[Congressional Record Volume 143, Number 149 (Thursday, October 30, 1997)]
[Extensions of Remarks]
[Pages E2128-E2130]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                     PERSONALIZING SOCIAL SECURITY

                                 ______
                                 

                            HON. NICK SMITH

                              of michigan

                    in the house of representatives

                      Wednesday, October 29, 1997

  Mr. SMITH of Michigan. Mr. Speaker, once in a while, a speech is made 
that really makes sense for America. Recently Jim Martin, president, 60 
Plus Association, made one of these speeches. On Social Security's 62d 
anniversary, Jim talked about the importance of personalizing Social 
Security.
  Jim notes that the likely alternative to personalizing Social 
Security is a tax increase. Since 1971, there have been 36 Social 
Security tax increases. A Social Security tax increase does not make 
economic sense and more importantly it is not fair to working 
Americans.
  Jim Martin, representing seniors all over America, supports the 
introduction of my Social Security Solvency Act, personalizing Social 
Security by offering each worker his or her own personal retirement 
savings account.
  Thank you, Jim, for your thoughtful remarks.

        Personalizing Social Security: Unplugging the Third Rail

                          (By James L. Martin)

       When I came to Washington as a newspaper reporter in 1962, 
     John F. Kennedy was in the White House, Neal Armstrong had 
     not yet walked on the moon, Strom Thurmond was a Democrat and 
     the problems with Social Security were perceived by few, 
     other than Barry Goldwater.
       So, today, August 14, 1997, on the 62d anniversary of 
     Social Security, the 60 Plus Association becomes the first 
     seniors group to publicly go on record to overhaul the 
     system, releasing a paper it commissioned by economist 
     Richard A. Hart, entitled ``Personalizing Social Security: 
     Unplugging the Third Rail.'' Why did a senior citizens group 
     decide to tackle the issue of Social Security reform? Let me 
     answer by citing a question I'm asked often about the program 
     signed into law by President Franklin Delano Roosevelt on 
     August 14, 1935.
       The question is always the same, ``Jim, why get involved?'' 
     After all, the theory goes, even if the current system is 
     going bankrupt, ``your seniors are protected, so why bother 
     with the uncertain future of this politically volatile 
     issue?''
       Believe me, it would be easy to take a head-in-the-sand 
     approach as so many do, including, I'm sorry to say, other 
     senior citizens groups. Unfortunately, this attitude

[[Page E2129]]

