings limit. Our 
     nation needs the skills, expertise and enthusiasm of older 
     workers and raising the current limit would 

[[Page S 16577]]

     send a strong message to older Americans that they can work 
     and earn more.
       The current limit is too low and should be raised so that 
     moderate and middle income beneficiaries who work out of 
     necessity will be able to improve their overall economic 
     situation. * * *
       An increase in the earnings limit is overdue. Over the last 
     several Congresses, either the House or the Senate has passed 
     earnings limit legislation, but it did not become law. As you 
     know, AARP has repeatedly supported earnings limit proposals 
     that were paid for in a responsible manner that was 
     consistent with the Social Security Act and did not increase 
     the ``on-budget'' deficit. The Association remains committed 
     to raising the earnings limit in a fiscally prudent way and 
     will work with you and others to ensure the earnings limit 
     legislation is adopted with the appropriate financing.

  Mr. President, I ask for the yeas and nays on this.
  The PRESIDING OFFICER (Mr. Grams). Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. McCAIN. Mr. President, before I yield the floor to my 
distinguished colleague from New York, who has more knowledge on the 
issue of Social Security than not only any Member of this body, but 
perhaps any living American--and I know that it has nothing to do with 
his advanced age--the fact is that the Senator from New York has been 
extremely helpful on this issue. The Senator from New York understands 
it, and his support of the concept of lifting the earnings test has 
been a vital factor in helping this issue to move along. I want thank 
him for his consistent knowledge and support on this issue.
  Mr. President, I yield the floor.
  Mr. MOYNIHAN. Mr. President, my colleague and friend from Arizona is 
more generous than even the hyperbole of the U.S. Senate allows. There 
are some important issues here.
  It is interesting to note that issues such as the Social Security 
earnings test go far back in our history. Indeed it was raised in 1935. 
And the gentleman who was brought from the University of Wisconsin by 
Edwin Witte to be on the staff of the Committee on Economic Security 
that Francis Perkins established, is still very much with us--the 
former chief actuary of the Social Security system. He was staff 
director of the Commission on Social Security that President Reagan 
organized in 1982, and which included Senator Dole in 1983. It is 
amazing, the continuity of the persons who have worked with the 
original legislation, or were in the original administration, and their 
wisdom and wit is available to us today.
  On Monday, Senator McCain and the majority leader introduced S. 1372, 
a bill to gradually increase the earnings limit to $30,000 in 2002 for 
Social Security beneficiaries aged 65 to 69. Under current law the 
earnings test is projected to increase from $11,280 for this year to 
$14,400 in 2002.
   In the past I have supported liberalization of the earnings test, 
and I will continue to do so in the future. But I have always insisted 
that any liberalization of the earnings test should be paid for and 
should be considered in the context of overall policies on Social 
Security.
  This bill does neither.
  Under the bill, discretionary outlays are reduced. But this does 
nothing for the off-budget OASDI Social Security trust fund as outlays 
in this account are increased by almost $10 billion over the next 7 
years. So the bill makes use of a budget gimmick. The interest rate 
received by the trust fund is increased by one-quarter of 1 percent so 
as to make it appear that the liberalization of the earnings test is 
paid for.
  And the bill is being considered--on the floor of the Senate, without 
having been referred to the Committee on Finance. This prevents us from 
taking into account the other important issues involved in the longrun 
financing of the Social Security system.
  If we want to liberalize the earnings test, this bill should be 
referred to the Finance Committee where we can have hearings, consider 
how to pay for it, and how to integrate changes in the earnings test 
with other Social Security policies.
  Let me make clear my support for the concept of increasing the 
retirement test to about $30,000. In 1990, I introduced S. 1909, a bill 
to increase the earnings test to $24,720 in 1996--roughly comparable to 
$30,000 in 2002. But I also paid for that liberalization of the 
earnings test by increasing the amount of Social Security benefits that 
would be subject to taxation. While that offset is no longer available, 
my bill addressed several important issues that are not addressed by 
the legislation now before the Senate.
  First, the liberalization was paid for with offsetting changes in the 
Social Security program.
  Second, the two provisions represented a move toward treating Social 
Security benefits on a parallel basis with private pensions. 
Individuals can retire from a company, collect a pension and continue 
to work in other occupations. And the portion of the private pension 
not previously taxed--the employer contribution and any accrued 
interest earnings--is taxed upon receipt of the pension benefit.
  Last week, along with every other Member of the Senate, I voted for 
the Senator from Arizona's sense of the Senate resolution acknowledging 
the need to raise the Social Security limit. The last clause of that 
resolution states:

       It is the intent of the Congress that legislation will be 
     passed before the end of 1995 to raise the social security 
     earnings limit for working seniors aged 65 through 69 in a 
     manner which will ensure the financial integrity of the 
     social security trust funds and will be consistent with the 
     goal of achieving a balanced budget in 7 years.

  I would say to my friend from Arizona, let us do this, but let us do 
it right. Let us refer this bill to the Finance Committee and make sure 
we are indeed ``ensuring the financial integrity of the Social Security 
trust funds.''
  There are two additional things to be said. First, the earnings 
limitation is a holdover from the 1930's. When the legislation was 
adopted the unemployment rate was about 25 percent. We did not have 
precise data on the unemployment rate and we used extrapolations from 
the decennial census. We counted everybody. We did not know about 
sampling. In April 1930, there was not much unemployment. And in April 
1940, there was not much unemployment and, therefore, the Depression 
was not reflected in the unemployment data gathered in the decennial 
census. People did know that large numbers of workers were unemployed. 
So the earnings test was meant to discourage older retirees from 
continuing to work. It was meant to persuade people to leave the work 
force when they had retired. And that is from another era.
  We have had extraordinary success with American economic policy since 
the Employment Act of 1946. In all those years--a half a century, we 
have had less than 12 months in which the unemployment rate has been 
above 10 percent,  and  that  was  during  the 1981-82 recession.
  The object of putting an end to the retirement test is not only 
appropriate, but it is at hand. In 1983, we did this. We arranged that 
persons who do work and are subject to the loss of benefits because of 
the earnings limitation are ``made whole,'' I think that is the usage, 
after they stop working. We phased in the so-called ``delayed 
retirement credit'' so that by 2005 it completely offsets the loss of 
benefits. Right now, beneficiaries get back about two-thirds of what 
they lose due to the earnings test.

