[Congressional Record Volume 144, Number 96 (Friday, July 17, 1998)]
[Senate]
[Pages S8464-S8466]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    SOCIAL SECURITY'S COMING CRISIS

  Mr. GRAMS. Mr. President, as the Senate continues its work on the 
spending bills for the next fiscal year, I rise today to speak about an 
issue that threatens the financial future of this nation: a disaster-
in-the-making that jeopardizes our ability to fund any of the important 
discretionary spending programs we now debate, such as education or 
medical research. I rise to speak about the coming crisis of the Social 
Security program.
  In my last remarks on this subject before this Chamber, I discussed 
the history of the Social Security program. Specifically, I talked 
about how hastily Congress passed the Social Security Act, how poorly 
the program was designed, and how fallacious its finance mechanism was. 
A Social Security crisis was inevitable--and arrived in the late 
1970's, when the program began running a deficit and Congress raised 
taxes to shore it up. President Carter claimed Social Security would 
remain solvent for another 50 years. Just five years later, Social 
Security was facing another near-term insolvency. That time, after 
again raising taxes, Congress claimed the system would remain viable 
for 75 years.
  Yet, here we are again.
  Mr. President, as with the previous two crises, the coming retirement 
crisis is real. All the socioeconomic data suggest it is approaching. 
Both the government and private sectors are projecting the future 
insolvency of the Social Security program.
  However, unlike the last two crises, the coming crisis will have a 
profound and devastating impact on our national economy, our society, 
and our culture unmatched by any we have faced since the founding of 
this Nation.
  Despite all the evidence to the contrary, some Washington politicians 
continue to sing the ``don't worry, be happy'' refrain. Social Security 
is not in crisis, they say--it is not broken and will not go bankrupt. 
All it needs are a ``few minor adjustments'' to fix its problems.
  Therefore, many of our constituents have only heard the good news and 
the happy talk: that Congress has balanced the budget for the first 
time in nearly 30 years and that the Congressional Budget Office 
projects surpluses growing to $140 billion within a decade. All of this 
good news is complemented by the fact that the Social Security Trust 
Fund boasts an asset balance that tops $600 billion and is expected to 
run surpluses for the next 13 years. And so the Social Security 
Administration passionately contends that Social Security benefits will 
always be there for everyone.
  Insisting that the Social Security crisis is not real--that we are in 
better financial shape today than ever before--is like telling the 
captain of the Titanic the waters are clear, with no threat of 
icebergs, and the ship should proceed full speed ahead.
  That is ``The Big Lie,'' Mr. President, and if we fall for that 
rhetoric, there is nothing but icebergs ahead for Social Security. For 
starters, the Social Security program's $20 trillion in unfunded 
liabilities have created an economic time bomb that threatens to 
shatter our economy. In addition, the declining rate of return of 
Social Security contributions means the system will be unable to meet 
the expectations of future retirees, who seek in retirement the same 
financial security they enjoyed in the workplace.
  Beginning in 2008, 74 million baby-boomers will become eligible for 
retirement and the system will begin to collapse. From that point on, 
we will have

[[Page S8465]]

