[Congressional Record Volume 141, Number 189 (Wednesday, November 29, 1995)]
[Extensions of Remarks]
[Pages E2256-E2257]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   SOCIAL SECURITY IS FAR FROM BROKEN

                                 ______


                         HON. CHARLES B. RANGEL

                              of new york

                    in the house of representatives

                      Wednesday, November 29, 1995

  Mr. RANGEL. Mr. Speaker, I rise today to enter into the Congressional 
Record an article by Mr. Gus Tyler celebrating the 60th anniversary of 
the Social Security trust fund and decrying the false prediction that 
Social Security is on the verge of bankruptcy, Mr. Tyler makes clear 
that the Social Security trust fund is not running out of money, as 
many of my colleagues have argued.
  The trust fund is strong and will remain strong as long as the 
American economy is strong. What threatens the trust fund is what 
threatens the economy: unemployment and a stagnant economy. We need to 
strengthen the economy not to dismantle Social Security. Moreover, the 
Social Security system strengthens the American economy by generating 
buying power and increasing savings. I would like to enter into the 
Congressional Record this statement by Gus Tyler which clearly outlines 
why we don't need to dismantle Social Security.

                trust fund doesn't need to be ``fixed''

                             (By Gus Tyler)

       The Social Security Trust Fund, which celebrates its 60th 
     birthday this month, will go bust sometime between the year 
     2020 and 2030. That forecast has been heard so often and from 
     so many authentic voices that the statement is now taken to 
     be a fact. Which it is not.
       To head off the imagined disaster, the following remedies 
     are presented: a) raise the payroll tax that funds the 
     system; b) reduce the benefits to retirees; c) do not adjust 
     the benefits to meet the cost of living; d) tax benefits to 
     help balance the budget.
       If these cures are applied, they will kill the patient who 
     is not sick.
       The Social Security Trust Fund will not run out of funds by 
     2020 or 2030 unless the United States runs into what amounts 
     to a depression that will continue for a protracted period. 
     And the remedies currently proposed will hasten the coming of 
     precisely such a depression that will not only destroy the 
     Social Security program, but will destroy the country.
       Here is the truth about Social Security as set forth simply 
     by an extremely authoritative governmental body known as the 
     Board of Trustees of the Federal Old-Age and Survivors 
     Insurance and Disability Insurance Trust Fund.
       The facts that follow are drawn from the 1995 report of 
     this official body to the appropriate persons and agencies in 
     accordance with Section 201(c)(2) of the Social Security Act 
     as amended.
       The Report (page 181) submits three scenarios on the future 
     of the Social Security system. One scenario assumes virtually 
     no growth in the economy in the first 75 years of the next 
     century. Another scenario assumes slow growth; a third 
     scenario assumes something between no movement and a slow 
     crawl.
       The first scenario--the worst possible case--assumes that 
     the country is in the economic doldrums for about 70 years. 
     By 1996 (next year), the economy will be effectively 
     stagnant, with a growth rate of minus 0.7 percent. That means 
     recession bordering on depression.
       The same scenario projects little hope for the future. 
     Growth will be near zilch. And, as a consequence, the Social 
     Security Trust Fund will be facing early bankruptcy. In fact, 
     says the footnote on page 181, ``estimates for later years 
     (after 2030) are not shown because the Funds are estimated to 
     become exhausted in 2030.''
       But--and this is a big ``but''--this is only one of three 
     scenarios submitted by the Board of Trustees.
       A second scenario assumes an annual growth rate of between 
     2 and 3 percent a year. That is a very slow growth rate when 
     compared with growth in the years from 1960 to 1964 (4.4 
     percent) or with growth in the years 1970 to 1974 (3.1 
     percent) or with 1984 (6.2 percent). A growth rate in the 
     next century--from the year 2000 to 2070--of a mere 2 to 2.5 
     percent is sluggish.
       Yet, according to the report of the trustees, if such a 
     growth rate, albeit slow, continues, by the year 2070, the 
     Social Security Trust Fund will have an income of $22.74 
     trillion dollars and will have accumulated assets of $98.7 
     trillion. Yes, ``trillion,'' not billion!
       The $98 trillion (roughly $100 trillion) is not as 
     outlandishly huge as it seems. The report for this scenario 
     assumes an annual 3 percent rate of inflation. Over 75 years 
     (from 1995 to 2070), a dollar will lose much of its value, 
     ending up worth about 10 cents in 1995 currency.
       Allowing for that factor, the $98 trillion dollar reserve 
     projected for 2070 would only be worth one-tenth that sum--
     about $10 trillion--in 1995 dollars.
       Ten trillion dollars in 1995 currency is, however, no mean 
     sum to have as a reserve in the Social Security Trust Fund. 
     It is twenty times as large as the present reserve of about 
     half a trillion. It is twice as large as the total federal 
     debt this year. It will, as noted above, be replenished in 
     2070 by an additional $22 trillion and by annual 
     contributions in that dimension in the years to follow.
       One of the problems that some insiders were posing a few 
     years ago when this scenario began to unfold was--what to do 
     with all that money? One of the possible answers would be to 
     allocate some of the money in the Old Age and Survivors Fund 
     to the Medicare Fund.
       The sums that are projected by this scenario are not the 
     outer limits of what can be realized. The assumption of the 
     ``optimistic'' forecast is that the economy will grow, 
     between now and 2070, at an average rate of about 2.5 percent 
     a year. That is no great shakes. Between 1960 and 1994, it 
     grew at 2.8 percent. And it could have grown faster if the 
     Federal Reserve Board had not been repeatedly checking growth 
     by raising interest rates and limiting the money supply.
       Should the economy grow at 3 and 4 percent a year, added 
     trillions would pour into the Social Security and Medicare 
     funds, as well as into the U.S. Treasury.
       But, would not such growth beyond, let's say, 3 percent, be 
     inflationary? The report of the Fund trustees says, ``No.'' 
     In 1984, the economy grew at the swift speed of 6.2 percent, 
     but the inflation rate (consumer price index) was only 3.5 
     percent. Again, in 1994, the economy grew at a lively 4 
     percent, but the inflation rate was only 2.5 percent.
       Perversely, in some of the years of slowest growth, prices 
     rose wildly. In 1990, the economy grew by a feeble 1.2 
     percent, but prices rose by 5.2 percent. And in 1980, the 
     economy actually shrunk by 0.5 percent, but prices 
     skyrocketed by 13.4 percent.
       The reasons for this seemingly contrary behavior are 
     several and make a fitting subject for another article. But 
     the fact remains that rapid growth does not mean inflation 
     and that low or negative growth does not mean lower prices. 
     (All these data are drawn from the above mentioned report, 
     page 56).