  Why do you not want people to work beyond age 65 or 62? And why does 
the Government take benefits away and then give most--and by 2005, 
all--of them back? It is not the Government's business to tell you when 
you should work and when you should not work if what you are getting 
are benefits that you have earned.
  One problem I have with this measure is that it is not paid for in 
the mode I would have thought necessary and pretty central as a matter 
of principle, which is that all Social Security benefits be paid out of 
a trust fund financed by Social Security revenues--payroll taxes 
collected under the Federal Insurance Contribution Act (FICA) of 1935.
  This is no small matter. We would not be here today--I suspect we 
might be here--but with a very different Social Security System. At 
that time, no sooner did a bit of New Deal legislation get enacted, 
then it would be challenged and end up in the Supreme Court and the 
Supreme Court would find it unconstitutional.
  Frances Perkins, who was very much a person around Washington in the 

[[Page S 16578]]

1960's when I knew her, described the scene in a garden party in 1935 
when Harlan Fiske Stone came up to her and said, ``What are you up to 
little lady,'' and she was a master mistress at getting men to do 
things for her because she appeared so helpless, and she said, ``We 
have this wonderful plan. It would give people retirement benefits, 
unemployment insurance, dependent children would get support, all these 
fine things, but every time we do something like this, great members in 
the Supreme Court say it is unconstitutional.''
  He said, ``Tell me a little more, if you would.'' He listened. Then 
he leaned over and did something no Supreme Court Justice would ever do 
today. He said, ``The taxing power, my dear. All you need is the taxing 
power.''
  So my distinguished predecessor, Robert F. Wagner, introduced the 
bill over here and the people did it over there in the Labor Committees 
and so forth. The bill that was signed by the President of the United 
States was introduced by a still obscure Representative from North 
Carolina who was chairman of the Committee on Ways and Means. It came 
over here to Finance. We passed it out, and in due time it was 
challenged, and the Supreme Court looked at it and said, ``You say this 
is a tax. Yes, it is a tax.
  ``It says here, Article 1, Congress should have the power to lay and 
collect taxes.'' That is why this is a Finance Committee legislation. 
We have always paid for Social Security benefits with FICA revenues.
  The measure before us pays for these benefits by an across-the-board-
reduction in discretionary spending. I think you start at about one-
tenth of a percent in fiscal year 1996 and go up to four-tenths of a 
percent by fiscal year 2002. These are large sums. We have to find 
about $10 billion over the next 7 years. We will be financing Social 
Security benefits from general revenues that are not spent on these 
discretionary programs.
  I have to assume that we will cut education programs. We will cut 
defense programs. We will cut transportation programs. Those outlay 
reductions will pay for the transfer of general revenues to the trust 
funds which pay for the increase in trust fund outlays. But these 
transfers are artificially created, by an increase of one-quarter of 1 
percent above the interest rate received by the trust funds under 
current practice. The current rate is a blend of the actual rates paid 
on Treasury Securities with a maturity of more than 4 years.
  I do not think we should do that. I think it compromises the 
insurance principle. It compromises the right of the beneficiary to the 
benefits that is earned by payments into the fund.
  There is a nice story about this. In 1941, a very distinguished 
professor at Columbia, who had been a member of the President's 
Committee on Administrative Management--the Brownlow Committee--that 
President Roosevelt established in 1937, called on President Roosevelt 
to say he had been looking around things here and Social Security 
revenues were coming in now. They were all being posted, as the clerks 
will say, by Federal clerks with pens and nibs and cardboards, and they 
put down the 14 cents or the 22 cents that a person earned.
  The professor in question called on President Roosevelt and said, ``I 
think that is just a lot of extra paperwork we do not need. This is a 
pay-as-you-go system. Just collect the money and pay it out and stop 
all this record keeping, which is really not very essential.''
  That was Luther Gulick of Columbia University. He lived to the age of 
100. He died last year. I called him in upstate New York. He lived on 
the St. Lawrence River. I went over this recollection with him. His 
mind was clear as Easter bells and President Roosevelt said to him--you 
could see Roosevelt doing it: ``Now, Luther, I am sure you are right 
about the administrative matters, but I never thought of those 
provisions as a matter of administrative efficiency. I wanted every 
Social Security beneficiary to have a number and have an account so 
that''--I hope the Senate will forgive this usage because Luther Gulick 
recorded--``no damn politician can ever take the Social Security 
benefit away.'' That is why you have a number. Senator McCain, it is 
probably your dog-tag number, I would not be surprised. Originally it 
was not to be used for identification. Now it is. You get them in 
delivery rooms.
  We have never paid out a penny in Social Security benefits that did 
not represent contributions made to the trust fund. For the longest 
while, the Federal Government was required to pay both the employer and 
the employee contributions for members of the Armed Services Committee. 
They had not done so, and in 1983 we found a big chunk of money that 
was put in the trust fund.
  On that basis, I say we ought not to depart from the principle that 
entitles you to the money. It is called an entitlement because it is 
your money. We tax it the way we tax --and we did this in 1993--pension 
benefits.
  You calculate what you paid in, and what you already paid taxes on. 
Subsequently you pay taxes on the portion that was not taxed--the 
employer contribution and the interest earnings on your contribution 
and that of your employer.
  So, with the greatest enthusiasm for the enterprise but reservation 
about the specific financing mechanism, which, in my view, goes to not 
just a marginal but a central point of the nature of Social Security, I 
respectfully say I will not support the measure.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, let me just point out how we would cure 
this perceived problem would be to mandate that the interest rate paid 
on the Social Security funds be increased by .25 percent each year for 
the next 7 years. This would ensure the integrity of the trust funds, 
which is the primary goal and overriding concern, obviously.
  To reimburse the Treasury, which would make this increased payment, 
the bill then mandates that all nonprotected discretionary programs be 
cut across-the-board by a uniform percentage equal to an amount 
necessary to pay for the increased interest.
  As the Senator from New York well knows, we find money around here 
all the time. It was interesting to me in the last 24 hours of the 
budget debate we found $13 billion. I did not find it, but the so-
called experts did. I am sure members of Senator Moynihan's staff here, 
if they were allowed to speak, would describe how they found $13 
billion. We seem to find all this money all the time.
  Yet, we are seeking to take care of what is a gross inequity, knowing 
full well there is no one--I say to the Senator from New York, I 
challenge him to find someone to tell me that there will not, at the 
end of the day, be increased revenues into the Treasury because more 
seniors will go and work. So what we are really talking about here is a 
way of satisfying some paperwork requirements as far as CBO is 
concerned, which is dictated by static scoring, when the reality is 
there is going to be more money coming into the Treasury because 
seniors will be working.
  So I appreciate Senator Moynihan's concern about the mechanism, but I 
have to tell him we have been wrestling with this particular problem 
for 9 years that I know of. Every time we try to remove this terrible 
inequity that exists in our society today, we say we cannot find the 
money. We obviously do not want to take it out of entitlement programs 
because we are then robbing Peter to pay Paul. It is kind of a kabuki 
show here, because we know full well from the GAO reports back to us 
that the money, after 2 years, will not be required because there will 
be additional revenues. In fact, the funds for Social Security 
recipients will be increased because as these people work, they also 
continue to pay into the Social Security trust fund.
  Mr. MOYNIHAN. Mr. President, I do not in the least disagree with the 
point of the Senator about an increased work effort and therefore 
increased revenues, including direct revenues to the trust funds. What 
the actual amounts would be, how actuaries would judge them, is beyond 
my capacity, but there would be some and they would be not 
inconsiderable.
  Even so, I maintained what might seem to be too purist a view but it 
is one I hold, that only revenues from the trust fund should be used to 
pay benefits. We will see what the Senate's wish is.

