[Congressional Record Volume 143, Number 45 (Wednesday, April 16, 1997)]
[House]
[Pages H1599-H1602]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
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BUDGET
That is how the Social Security system is supposed to be working
today. I cannot emphasize this enough, though. That is not what we are
doing with the money. What we are doing with the money in Washington
today is we are putting it in the big government checkbook called the
general fund. We spend all the money out of the general fund and then
some. That leads to the deficit. Since there is no money left in the
checkbook at the end of the year, we simply put IOU's down into the
Social Security trust fund.
As a matter of fact, when we report the deficit, we do not even
report the Social Security trust fund money, that $65 billion, as part
of the deficit. When this city reports the deficit to the American
people of $107 billion, what they do not tell them is that in addition
to that $107 billion, they have taken $65 billion out of the Social
Security trust fund. When they talk about balancing the budget in
Washington, DC, what they actually mean when they say they are going to
balance the budget by the year 2002 is that they are going to go into
the Social Security savings account, take out $104 billion in the year
2002 and put it in the big government checkbook, and they are then
going to call their checkbook balanced even though they took this money
out of the Social Security trust fund to make it appear balanced, and
that is a big problem.
Mr. COBURN. Let me ask the gentleman a question. Of the money that
the Federal Government has borrowed, the internal debt to the Social
Security, has the Federal Government paid any interest on that debt?
Mr. NEUMANN. That is a very good question. There is supposed to be
$550 billion in that trust fund today. They pay all of the money into
the trust
[[Page H1600]]
fund with IOU's, so guess how they pay the interest to the trust fund.
Mr. COBURN. With IOU's.
Mr. NEUMANN. With another IOU is exactly right.
Mr. COBURN. So in essence none of the money that is supposed to be
set aside for Social Security trust fund purposes nor the interest
actually has ever been paid, and we continue to send a piece of paper
to cover the interest and the additional moneys that we will take this
year. What is the estimate this year of the amount of moneys that will
be taken from excess Social Security funds, payments over
disbursements?
Mr. NEUMANN. In 1997, we expect that number to read in the range of
$74 billion. So they will take another $74 billion worth of IOU's. They
will spend the $74 billion on other government programs, and they will
simply put IOU's in the trust fund.
Mr. COBURN. Plus another $35 or $40 billion in interest payments?
Mr. NEUMANN. No, the $74 billion is the total number.
Mr. COBURN. Will be the excess plus the interest payment that is due
on the $550 billion?
Mr. NEUMANN. Right. Of that $75 billion, about $35 billion is actual
cash over and above what is collected out of paychecks, and the other
$40 billion is the interest on what is already in the trust fund. So,
yes, they are paying all of it, it is about $75 billion. It is made up
of about $35 billion in principal and $40 billion in interest.
Mr. COBURN. But they are not paying it.
Mr. NEUMANN. They are paying it with IOU's, exactly right.
This really becomes important if I can just go to why this is
important not only to senior citizens, but it is important to people in
their 50's and in their 40's and it is important to our young people,
too, because in 2012, the Government tells us, in my opinion it could
happen as soon as 2005, there will not be enough money coming in to pay
the benefits back out to our senior citizens, and of course that is
when we need the savings account. Now if the savings account is full of
IOU's in 2005, or 2012 in the best case scenario, if there is nothing
there in that savings account and we have reached the point where there
is not enough coming in, there are really only two choices, and this is
why it affects everyone. The choices are either to tell the seniors
that they cannot have as much as they were expecting from Social
Security. From what I have seen of Washington, DC, that is absolutely
not going to happen nor should it happen.
The other alternative is to go to people like my son, a sophomore in
college, and other kids like him, who are in those years, 8, 9, 10
years from now, are going to be married and have their own kids and
forming their own families and working hard to make a living for
themselves, we are going to have to go to those young people and say
there is not enough money coming in for Social Security. Back there in
1997 we did not do the right thing and put the money in the savings
account like we were supposed to, so our only choice now, young people,
Andy and Tricia, my daughter, who is a senior, 8 years down the road
you have got your own young family, we have to take more taxes out of
your paycheck to make good on our Social Security commitment to our
seniors.
That is why this a problem that crosses all generations. It is for
the young people, it is the threat of increased taxes in 2005 and
beyond. It is a threat to our people in their 40's and 50's that the
Government will not make good on their commitments for Social Security,
and it is a threat to the people that are seniors today.