     leads to a false impression that seniors are ``greedy old 
     geezers,'' a `gimme, gimme, gimme'' mentality which I hope to 
     dispel. Seniors who built this country, in Depression and war 
     time, through their blood, sweat and tears, deserve better.
       To help dispel that erroneous image, I harken back to some 
     of the advice one particular senior citizen has given me, and 
     still does--my favorite senior--my mom, my sainted mother, if 
     you will, Mary L. Martin, who, in her eighties, still works 
     part-time! Her advice is that seniors' most valued assets are 
     not their social security, their retirement income or their 
     pensions--although these are certainly near the top of their 
     list--but in her opinion, seniors' most valuable assets are 
     their children, their grandchildren and their great 
     grandchildren.
       So that's why I decided to involve 60 Plus, seniors group 
     responsibly trying to find a solution to the problem, for the 
     sake of our children and our grandchildren.
       To put it bluntly, Heritage Foundation economist Dan 
     Mitchell said, or perhaps it was another often quoted 
     economist, Americans for Tax Reform's Peter Ferrara, who 
     said:
       ``Security was a Ponzi scheme then. It's a Ponzi scheme 
     now.'' But even a Ponzi scheme--borrowing from Peter to pay 
     Paul--worked well in the beginning, not only for Carols Ponzi 
     but for others, just as the so-called Social Security Ponzi 
     scheme worked well for seniors. But there looms now a ``run 
     on the Ponzi bank'' as the Baby Boomers prepare to retire.
       As Mr. Hart states in his paper, ``the Social Security 
     retirement train is a collision course with demographics. 
     Social Security's pay-as-you-go system, where the taxes of 
     today's workers are transferred to today's retirees, leaves 
     it particularly vulnerable to demographic trends. As Baby 
     Boomers age, life expectancy is rising and birth rates are 
     falling. As the Social Security train heads straight into a 
     demographic wall,'' Mr. Hart continues, ``more and more 
     Americans anticipate the oncoming wreck.'' Mr. Hart is right. 
     More and more of us recognize the looming crisis.
       A recant poll said that a majority of Democrats, for the 
     first time, acknowledged not only that there is a problem 
     with the system, but a majority of Democrats now even favor 
     privatization as a solution. Everybody universally agrees 
     there's a problem. But a solution remains elusive.
       For example, President Clinton's Social Security Advisory 
     Council has issued its long awaited report. This 13-member 
     panel of experts readily agreed there is a problem but did 
     they agree on a solution? Well, yes and no. They offered 
     three solutions. It's not an exaggeration to say they split 
     three ways from Sunday, six endorsing one solution, five 
     another and two yet a third. Significantly, all three 
     directly, or indirectly, advocated privatization. In 1983, 
     President Reagan's Social Security Reform Commission came 
     forth with its solution to keep the system solvent for, it 
     said, at least another 75 years, well into the next century.
       That begs the question, why another Commission so soon in 
     the 1990's, after the 1983 Commission? The answer is that the 
     system is in more trouble than previously thought. The 
     problem is twofold. One: The good news is that we seniors are 
     living longer, due to medical advances and our own better 
     health habits. Two: The bad news is that you younger 
     generations have to pay.
       Of course, that's the way the system has always worked. But 
     before there were more than 20 workers, not three, paying 
     into the system for each beneficiary. One other fact that 
     bears noting is that when first enacted, according to the 
     actuarial tables, seniors died at about age 64, or as Mr. 
     Hart so delicately phrases it, most workers were conveniently 
     dead and buried before they could collect their benefits at 
     age 65. As 60 Plus Honorary Chairman, former Indiana 
     Congressman Roger Zion puts it, at a vigorous and robust 75, 
     he has been ``statistically dead'' for 11 years. Now that 
     seniors are living longer, that places further financial 
     strains on the system. Clearly, a day of reckoning has come. 
     The old fix of just raising taxes, some 51 times in 62 years, 
     cannot continue. There's a limit.
       There have been half-hearted attempts in the past to 
     address the problem, half-hearted because not many 
     politicians want to be accused of touching the so-called 
     third rail. You know the old song--Social Security is the 
     third rail of politics, touch it and you die.
       Politicians have gotten away with this third rail scare 
     tactic for too long, scaring seniors for political gain. Some 
     of us recall the 1964 Barry Goldwater-Lyndon Johnson 
     Presidential campaign when there was a TV commercial showing 
     a giant pair of scissors cutting a Social Security card with 
     a voice-over solemnly intoning that this would be the result 
     if you voted for Goldwater. Another 1964 TV commercial also 
     stated that a vote for Goldwater could result in U.S. 
     soldiers being sent to fight and die in southeast Asia. Well, 
     as one political wag put it, he ``voted for Barry and sure 
     enough, U.S. soldiers were soon sent to fight and die in 
     Vietnam.''
       So, I would like to put politicians, regardless of party, 
     on notice that seniors are tired of falsely being told their 
     Social Security is going to be taken away. It's more likely 
     that a meteorite will fall on the Social Security 
     Administration building in Baltimore before a politician, of 
     either party, would propose taking away Social Security.
       Let me point out how 60 Plus became engaged on this issue. 
     A few years ago the Third Millennium, Generation X'ers in the 
     18-34 age group, announced the startling news that most X'ers 
     believed more in UFOs (unidentified flying objects) than that 
     the system would be around when they retired. I responded on 
     a radio talk show that seniors are also aware that the system 
     is headed for bankruptcy. Then I added, somewhat flippantly, 
     perhaps, that seniors believe more in the second coming (has 
     it been 20 years this week?) of Elvis Presley than in the 
     system's future solvency and that seniors might also prefer 
     changes. After a few call-ins and further discussion of UFOs 
     and Elvis, I decided to poll senior citizens. Our poll to 
     approximately 100,000 seniors found that, by a surprising 3-
     to-1 margin, seniors preferred a privatized system. We then 
     commissioned a survey by pollster Frank Luntz, an excerpt of 
     which is in the study we've released. The Luntz poll 
     confirmed our 3-to-1 ratio.
       We were called by Insight Magazine, and we debated, in 
     print, our counterpart at the American Association of Retired 
     Persons, Horace Deets, in dueling 2000-word essays. If I 
     could sum up each essay in one word, it would be: AARP--
     taxation, 60 Plus--privatization. AARP favors the same old 
     solution, tax increases, while 60 Plus looks for new 
     solutions.
       Will privatization work? The privatization role model is 
     the Chilean system. During the 1983 Social Security study, 
     when Chile was mentioned as a solution, the status quo 
     seekers dismissed their system as a new and unproven 
     experiment. But, fast forward 15 years later and Chile now 
     has an amazing track record of success. Now the status quo 
     seekers try to demonize the word ``privatize,'' implying that 
     you have to be a stock market expert or the big boys on Wall 
     Street will fleece you. Nothing could be further from the 
     truth. There are a lot of workers in Chile who can't play the 
     stock market but who proudly walk around with a passport-
     sized book with their name on it, keeping track of their 
     investments. That is one of the reasons we use the word 
     ``personalize'' because the system would allow each and every 
     individual to take personal control of his or her own 
     financial destiny.
       Since 60 Plus is nonpartisan, we credit legislators from 
     both parties for coming up with innovative ideas. One is 
     Democratic Sen. Bob Kerrey of Nebraska, from whom we borrowed 
     the word ``personalize.'' Another suggestion, by one of the 
     Generation-X'ers, is to ``modernize'' the system. Many others 
     on Capitol Hill deserve credit, including Republican 
     Congressman Jim Kolbe of Arizona and Democratic Congressman 
     Charlie Stenholm of Texas, co-chairs of a public pension 
     reform caucus which now numbers more than 70 members of 
     Congress, equally represented by both parties. Michigan 
     Congressman Nick Smith has introduced legislation to address 
     the problem, as have Reps. Mark Sanford of South Carolina, 
     David McIntosh of Indiana, Mark Neumann of Wisconsin and John 
     Porter of Illinois. Others safeguarding Social Security 
     include House Ways and Means Committee Chairman Bill Archer 
     of Texas and Subcommittee Chairmen, Reps. Bill Thomas of 
     California, Dennis Hastert of Illinois and Jim Bunning of 
     Kentucky. Surely, the latter, Jim Bunning, the big, burly 
     Hall of Fame baseball pitcher--known as a fierce competitor 
     in his playing days and now the father of nine and 
     grandfather of 31 (at last count)--would be a formidable 
     opponent for those who try to demagogue Social Security as 
     they did in the 1980s when some Members of Congress 
     courageously talked about reform in order to save it.
       More than two dozen countries in South America, Europe and 
     Asia, have adopted, or are in the process of adopting, a 
     Chilean-style system. Even socialist Sweden is going that 
     route. And here, workers in three Texas counties, before a 
     loophole in the law was closed, opted for privatization and 
     their rate of return is making for a lot of serious 
     discussion as they prepare for retirement. Moreover, a 
     resolution recently passed both the House and Senate in 
     Oregon asking the state to opt out of the Social Security 
     system and create a separate retirement system for state 
     workers.
       So the slight spark across the sky of the Chilean 
     experiment has become a bright constellation. It's a success 
     story that I believe, with all my heart and soul, can be a 
     guide for our own troubled system.
       Incidentally, in the old days, the father of the Chilean 
     plan, Dr. Jose Pinera, literally visited Washington in the 
     dead of night because his untested plan was so controversial. 
     But a few years ago, the Cato Institute gave a dinner in his 
     honor and a number of Members of Congress allowed their names 
     to be placed on the host committee. What a change in 
     attitude. Of course, it was not lost on them that this former 
     minister of labor was elected to office himself, with a major 
     plank in his platform, his plan to privatize social security.
       Having read an article years ago by Ed Crane, President of 
     the Cato Institute, about the social security problem, we 
     started searching for solutions. We kept being referred back 
     to the Cato Institute itself, which has taken a pioneering 
     road on this issue for more than a dozen years. One name kept 
     coming up, time and again. That name was Michael Tanner, 
     Cato's Director of Health and Welfare Studies, and the author 
     of several books on health and welfare reform. Mr. Tanner has 
     worked on the Social Security issue extensively, to say the 
     least. Spoken on it. Written on it. Debated on it,

