[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

[[Page H1385]]

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

[[Page H1386]]

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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