Let me just go one step further for the young people. If in fact
there was $550 billion in the Social Security trust fund, growing all
the way to $1 trillion by 2002, if there was 1 trillion actual dollars
in that savings account, we could then tell our seniors, your Social
Security is safe and we could turn to our young people and begin a
discussion about what we might do rather than stay in the Social
Security system, because the reality is none of them believe they are
going to get Social Security, or very few.
We had an interesting situation in my own house this past week. My
third, my youngest, who is 14, worked last summer mowing lawns. He
earned $900. I said Matt, you have got to report that $900 on your
taxes. So we filled out a tax return for him and guess what we found
out? He owed Social Security money, about $128. So we are asking a 14-
year-old in the United States of America today to pay $128 out of $900
into that Social Security trust fund, and we down here in Washington
are taking that money and we are spending it on other Government
programs.
It would be important that we discuss the solutions that the
gentleman from Oklahoma [Mr. Coburn] and I are both working very hard
to get enacted into law here so we do not leave the impression that
there is nothing that can be done about this.
We have introduced a bill, it is called the Social Security
Preservation Act. The Social Security Preservation Act is a very
straightforward bill. All it does is take the excess money that is
collected from Social Security and puts it directly down here in the
Social Security trust fund. That is a change of direction of cash-flow.
Today that money that is collected goes directly over here into the
Government's general fund and then it gets spent on other Government
programs. Our Social Security Preservation Act is very straightforward.
It simply takes the dollars and puts it directly down here into the
Social Security trust fund.
The real meaning for this is that our senior citizens can count on
their Social Security checks, the people in their 40's and 50's, if
this money is actually there, can count on Social Security to be there
for them as they have been banking on and paying into, and our young
people can start looking ahead to a day when there are real dollars in
the Social Security trust fund so they can start thinking about doing
something to take care of themselves in their own retirement.
Mr. COBURN. And the American public will know what the true size is
of the deficit that their Representatives are voting for each year,
which in fact is significantly higher than what is reported in the
press and by the Congressional Budget Office and the Office of
Management and Budget, because it does not reflect this money borrowed
from Social Security.
Mr. NEUMANN. That is exactly right. I have another chart here with me
that really shows that. In 1996, this blue area on the chart is what
the people in Washington reported to the American people as the actual
deficit. What that is, is the amount they overdrew their checkbook.
They overdrew their checkbook by about $107 billion in this particular
year. What they did not tell them is that in addition to that, the
Social Security trust fund money was also spent. That is another $65
billion, and the true deficit, had they put the Social Security money
aside the way we are supposed to be doing, the true deficit was $172
billion.
Again, I would emphasize that in Washington, all the budgets except
the one the gentleman and I are working on out here, President
Clinton's budget, in 2002 when they say the budget is balanced, what
they actually mean is they are going to go into the Social Security
trust fund, take out $104 billion, the projected surplus that year. So
when they say the budget is balanced, they are going to go into the
Social Security trust fund, take out $104 billion, put it in their
checkbook and say we balanced the budget.
That is ridiculous. In the private sector where both of us come from,
you could not get away with that kind of reasoning, and they should not
get away with it out here in Washington, DC, either.
Mr. COBURN. That is why it is so important for people of courage to
stand up and do the right thing as far as the budget is concerned. The
fact is, is we can balance the budget. We can make the hard decisions.
The question is whether or not we will. The only way I am convinced
that is going to happen is if the people of this country demand that
their representatives make the hard choices that secure the future not
only for the seniors and those 50 years of age, my age, and older, for
their Social Security but also secure the future for our children and
our grandchildren. Because in fact if we do not do these things now,
the burden on them and the percentage of their life that they are
working just to fund the Federal Government is going to be far in
excess
[[Page H1601]]
of 50 percent and probably close to 70 or 75 percent. The problem is
not unfixable, although that is what we hear. The reason it is
unfixable is people are not willing to make the tough decisions about
the programs.
The thing I would want the American public to know is we cannot
continue to do what we are doing and that everybody, everyone,
everywhere is going to have to experience some pain in some way if we
are going to balance the budget. Sometimes that pain is just a change
in a program, but still the delivery of the service. Sometimes that
pain is not a Government subsidy to oversee sales for some corporation.
