[Congressional Record Volume 142, Number 108 (Monday, July 22, 1996)]
[Senate]
[Pages S8491-S8492]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            SOCIAL SECURITY

  Mr. KERREY. Mr. President, I do not know if I will take 10 minutes or 
not, but it was called to my attention this morning when I got back in 
town that there was an opinion piece that appeared in the Washington 
Post yesterday, Sunday, written by Mr. Henry Aaron, a senior fellow in 
the Economic Studies Program at the Brookings Institution. The headline 
is ``The Myths of the Social Security Crisis.'' Henry Aaron, a 
distinguished fellow and economist, goes through one, two, three, four, 
five myths.
  I do not know how many of my colleagues or how many people that are 
concerned about this particular issue read this opinion piece, but I 
wanted to immediately--and I will come later to the floor to deal with 
some of the statements Mr. Aaron makes in detail--but wanted to 
immediately come to the floor and urge colleagues who have increasingly 
started looking at Social Security as an issue that we need to address 
currently, to hear the following.
  First, Mr. Aaron says myth one is that ``Social Security is in 
crisis.'' This essentially is a strawman argument, the fact that some 
people are saying it is in crisis. Destroy that argument, therefore, we 
do not need to do anything.
  Mr. President, I hope we do not have to deal with problems only when 
they are in crisis. I hope that, particularly with a program that 
promises retirement payments to people 30, 40, 50, 60, 70 years from 
now--and understand that every beneficiary of Social Security for the 
next 70 years is alive today. They may be 5 years old, but they are 
future beneficiaries. And we need to, whether or not we have the 
resources or the will, to be able to pay their benefits. So the longer 
one delays, the more difficult the solution becomes.
  Mr. Aaron actually later on said one myth is that it is ``the third 
rail of American politics--touch it and you die.'' That is another myth 
he identifies. I do not actually think that is a myth.
  The last time we dealt with Social Security substantively was in 
1983. We waited until we were almost out of money. Even then we almost 
did not do anything. Even then it took an independent panel to provide 
the Congress with protection.
  Mr. Aaron says we did it in 1983. The change that was made in 1983 is 
already under attack. The reason it was changed was the Deficit-
Reduction Act. There was a substantial effort to eliminate that change.
  So I do not think that the fact that Congress has dealt finally with 
Social Security is a myth that destroys the myth that this is a third 
rail, we wait until it is in crisis. If we wait once again until it is 
in crisis, Mr. President, we are not going to see the same thing we had 
in 1983. Once the baby boomers have retired, and you look at the 
numbers that are required to pay out, it is a much different situation 
than we face today. It is not in crisis. I do not argue that Social 
Security is in crisis. I am not saying it is contributing to the 
deficit, which is another myth that is here.
  But one of the myths that is not on Mr. Aaron's list--and I have a 
great respect for Henry Aaron and his views--but one of the myths he 
does not identify that is the most troubling and difficult of all is 
that Americans who are beneficiaries today, No. 1, believe that the 
Social Security Program is a savings program, that all they are getting 
back is what they paid in.
  We have perpetrated that myth very often with television advertising 
saying: Your Social Security is safe. I will not let anybody touch your 
Social Security. It is the safest program that we have today. You do 
not really hear people standing up talking about radical change in the 
program or cutting current beneficiaries.
  But to listen to the organizations who are concerned about this 
program talk, when they do their direct mail pieces, you would think 
that every single day somebody is down here on the floor talking about 
changes in the program.
  The program enjoys broad support from the American people. And 85 
percent of almost every generation supports Social Security as a 
program. It has reduced the rates of poverty substantially in this 
country of people over the age of 65. It has been, in general, a very, 
very good program.
  The myth, though, that it is a savings program encourages people to 
believe that their payroll tax is going into an account that is 
reserved for them that they own. It is not being reserved for them. 
Social Security was designed as a collective transfer program. It is 
social insurance because there are progressive payments made. The 
connection between what you receive is based upon your income, not 
based upon what you have contributed. It is very progressive.
  As a consequence, it has been a program that most, I think, look at 
as a good way to help, and particularly lower income retirees avoid the 
trauma of living in poverty at the very time when they are no longer 
able to produce and earn a living.
  But it is not savings. That is the most difficult myth of all. There 
is no account being held here for people that are paying into the 
program, which leads, Mr. President, to one of the most important 
reasons that people, like myself, have been arguing for reform.
  The first one is, as I said earlier, waiting until the end, as we 
typically do. Mr. Aaron is basically saying: Wait until there is a 
crisis. There is no crisis. Why act? Wait until there is a crisis, he 
is saying. Wait another 30 years until there is a crisis, and then act.
  That is foolishness to do that. The people who are going to pay the 
price for that are not current beneficiaries, people currently 
receiving payments. But it will be people under the age of 43 who will 
have to answer the question, ``Gee, wait a minute. Do I want, in order 
to preserve my benefits, my kids to pay that kind of payroll tax?'' 
Look at the kind of payroll tax that they are going to have to pay if 
you wait for 30 years, if some kind of adjustment is not made before 
then.