[[Page E 2257]]

       In sum, the future of Social Security (and Medicare) is not 
     glum if the economy continues to grow at a reasonable rate. 
     The way to go, then, is to take steps to expand the economy.
       But the remedies proposed to ``fix'' the Social Security 
     system that is not broken will break both the security system 
     and the economy. Let us, briefly, consider each of these 
     proposals.
       1. Raise the payroll tax. Such a tax would reduce the 
     ``disposable income'' of employees. They and their families 
     will have less with which to buy. In our ``market economy,'' 
     any such shrinkage of the ``market'' has to shrink the 
     economy--less buying, less production, fewer jobs. Right now, 
     retailers and manufacturers are stuck with a pile up of 14 
     months of consecutive inventory accumulations they cannot 
     sell. To cut buying power of employees would mean more unsold 
     wares.
       2. Reduce the benefits. That would have the same effect as 
     raising the tax on employees. Reduced benefits mean reduced 
     buying power. And reduced buying power means reduced 
     production, etc. ad nauseam.
       3. Do not increase the benefits to keep up with the rise in 
     the cost of living. This, too, would be a subtle, but 
     effective way to do what 1) and 2) above do more directly. If 
     prices rise and the ability to buy does not rise 
     simultaneously, people buy less. By now, we all know the 
     rest.
       4. Tax the Social Security benefits of the ``affluent.'' 
     Such a tax is, in effect, a reduction in benefits. Uncle Sam 
     gives with one hand--the security check--and takes with the 
     other hand, the tax. That would work just like the other bad 
     medicines.
       In addition, who are the ``affluent''? Are we talking about 
     a retiree with an income of $25,000 or a retiree with an 
     income of $250,000? To tax the latter would probably not 
     seriously change his or her spending habits; to tax the 
     former will.
       What is not generally appreciated about the Social Security 
     system is that it is one of the greatest and most reliable 
     sources of nourishment for the entire American economy. In 
     1995, some 43 million people will have received about $340 
     billion with which to buy things and purchase services. Let's 
     assume that in a mean moment of madness, all those payments 
     were discontinued. How long would the American economy be 
     able to sustain itself?
       The Social Security system, however, does more than provide 
     the fuel for consumption, it also provides capital for 
     production. Every year, for many years, the security fund has 
     generated multi-billion dollar surpluses. At the end of this 
     year, it will have a reserve of more than half a trillion.
       Where does that money go? It goes, just about all of it, to 
     purchase government securities. That frees up other capital 
     for investment in the private sector of the economy.
       In this way, the Social Security system strengthens America 
     in two ways: a) it generates buying power; b) it generates 
     savings.
       And, if we, as a nation, pursue policies to expand, rather 
     than stunt, growth, the entire economy and U.S. Treasury, 
     whose income is drawn from that economy, will be in better 
     shape and our senior citizens need not worry about either 
     their or their children's future.

                          ____________________