[Congressional Record Volume 144, Number 1 (Tuesday, January 27, 1998)]
[Senate]
[Pages S5-S6]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   WHAT TO DO WITH THE BUDGET SURPLUS

  Mr. GREGG. Mr. President, this evening we will hear from the 
President of the United States in his State of the Union Address. We 
live in a time where the United States is extraordinarily fortunate. We 
are at peace. We are a Nation that has great prosperity. We are a 
Nation with a balanced budget for the first time in 25 years. This is 
all good news. But there looms on the horizon a fiscal policy which, if 
we do not address in the coming near term, will dramatically undermine 
our Nation and make it difficult to pass on to our children a country 
of prosperity. That, of course, is the pending retirement, beginning in 
the latter part of the next decade, of the postwar baby-boom 
generation, that huge demographic group of which I and the President 
are members, which has impacted this country this very decade in some 
unique way, and which in the next two decades will, as a result of 
their retiring have an impact of basically bankrupting this country in 
the Social Security system, which so many seniors rely on, if we do not 
address these concerns.
  The opportunity to address these concerns is today. It is much like 
that oil filter ad, ``You can pay me now or you can pay me later.'' The 
opportunity to make changes in our Social Security system, which will 
allow for its solvency, allow it to be a strong and vibrant part of our 
fabric as a Nation, the opportunity for those changes to be effective 
and to be done reasonably, is much better today than if we wait for 4, 
5 or 10 years.
  In addition, of course, as we head into a time of surplus, there will 
be, as a basic policy in this Chamber and in the House, over the next 
few months a question of how we use that surplus. What is generating 
the surplus should be the first question. What is generating the 
surplus is the Social Security trust fund. For the foreseeable future, 
the extent to which we generate a surplus at the Federal level will be 
as a result of the fact that more people are paying Social Security 
taxes than are taking benefits out of the Social Security trust fund. 
It is not a surplus generated, therefore, as a result of the day-to-day 
operation of Government being in surplus, of having raised more tax 
revenues for the day-to-day operation of the Government--defense, 
education, environmental protection, building roads, for those accounts 
income surplus; rather, it is a surplus generated by the fact that 
people who pay payroll taxes are paying more in payroll taxes to 
support people on retirement under Social Security than they need to.
  That should be retained as a primary point as we move down the road 
of addressing the surplus issue. Therefore, I would like to posture 
that if we are going to be responsible as legislators and as keepers of 
our Nation's future, we have an obligation to address the issue of 
Social Security and address it in the short-term, rather than to wait. 
I also would like to suggest a manner in which we might consider 
addressing it. One of our goals, as we look at the issue of the 
surplus, should be to give people tax relief. Another goal, as we look 
at the issue of the surplus, should be to pay down the Federal debt. A 
third goal, as we look at the issue of addressing how we are going to 
deal with the surplus, should be to increase the savings of the 
American people. A fourth goal should be to assure the solvency of the 
most critical Federal program that we have, the Social Security system.
  All four of those goals can be significantly advanced if we 
intelligently approach the use of the surplus and apply it to benefit 
the Social Security system. How can we do that?

  Well, the best way would be to cut the Social Security tax. This is 
the most regressive tax we have. It is also the taxes generating the 
surplus. If we were to reduce the Social Security tax so that the 
average wage earner, instead of paying approximately 7\1/2\ percent, 
would end up paying 6\1/2\ percent; it would mean that the average wage 
earner in this country would receive the benefits directly of a tax 
cut, the purpose of which would be to refund to them the surplus which 
is being generated by the Federal Government.
  In such a tax cut, if we were to say to the folks receiving it, the 
wage earners, the people paying the payroll tax, if we were to say that 
the tax cut must be saved in an account designated in your name, a 
personal savings account, such as an IRA account, then we would be 
accomplishing a second goal, which would be to allow individuals who 
are seeing retirement coming at them to begin to specifically have an 
account in the Social Security structure which would be in their name 
and on which they could participate in the investment decisions, and 
which would most likely return a much better return than the present 
Social Security system returns, and which would give them an actual 
savings vehicle.
  Thirdly, the practical effect of cutting the tax for people who are 
wage earners and allowing them to save would be that we would begin the 
process of refunding the liability in the Social Security system. The 
Social Security system today has a $3 trillion unfunded liability. So 
that as the postwar baby-boom generation hits the system in 2008, which 
is the first year when the system starts to pay more out than it takes 
in, there becomes a liability that must be paid for through either 
increased taxes or by reducing the benefit structure of approximately 
$3 trillion. Well, to the extent that we can encourage people to save 
by cutting their taxes today and putting those tax cuts into savings 
accounts, we can significantly reduce the unfunded liability of the 
Social Security system, which will, in turn, reduce the debt of the 
Federal Government, which would

[[Page S6]]

be another goal in using the surplus that we presently are confronting, 
or which we are soon to have.
  So it is great news that we have this surplus. After 25 years, it is 
extraordinary news. But the proper management of this surplus is 
clearly one of the core public policy questions that we have to face as 
a Congress. It is my view that the proper management of this surplus 
should involve returning to the taxpayers the funds that were paid in, 
which gave us the surplus, allowing us to give the taxpayers an 
opportunity to save for their retirement, and to assure the solvency of 
the Social Security system, and to begin to pay down the Federal debt. 
These are the goals that I believe we should be looking at.
  I am hopeful that the President, in his State of the Union Address, 
will set forth a process and a procedure for allowing us to reach these 
types of goals. So I look forward to hearing the President's proposals 
in his State of the Union, and I certainly look forward to the next few 
months as this Congress wrestles with the issue of how to preserve and 
protect the Social Security system at the same time that we address the 
budget surplus.
  Mr. President, I yield back my time.
  The PRESIDING OFFICER. The Senator from Vermont.

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