Sometimes that pain is making sure that we have an efficient food stamp
program, or getting rid of the fraud in Medicare. It is something that
we can do.
Mr. NEUMANN. I would point out to the gentleman from Oklahoma [Mr.
Coburn] that this year has been a unique year for us. This is my third
year here as I came here with the gentleman, of course. I put budget
plans together for each of the first two years. This year it was the
easiest by far of any of the years we have dealt with. Revenues right
now today are so much higher than anyone anticipated that we can
actually get this job done simply by saying no to all new Washington
spending programs. As a matter of fact, if we accept President
Clinton's numbers on Medicare but do not allow the new things that he
has added in Medicare, if we accept his Medicaid numbers but do not
allow the new Washington spending programs that he has added in
Medicaid, if we go down to other mandatory spending, that is, your
welfare reform and so on, if we again accept the numbers that he has
proposed but do not allow any new Washington spending programs and if
we take the discretionary spending numbers, and as the gentleman
recalls, that was the yellow part on those charts the gentleman had up
there, if we just take the numbers that we have already passed through
both the House and the Senate, we have already agreed that we were
going to keep the spending levels at this level, if we do all of those
things, we do in fact get to a balanced budget by 2002, while at the
same time we set aside the Social Security cash reserve and allow the
American people to keep more of their own money, providing a $500 per
child tax credit as well as reforming the estate tax, or the death tax,
if you prefer, as well as reforming the capital gains tax which of
course will allow the creation of many, many more jobs. I think we
really should expand this vision. I think we should expand it beyond
the year 2002 to our children's future and to the next generations of
Americans. Because our fathers before us have preserved this Nation and
given it to us in the shape that it is in and it is now our
responsibility to think what kind of shape this Nation is going to be
in for future generations. Really that is the last part of our budget
plan. The last part is that after we get to balance in 2002 while at
the same time letting the American people keep more of their own money
and putting the Social Security money aside the way it is supposed to
be, our plan also contains the appropriate course of action to pay off
the Federal debt so that by the year 2023, when the gentleman and I are
going to be thinking of retirement in all fairness. And, by the way,
back in the private sector, long gone from Congress. But by 2023 when
it is time for us to leave the work force, we can honestly have the
debt paid off and pass this Nation on to our children debt-free. I just
cannot think of anything else that we could be doing that would be more
important.
Mr. COBURN. What does it take to do that? What is required to do
that?
Mr. NEUMANN. My background is as a math teacher and then as a home-
builder, and I kind of combined the things I learned in both of those
to figure out a very straightforward procedure to do it.
For any of our colleagues listening tonight, we have the details of
this plan laid out from start to finish, from 2002 forward as to
exactly how to go about it. It is very interesting what is happening to
revenue at the Federal Government. Revenue to the Federal Government
grows for two reasons. It grows because of inflation, that is, if you
get a pay raise next year, you pay a little more in taxes, that is
inflation, but it also grows because of real growth in the economy. So
in our present situation we are looking at inflation of roughly 3
percent and real growth of roughly 2 percent. Revenues to the Federal
Government then go up by 3 plus 2, or 5 percent to the Federal
Government.
Our suggestion is very simply that once we reach balance in 2002, we
cap spending increases at a rate 1 percent below the rate of revenue
growth. I might point out, much to the chagrin of some of our fellow
colleagues out here that would prefer to see Government actually
shrinking much faster, that when we do this plan, when we cap spending
increases at a rate 1 percent below the rate of revenue growth, we are
still in a situation where the Government is expanding faster than the
rate of inflation. So that if revenues are going up by 3 plus 2,
inflation plus real growth, or 5 percent, we cap spending increases at
4 percent, still 1 percent faster than the rate of inflation, what we
find out happens is that by 2023 our debt is repaid in its entirety.
It has been interesting. The Speaker has been recently talking about
Hong Kong, and whatever Members think of Hong Kong, they have a very
different situation in their Government than we have in ours. In our
Government today, a family of five like ours is paying $600 a month to
do nothing but pay the interest on the Federal debt. If we were to
enact this plan and pay off the debt by 2023, the next generation of
Americans, the next family of five a generation from now, would not
have to pay that $600 a month. Just think about this.
