[Congressional Record Volume 142, Number 67 (Tuesday, May 14, 1996)]
[House]
[Pages H4906-H4907]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 PROTECTING SOCIAL SECURITY--WILL AMERICA GROW UP BEFORE IT GROWS OLD?

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from Michigan [Mr. Smith] is recognized during 
morning business for 6 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, earlier today I attended a Social 
Security forum. One of the presenters at that forum said Social 
Security could be taking in less money from FICA taxes than it is 
required to pay Social Security checks by the year 2005. By the year 
2005, Social Security under that definition could be broke. There is no 
real trust fund. That is why, Mr. Speaker, I have entitled my remarks 
for this morning ``Protecting Social Security--Will America Grow Up 
Before It Grows Old?''
  In 1983 Congress passed historic legislation to save Social Security. 
At that time the Social Security Administration warned that the system 
had an unfunded liability equal to 1.82 percent of payroll. In other 
words, the taxes would have to be increased by 1.82 in order to 
accommodate the requirements for survival for Social Security.
  A 1983 law eliminated this liability temporarily. However, the 
actuaries today now say that the unfunded liability is 2.17 percent of 
taxable payroll, 19 percent worse than in 1983, and yet, Mr. Speaker, 
we do nothing. Some people have called it a third rail. Some people 
say, do not touch Social Security because you might not be reelected, 
because seniors do not want their Social Security interrupted or 
considered. I do not believe that is true. I believe most senior 
citizens today want to protect Social Security for their kids and their 
grandkids.
  Let me tell my colleagues about the existing liability that equals $4 
trillion in Social Security. Put another way, under the current system 
every beneficiary for the next 75 years will have to absorb a 14-
percent cut in benefits for the system to balance. The other 
alternative is that we raise taxes by 16 percent on the already 
overburdened American worker.
  Traditionally Congress waits until the last minute or the last moment 
to solve these kinds of problems, using a crisis environment to 
convince our constituents and ourselves that sacrifices could be made. 
If that happens, probably what Congress would do first is to look at 
reducing COLA's for existing retirees.
  That is not the right way to solve this problem. I think, no matter 
how we try under current law, there will only be two workers paying 
into the system for each retiree drawing benefits by the time that we 
reach the 2010 to 2020 era. When we started this program, there were 38 
workers for every 1 retiree. Today there are 3 workers for every 
retiree. When we hit the catastrophic era of 2010 to 2020, there will 
only be two workers for each retiree.
  I am introducing legislation this year, and it offers a way out and I 
believe it justifies consideration. Part one of my bill eliminates the 
unfunded liability of the trust funds by slowing the growth of benefits 
in two basic ways.
  Under the bill initial benefits will still rise after inflation, but 
they will not double as they do now under current law. It also imposes 
some modest means testing of benefits. This proposal holds harmless 
low-income workers and also existing retirees. I repeat, my proposal 
holds harmless the low-income workers and also existing retirees. 
Furthermore, this proposal gradually raises the retirement age, then 
indexes it to life expectancy. These two reforms more than eliminate 
the unfunded liability of this system, according to the Social 
Security's actuaries.
  The Social Security Administration has scored this bill and found 
that each worker could invest between 1.8 percent of what they earn in 
payroll and 10 percent of their paycheck in a personal retirement 
savings account that is going to be their personal passbook savings 
account, their property, so at least for those funds they do not have 
to be worrying about a government

[[Page H4907]]

that is going to use these moneys up and eventually not pay those 
payments.
  Over time, the assets in workers' accounts will grow very rapidly, 
producing genuine retirement security. The balances grow so rapidly 
that it seems only fair to ask these successful investors to agree to 
lower Social Security benefits. Thus, worker/investors will still 
receive Social Security checks, although they will be smaller than 
those defined under part 1, as well as full ownership rights to their 
plans. However, the benefits flowing from their personal retirement 
savings accounts will more than make up the difference. Furthermore, 
account balances will belong to workers and will be passed on to their 
heirs, improving the financial security of wives, husbands and their 
children. Personal retirement savings accounts are a very good deal.
  With some guidelines I believe it should be up to each worker to 
determine how his funds will be invested or if he wants to fund a 
personal retirement savings account at all. In fact, workers may elect 
to remain in the existing system if they wish and collect only Social 
Security benefits. It will be their option alone whether to place a 
portion of their paychecks in the hands of professional money managers. 
However, eligible investments in accounts include only assets now 
eligible for investment in individual retirement accounts [IRA's]. 
Also, under the proposal, managed investment accounts will have to meet 
investment and reporting requirements.
  Another important benefit of this proposal is that it will stabilize 
fiscal policy. This year, Social Security will take in $75 billion more 
than it distributes. By 2005, the annual cash flow surplus will rise to 
$135 billion. But in 2025 and beyond, there will be annual cash 
deficits of $330 billion and rising as far as the eye can see. Under 
this plan, cash flow in and out of the Social Security System will 
always be equal. Pressure to cut other spending or to raise taxes will 
not be required by cash flow problems. Social Security will be 
depoliticized--as it should be.
  I plan to introduce this bill soon and invite my colleagues to 
cosponsor. Together, we can restore the solvency of America's most 
popular program and make it even better.

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