[[Page S 16579]]

  The principle is correct. The issue can be resolved, the sooner the 
better. But it is my hapless responsibility to say, not this afternoon.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. I thank the Senator from New York again. By the way, I 
remind him we had a very interesting hearing on March 1 of this year, 
where they had several very interesting witnesses including Mr. Meyers, 
who is another one of those.
  Mr. MOYNIHAN. Mr. Meyers who came here in 1934.
  Mr. McCAIN. Exactly, the gentleman who probably is really the real 
corporate knowledge on Social Security, who also at that hearing 
testified that this earnings test should be raised and that additional 
revenues would accrue from lifting this earnings test.
  I also remind my colleagues it is a fact that $200 million per year 
are spent just to monitor the earnings test; in other words, to make 
sure that everybody who is between age 65 and 69 is penalized properly 
and does not get away with keeping that $1 out of every $3 in their 
earnings.
  So we would dramatically reduce that burden right away and experience 
an immediate savings of considerable numbers of millions of dollars if 
we just go ahead and lift it. Because then the Social Security 
Administration would not have to expend $200 million on an annual basis 
for that.
  I note the presence of my friend from West Virginia on the floor. I 
yield the floor.
  The PRESIDING OFFICER. The Senator from West Virginia.
  Mr. ROCKEFELLER. Mr. President, I thank my friend, the Senator from 
Arizona. One of the things which actually is not generally, I expect, 
known that much is that Medicare as well as Medicaid are part of the 
Social Security Act that is being discussed, in fact, by the Senator 
from Arizona. It has to be said that when one looks at what might 
happen in legislation, what might be the result of a conference, what 
might be the result of a compromise following a veto by the President, 
should that happen, there is a lot of speculation about what might 
happen. But I think one thing which is very, very clear at this point 
is that what we are doing in the U.S. Senate and what we have done to 
Medicare, which is a part of the Social Security Act, is extraordinary.
  I would like, in fact, to take from my friends from across the aisle 
the word which they often use when they are discussing Medicare, which 
comes from the Social Security Act. They talk about reforming Medicare.
  I went, as I do every afternoon at 1 o'clock sharp, to my Webster 
dictionary, and I took out the word for ``reform.'' I ask unanimous 
consent when I am finished, Mr. President, if I can have this printed 
in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. ROCKEFELLER. It says, ``a: to amend or improve by change of form 
or removals of faults or abuses; b: to put or change into an improved 
form or condition.
  ``2: to put an end to (an evil) by enforcing or introducing a better 
method or course of action.
  ``3: to induce or cause to abandon evil ways,'' and then they use the 
example of a drunkard--odd.
  ``4: to subject (hydrocarbons) to cracking.''
  I think I better stop there because that is rapidly getting into 
areas which I cannot be quite so sure of.
  Then I also, being the persistent intellectual at 1 o'clock every 
day, in my Webster's dictionary, I went to the word ``raid,'' because 
that is what those of us on this side of the aisle use referring to 
what happens to Medicare in the reconciliation bill. That is described, 
and I would similarly ask that portion which I read be printed in the 
Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 2.)
  Mr. ROCKEFELLER. ``Raid'' is, ``1a: a hostile or predatory incursion; 
b, a surprise attack by a small force.
  ``2a: a brief foray outside one's usual sphere; b: a sudden invasion 
by officers of the law; c: a daring operation against a competitor,'' 
and, again, here I think the definition is wandering off into different 
territory.
  But my point, obviously, is what we are contemplating, and what it 
is, in fact, that we have put forth in reconciliation is not yet 
accounted for, not yet conferenced with the House, and is nothing less 
than the ``raiding'' of Medicare. I assume that there are those who 
feel very differently about it. But I do not. I feel very strongly 
about it. I speak as a representative of the State of West Virginia 
where the average senior income for seniors in general is $10,700 a 
year, and 21 percent of that goes already to health care, unless the 
senior is 84 years old, which increasingly seniors are, in which case 
it is 34 percent of the $10,700. You can see, therefore, that the 
amount of money that is being spent on health care already by Medicare 
recipients, beneficiaries, is enormous.
  So the majority party wants to fix Medicare, to reform it. And they 
want to do that by cutting $270 billion from it, they would say to slow 
the growth by a rate of $270 billion.
  I, incidentally, had responsibility in the 1993 Budget Act, so to 
speak, for cutting $56 billion out of Medicare. I never referred to it 
as ``slowing'' the rate of reduction. I always referred to it as 
``making the cut.'' And I hold to the same language then as now because 
that is what I believe. It is like, if you had a certain amount of 
money 3 years ago and you have the same amount of money now, a hip 
replacement has gone up by 22 percent in cost, you cannot do 84 percent 
of the hip replacement. You either do the hip replacement and you can 
pay for it, or you do not have the money for it and you cannot do it at 
all. So this whole question of rate of growth is one that I will leave 
for historians to worry about.
  But any way you slice it, if you are cutting $270 billion--and when 
all the trustees of the hospital insurance trust fund say that you have 
to cut it $89 billion--then you come to the obvious conclusion that 
those who would cut $270 billion are saving Medicare for a much longer 
period of time than those who would only cut it by $89 billion.
  But an interesting thing happens. The fact is that, if you cut $89 
billion, as the trustees have recommended publicly in testimony and 
every other way, Medicare will be solvent until the year 2006. On the 
other hand, if you cut it $270 billion, guess until what year Medicare 
will be solvent? The year 2006, the same year, the same amount of time.
  So the whole question then arises, Why cut $270 billion out if $89 
billion will do the job over the period of the next 10 years? The 
answer, of course, is in the contract phase of the need for the $245 
billion tax break. I understand that intellectually because, if you are 
going to get a $245 billion tax break and at the same time balance the 
budget in 7 years, you have to get your hand on a whole lot of money, 
and there is not a whole lot of money in any one pot, except if you go 
to Medicare, or if you go to Medicaid. Those are the two pots. Those 
are the two pots that you can go to under reconciliation or a Budget 
Act, and simply get large amounts of money, if you are of a will to do 
so.
  However, the consequence of what the majority party is doing in the 
Senate, and has done in the Senate, means that Medicare recipients are 
going to have to pay enormously more from out-of-pocket expenses--out 
of their own pocket expenses, and all of this to fund a tax break. 
There is going to be about $1,700 less per beneficiary by the year 
2002. Deductibles are going to be doubled. Premiums are going to be 
raised. The eligibility age for Medicare is going to go from 65 to 67 
years old, and there will be an enormous amount, I believe, of danger 
in equality and quantity of health care. Let me explain what I mean.
  Putnam County General Hospital, Mr. President, is what I would 
imagine many hospitals are like in the Presiding Officer's State. It is 
a rapidly increasing county in terms of its income, and in the sense of 
upscale county. Its future is unlimited. It has most of the flat land, 
or a lot of the flat land in West Virginia, and a lot of upper income 
houses as well as middle-income houses. Yet, when you go to the 
administrator of that hospital, he will tell you that between 68 
percent and 72 percent of his entire revenue stream is paid for not by 
the newly dynamic wealth of Putnam County, not by private-pay patients, 
but by Medicare and 