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Just because they do not have to pay the interest on the Federal
debt, they can have a $600-a-month, $7,200-a-year, tax cut without
affecting any programs in the entire. Now the Hong Kong model goes one
step further. The Hong Kong model says not only are we going to not
have a debt facing our Nation, but we would like to go one step further
and have a rainy day account. That is, if something goes wrong that we
were not expecting, we have got money set aside for it.
So they have set up an account. The equivalent in American would be
about $750 billion in that account. That would then pay interest into
the Federal Government as opposed to what we are doing today, which is
going right, which is going into our families and collecting money from
them to pay the interest on the debt. It would be exactly the opposite.
My dream, my vision for the future of this country, is that we do
balance the budget by the year 2002, we set aside the Social Security
trust fund money, we let our families keep more of their own hard-
earned money in their pockets through the $500 per child tax credit,
and then we look beyond 2002 and we actually pay off the Federal debt,
maybe establish this rainy day fund. But whichever, even if we do not
establish the rainy day fund, get to the point where our folks are not
paying $500, $600, $700 a month into the Federal Government to do
nothing but pay the interest.
Is that not a nice vision for America?
Mr. COBURN. It is a great vision and one we ought to leave the
American public with is that it is doable to balance the budget, we can
meet the commitments to those that we have made commitments to and
still balance the budget. We cannot have everything we want and balance
the budget, but we can have everything that we need.
As we close this out, what I would want the American public to know
is that, as we spend $1.6 trillion, sometimes that is hard to figure
out how much money that is, and the best way I know to know how much a
trillion dollars is is, if you spent a million dollars a day every day
for 2,600 years, you would have spent your first trillion dollars.
So as we think about the magnitude of the size of our Federal
Government and how that impacts how each one of us can relate to a
million dollars a day being spent, it shows you that the magnitude is
there that we can make the changes. All we have to do is be determined
to do it.
Mr. NEUMANN. I use another example when we talk about how much the
Federal Government is spending every year, you know, and you hear all
this discussion about spending cuts out here.
[[Page H1602]]
The Federal Government this year is spending $6,500 on behalf of
every man, woman and child in the United States of America. So just to
put this in perspective, $6,500 for every man, woman, and child in
America. A family of five like mine, the Federal Government is spending
over $30,000 on behalf of that family of five like mine.
You know, a couple of other things that I think are important is you
talked about the concept of need versus want, and I always like to go
through what happens if you find a new program that we really need to
do in America and you have got this frozen discretionary spending or
you are trying to keep spending from going up. I think our vision for
the future is that, when you find a new program that is legitimately
necessary; for example, we have passed welfare reform last year. That
means many women are leaving the welfare rolls and going into the work
force, and that is a good outcome. But when they go into that work
force, they are at the bottom end of the pay scale in some cases, and
we want to see opportunities for them to move up the pay scale. But
when they start they might be at $6 an hour or $5.50 an hour, and that
does not add up real fast to how many dollars are coming home.
We also just found out that women in their forties should have
mammograms. So these folks that have left the welfare roll and done the
right thing, gone into the work force, they are able to work, so they
have now taken a $6-an-hour job. We just found out that, if they are in
their forties, they should have a mammogram. Well, they qualify for
Medicaid, so the health insurance is there to provide them with health
care, but the money is not in the Medicaid Program currently to pay for
the mammogram that we have now found out that this working poor should
have.
So what do you do about that? Our vision includes things like, when
you find something like that that you need to do, you find another
program that you do not need to do, and let me give you an example how
that might work.
Mr. Speaker, we put the money in for the mammograms, then we go into
our Russian monkeys in space program and say we are not going to go
into the taxpayers' pocket and take money out of their pocket and send
it to Russia to launch monkeys into space anymore. That $35 million
instead gets redirected over into the Medicaid Program so we can now
fund a program that we find to be worthwhile.
Mr. COBURN. It is a matter of making judgments as to what our
priorities are and how do we best benefit ourself, and once we assume
and know we can balance the budget, that is the hard work of Congress,
and as it should be.
I want to thank you for joining me in this today, and I would want
the American public to leave this discussion knowing that it is
possible to balance the budget, it is possible to pay off the debt, it
is possible to live up to the commitments that we have made in Social
Security, Medicaid and Medicare, and welfare and at the same time
secure the future for the next generation.
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