[[Page E2130]]

     around the world often with Dr. Pinera at his side. That's 
     why 60 Plus, particularly Roger Zion and I, are so pleased 
     that Mr. Tanner has not only eloquently embraced this new 
     plan Mr. Hart proposes, but has joined us at today's 
     official release of the proposal, along with an equally 
     strong endorsement by today's other featured speaker, Fund 
     for a New Generation's Adam Dubitsky.
       Richard A. Hart takes up the challenge to find a solution 
     in an insightful paper showing how Personal Retirement 
     Accounts (PRAs) can assure both dignity and comfort for 
     future generations of senior citizens. This paper, a 
     variation on a theme advanced by others, should continue the 
     dialogue on a system which urgently needs reform.
       To those who fear Social Security's ruin, wise seniors know 
     that there is no Social Security Trust Fund. 60 Plus calls it 
     the Social Security Bust Fund as surpluses are used for other 
     government programs. As Democratic Senator Ernest Hollings of 
     South Carolina has said, ``There is no trust. There is no 
     fund.'' We need to alert people to keep at arm's length those 
     politicians who spread fear among seniors, as we stand at a 
     cross-roads to which direction Social Security reform should 
     go.
       In the 60 Plus Association's opinion, some form of 
     ``personalization'' remains the best and most feasible 
     option. We must guarantee present retirees their benefits as 
     part of a government promise to them, but we must also 
     safeguard current generations paying into Social Security 
     system so that the benefits will be there when they retire.
       On August 14, 1935, President Roosevelt signed into law the 
     Social Security Act. On May 2, 1997, the FDR Memorial was 
     opened here in Washington, D.C. The Social Security system 
     helped seniors escape poverty, but we now know there are 
     major problems facing future generations. What more lasting 
     commemoration to FDR can we embrace than the adoption of a 
     system which will save it for a new age, a new era, and a new 
     population.

     

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