[Congressional Record Volume 142, Number 46 (Friday, March 29, 1996)]
[Senate]
[Pages S3230-S3232]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   SENATE RESOLUTION 238--RELATIVE TO BUDGET OR TAX LEGISLATION AND 
           EXPANDED ACCESS TO INDIVIDUAL RETIREMENT ACCOUNTS

  Mr. HELMS (for himself, Mr. Roth, Mr. Lott, Mr. D'Amato, Mr. Nickles, 
Mrs. Hutchison, Mr. Faircloth, Mr. Breaux, Mr. Shelby, Mr. Bennett, and 
Mr. Santorum) submitted a resolution which was referred to the 
Committee

[[Page S3231]]

on the Budget and the Committee on Governmental Affairs, jointly, 
pursuant to the order of August 4, 1977, with instructions that if one 
committee reports, the other committee have 30 days to report or be 
discharged:

                              S. Res. 238

       Whereas the Congress recognizes that an increased saving 
     rate would be beneficial for the American economy, providing 
     much needed capital for investment which leads to economic 
     growth and increases in jobs and wages;
       Whereas the personal saving rate in America averaged 
     between 6 percent and 8 percent from 1950 through 1980, but 
     dropped below 5 percent in the late 1980's, where it remains 
     today;
       Whereas the United States now has the lowest saving rate of 
     all other industrialized nations in the world and this 
     results in deficit financing and foreign borrowing to finance 
     our consumption and investment;
       Whereas when the deductibility of contributions to 
     individual retirement accounts (``IRAs'') was significantly 
     curbed in 1986, deductible contributions to IRAs dropped from 
     almost $40,000,000,000 in 1985 to a low of about 
     $7,000,000,000 in 1993;
       Whereas millions of people are currently precluded from 
     making fully deductible IRA contributions, and they are 
     relying on Congress to increase the current income limit on 
     individuals eligible to contribute to IRAs and to create a 
     new nondeductible IRA so all Americans can utilize IRAs to 
     save for their futures;
       Whereas the time has come to allow spouses working at home 
     to have an equal opportunity to invest in an IRA since out of 
     the 53,000,000 households with married couples, at least 35 
     percent have only one wage earner in the household, thereby 
     illustrating the need for IRAs for spouses working at home;
       Whereas because of the current restrictions on IRAs, only 
     around 8 percent of American workers invest in them;
       Whereas unless remedial action is quickly taken to increase 
     the saving rate, millions of American will be lacking in 
     sufficient resources to fund their retirement needs;
       Whereas 50 years ago 42 workers contributed Social Security 
     taxes for every beneficiary, today there are fewer than 4 
     workers per beneficiary, and by 2025 the ratio will have 
     dropped to only 2.2 workers per beneficiary;
       Whereas if an expanded individual retirement package is 
     included in any budget agreement or appropriate to measure, 
     it will give millions of American the opportunity to use IRA 
     funds to provide for retirement, buy a first home, pay for 
     children's college education, or protect themselves in the 
     event of extended unemployment--all without incurring any 
     penalty; and
       Whereas if an expanded individual retirement accounted 
     package is included in any budget agreement or appropriate 
     tax measure, millions of Americans can immediately begin 
     using IRAs to save for their futures, reducing dependence on 
     government, and millions of unemployed or underemployed 
     Americans can pursue the American Dream: Now, therefore, be 
     it
       Resolved, That it is the sense of the Senate that any 
     budget agreement or appropriate tax measure coming before 
     Congress this year shall include expanded access to 
     individual retirement accounts so that the saving crisis in 
     America can be reverse, new jobs can be created, economic 
     growth can be increased, and the American Dream can be 
     restored.