[[Page S8492]]

  One of the flaws, in my judgment, of the 1983 fix was it said that we 
are going to raise taxes higher than what is necessary for the first 
time in the 50-year history of the program. The 1983 fix said, we are 
going to raise taxes higher than what is necessary to prefund the 
benefits of the baby-boom generation. Then we immediately--rather than 
setting it aside to be used for the baby-boom generation--we 
immediately begin to use it to pay for current expenditures.
  Again, I am not arguing that Social Security contributes to the 
deficit. But I am prepared to argue that people who get paid by the 
hour, people whose wages are under $62,400 a year, which if you are 
looking for a definition of the middle class, you just as well said it 
there, because everybody over $62,400 does not pay that full 12.4 
percent. You only pay it on the first $62,400. Anybody who is under 
$62,400, understand, you are shouldering more deficit reduction than 
those above because you are paying higher taxes on your payroll than 
needed to fund current benefits.
  I do make the argument that the program needs to be changed sooner 
rather than later because we want to avoid the crisis, because you want 
to look out in the future and say that, whether you are a beneficiary 
who is 20 or 30 or 40, regardless of your age, whatever promise we have 
on the table we ought to be able to fund it.
  I believe it was a mistake to change the law in 1983 to have this 
account building up to this huge amount, first, because we used it for 
deficit reduction, but, second, I do not think it makes any sense to 
say that we are only concerned about the beneficiaries over the next 
35, 40 years.
  Whatever promise we have on the table we ought to be able to keep for 
everyone in perpetuity. Any insurance company has to do that, has to 
abide by that rule, and we should, as well.
  To do that, Mr. President, what you need to do is change the funds, 
so you build it up to a level that keeps it stable and then keeps it 
there in perpetuity. Whatever payroll taxes are needed, whatever 
benefits we are promising to pay to future beneficiaries, you should be 
able to look and have the actuaries run the numbers and say, you have a 
stable fund, it will be there forever; the benefits that you promised 
to somebody 20, 30, 40, years ago, you will be able to keep those 
promises just as you said.
  The implication given by Mr. Aaron, and I really do regret it, is 
that the financial managers in America are putting a lot of pressure on 
Congress to change this program so that it is privatized. First, Mr. 
Aaron, in this article, says one of the dirty little secrets about 
privatization is that it requires a tax increase, and nobody is making 
a proposal in partial privatization. That comes upfront with that. 
First, it does not require a tax increase in all cases; second, there 
is a proposal already. Senator Simpson and I introduced legislation 
that would allow Americans to take 2 percent of their payroll tax and 
use it, individualize their own wealth. It is fully funded. There is no 
tax increase in that.
  I intend to send a copy to Mr. Aaron so he can evaluate it and 
determine whether he likes the proposal, or the next time he criticizes 
Congress or a general audience for not having a specific proposal, at 
least he can offer one exception.
  Mr. President, I think the privatization argument itself is better 
framed, rather than, Are you for privatization or against it, better 
framed, Are you for the individualization of the account? By that I 
mean, under the proposal of Senator Simpson and myself, what we do is 
say there is still a collective payment, still a payment, although it 
is misdescribed by many people. We will promise to transfer from the 
wages of people who are working, a fixed payment, fixed tax on their 
wages, and transfer, in a very progressive way, to people who are 
retired. That will still be there. You will be eligible for early 
payment if you want it, or a regular payment, or a late payment.
  The PRESIDING OFFICER. The Chair advises the Senator the 10 minutes 
have expired.
  Mr. KERREY. I end with 30 seconds, by merely saying the personal 
investment plan, as described by Senator Simpson and myself, is not 
privatization. It is fully funded. And it is, it seems to me, called 
for in a program which has not been changed fundamentally in 60 years.
  I yield the floor.

                          ____________________