[Congressional Record Volume 143, Number 28 (Thursday, March 6, 1997)]
[Senate]
[Pages S2017-S2019]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               THE AMERICAN PRODUCTIVITY RENEWAL PACKAGE

  Mr. GREGG. Mr. President, I want to speak about a series of 
initiatives that I have introduced to try to address what I see as the 
major public policy concerns as we move into the next century, on the 
fiscal side of the ledger, that affect people in their lives.
  As we move out of the 20th century, we have seen a period where, 
certainly throughout most of the 20th century, there was a sense that, 
through a centralized Government, through an economy dominated by a 
Government, you could manage the lives and affairs of individuals and 
improve their lifestyle. Of course, the most exaggerated example of 
this was communism and the Russian revolution, which began the major 
Communist state of this century or any time. And it did not work. One 
of the great truths of the 20th century, of which there have been about 
three, one of the great truths is that communism--the concept that the 
state can manage the marketplace and make people better off by 
requiring that people function under a top-down system where their 
lives and their style of economic production is controlled by a central 
mechanism--simply does not function effectively. Instead of producing 
prosperity, it produced despair. Instead of producing freedom, it 
produced totalitarianism.
  So, one of the great truths that has come out of this century is that 
capitalism works, that the free market works, that giving the 
individual the incentive to be productive, by allowing the individual 
to retain a large amount of the product of their work, is something 
that produces prosperity for the individual and, as a result, produces 
prosperity for society. And a prosperous society is a freer society, we 
have also learned that. That is the second truth.
  Yet, our Government continues to function, even here in the United 
States, with a hybrid of the theory that a centralized decisionmaking 
process can handle major social and economic issues more effectively 
than the marketplace can handle them or the individual can handle them. 
In the 1930's and 1940's, we as a nation, our intellectual community, 
especially the Northeastern intellectual community, was caught up in 
the concept that you could manage almost every major social and 
economic problem from the top down. We were caught up in the concept 
that a few good minds put together in a room, thinking, could resolve 
issues of major concern for the society at large, especially fiscal 
issues.
  This led to a centralization of decisionmaking here in Washington 
throughout the 1950's, 1960's and 1970's, which reached its peak in the 
early 1970's, and gained momentum from that peak throughout the 1970's 
until the arrival of Ronald Reagan, who said, ``Let's stop and think a 
minute as to what we have done here and whether it has been 
successful.''
  The conclusion was that many of the decisions to centralize the 
process of policymaking in the hands of a few here in Washington simply 
was not working, that it was not producing a resolution to the problems 
that were at the core of our society, and especially it was not helping 
the prosperity of the Nation and individuals who lived in the Nation in 
many ways. So, we have, as we move toward the end of this century, come 
to the conclusion that maybe a centralized Federal Government is not 
all that effective in solving all of our problems; maybe we should slow 
the rate of growth of this Government and return authority to the 
people and to the States. And that, really, is what the Republican 
revolution has been about.
  If we take that as true, and I do happen to believe that is one of 
the things that has been proven by time, now--it is not a question of 
philosophy or theory any longer, it is a time-tested, proven event--
then we still have some major issues to address, because some of the 
most significant social/fiscal issues which we have as a country today 
are still being driven in their policies as to how they are resolved by 
these concepts which came out of the thirties and the forties and the 
fifties of centralizing the decision in Washington and making the 
process of addressing those decisions a Washington-driven one.

  The three issues that are at the core of this, the three concerns 
that we as a society must have, from a fiscal policy standpoint--I am 
not talking about social policy; there are a whole set of other issues 
dealing with social policy--but from a fiscal policy standpoint of how 
Government deals with major issues, the three core concerns which we 
must have, as we head into the next century, are, one, how do we deal 
with Social Security; two, how do we deal with Medicare, which is a 
health care component for our senior citizens, and Medicaid; and three, 
our tax laws, how do we structure our taxes?
  All three of those issues, all three of those functions of Government 
which deal with the broad spectrum of the quality of life of a vast 
majority of Americans, are now dominated by a philosophy which grew out 
of the thirties, which was that a centralized, Government-
decisionmaking process can better manage these systems than a 
decentralized, marketplace-driven approach.
  As a result, we have some chaos headed our way. We know that, under 
the present Social Security system, as a function of its present rate 
of return on investment and as a function of demographics, the system 
goes broke, taking the country with it, starting in about the year 
2010. It goes broke in about the year 2020, but gets into what one 
might call a fiscal spiral beginning about the year 2017 which is not 
reversible.
  This is driven by the fact that returns on investment in Social 
Security dollars put into the trust fund have been extraordinarily low. 
They are basically a rate of return set by the Federal Government on 
special bonds given to the Social Security fund, which is where the 
Government borrows.
  Second, we have a population shift in this country, which is a 
function of the postwar, baby-boom generation, where we now have 3\1/2\ 
people paying into the system for every 1 person taking out, and in the 
year 2012, we will have 2 people paying into the system for every 1 
person taking out, and this cannot support the present benefit 
structure when you have such a change.
  In addition, there is the fact that people are living longer. When 
Social Security was first created, people lived to be 61. The time was 
set at 65. That was Franklin Roosevelt's choice. He was no slouch and 
understood actuarial tables. Today, people live to be, on the average, 
male, 72, female 78, and it is going up.
  So we have a Social Security system which we know is headed toward 
bankruptcy due to demographics and due to the fact there is no 
prefunded system. It is a pay-as-you-go system with a very low rate of 
return on the investment.
  Then we have the Medicare system, which is going broke, managed by 
the Federal Government. Basically, it is a Federal Government program, 
single manager, single opportunity for seniors. They have to buy fee-
for-service delivery. They have to buy a certain set of benefit 
structures. That system is going to go broke in the year 2001 at the 
latest; probably in the year 2000, only 3 years from now.
  It is going to go broke because of the fact that it is a system which 
is using

