[Congressional Record Volume 143, Number 41 (Wednesday, April 9, 1997)]
[House]
[Pages H1384-H1386]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1615
SOCIAL SECURITY
The SPEAKER pro tempore (Mr. Jenkins). Under the Speaker's announced
policy of January 7, 1997, the gentleman from Michigan [Mr. Smith] is
recognized for 60 minutes.
Mr. SMITH of Michigan. Mr. Speaker, for everybody's information, I
will be taking slightly less than 20 minutes for this presentation. I
think this is the time of year when every American, Mr. Speaker, should
be looking at their income tax returns and seeing how much they pay in
taxes. They should be looking at their payroll check, if
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they have payroll deductions, to see how much is deducted from that
check for taxes for Government.
Right now if you are an average working American, Government taxes 41
cents out of every dollar you make. Government, in their thinking that
they can make decisions of how to spend the money you earn better than
you can, have simply decided to keep increasing the size of Government,
doing more things, making more promises.
Mr. Speaker, I wanted to talk for a few minutes today on one of those
promises, which is Social Security. Now, politicians have promised more
than they can deliver on Social Security. The official estimate of the
Social Security Administration is that Social Security is going
bankrupt. This first chart that I have shows that there is going to be
a slight surplus of money coming into Social Security until
approximately 2011. After that, the taxes coming in that pay for the
benefits going out are going to not be enough to adequately supply the
existing benefit grant level. So the red part of this graph shows how
much deficits are going to increase if we are going to keep our
commitment under the existing Social Security benefit plan.
We have a serious problem in Social Security. It was decided in 1935
to have, if you will, a Ponzi game, a pay-as-you-go system where
existing workers pay in their taxes and those taxes are immediately
paid out to existing retirees, a pay-as-you-go program. That is the way
it is today. That is the way it has always been since it was devised in
1935. Not a very good way when we consider the fact that we have a
declining number of people working to pay in those taxes and we have an
increased number of retirees, because they are living longer, for one
thing, to receive those benefits.
Mr. Speaker, this chart shows that in 1950 there were 17 people
working paying in the Social Security tax for every 1 retiree. Today
there are three people working paying in their Social Security tax of
12.4 percent to supply each retiree that is on Social Security. By
2029, the estimate is that there will be only two people working to pay
in those taxes. Of course what we have done is simply increased the
taxes that the fewer and fewer number of workers pay in, not fair to
the young people of today.
We need to start having something like generational accounting, how
much are we taking away from our young people in terms of the taxes, in
terms of the borrowing that we are doing today that we are, in effect,
using the money they have not even earned yet because somehow we have
decided our problems today are important enough that we are going to
take the money that they have not even earned yet and make them pay
back the debt that we are now imposing on them.
Mr. Speaker, this chart shows what is happening in terms of the cost
of Social Security. It is hard to conceive $350 billion. So what I did
is I broke this down to how much does Social Security cost per minute.
This year Social Security is costing $700,000 a minute. Last year it
cost $660,000 a minute. But look what is going to happen by the year
2030. It is going to cost $5,700,000 per minute. That is because more
people are living longer, plus we have got the baby boomers that are
going to start retiring in the year 2011, 2012, 2013.
The baby boomers of course was the huge increase in the birthrate
that happened after World War II. Everybody thought the economy is
great, we are coming out of this war as national heroes, we are going
to have children because we can take care of them.
This shows the chart, the graph of the life expectancy of senior
citizens. When Social Security started in 1935, the average age of
death was 61 years old. The retirement age was 65. Of course what that
means is most Americans never lived long enough to earn any of the
Social Security benefits, so it was easy to balance the system in those
days when most people were dying off before they even became eligible
for Social Security. The estimates are now that, when you are born, on
the average you are going to live to be 74 years old. But if you reach
65, the current age for total full eligibility for Social Security
benefits, if you reach the age 65, now on the average you will continue
living until age 84.
Some estimates are as high as, by the year 2030, one-third of the
population will be living to be 100 years old. Of course what that does
is mean more Social Security recipients depending on those workers, if
we continue the existing system, to pay in their taxes, to pay for the
existing benefits.