[[Page S 16580]]

Medicaid. He says that if this cut is allowed to stand, that Putnam 
General Hospital is in severe difficulty. The mathematics make it 
clear--$270 billion cut in Medicare, $187 billion cut in Medicaid, and, 
hence, real problems for that relatively upscale hospital.
  We have a lot of hospitals in West Virginia that do not fit that 
category. They are in very rural counties. Many shut down some years 
ago. They depend almost entirely on Medicare or Medicaid for their 
revenue stream. When I say the ``revenue stream,'' I just simply mean 
the money they use to pay their doctors, nurses, oxygen, their light 
bills, and the rest of it.
  I believe--I do not really think anybody can make the argument--that 
the Boren amendment, by which you are meant to pay people much closer 
to the services that they render, has now been tossed aside. And I 
believe that doctors, physicians who have been taking care of seniors 
for many years are--some of them--going to be in the economic position 
where they will have to simply say on their little shingle, ``Dr. So-
and-So. But if you are on Medicare, please do not stop here. I cannot 
afford to treat you. I cannot afford to treat you.''
  In other words, I believe that doctors will be driven out of the 
program and Medicare beneficiaries will be turned away.
  There is another problem which we, in fact, cured in the Senate. This 
is the most devastating problem. It came pretty much as news to 
everybody. But it has not been cured in the House. Therefore, I 
consider it to be a live neutron bomb just sitting there on the table. 
It was the majority party's efforts to, in fact, get control of the 
cost of fee-for-service Medicare. Obviously, some Medicare patients are 
in HMO's. It is estimated that as much as 20 percent may go into HMO's. 
But, obviously, the great body of Medicare beneficiaries are in fee-
for-service Medicare, and they like that. They like that for one 
reason--because, by definition, over the years it has always meant one 
thing, and, that is, they get to go to the doctor of their choice. They 
get to choose the doctor of their choice, they get to keep the doctor 
of their choice, and use the doctor of their choice. And that is the 
central, sacred theme of fee-for-service Medicare.
  But until it was taken out in the Senate--I will say that the junior 
Senator from West Virginia probably had something to do with that by 
talking about it for about an hour one day several weeks ago--there was 
this thing called BELT which was a mystery. Nobody had heard of BELT. 
BELT stands for budget expenditure limit tool.
  I am not discussing something in the abstract. We thankfully have 
taken it out of the Senate's package. But it remains--and in fact a 
rougher one remains--in the House. So that in the conference, where I 
always have this worry that the House is going to outdo the Senate 
because of their fervor--they appear to be less willing to negotiate, 
less willing to compromise on both sides than the Senate, so I always 
worry very much about the conference. So the way this would work would 
be that the majority party now in the House would assign about a 4 
percent, 4.7-percent growth rate to Medicare, the cost of health care 
in Medicare.
  Now, we know that the actual cost of the increase in health care in 
Medicare is over 7 percent. But if this rate of growth of the cost of 
health care exceeded 4.7 percent, automatically--automatically--there 
would be a sequester and there would be automatic reductions, arbitrary 
in nature but absolute in fact, in key Medicare spending in the 
following year. The cuts that are specifically listed were inpatient 
hospital services, home health services, hospital care services, 
diagnostic tests, physicians' services, outpatient hospital services. 
As far as I know, that is most of health care. Mental health and other 
things are not in there, but that is most of health care. There would 
be, therefore, this sequestration and a ratcheting down so that the so-
called fee-for-service concept for the Medicare beneficiary would 
simply disappear.
  It was all hidden in this little piece of paper and still resides in 
the House. So I am very, very worried about that.
  People listening may wonder why I am talking about Medicare. It could 
be that the Senator from Arizona is sharing some of those thoughts at 
this particular point. This is why I am talking about Medicare. I am 
here to use this opportunity to offer an amendment, which I will do but 
not immediately, to give the Senate yet another chance to walk away 
from some of the ills that I have been talking about and give it a 
chance to protect Medicare from the damage that is contemplated in the 
two versions, the House version and the Senate version, of the majority 
party's budget, which is, of course, now headed for a conference where, 
as I indicate, I worry because I think the House's fervor in some areas 
is in excess.
  I will offer an amendment very soon to do just what we have been 
trying to get a vote on for 3 days but have not been permitted to get a 
vote on for 3 days. We have been prevented from being able to do this 
until this opportunity.
  As most of my colleagues know, the Senate still needs to appoint 
conferees to the reconciliation bill so that we can negotiate some of 
these matters out. It is amazing that conferees have not been 
appointed, but they have not been appointed. This side can do nothing 
about that. That has not been done because the majority leader knows 
that the Members on this side of the aisle have just a few motions to 
instruct conferees. We only have a few. Of course, the purpose of this 
is designed to make one last plea for the prevention of damage to 
Medicare, for real nursing home protection, and one or two other vital 
goals. I think there are a total of maybe four or five.
  The bill now in the Chamber is a very appropriate place to make the 
same proposal. So I am here to make sure that when we are on a bill 
designed to spend billions more on a category of Social Security 
recipients through the earnings test we first discuss, debate and vote 
on the question of whether $270 billion is going to be cut from 
Medicare or whether that will not be the case and whether 30 million 
seniors are going to see their premiums increase or not, whether they 
will be turned away from doctors or whether they will not.
  So that is my purpose, and I share that respectfully with my 
colleague and friend from Arizona, who probably wishes that I had 
picked another time to do all this. But you do have to consider the 
fact that in spite of the fact that in West Virginia the average income 
for seniors is $10,700, nationally that same figure is only $17,750.
  Most of Medicare spending is for beneficiaries with very modest 
income, and we have discussed this before, but it bears repeating 
because I am not sure how far out there into the public this has 
gotten. Sixty percent of those with incomes of less than $15,000; 83 
percent of those with incomes less than $25,000; 97 percent of those 
with incomes less than $50,000.
  This is a Medicare beneficiary population that we are talking about. 
As I have indicated, seniors already spend more of their income on 
health care in 1994 than anything else--21 percent. Nonsenior 
households, interestingly, only spend about 8 percent of their income 
on health care. Private insurance grew at a faster rate, almost 10 
percent, than Medicare spending, which was about 7.7 percent, from 1984 
to 1993.
  Under the Republican plan, as I indicated, Medicare will be squeezed 
to a growth rate of 4.9 percent--I believe I said 4.7; I correct 
myself--4.9 percent per person while private health insurance will 
continue to grow at over 7 percent per person over the next 7 years, 
relegating seniors to a second- rate, second-class health care system.
  My amendment will be a final opportunity for the Republicans in the 
Senate to defend--not raid but defend--the Medicare trust fund from a 
mind-boggling raid, a raid that will cut health care benefits, that 
will increase seniors' costs and threaten the very existence of 
hospitals, a raid that is designed purely and simply, mathematically, 
architecturally, self-evidently to pay for tax breaks tilted in favor 
of the most affluent, comfortable households in our great country.
  The reconciliation bill passed at 1 a.m. on Saturday last will cut 
Medicare by $270 billion over 7 years. We all know that. We have all 
been told that this will save Medicare, keep it solvent, make the 
program stronger. Wrong, Mr. President, wrong and wrong again. The 
professional experts 