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a 1960's model of health care delivery in the 1990's. It is a system 
which still relies on fee for service when, in fact, we know that in 
the marketplace today, very few people use fee-for-service health care. 
Most people choose some sort of fixed-cost, prepaid health care plan, 
whether it is a HMO, PPO, PSO, or whatever. They choose some sort of 
alternative rather than going out to a doctor on a cost-plus basis who 
refers you to another doctor on a cost-plus basis, then refers you to 
another doctor, which is what the present system does.
  It is a classic program which was designed by Government bureaucrats 
in the 1960's which was probably outdated even then, but which has 
clearly not been updated for the 1990's and is going to go broke in the 
year 2000 because it is not structured for these times. That is the 
second system which represents a major issue of fiscal policy.
  Between those two, Medicare and Social Security, they will be 
accounting, between them, for almost 50 percent of the Federal budget 
by the year 2000, and by the year 2017, if you throw in interest on the 
Federal debt, they will be counting for all the revenues of the Federal 
Government. That is their size and their impact under their present 
structure.
  The third issue, of course, is our tax laws. Our tax laws are, again, 
a centralized decisionmaking process where we in Washington, a group of 
elite in the Government, choose winners and losers in the marketplace. 
We choose that this type of market activity will be a benefit and that 
type of market activity will be penalized because, for some reason, we 
think we can think better than the marketplace and individuals can 
think on how they should invest their money, and tax laws are 
structured to be a top-down, centralized, essentially Government-driven 
exercise in managing the marketplace through the Government. Of course, 
nothing affects the prosperity of a country more than the level of 
taxation and the manner in which you tax.

  So my representation is this. I have put together a package of bills 
which I call the American productivity renewal package, which addresses 
these three core issues of fiscal policy from a marketplace approach, 
instead of using the dynamics which have dominated these policies since 
the thirties, which is a Government-driven approach and which is a 
centralized-planning approach. Instead of using that approach, which 
has clearly failed and which is predicted to be a catastrophic failure 
as we move into the next century, I am acknowledging the fact, the 
truism of the 20th century, which is that the marketplace, not the 
Government, is the primary provider of prosperity within a society.
  These three proposals which I put forward involve, first, in the 
Social Security area, that we recognize that you cannot have a pay-as-
you-go system with an unfunded liability of $3 to $4 trillion and an 
aging population that is exceeding the ability of the working 
population to pay for it and expect that system to survive. So what we 
need to do is to create a better return for those younger people who 
are now paying into the system on their savings. We need to be able to 
say to the working American who is under the age of 45, ``In order for 
you to get a decent Social Security retirement, we are going to have to 
have you earn more money on the dollars that you pay into Social 
Security and, more important, we are going to have to give you the 
ability to identify those dollars to yourself.''
  Today under Social Security, if you pay a dollar in, the dollar goes 
out. You have no account. There is no savings account which says, ``Bob 
Smith'' or ``Mary Jones'' on it. It is basically a dollar in, dollar 
out, and, as a result, you have this huge unfunded liability.
  We need to prefund that liability, No. 1, so that people can have 
their own savings account designated to themselves. And, second, we 
need to allow people to get a better return than what is presently 
occurring under the present system, which is about a 3 percent rate of 
return, which is not inflation adjusted, so if inflation is more than 3 
percent, it is no return at all. We need to allow people to get a 
better rate of return.
  What my proposal does, in the Social Security area it says today 
Social Security is running a surplus. It is running about a $29 billion 
actual surplus. It actually has about a $70 billion surplus, but half 
of that is interest which the Federal Government is paying on debt, so 
it is, basically, paying interest to itself. But there is actually 
about a $29 billion real surplus in Social Security, which represents 
about 1 percent of the 7.5 percent payroll tax people pay.

