[Congressional Record Volume 144, Number 74 (Wednesday, June 10, 1998)]
[Senate]
[Pages S6004-S6005]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    PRIVATIZATION OF SOCIAL SECURITY

  Mr. WELLSTONE. Mr. President, I also, if I could, want to take just a 
few minutes to speak about Social Security, about its future, and about 
a campaign under way to trade it in for a privatized system like the 
one we have in Chile.
  President Clinton has called for a nationwide debate on Social 
Security for the balance of this year, to be followed by a White House 
conference in December and legislative action early next year. I think 
it is time--perhaps well past time--for the defenders of Social 
Security to speak up and be heard.
  As far as I am concerned, Social Security is one of America's 
proudest accomplishments of the 20th century. It has given retirement 
security to Americans of all ages and has rescued millions of seniors 
from the scourge of poverty. Everyone says they want to protect and 
preserve this remarkably efficient and effective program which is so 
beloved by the American people. But you would never know it, judging 
from the direction the debate is taking.
  The premise of the debate is that Social Security is on the verge of 
bankruptcy and must be transformed in order to survive. I strongly 
disagree. Social Security is not in crisis. It is not broke. It is not 
facing bankruptcy. It may need some modest adjustments, but the 
greatest dangers facing Social Security today are the many misguided 
proposals to ``fix'' it.
  You can hardly open a newspaper these days without reading about the 
impending collapse of Social Security. This is nonsense. Social 
Security is now taking in $101 billion more each year than it pays out 
in benefits.
  In April, the Social Security trustees reported that the trust funds 
will be able to cover benefits for the next 34 years, until the year 
2032. After that, without any changes to the system, it will still be 
able to pay out 70 to 75 percent of the promised benefits, virtually 
indefinitely without any change whatever in the system. There is no 
reason why Social Security should come to an abrupt end in 2032 or any 
time thereafter.
  Some would seize upon this projected funding imbalance decades from 
now as an excuse to undermine the program. They want to replace Social 
Security with a privatized system in which retirement security depends 
solely on success in playing the financial markets. But why would we 
want to get rid of a program that has worked so well? Why should we 
want to ``end Social Security as we know it?'' In fact, that's what I 
think some of these proposals should be called--``ending Social 
Security as we know it.''
  If we really want to protect and preserve Social Security, we should 
be guided by two principles. First, we should focus all of our energies 
on the real problem, which is a possible imbalance in the trust funds 
after the year 2032. Second, under no circumstances should we allow 
funding for Social Security to be squandered on the fees, commissions, 
and overhead of Wall Street middlemen.
  There are a number of ways to go about this. Several prominent 
economists have come forward with detailed reform packages that would 
guarantee long-term balance of the trust funds. Other proposals will be 
coming out soon. These are relatively minor adjustments to the current 
system. They are not radical surgery.
  Privatization, on the other hand, is radical surgery. And it doesn't 
even solve the problem. In fact, it actually takes away money from the 
trust funds.
  How could that be? The answer is so-called ``transition costs.'' They 
are really going to be a huge problem. Right now, over 80 percent of 
payroll taxes are used to pay benefits for current retirees. Under a 
privatized system, those payroll taxes would be diverted into 
individual retirement accounts. But younger workers would still have to 
pay payroll taxes to fund benefits for current retirees. In effect, 
they would be paying twice. There is no way of doing that without 
increasing taxes, cutting benefits, or depleting the trust funds.
  Here is an idea: Instead of paying unnecessary transition costs, what 
if we used that money to restore the trust funds? The same goes for the 
more modest steps toward privatization now being discussed in Congress. 
Some members have proposed diverting 1, 2 or 3 percent of the 12.4-
percent payroll tax into new individual accounts. Others would use a 
budget surplus to do the same thing. Instead of setting up private 
accounts, we could just as easily use that money to shore up the trust 
funds. That is the problem we are supposed to be fixing, isn't it? It's 
hard to explain how you are saving the trust funds when you're taking 
money out instead of putting money in.
  The important thing, Mr. President, is to stay focused. As our 
guiding principle, we should insist that any legislation purporting to 
save Social Security actually live up to its billing. It should reserve 
for the trust funds any new savings or revenues. We shouldn't let some 
speculative shortfall, 34 years from now, be used as an excuse to force 
through a very different--and, I would add, a very radical--agenda.
  Why are we getting sidetracked with individual accounts and 
privatization schemes that don't actually solve the problem? The reason 
is simple--money. Wall Street money, and lots of it. Mutual fund 
companies, stock brokerages, life insurance companies and banks are all 
salivating at the prospect of 130 million potential new customers 
coming their way. Privatization of Social Security could bring them 
untold billions of dollars in extra fees and commissions. That is why 
they have invested millions of dollars in a massive public relations 
campaign promoting privatization, and they are doing a heck of a good 
job of it. That is one reason why they have contributed so heavily to 
congressional and Presidential campaigns. The heavy hitters, the big 
givers, they are heavily involved in this campaign.