[[Page S 16581]]

in charge of keeping the books for Medicare, the actuaries, the 
professionals, the people who do this for a living, say that $89 
billion will solve the problem.
  That is not the long-term problem. That is the short-term problem, 
from now through 2006, and then our suggestion would be that we do 
exactly what Ronald Reagan did, wisely and effectively, in 1981, when 
he appointed the Social Security Commission which came out in 1983 in 
fact with a solution for Social Security, a solution which was accepted 
by the people of this country, accepted by the seniors of this country, 
accepted by the Congress of this country, both sides of the aisle, 
because it had been entered into with the understanding that it would 
be done with the idea of it being fair, nonpolitical and, therefore, 
worthy of the support of all, including the President of the United 
States.

  It was an extraordinary ability. Senator Moynihan and Senator Dole 
were two of the members of that commission. What they did in service to 
their country and in service to the Social Security commission is 
little noted, but can never be forgotten by those who understand the 
consequences of their actions.
  Hospitals, doctors, and nurses and other health care providers in 
every single one of our States believe, with absolutely certainty--they 
do not equivocate--that cuts of this size, the $270 billion, will 
disintegrate the kind of health service that 30 million senior 
Americans have counted on for three decades, in a program that works, 
in a program that works in part because, prior to its passage, less 
than half of Americans had health insurance who were of the senior age.
  Why? Because if you are at the senior age and you have any kind of 
ailments at all, or you are just senior age, you cannot buy health 
insurance. If you have anything wrong with you at all, you cannot buy 
health insurance. You can have $10 million and you cannot buy health 
care. That is why Medicare took place. Now 99 percent of our senior 
population has health care insurance. What a wonderful thing that is, 
what a marvelous thing that is.
  I have no way of explaining to my constituents back in West Virginia, 
to the 330,000 Medicare beneficiaries in my State, why their Medicare 
deductibles will double, their premiums will skyrocket, and West 
Virginia hospitals are threatened with the possibility of losing $25 
million in 1996 and more than $681 million over the next 7 years.
  I keep saying I wish this were some kind of a dream. But the threat 
is real, and it is not a dream. It is written into the pages of the 
bill that has been passed, unless, of course, we decide to change it. I 
can only report what I read in this budget package. So, $270 billion 
would be cut out of Medicare, $225 billion will be given--some say $245 
billion, some say $225 billion--will be given away in tax breaks and 
giveaways.
  Then, Mr. President, there is the $187 billion which is sliced out of 
Medicaid, which is integrated into Medicare in its effect on our health 
care system, leaving the Medicaid system in tatters, as it is chopped 
up into block grants, something which States, no matter what their 
Governors might say, do not want--do not want.
  Talk to George Voinovich, talk to Christine Whitman, talk to some of 
those Republican Governors who have the courage to say what they feel. 
Talk to any of the Democrat Governors. I mean, I was a Governor of my 
State for 8 years. I know our present Governor does not want any part 
of it, because all he does now in his regular session, and then special 
sessions, and then additional special sessions, is try to figure out 
how to come up with more money to pay for Medicaid. Medicaid is about 
the only subject they even talk about.
  It is true, Mr. President, it is a terrible crisis in our State as it 
stands today, much less cutting $187 billion out of it and block 
granting.
  The response on the other side will be that we are exaggerating, we 
are trying to scare seniors. We do not agree with that. This budget is 
scary. The seniors I have talked to are scared. And, interestingly, 
they have become scared at what I would call a very rational pace, if I 
can explain myself. Some of the groups responsible for communicating 
with seniors have been rather casual about this whole subject, in my 
judgment. Indeed, the American Hospital Association for a period of 
time was rather casual about dealing with this subject.
  But, interestingly, seniors began to understand what the consequences 
to their lives might, in fact, become. They began to get very angry, 
very angry. And then some of the groups here in Washington started 
reacting to them. The hospital administrators already were very angry. 
They were angry months ago. But their association was not listening 
here in Washington as closely as it could have been. Now they are. And 
the American Hospital Association very much dislikes, and is very much 
opposed, and very blatantly and openly opposed, to these kinds of cuts 
because of what it will do to the hospitals that take care of the sick, 
including seniors in our country.