  So what my proposal says is that, rather than paying a 7.5-percent 
payroll tax, people will only have to pay a 6.5-percent payroll tax. 
They will get that percentage back, that percent difference back. They 
will have the right to take that percentage difference and invest it in 
a savings account or some other vehicle that allows them to produce 
income for their retirement.
  It will have to be a retirement account, like an IRA. And the 
practical implications of that are two: No. 1, people will start to 
generate a nest egg for retirement that will be real, that they will be 
able to look at every year when they get their statement; it will be 
there, and it will be able to generate a better return than 3 percent. 
And, No. 2, it has no impact on present-day Social Security recipients 
or people who would be receiving Social Security who are over the age 
of 45, because we are now running a surplus and we could pay the cost 
of their Social Security benefits without impacting them with this type 
of private account. It is using the marketplace and recognizing that 
the marketplace must be used to prefund the liability of Social 
Security.
  In the area of Medicare, this package of bills does something called 
choice, where essentially we say to the senior citizen, rather than 
having a program where the Government tells you who insures you, we 
will give you a program where, like a Member of Congress or a Federal 
employee, you can go out and choose who would insure you. They would 
have to give you a certain set of benefits and the benefits will have 
to at least equal what you are presently getting under Medicare, but 
you will be able to choose the benefit package you feel best meets your 
needs--you, the senior citizen. You will not be limited to one choice 
or, at most, two choices, which, at present, the present Medicare 
Program has.
  Equally important, what we are going to say to the senior citizen is, 
today it costs, for example, $4,800 for a senior to be on Medicare. To 
the extent that a senior can go out and find a health care plan which 
gives the basic benefits of Medicare, maybe even more benefits, but 
gives it to them for less than $4,800--say, $4,500--we will let the 
senior keep the difference, or at least 75 percent of it, that $300 
between $4,800 and $4,500.
  What does this do? It creates three marketplace forces which will 
lead to making the Medicare system more solvent. No. 1, it means the 
senior becomes a cost-incentive buyer of health care. They think about 
where they are going to buy their health care. Granted, people who are 
already in the system who are in their late 70's or 80's probably are 
not going to change. But you have a whole group of seniors coming into 
the system who have been used to looking at a variety of health care 
options, so they will be comfortable doing this. But getting that 75 
percent back of your savings makes them cost-incentive buyers.
  No. 2, it will create a marketplace which will compete for the 
seniors' dollars. Because, believe me, there are a lot of health care 
providers who deliver high-quality health care who would be very 
excited about the chance to buy into this.
  And, No. 3, it gives the Federal Government a predictable rate of 
growth as to how much health care is going to increase in Medicare 
accounts. And we, in order to make the trust funds solvent, do not need 
to cut Medicare. All we need to do is slow its rate of growth to about 
7 percent, 6.5 percent--what is now a 10-percent rate of growth. That 
rate of growth, by the way, is still twice the rate of inflation and a 
multiple of 5, possibly, the rate of health care inflation.
  So this creates a marketplace atmosphere around which Medicare would 
compete and around which seniors could participate in their health care 
system and which would control costs and which would give seniors more 
choices than they have today, more options in health care than they 
have

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today. It recognizes the fact that, you know, a 1960 system, where the 
Federal Government basically picks who you can have health care with, 
simply does not work. You have to use the marketplace.
  The third element of this American productivity renewal package is to 
look at the tax laws and acknowledge the fact that the tax laws are 
arbitrary. They are as arbitrary as some bureaucrat in Washington could 
possibly make them, or some Member of Congress could possibly make 
them. Why should somebody be a winner and why should somebody else be a 
loser under the tax laws? Simply because a Member of Congress or 
somebody at Treasury decided unilaterally to affect the marketplace by 
making the decision that this person will be a loser and this person 
will be a winner, that is not right. That perverts the flow of capital; 
it perverts investment; it perverts the manner in which people go out 
and make decisions in the marketplace. It causes an inefficient use of 
dollars that are used to create capital and create savings.
  So we need a flatter system. We need a system that eliminates the 
vast majority of the deductions and says to the taxpayer, ``You can 
fill your form out on one page, one postcard, and in doing that, we 
won't control how you make decisions with your money. We'll take your 
taxes still, but we won't control whether or not you invest in this 
item or that item. That is simply a decision as to whether or not 
you're going to get better or worse tax treatment.'' And, thus, capital 
will flow much more efficiently to those items which are most 
productive and those items which will create the most prosperity, 
because that is the way a capitalist system works and a marketplace 
system works.

  So by addressing these three core issues of fiscal policy from a 
marketplace approach as versus from a centralized planning approach, 
which is what has been done for the last half century, we can, I 
believe, ready ourselves for the next century, make this country more 
competitive, and, most importantly, put the country in a position where 
our children will be assured that we are going to be a fiscally solvent 
place and a prosperous place for them to raise their children, rather 
than a place subject to the vagaries of a huge Government debt and 
inflation that would cause a bankruptcy of the Social Security system.
  Mr. President, I appreciate your time. I yield the floor and suggest 
the absence of a quorum.
  The PRESIDING OFFICER (Mr. Enzi). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mrs. HUTCHISON. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Thomas). Without objection, it is so 
ordered.
  (The remarks of Mrs. Hutchison pertaining to the introduction of S. 
411 are located in today's Record under ``Statements on Introduced 
Bills and Joint Resolutions.'')
  Mrs. HUTCHISON. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent to have 7 
minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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