Here are just two charts. It shows between now and the year 2040
seniors will increase at 108 percent, coming to 71 million, where
workers will increase only 23 percent of the population. That means
fewer workers like we showed on the chart supporting with their taxes
for more and more retirees.
So the question is, should we yet again increase taxes on those
workers? This chart shows how we have increased taxes over the years.
So every time there was a little money needed in Social Security, we
increased the tax on workers. Of course when it started out, it started
out at 2 percent on the first $3,500 of earnings. Now it is 12.4
percent on the first $62,000 of earnings. And that base of $62,000 is
automatically indexed to go up every year.
Listen to this. Mr. Speaker, we have increased taxes on workers 36
times since 1971, more often than just once a year. We cannot increase
that tax on workers anymore. It is not fair. Taxes are already getting
too high. What this next chart shows, if the next chart is in order,
and it is not quite in order, is how long it took to get everything
back that you and your employer paid in Social Security taxes.
If you happened to retire back here in 1940, of course, it only took
2 months to get everything back you put in. Taxes were very low and the
program was just starting. If you retired in 1960, it took 2 years to
get back every tax dollar that you put in, that your employer put in,
plus compounded interest. By 1980, it took 4 years after retirement.
Look at 2 years ago. In 1995, you have to live 16 years after you
retire to get the money back that you and your employer put in. Not a
very good investment.
Some people say, look, if you go to a private investment, it is
risky, Nothing is more risky than the existing system because you are
going to be very, very lucky if you get back what you put into the
system in taxes.
In 2005, which is 8 years from now, you are going to have to live 23
years after retirement. By 2015, you will have to live 26 years after
retirement to get back just what you and your employer put in in taxes.
Today 78 percent of American workers pay more in the Social Security
tax, the 12.4 percent Social Security tax, than they pay in the income
tax. That tax is high enough.
Mr. Speaker, I want to spend a little time with this last chart. This
last chart is a pie representing how the Federal Government spends its
money. Last year we spent a little over $1.5 trillion. Look at the
large piece of this pie, how much Social Security took out of the total
spending of Federal Government, 22 percent.
If we go around, we are looking at Medicare, Medicare is an amendment
to the Social Security Act that was amended in 1965 to say, let us
expand the Social Security Program to cover health care for senior
citizens. Medicare is growing at almost the rate of 10 percent a year,
and pretty soon Medicare is going to be a larger, huger problem than
Social Security.
We have got to somehow take our heads out of the sand and start
dealing with some of these tough issues. I know for politicians it is
easy to put those decisions off. Maybe you say, look, I am only going
to be in office another 2 years or 4 years, let the people after me
deal with these tough issues. They are tough. How are we going to solve
the problem?
I want to point out that interest on the public debt of the $5.2
trillion that we have overspent, annually we overspend, and that is
called the deficit. You add all those deficits up and now it comes to
$5.2 trillion. It takes 15 percent of the total budget just to pay the
interest on that debt nobody down here in Washington is thinking about
anyway or any possibility of paying that debt back. We are leaving it
up to the young people to say, somehow you solve this problem later on.
We have got to quit this kind of Ponzi game like we have in Social
Security. We have got to start having generational accounting. We have
got to have the kind of decisions in Washington that do not take the
chances
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away from our kids and our grandkids to have the same kind of
opportunity, to have the same kind of standard of living that we have
had.
I have introduced a Social Security bill. It makes a lot of modest
changes. It does not increase the tax. It does not affect existing
retirees. In fact, it does not affect anybody over 57 years old. But it
gradually slows down the increase in benefits for the higher income
recipients. It adds one more year to the time that you would be
eligible for Social Security benefits.
It makes a couple other small changes. I say, and it has been scored
to keep Social Security solvent forever; I say, let us run this
proposal up the flag pole. Let us start looking at ways we can improve
it, but let us not any longer pretend that the problems, that the
problem does not exist. I say, if we have any regard for our kids, we
are going to do two things: We are going to give them a good education
and a good opportunity. We cannot give them a good opportunity if we
continue to go deeper and deeper in debt and expect them to pay for it.
We cannot give them the opportunity if we continue to increase taxes,
thinking that Government can spend a worker's money better than they
can.
Mr. Speaker, I yield back the balance of my time.
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