                               Exhibit 1

      [From Merriam Webster's Collegiate Dictionary, 10th edition]

     \1\ re-form \ri-'form\ vb [ME, fr. MF reformer, fr. L 
     reformare, fr. re- + formare to form, fr. forma form] vt 
     (14c) 1 a: to put or change into an improved form or 
     condition b: to amend or improve by change of form or removal 
     of faults or abuses 2: to put an end to (an evil) by 
     enforcing or introducing a better method or course of action 
     3: to induce or cause to abandon evil ways <a 
     drunkard> 4 a: to subject (hydrocarbons) to cracking b: to 
     produce (as gasoline or gas) by cracking  vi: to 
     become changed for the better syn see correct

                               Exhibit 2

      [From Merriam Webster's Collegiate Dictionary, 10th edition]

     \1\ raid \`rad\ n [ME (Sc) rade, fr. OE rad ride, raid--more 
     at road] (15c) 1 a: a hostile or predatory incursion b: a 
     surprise attack by a small force 2 a: a brief foray outside 
     one's usual sphere b: a sudden invasion by officers of the 
     law c: a daring operation against a competitor d: the 
     recruiting of personnel (as faculty, executives, or athletes) 
     from competing organizations 3: the act of mulcting public 
     money 4: an attempt by professional operators to depress 
     stock prices by concerted selling \2\ raid vi (1865): to 
     conduct or take part in a raid  vt: to make a 
     raid on


                           Amendment No. 3043

  Mr. ROCKEFELLER. Mr. President, I send an amendment to the desk and 
ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from West Virginia [Mr. Rockefeller] proposes 
     an amendment numbered 3043.

  Mr. McCAIN. Mr. President, I ask further reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Is there objection?
  Mr. ROCKEFELLER. I object.
  The PRESIDING OFFICER. There is an objection. Objection is heard.
  The clerk will read the amendment.
  The assistant legislative clerk read as follows:
       At the appropriate place insert the following:
       It is the sense of the Senate that the conferees on the 
     part of the Senate on H.R. 2491 should not agree to any 
     reductions in Medicare beyond the $89 billion needed to 
     maintain the solvency of the Medicare trust fund through the 
     year 2006, and should reduce tax breaks for upper-income 
     taxpayers and corporations by the amount necessary to ensure 
     deficit neutrality.

  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Mr. President, I say to the Senator from West Virginia 
that I am very disappointed, of course, he would put this amendment on 
a bill that is very important to the people of his State. He stated the 
average income of the elderly in the State is $10,000 a year. It seems 
to me that he would be eager to, as quickly as possible, give them an 
opportunity to earn a sufficient amount of money in order to be able to 
better their living standards and raise their income.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. KERREY. Mr. President, I ask unanimous consent that further 
proceedings under the quorum call be dispensed with.
  Mr. McCAIN. I object.
  The PRESIDING OFFICER. Objection is heard.
  The assistant legislative clerk continued with the call of the roll.
  
[[Page S 16582]]

  Mr. KERREY. Mr. President, I ask unanimous consent that further 
proceedings under the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KERREY. Mr. President, I would like to talk a bit about this 
bill. I know the Senator from Arizona has worked on this for, I guess, 
7 or 8 years now. And I know for at least the time I have been in the 
Senate this has been an active interest of his, and he has played a 
very constructive role in raising this earnings test in the past.
  Unfortunately, I was not here when he made his opening statement. 
This is a very--fortunately for all of us who have trouble reading some 
of these bills--a very short piece of legislation, and I do not want to 
make any comments on it that are inaccurate. But, as I understand it, 
what we basically have in the law right now says that for a period of 5 
years, from age 65 to 70, there is an earnings test. After 70 there is 
no earnings test. During that period of 65 to 70 years of age, 
beneficiaries of Social Security payments are penalized. They have 
actual reduction in their benefits as they receive income. I think the 
test is at $11,200 today.
  What this piece of legislation would do is, over time, take that 5-
year window, that penalty, up to $30,000 over a 5-year----
  McCAIN. Seven.
  Mr. KERREY. 7-year period of time.
  Mr. President, in general, I have supported and on a number of 
occasions have actually voted for raising this earnings test. I must 
say I have very strong mixed feelings about it. I would like to just 
talk, and I am not going to offer any amendment at this point in time. 
When I am through, I will put the Senate back in a quorum call.
  I have had the opportunity to examine and spend a great deal of time 
looking at Social Security as a program. Senator Simpson and I, in 
fact, have developed a piece of legislation, S. 825, that we have 
introduced in this body to reform the Social Security Program, that has 
a different purpose than what the Senator from Arizona is attempting to 
do, and I find myself increasingly sort of obsessed with this issue and 
talking sometimes when no one particularly cares to hear about it. But 
I would like the take this opportunity, for a moment, to talk a bit 
about what I think needs to occur with the Social Security program to 
improve it for different objectives.
  First of all, it must be understood that Social Security is an 
intergenerational commitment; it is a very strong and powerful 
commitment.
  It is not a retirement fund. There is not an account held for 
individuals that they own. We have a calculation that you can get. If 
you send in to the Social Security Administration and ask them, they 
will tell you how much you have paid in and they will tell you 
approximately, based upon your current earnings at least, what you are 
going to be paid when you retire.
  It is not a defined contribution system. It is a defined benefit 
system. We are told what our benefits are, and it is a very progressive 
system, though the contribution is flat and, as a consequence, I think 
fairly you can say the contribution system is a regressive system of 
taxation, which is, interestingly, one of the reasons that a recent 
poll, that was very controversial, the New York Times did asking a 
number of questions about the budget reconciliation agreement. The 
lower the income, the higher the enthusiasm for a tax cut. The lower 
the income of Americans who are in the work force, the more 
enthusiastic they were about their tax cut. I argue that is because the 
payroll tax and the other taxes that lower income people pay who are in 
the work force tends to actually force them to make painful and 
difficult choices. That is probably why that is the case.
  Nonetheless, it is a regressive tax, but it is a very progressive 
payment system. That is to say, there are bend points in the 
calculation which will actually decrease my income from Social Security 
in order to make sure that people with lower incomes will, over their 
working life, get a higher payment. We have designed it in that 
fashion.
  So I want to take this opportunity to, again, make it clear to 
citizens who sometimes write me and say, ``I've got an account there; I 
paid in it all my life; I am getting out what I paid in,'' that is not 
true. We are not paid what we pay in. We usually get back more.
  The system is designed to provide us with a supplemental source of 
income. Unfortunately, for a variety of reasons, not the least of which 
are tax law changes and pension law changes that make it more difficult 
for people to provide private sector pensions, increasingly people see 
Social Security as a primary source of income. The percentages are 
increasing of those who have as their only source of retirement income 
the Social Security System.
  Accurately described, Social Security is a very strong and, I think, 
correct intergenerational commitment. It is an intergenerational 
commitment. Every time I give a speech like this, people call and say, 
``Kerrey wants to get rid of Social Security.'' I do not. It is a very 
strong commitment that is made on behalf of people who are retired by 
people who are not retired to allow a fixed percentage of their wages 
to be taxed and distributed to those who are retired. That is basically 
what it is.
  When it began, the first payment that was made in 1935 took 1 percent 
of our wages, and the reason it took 1 percent of our wages is the 
promise to pay was to begin 6 years after normal life expectancy. 
Normal life expectancy was approximately 59; 65 was the normal 
eligibility age for Social Security in 1935. Today, it is still 65.
  The good news is we are living longer. That is very good news. I do 
not want anybody to think that I think we should be dying earlier. I am 
glad, through medicine, through research, through changes in 
lifestyles, and so forth, that people are living longer. That is good 
news. That is my intent, anyway.
  But now the promise continues 11 years after the age of 65. Normal 
life expectancy is now 11 years beyond this normal eligibility age, 
which is age 65. There is an early eligibility age of 62 and there is a 
normal eligibility age of 65 written into law, both of them begin 
considerably before normal life expectancy ends.
  It would be bad enough if we were dealing with sort of constant 
numbers in terms of the number of people retiring, but we are not. My 
generation did not have as many children as our parents thought we were 
going to have. So, when the baby boomers start to retire in 2008--60 
million of us, by the way--if anybody doubts this problem is caused by 
Ronald Reagan, George Bush, or Bill Clinton, it is a demographic 
problem not caused by any political leader; it was caused by a 
generation.
  (Ms. SNOWE assumed the chair.)
  Mr. KERREY. Madam President, the point I am trying to make here is we 
have a tremendous problem with Social Security. The longer we wait to 
address it, the more difficult it is to address, and the problem is a 
demographic problem.
  The problem is also one of perception. Many citizens are of the view 
that Social Security is a fund that is held for them and it is 
available to them when they retire. That is not what it is. We pay into 
it, but it is an intergenerational commitment made by people who are in 
the work force today to allow a fixed percent of their wages to go to 
people who are out of the work force. It is a contract. It is a 
contractual arrangement, and everybody out there in America, whether 
they are currently eligible or will be eligible in the future, 
understands that contract is there for them.
  There are really 260 million Social Security beneficiaries. It is 
just that 30-some million are currently eligible. All the rest will be 
eligible. All Social Security beneficiaries up to about the year about 
2006 or so are currently alive. What you have to do is look and ask, 
``Not only can I write the checks today, but how am I going to do in 
the future?''
  In 1983 when we changed the law, what we did for the first time was 
break the pay-as-you-go system and create, in effect, a system where 
the reserve is going to build up to a very large amount. Unfortunately, 
we have been borrowing it and using it to pay budget bills since 1983. 
But that number drives up to a very large amount and then drives down 
starting at about the year 2013 until the fund is completely expended 
in 2029.
  When I say 2029, people say, ``Fine, let's just wait until 2029.'' 
Madam 