  Let me read from a story in the Washington Post on September 30, 
1996. The headline says, ``Wall Street's Quiet Message: Privatize 
Social Security.''
  It reads:

       Wall Street is putting its weight behind the movement in 
     Washington to privatize Social Security . . .
       Lobbyists for Wall Street are trying to stay behind the 
     scenes as they argue for privatization because they and their 
     firms so obviously stand to profit by the changes they are 
     promoting, according to financial industry executives. 
     Representatives of mutual funds, brokerages, life insurance 
     companies, and banks are involved in a lobbying effort to 
     have the government let Wall Street manage a slice of Social 
     Security's money . . .
       Representatives of investment firms have begun lobbying 
     Capitol Hill and the White House to advance their agenda, 
     according to financial service industry executives . . .
       Wall Street officials want to avoid or at least deflect 
     accusations that they are seeking to transform Social 
     Security to line their own purses.

  And, I might add, their own purposes.
  There has been some very good reporting in the Post, in the Wall 
Street

[[Page S6005]]

Journal, and elsewhere on exactly who is paying how much money to whom.
  It is absolutely unbelievable the way in which these Wall Street 
interests have hijacked this debate. It is time for those of us who 
want to protect this system to stand up and begin to speak out and 
fight back against these very radical efforts to privatize a social 
insurance program that has been such a huge success, not just for 
senior citizens, but for our parents and our grandparents.
  I think it would be a tragedy if we stood by and let the trust funds 
be squandered by Wall Street--and squandered on Wall Street. In Chile, 
where they privatized Social Security in 1981, an estimated 19 percent 
of worker contributions gets skimmed off the top by pension companies. 
That's 19 percent skimmed off the top by the middlemen.
  Social Security in our country, by contrast, has administrative costs 
of less than 1 percent with no fees, no commissions. One percent 
administrative costs, no fees, no commissions, not going to the big 
Wall Street interests. And now we have these efforts to privatize the 
system and turn over a large part of the surplus to Wall Street? 
Unbelievable.
  Champions of privatization like to brag about higher returns on the 
stock market as compared to Social Security. I think those claims are 
exaggerated. But even if they were true, you don't need individual 
accounts managed by Wall Street campaign contributors to capture the 
higher yields. You would get the same average returns if Social 
Security did the investing itself. And that way, seniors would still be 
guaranteed a monthly benefit indexed for inflation.
  I'm not saying we should do that, necessarily. Stock markets go down 
as well as up. With all the financial turmoil in Asia and Russia right 
now, we might want to think twice about betting the future of the trust 
funds on go-go emerging markets. But whatever we do, we should insist 
that the trust fund money not be siphoned off to Wall Street middlemen.
  I want to say that again to my colleagues. We might want to think 
twice about betting the future of the trust funds on go-go emerging 
markets. But whatever we do, we should insist that this trust fund 
money not be siphoned off to the Wall Street middlemen, which is 
actually what the privatization proposals do.
  Our immediate focus should be on fixing the problem at hand--a 
projected shortfall in the trust funds 34 years in the future. We 
should not be diverting resources to half-baked schemes that would only 
make the problem worse.
  We should not let Wall Street campaign contributors push through a 
``reform plan'' that would only give them a slice of the trust funds. 
Privatization is a phony solution to a phony crisis.
  Social Security has been phenomenally successful for over a half a 
century--60 years. It ensures millions of Americans against disability, 
death of a spouse, and destitution in their old age. Compared to 
private retirement plans, it is a very good deal. And it is the most 
successful antipoverty program America has ever devised.
  It is simple. You reach the age of 62 or 65, you get older, you are 
no longer working, your earnings decline. There was a time when 
probably half of the poverty population in our country were the 
elderly. That was a national disgrace. That is no longer the case. This 
is a very successful program.
  While all of us should be saving more, the fact is that there will 
always be millions and millions of Americans who depend solely on 
Social Security for their retirement security. In fact, as fewer and 
fewer Americans have employer-provided pensions and as businesses are 
rapidly shifting from defined benefit plans to defined contribution, we 
need Social Security now more than ever. This is no time to end 
``Social Security as we know it.''
  We now have proposals, privatization schemes, to ``end Social 
Security as we know it.'' That is what this is all about. I am amazed 
that we have not had more discussion about how to modify and support 
Social Security as opposed to the privatization schemes that dismantle 
Social Security.
  I will give some of my colleagues credit. They have been able to 
take, 34 years in the future, a potential shortfall and reduce it to an 
agenda that dismantles the Social Security system as we know it.
  We need to have a major discussion and debate over this. In the 
coming weeks and months, I plan to be talking at great length about how 
we can correct the projected shortfall 34 years from now without ending 
Social Security as we know it. Right now, friends of Social Security 
are generating a number of proposals that do not amount to radical 
surgery. Those ideas deserve to be heard. Advocates for the 
privatization plan favored by Wall Street should not have a monopoly 
over this debate. If we have a fully informed discussion and all 
options are really on the table, I am very confident that the American 
people will support a progressive solution that does not end Social 
Security as we know it.
  I yield the floor.

                          ____________________