[Congressional Record Volume 143, Number 159 (Wednesday, November 12, 1997)]
[Extensions of Remarks]
[Pages E2340-E2341]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    A COMPACT FOR AMERICA'S FUTURE: SAVING SOCIAL SECURITY FOR OUR 
                             GRANDCHILDREN

                                 ______
                                 

                            HON. NICK SMITH

                              of michigan

                    in the house of representatives

                      Wednesday, November 12, 1997

  Mr. SMITH of Michigan. Mr. Speaker, a few months ago, I received a 
letter from one of my constituents, Betty Dowdling of Marshall, MI, 
urging me to continue working on preserving Social Security for future 
generations. ``It is most certainly not fair to leave big debts for our 
children and grandchildren,'' she wrote. She's exactly right. The good 
news is that more and more people are coming around to Betty's point of 
view.
  There has been a lot of talk in the last year about the future of 
Social Security. It is an issue that, in some way or another, affects 
every American, young and old. If you're currently working, you pay tax 
into Social Security--listed as FICA on your paycheck stub. And if 
you're retired, you probably regularly received a Social Security 
check.
  When President Franklin Roosevelt enacted Social Security in 1935, it 
was meant to provide modest assistance to the Nation's most elderly--
those over 65--paid for by the current work force. At that time, the 
system worked wonderfully. Most people never made it past the age of 
61, and, as it worked out, about 42 workers contributed to the system 
for each retiree.
  Today, Social Security is the Nation's largest budget expenditure. 
Thanks to advancing technology and improved health care, the average 
life expectancy for Americans is no longer 61, but a record 74. Instead 
of 42 workers paying taxes to support each retiree, there are now just 
three workers for each retiree. Instead of the old 1 percent payroll 
tax enacted in 1935, the tax is now 12.4 percent. In just the past 26 
years, in fact, the payroll taxes all workers pay has been hiked 36 
times--that is on average more than once a year. As the so-called baby 
boom generation starts to retire at the turn of the century, the ratio 
between workers and retirees will continue to get smaller and the 
propensity to increase taxes will continue to be greater. As early as 
2005--less than 8 years from now--the Social Security trust fund will 
start spending more than it takes in. That is unless we take some 
action now to change the system.

[[Page E2341]]

  Shortly, and with support from Democrats and Republicans, I intend to 
introduce a bill that would allow workers to use a portion of their 
current Social Security payroll tax for private investment. This bill 
would give you the option of investing your own earnings in stocks or 
bonds and with the guidance of a professional money manager, with 
potentially far greater returns that you would ever get in the current 
system. The average annual rate of return for stocks and bonds in the 
last 70 years has been 9 percent. That is almost five times the rate of 
return from Social Security. By allowing you to invest more of your 
money as you like--and your Social Security payroll tax after all is 
still your money--you could amass substantial savings.
  Senator Bob Kerrey, a Democrat from Nebraska who is also working on 
this problem, likes to tell the story about Gladys Holm. Ms. Holm was a 
secretary who in her whole life never earned more than $15,000 a year. 
When she died last year at 86, she was worth over $18 million. Her 
secret? She just put aside a little bit of money each month throughout 
her working life and put it in private investment. Through compound 
interest--and unusually wise investments--Gladys Holm had become a 
millionaire.
  Though that example is probably atypical, we could do similar things 
with our Social Security system. By allowing private investment--as 
England does with great success--every American could actually have a 
strong safety net when they reach old age. Even better, the money you 
would invest and save would be your own--not the Government's. It is 
yours to invest, yours to spend, yours to pass on to your kids and 
grandkids or charities or whatever else you like. Private investment 
means more power to you.
  If we enact these needed reforms, Social Security may finally create 
the retirement security President Franklin Roosevelt envisioned in 
1935. This year, a Federal memorial opened in Washington honoring FDR. 
I think the better tribute to Roosevelt would be if we worked this year 
to preserve his most important legacy for his great-grandchildren, our 
great-grandchildren, and many generations to come.

                          ____________________