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President, the longer you wait, the bigger the adjustment is. We may be 
able to jog and we may be able to quit smoking or drink in moderation, 
whatever you want to do to hopefully extend your life, but you do not 
get those years back. When you are trying to take advantage of 
compounding interest rates in a savings, a collective savings, time is 
not on your side. Every year you wait, you do not get that year back.
  The people who will pay the price for it are not the current 
retirees, but it will either be future retirees or my children who are 
going to be scratching their heads trying to figure out, ``Do I cut 
dad's Social Security payment substantially or do I have my taxes go up 
in a rather substantial fashion?''
  We are going to see a decline in the number of workers per retirees 
starting in the year 2008 that is without precedent. There is no 
precedent for it, and there is no possibility we are going to see gains 
in productivity that are sufficient to be able to allow less than three 
workers per retiree to be able to produce what five workers per retiree 
are producing today.
  Madam President, there is a need for us to change this trend line of 
Social Security payments so that we can say to all beneficiaries--those 
who are eligible today and those who are eligible in the future--that 
we are going to be able to write your checks.
  Today, you cannot say that. Today, if you look at somebody under 40, 
you have to say to them, ``The current law will not allow me to write a 
check to you. I am going to have to make an adjustment.'' The longer I 
wait, the bigger the adjustment; the longer I wait, the higher the 
taxes have to be or the larger the cuts have to be in current 
beneficiaries. That is problem No. 1.
  Problem No. 2 with Social Security is that it is a very rigid system. 
The legislation of the Senator from Arizona addresses one part of that 
rigidity. That is, we have a rule, a Federal rule--a law, actually--
that the Senator is trying to change that says for a 5-year period of 
time, from age 65, which is normal eligibility age. It is not normal 
retirement. You can wait to retire or you can retire early or retire 
any time you want, but you are eligible for a payment from the Federal 
Government, full payment at 65 and an early smaller payment at age 62. 
The rules say I have to wait until I am 65 to get a payment, and for 5 
years, if my income exceeds $11,200 a year, you are going to reduce the 
payment that I get.
  It is a very rigid system. I believe what needs to occur and what 
Senator Simpson and I have done with our legislation is said, let us 
change the law so that 2 percent--we start with 2--so that 2 percent of 
the 12-percent payroll tax goes into a personal investment plan for 
individuals when they start working that has three big advantages: 
First, a much higher rate of return. Let it be known to all citizens 
that one of the problems we have with Social Security is they are 
invested in non-negotiable Treasuries, the lowest possible rate of 
return that you can have out there.
  The lowest possible rate of return that we have--less than 2 percent 
and closer to 1 percent--does not even double twice during the course 
of a 45-year working life. It doubles once, that is all. A higher rate 
of return. In the FERS account, it is not unusual for our employees to 
say they expect to get 8 to 10 percent when compounding it. That means 
they are going to get a doubling, over a 45-year period, of six times--
a substantial increase as a consequence of taking advantage of a higher 
rate of interest.
  Secondly, Madam President, the advantage is that it is more flexible. 
Some people have attacked the proposal that I have made, saying that we 
are going to adjust the eligibility age from 65 to 70, which we do. It 
does not affect anybody, by the way, over the age of 50, that is not in 
the baby-boom generation, that is already retired, or will retire 
during the next 10, 15 years. We do increase the eligibility age. But 
by establishing this personal investment plan, we give something to the 
individual that they own and can take at age 59\1/2\ under the current 
individual retirement account law.
  So the second thing is that it is more flexible. You can tailor it to 
your own needs, rather than being dependent upon Congress changing the 
law to satisfy whatever your individual requirements are.
  Third, Madam President, we do change it so that you own it. Unlike 
the current system, if you happen to, unfortunately, not make it to age 
65--let us say at age 64 you die--all those moneys that you paid in go 
to somebody else. You do not get anything out of it. It is a collective 
pool. Under our proposal, the individual owns it. They have an asset. 
Done correctly, it can be a way for us to help Americans of all incomes 
acquire wealth--$1,200 a year, dedicated into an average savings 
account over a 45-year period, will convert that individual into a 
millionaire.
  Well, Madam President, that is exactly what 12 percent payroll tax is 
on $10,000 worth of wages. So there are other changes that I believe 
are more important than the earnings test if we are going to be able to 
say to all beneficiaries, whether you retire today or in the future, 
that the promise we have on the table we are going to be able to make 
and we are going to be able to keep; secondly, to convert that system 
into one that brings a higher return and that individual owns it. It 
seems like the system we set up 60 years ago needs to be adjusted in 
more ways than just raising the earnings test.
  I yield the floor.
  Mr. KYL. Madam President, I rise as an original cosponsor of S. 1372, 
introduced by Senator John McCain and Majority Leader Dole. It is time 
to lift the senior citizens earnings limitation off the backs of 
America's and Arizona's senior citizens. This legislation would 
gradually raise the limitation to $30,000 between 1996 and 2003, and 
would thereafter index for inflation.
  During the 1992 Presidential campaign, President Clinton said that 
America must ``lift the Social Security earnings test limitation so 
that older Americans are able to help rebuild our economy and create a 
better future for us all.'' I could not agree more. Yet, despite the 
continued urging of many Members of Congress and millions of Americans, 
the President appears reluctant to make good on this campaign promise. 
So, it has fallen to Senator McCain once again to pursue this issue, as 
he has for so long.
  The Social Security earnings limitation [SSEL] was created during the 
Depression in order to move older workers our of the labor force and to 
create job opportunities for younger workers. Obviously, this situation 
no longer exists. Currently, under the SSEL, senior citizens aged 62 to 
64 lose $1 in benefits for every $2 they earn over the $8,040 limit. 
Seniors aged 65 to 69 lose $1 in benefits for every $3 they earn over 
$11,160 annually. When combined with Federal and State taxes, a senior 
citizen earning just over $10,000 per year faces an effective marginal 
tax rate of 56 percent.
  Moreover, when combined with the President's tax on Social Security 
benefits passed in 1993, a senior's marginal tax rate can reach 88 
percent--twice the rate millionaires pay.
  If enacted, this legislation would gradually repeal the earnings test 
and would allow seniors to continue to work to meet their needs without 
penalty.
  Some lawmakers apparently forget that Social Security is not an 
insurance policy intended to offset some unforeseen future occurrence; 
rather, it is a pension with a fixed sum paid regularly to the retirees 
who made regular contributions throughout their working lives. Social 
Security is a planned savings program to supplement income during an 
individual's retirement years.
  I believe no American should be discouraged from working. Such a 
policy violates the principles of self-reliance and personal 
responsibility on which America was founded. Regrettably, America's 
senior citizens are severely penalized for attempting to be financially 
independent. When senior citizens work to pay for the high cost of 
health care, pharmaceuticals, and housing, they are penalized like no 
other group in our society.
  Senior citizens possess a wealth of experience and expertise acquired 
through decades of productivity in the workplace. Companies hiring 
seniors have noted their strong work ethic, punctuality, and 
flexibility. Their participation in the work force can add billions of 
dollars to our Natiion's economy. To remain competitive in the global 
marketplace, America needs for its senior citizens to be involved in 
the 