  Mr. HELMS. Mr. President, in 1981 President Reagan proposed that 
individual retirement accounts be expanded to allow all workers to 
supplement their employer pensions with individual, tax-deferred 
savings. You see, Mr. President, Ronald Reagan understood the 
importance of increased national savings; he correctly perceived that 
the expanded use of IRA's would result in additional savings by 
families and individual citizens.
  The year President Reagan proposed the IRA expansion, citizens across 
America invested $4.8 billion in tax-deferred IRA accounts. Three years 
later, in 1984, the amount of contributions to IRA's had increased to 
more than $35 billion.
  And this past year, Mr. President, IRA contributions dwindled to 
about $7 billion--due in large part to the ramifications of the Tax 
Reform Act of 1986, which limited tax-deferred IRA contributions only 
to workers having no employer-sponsored retirement plans in which to 
invest and save--and to those citizens meeting an income test. Not 
surprisingly, these unwise restrictions diminished IRAs as an effective 
way to save for broad segments of society.
  It's high time that the Federal Government's tax policy again 
encourage the American people to save through tax-deferred IRA's. So, 
Mr. President, I'm introducing a resolution expressing the sense of the 
Senate that, if a budget agreement is reached this year, it should 
include expanded access to IRAs.
  The distinguished chairman of the Finance Committee, Senator Roth, 
along with the Senator from Louisiana. Mr. Breaux, have introduced an 
effective bill (S.12) to encourage savings and investment through IRAs. 
This legislation gradually restores the universal availability of the 
tax-deductible IRA. It also establishes the back-end IRA, a new 
investment instrument in which contributions are not tax deductible, 
but earnings are not taxed at withdrawal.
  The Congress should make certain that all Americans, including those 
who choose to work at home, have the opportunity to participate fully 
in IRA savings. Moreover, the tax system should allow investors to 
withdraw savings for a limited number of contingencies For example, 
families should be allowed to make penalty-free withdrawals for certain 
education expenses, first-time home purchases, catastrophic illness and 
long-term unemployment. These commonsense proposals must be included in 
any budget agreement struck this year, or any appropriate tax measure 
considered by the Senate.
  Mr. President, the saving rate in America has declined significantly 
in the past two decades. In the 1970's, Americans saved 8 percent of 
average disposable income. By 1994, that figure had dropped to 4 
percent. The saving rate in Japan, for example, is three times that in 
America; Canadians save twice as much as Americans. According to the 
Federal Reserve Board Chairman, Alan Greenspan, reversing the low 
saving rate is one of the most important long-term economic challenges 
in America.
  If the availability of IRAs is expanded, savings will increase, and 
that will benefit the entire economy. A boost in savings will fuel 
added investment spending, which in turn drives the engine of economic 
growth and job creation. Likewise, it will reduce our reliance on 
foreign investment.
  The importance of individual savings has never been greater, Mr. 
President, as the current demographic situation makes clear. The 
population as a whole is aging and the ratio of retirees to workers is 
increasing in the 1940's, for example, approximately 40 workers 
contributed to Social Security for every beneficiary of Social 
Security. Today, there are fewer than four workers per beneficiary, and 
by 2025 the ration will have dropped to only 2.2 American workers per 
retiree. This is certain to place enormous stress on the public pension 
system in America.
  Younger workers, especially, should be encouraged to save for their 
retirement needs. Personal responsibility and personal savings are the 
wave of the future, Mr. President. The Senate should, therefore, 
include expanded savings opportunities in any future budget agreement, 
or in any appropriate tax measure to come before the Senate.
  Mr. LOTT. Mr. President, I am very pleased to be a cosponsor of 
Senator Helms' sense of the Senate resolution that an expanded IRA 
should be included in any budget agreement we are able to reach.
  I am still hopeful that we will be able to reach an agreement this 
year. Some say I am the eternal optimist. But, I truly believe it is in 
the best interest of our country to enact the changes necessary to put 
us on the path to a balanced budget. And, I hope that, in the end, this 
will prevail.
  I also believe that tax relief should be included in any final 
agreement. It is critical that we provide incentives for economic 
growth and relief to families.
  The tax cuts in the 1980's led to significant increases in real 
savings and real net worth of U.S. households; they also attracted huge 
influxes of foreign capital. All of this helped finance vigorous 
economic growth.
  To the contrary, the increase in marginal taxes in 1990 and 1993 have 
suppressed private-sector savings and led to stagnation in investment 
in the United States by foreign investors. To increase the U.S. 
economy's capacity to expand, we must reverse the tax rate increases of 
the past 4 years.
  There are two aspects to our national savings problem:
  First, public dissaving in the form of large Federal deficits, and
  Second, a decline in private savings, especially for retirement.
  We addressed both of these in the Balanced Budget Act of 1995 which 
the President vetoed last December.

[[Page S3232]]

  Our national savings rate is alarmingly low: It has fallen 50 percent 
since 1970. Americans are saving less today than at almost any time 
since World War II.
  From 1993 to 2020, the percentage of Americans over 65 years old will 
increase by 64 percent. The Baby Boom generation is aging, and people 
are spending more years in retirement than ever before. Yet, studies 
show that Baby Boomers are only saving one-third of what they need for 
an adequate retirement.
  The ratio of those paying into Social Security versus those drawing 
it is shrinking. People must realize this trend and acknowledge that 
their Social Security benefits should only be the foundation for their 
retirement: They must also take personal responsibility.
  The personal savings rate has plummeted from 8 percent of disposable 
income in 1970 to only 4 percent in 1994. This represents a loss of 
roughly $200 billion in capital that could have been put to work in our 
economy.
  Our savings rate is lower than any industrialized country. For 
example, Japan's savings rate was 14.8 percent in 1994, compared to 
ours of just over 4 percent.
  Low rates of savings and investment have limited productivity growth 
and employment opportunities for more than two decades. This has held 
back investments and kept the United States at sub-par growth levels.
  We must address this long-term problem, realizing the importance of 
savings to the economy and the well-being of current and future 
generations.
  If we do not take steps now to increase private savings, our deficits 
will preempt all projected private savings early in the next century.
  Expanded IRA's will provide the incentive people need to save.
  I have always been an advocate of IRA's. Contributions to IRA's grew 
from $5 billion in 1981 to about $38 billion in 1986, accounting for 30 
percent of the total saving by individuals that year. IRA's were 
working as they were supposed to.
  I thought it was wrong in 1986 to limit the deductibility of 
contributions. As a result, by 1990 annual contributions to IRA's fell 
to less than $10 billion, and participation fell from more than 15 
percent of income tax filers in 1986 to only 4 percent in 1990.
  We have made several efforts since then to restore the deduction, but 
to date have not been able to accomplish this. We were close this year. 
The Balanced Budget Act would have allowed penalty-free withdrawals 
from IRA's for first-time home purchases, medical expenses, education 
expenses and unemployment. Individuals would have been allowed to 
withdraw for themselves and members of their families.
  In addition, the bill would have allowed for a super IRA and spousal 
IRA's. It blows my mind that women who work in the home are not allowed 
to contribute but $250 to an IRA; this is just basically unfair.
  I believe expanded IRA's will serve as an incentive to Americans to 
save for their own retirement. Studies show that approximately one-
third of Americans have put away almost nothing for their retirement. 
While saving for retirement is important for social reasons, there is 
an added benefit: Increased IRA savings will allow capital investment 
which will, in turn, spur economic growth.
  So, in conclusion, I would urge my colleagues to support this sense 
of the Senate resolution. And, I would urge them to continue to support 
legislation to make investment in IRA's possible for all Americans.
  Let's give people the opportunity to take control of their own lives 
and retirements and restore the American dream.

                          ____________________