more retirees than ever before, and fewer workers paying into the 
system. And as medical advances continue to extend life expectancy, 
future retirees will be receiving benefits longer than was ever 
anticipated when the program was created.
  The problem begins with the fact that the current Social Security 
system is a ``pay-as-you-go'' entitlement program. The money a worker 
pays in today is used to support today's retirees--the government does 
not hold it for an individual worker until he or she retires--meaning 
there is no reserve waiting for future retirees.
  To put it real simply, there is no account in Washington, DC with 
anybody's name on it that has one dollar for your retirement. Not one 
dollar in Washington has been set aside. They rely on the workers today 
to collect the money from them to pay those on retirement today. When 
the program was originally conceived in 1935, this did not pose a 
threat. Back then, the average life expectancy for Americans had not 
yet reached age 65 and there were many more workers paying into the 
system than were taking out.
  To put this into perspective, before the ``baby boom'' generation was 
born, there were 100 workers for every retiree. But as these same baby 
boomers begin to retire, the funding support is projected to eventually 
drop to merely two workers per retiree--100 for every retiree 50 years 
ago and 2 workers for every retiree at the beginning of the next 
century. Furthermore, these future retirees are expected to live to 
more than 75 years of age. We have gone from a program where the 
average worker died before ever receiving their benefits, to a 
situation where retirees are living years after they have received all 
their contributions back from the program. In fact, the Congressional 
Research Service estimates today's average Social Security recipient 
receives back his or her lifetime contributions within the first three 
to five years of retirement.
  By the way, Mr. President, if we ran our households the way the 
government operates Social Security, we would never be allowed to 
finance a house, we could never send our kids to college with the help 
of a student loan, we could not even get a car loan; in fact, we could 
not function in the real world at all. If we ran our companies on a 
pay-as-you-go basis, there is a good possibility we would have been 
tossed in jail long ago.
  When there are fewer workers to support each retiree, it is obvious 
something has to give. When Congress attempted to address projected 
shortfalls in the past, the government's response meant either reduced 
benefits for retirees, higher payroll taxes on workers, or some 
combination of the two. For workers, that has amounted to 51 tax 
increases on income or income adjustments in just the last 25 to 30 
years; 51 times the government has raised Social Security taxes, or 
adjusted the income on which those taxes were levied. So it comes as no 
surprise that similar proposals are finding their way into our debate 
again today.

  Unfortunately, this comes at a time when retirees are growing 
increasingly dependent upon Social Security benefits as their main 
source of income. This is in spite of the fact that Congress never 
intended Social Security to become a replacement for personal savings. 
Social Security was to be a supplement, not the major source of an 
individual's retirement dollars. According to a report by the 
Congressional Budget Office, though, workers have come to expect that, 
upon retirement, Social Security will provide them with income to 
replace a significant portion of their previous earnings. As proof of 
that, in 1996, Social Security made up approximately 40 percent of the 
cash income of the elderly. And as the number of workers covered by 
pensions continues to decrease and tax rates continue to complicate the 
ability of workers to save for their future and ensure their retirement 
security, dependency will surely grow.
  The Social Security Trust Fund's unfunded liability makes the long-
term budgetary impact of America's changing demographics even more 
significant.
  The government's own data shows that the Trust Funds will begin to 
have cash shortfalls in less than 12 years. Beginning in 2010, Social 
Security will have to pay about $1 billion more than it will collect in 
taxes.
  There will be no surpluses in the Social Security fund. In the year 
2015, that number will climb to $90 billion of deficits.
  In 2035, it will reach $1 trillion and in 2075, the annual shortfall 
will explode to a staggering $7.5 trillion per year. Even after being 
adjusted for inflation, the total unfunded liability is still 
staggering--at $20 trillion.
  On paper, the Trust Fund boasts more than $600 billion in assets. 
``On paper'' is the key, however. For years, Congress has regularly 
raided the Trust Fund to pay for additional federal programs--a 
practice that continues unabated today. Unfortunately, as the baby-
boomers begin to retire, the government IOUs will become due.
  Washington will either have to cut government spending, raise taxes, 
or borrow from the public to redeem those IOUs. Obviously, being 
unwilling--or unable--to control its own spending, Washington routinely 
chooses the latter two options. And so beginning by 2013, or maybe even 
earlier, taxpayers will be asked, yet again, to pay up as the IOUs are 
cashed in to fund retiree benefits. I agree with the majority of my 
Minnesota constituents that the government has no business raiding the 
Social Security Trust Fund to pay for its pet spending projects. The 
taxpayers have every right to be outraged that such a blatant abuse of 
the system is allowed to continue.
  All these factors lead to the conclusion that the Social Security 
Trust Fund will go broke by 2032 if we continue on our present course. 
If the economy takes a turn for the worse, or if the demographic 
assumptions are too optimistic, the Trust Fund could go bankrupt much 
sooner. And once the cash shortfalls begin, they quickly climb to 
staggering levels.
  Washington's fiscal mismanagement means it not only raises taxes, it 
also must borrow more from the public to cover the shortfall. Without a 
policy change, the CBO estimates the debt held by the public will 
balloon to nearly $80 trillion in 2050--from under $6 trillion today to 
$80 trillion in 2050. According to the General Accounting Office, the 
estimates are much worse. They say, it could top $158 trillion in debt 
and consuming nearly 200 percent of our national income. A national 
debt at this level would shatter our economy, and shatter our 
children's hopes of obtaining the American dream.
  Mr. President, we often hear those individuals who want to maintain 
the status quo argue that by increasing the payroll tax by ``just'' 2.2 
percent--going from 12.4 to 14.6 percent--we can somehow fix the 
problem for another 75 years, but that is absolutely false.
  Based upon the Trustee's Report, the present value of the unfunded 
promise of future benefits totals more than $5 trillion--this is how 
much money we would have to collect and invest today to pay for the 
future retirees. To collect this much money, the federal government 
would be forced to impose a tax rate in excess of 100 percent on every 
American. This, of course, is assuming such funds would not be spent 
elsewhere in the interim and replaced with more IOUs, as we have done 
in the past.
  The Concord Coalition projects that, from now to 2040, the cost of 
Social Security will rise from 11 to 18 percent of workers' taxable 
income. Add in Medicare and Medicaid and the taxes on these three 
programs take 40 percent off our paychecks--not even counting our 
Federal or State or local taxes; just those three programs: Social 
Security, Medicare, and Medicaid, would be a 40 percent tax on your 
income.
  With federal, state, and local income taxes and other taxes, the tax 
burden will become too high for anyone to bear. These high tax rates 
will erase all growth in real after-tax worker earnings over the next 
half-century. When this occurs, the economy will be destroyed and a tax 
revolt from younger workers will certainly follow.
  Mr. President, the only good news is that these problems are down the 
road and not already upon us. Of course, it would be easier to put off 
these difficult decisions by waiting until the crisis has actually 
arrived before we begin repairing the damage. As members of Congress, 
however, it is our responsibility to address the situation now, before 
we pass this financial nightmare onto our children and grandchildren. 
That is why I am speaking on this issue today.