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economy: working, producing, and paying taxes to the Federal 
Government. A law which discourages this is not just bad law, it is 
wrong--and it hurts not only seniors but all Americans.
 Mr. HATFIELD. Madam President, this legislation would provide 
the flexibility and opportunity for older Americans to remain 
productive citizens of this Nation. I do not believe that older 
Americans should be penalized for their ability and willingness to 
remain active and productive members of society. The current earnings 
test arbitrarily mandates that a person retire at the age of 65 or face 
losing benefits. I do not believe that any person who desires to work 
should be dissuaded from pursuing the goal of employment due to the Tax 
Code. Finally, let us not forget the hazards our low income senior 
citizens face who do not possess a pension fund or retirement plan. 
Low-income seniors who are working out of necessity and face a severe 
tax penalty should not be penalized for no other reason than their age. 
For these reasons I support S. 1372 which would increase the earnings 
limit for seniors.
  Unfortunately this legislation to correct that inequity was paid for 
by using discretionary Federal dollars. In the last 30 years we have 
seen discretionary Federal outlays, as a percentage of this country's 
gross national product, plummet from over 14 to 8 percent in 1994. 
Moving money from discretionary accounts to mandatory accounts is 
moving us in the wrong direction. I look forward to voting to correct 
this inequity in the Tax Code at a latter date when discretionary 
spending accounts are not used to offset the cost.
  Mr. GRAMS. Madam President, I want to commend the Senator from 
Arizona, Senator McCain, for his leadership on this issue and ask 
unanimous consent to have my name added as a cosponsor to the Senior 
Citizens' Freedom to Work Act.
  As a longtime proponent of an all-out repeal of the earnings limit, I 
am pleased the Senate is taking action on eliminating the additional 
burden President Clinton placed upon our seniors in his 1993 tax bill.
  The current Social Security earnings test penalizes senior citizens 
by reducing their benefits if they continue working beyond retirement 
age and earn over $11,160 per year. For every $3 earned above that, 
they are forced to send $1 back to the Federal Government. That is 
unfair.
  While repeated attempts have been made to repeal this seniors' 
penalty, or to at least substantially raise the earnings limit so that 
senior citizens can continue to contribute to society, the Clinton 
administration and the leaders of the previous Congress prevented any 
measures from passing. Today, we have an opportunity to prove that 
things have changed, and the Senate can do that by passing S. 1372 and 
providing some overdue tax relief to our seniors.
  I wanted to share with my colleagues some of the letters I have 
received from Minnesota seniors on this issue.
  One constituent of Pierz, MN, writes:

       I cannot afford to start drawing my Social Security because 
     of the earnings limit penalty. . . . If allowable earnings 
     were increased to $30,000 as the Republican plan proposes, 
     consider all the additional Social Security taxes that would 
     be collected. Also consider all the additional income taxes 
     that would be collected by the federal and state governments. 
     We, as Seniors on this issue, need YOUR HELP.

  A senior citizen from Eden Prairie shared a copy of a letter he sent 
to one of my colleagues. ``I wrote in 1993 regarding my concern over 
Social Security income being taxed,'' said the original letter. ``Not 
only was 50 percent of it then being taxed . . . but the Clinton budget 
plan increased the amount subjected to tax to 85%.'' The response this 
Senator received from my colleague was that he supported President 
Clinton's 1993 tax plan because it was ``fair.''
  Madam President, I stand before you today because Clinton's assault 
on this Nation's senior citizens in 1993 was not fair. It is blatant 
discrimination against 700,000 older Americans. Furthermore, it 
discourages seniors from working, robbing businesses of skilled and 
experienced workers.
  Today, we have an opportunity to restore fairness, and to deliver on 
the promise we made to seniors. Therefore, I urge my colleagues to 
support the Senior Citizens' Freedom to Work Act.

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