[Congressional Record Volume 144, Number 79 (Wednesday, June 17, 1998)]
[Senate]
[Pages S6491-S6492]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERREY (for himself, Mr. Moynihan, Mr. Breaux, and Mr. 
        Lieberman):
  S. 2184. A bill to amend the Social Security Act to provide each 
American child with a KidSave Account; to the Committee on Finance.


                  social security kidsave accounts act

 Mr. KERREY. Mr. President, many of the things we do in the 
Senate require hypothetical analysis, shaky forecasts and hazy 
predictions. Indeed at times it could be said that we don't know what 
we're doing. Today Senator Moynihan and I are introducing a bill based 
on a mathematical certainty. Our bill would make every baby born in 
America wealthy. Guaranteed.
  This proposal, called KidSave, supplements S. 1792, the Social 
Security Solvency Act of 1998, which the Senator from New York 
introduced earlier this year and of which I am an original cosponsor. 
It would cut the payroll tax by $800 billion--the largest tax cut in 
American history, and the one most targeted to middle class families--
so individuals can harness the power of compounding interest rates to 
build wealth for retirement. One of the discoveries I have made in 
researching this idea is that the most important variable in 
compounding interest rates is time. The earlier you start, the more 
wealth you build.
  KidSave is based on that observation. It would use part of the 
savings created by S. 1792 to open a $1,000 account for every child at 
birth and contribute $500 a year to that account for the first five 
years. These KidSave accounts would be invested in broad funds 
administered by the Social Security Administration, and be similar to 
the Thrift Savings Plan available to federal employees and to members 
of this body.
  As I said, Mr. President, this is a mathematical proposition. Even at 
modest rates of return, the long stretch of time over which this 
investment would be compounded means every baby born in America would 
have a shot at the American dream. At just 5.4 percent return, less 
than the historical rates of return for the market, these birth 
accounts alone would allow every American to supplement his or her 
retirement income by $235 a month in 1998 dollars, and still leave more 
than $100,000 behind to his or her heirs.
  These accounts would supplement those opened by the payroll tax cut 
proposed in S. 1792. This approach to retirement security is two-
pronged. First, we shore up the solvency of Social Security so it 
continues to provide a reliable monthly check. But we also realize that 
check isn't enough to live on. The average Social Security check in 
Nebraska is $733 a month. Nationwide, sixteen percent of beneficiaries 
have no other source of income. Another 14 percent rely on Social 
Security for more than 90 percent of their income, and nearly two-
thirds overall derive more than half their income from that small 
check. For many of them, it's not enough. Our proposal is based on the 
idea that retirees need both income and wealth, and experience bears 
that idea out. Today retirees with asset income have more than double 
the retirement income of those who don't.
  But this is about much more than money. Not only is this a guaranteed 
route to retirement security, it's also a mathematically certain 
solution to one of the toughest problems we face: The rich are getting 
richer and the poor are getting poorer. To understand this problem, we 
must understand the difference between income and wealth. Income, Mr. 
President, consists of the paychecks we use to pay our bills. Wealth is 
what an individual owns in assets like a home, mutual fund or pension. 
We've heard a lot recently about

[[Page S6492]]

the gap between rich and poor in terms of income. The gap in wealth is 
even worse and, I would argue, more important. As our economy becomes 
more global and technology-intensive, it is disproportionately 
distributing its rewards to those who own a piece of our economy.
  Despite the growing importance of wealth, a stark gap has opened 
between those who have it and those who don't. The bottom 90 percent of 
Americans earn 60 percent of all income, but own less than 30 percent 
of net worth and less than 20 percent of financial assets. These 
Americans are being left behind as the economy apportions more and more 
of its rewards to owners of wealth. Social Security can be a vehicle 
for solving that problem.
  We believe wealth can transform Americans' attitudes about their 
future. Wealth enables higher living standards, but it also enables 
generosity and the optimism that comes with feeling secure about the 
future. Wealth can make every American an Oseola McCarty, 
the remarkable woman in Hattiesburg, Mississippi, who after more than 
seven decades of low-wage work as a washer woman donated $150,000 to 
the University of Southern Mississippi--wealth she had built by saving 
a little bit of money over a long period of time. Wealth can make every 
American like Al, a man who works as a printer for the U.S. Senate. His 
Thrift Savings Plan has boomed so much he is thinking of opening a 
savings account for his two-year-old boy. Wealth can give every 
American the opportunity to be like another man I recently met, whose 
firm was bought out but who became wealthier because he owned a piece 
of it. When I spoke with him, he didn't talk about his income. He said 
he had told his wife: ``Whatever else happens to us in life, we know 
the kids can go to college.''

  Each of these Americans has something in common, Mr. President. They 
own a piece of their country. When the economy grows, they grow. They 
have a stake in low inflation. They want trade barriers lowered. They 
are on the front lines of a transformation from an ``us-vs.-them'' 
economy to one in which the attitude is: ``We're all in this 
together.''
  And, Mr. President, that's an opportunity we can open today to every 
baby born in America. Guaranteed. I urge my colleagues to support this 
legislation.
 Mr. MOYNIHAN. Mr. President, Senator Kerrey and I, along with 
Senators Breaux and Lieberman, are pleased to introduce the Social 
Security KidSave Accounts Act, which nicely complements the Social 
Security Solvency Act of 1998 introduced by Senator Kerrey and me in 
March. In that proposal we reduced payroll taxes by $800 billion over 
10 years. The reduction in the payroll tax rate from 12.4 percent to 
10.4 allows the funding of personal savings accounts with the 2 
percentage point reduction in the payroll tax.
  A worker with average earnings depositing 2 percent of wages--one 
percent from the worker and one percent from the employer can--over 45 
years--accumulate almost one half of a million dollars. Add in the 
wealth generated over a lifetime of 70 years from the interest on the 
KidSave accounts of $3,500--$1,000 at birth and $500 for each of the 
next five years--and you have created a new class of millionaires. 
Workers will have estates which they can pass on to their heirs.
  Combined, these two bills create wealth without spending the budget 
surplus. The Congressional Budget Office estimates that for the ten 
year period 1999-2008, our bill, which saves Social Security 
indefinitely, increases the budget surplus by $170 billion. This 
KidSave bill spends only about $100-$120 billion of that increase. In 
short, we create private savings without reducing public savings.
  Together these bills provide for a more comprehensive approach to 
retirement savings. The foundation of this approach remains Social 
Security, the financial future of which is secured for 75 years and 
beyond. If this legislation is enacted, as I hope it will be, 
significant new private savings would be added to this 
foundation.
                                 ______