[[Page S8466]]

  Experts tell us that delaying action would require we take even more 
drastic measures in the future. Not only would such delays be costly, 
they would leave Americans with less time to prepare themselves for any 
adjustments to the program. When we consider that Social Security taxes 
consume approximately one-eighth of an average worker's lifetime 
income, there is a significant amount of money at stake for every 
individual. And that could grow, as we said, to one-fifth of all the 
money that an individual makes.
  While Congress cannot change future demographics or merely replace 
the IOUs it has left sitting in the Social Security Trust Fund, it does 
hold the power to offer retirement security to all Americans by 
improving the way the Social Security System will operate in the 
future. I firmly believe it can be done without breaking the 
government's covenant with current retirees or leaving those about to 
enter the program in fiscal limbo. But it will take an innovative 
approach that breaks from Social Security's ``government-knows-best'' 
roots.
  We must look to the ingenuity and competitive spirit of the private 
sector to improve and rejuvenate the program if we are to give future 
retirees any promise of retirement benefits.
  I have often heard today's workers lament they do not think Social 
Security will be there for them. Forty-six percent of all young people 
believe in UFOs, says a study by Third Millennium, while just 28 
percent think they will ever see a Social Security check. So more kids 
believe in UFO's than Social Security. Still, it is not too late to 
change that course and prevent the coming Social Security crisis.
  As the national debate goes forward, Congress has the ability to 
empower workers with the tools to control their own future. If we can 
learn from our past mistakes and own up to the financial nightmare 
waiting down the road, we can transform Social Security from a program 
that threatens financial ruin to one that holds the promise of improved 
retirement security for generations to come.
  We have much work to do and no time to waste, so I urge my colleagues 
to join me as we begin the transformation.

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