[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]




                              {time}  1730
                                 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.

                              {time}  1745

  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.

                          ____________________