[Congressional Record Volume 145, Number 32 (Tuesday, March 2, 1999)]
[House]
[Pages H863-H870]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      PRESERVING, PROTECTING, AND ENHANCING SOCIAL SECURITY SYSTEM

  The SPEAKER pro tempore (Mr. Shimkus). Under the Speaker's announced 
policy of January 6, 1999, the gentleman from Texas (Mr. Doggett) is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. DOGGETT. Mr. Speaker, over the course of the next hour, a number 
of Members, Democrats here in the House, want to explore with our 
colleagues and with the American people our commitment to preserving 
and protecting and enhancing our Social Security System. It is my 
belief that Social Security is one of the best programs that ever came 
out of this House of Representatives and this Congress and this Nation.
  If we reflect back on the history of this program to a time in this 
very chamber in the 1930s, a time when most of our seniors were left in 
poverty, left often in disgrace to live destitute in their final years 
in this country after having built it into the great country that it 
is, and we reflect back on that time and compare it to the standard of 
living available to most seniors in this country today, it is a 
remarkable development. Over the course of some 60-plus years, thanks 
to the leadership of the great Franklin Delano Roosevelt and a 
Democratic Congress, we have a Social Security System that really is 
something that all of us can be very thankful for.
  That was a system that came into effect over very significant 
Republican opposition, and it took from the 1930s until the 1960s, 
decades of effort by Democrats in this Congress to move to the second 
pillar that is so important to the security of our seniors, and that is 
Medicare.
  When my fellow Texan, Lyndon Johnson, signed Medicare into law to 
assure that those who had some retirement security also had a certain 
element of health security, nine out of ten of our Republican 
colleagues in this House, nine out of ten, voted no. They did not 
believe in Medicare.
  And so I think it is important, as we begin what I hope will be a 
bipartisan effort to bring us together to resolve the issues now about 
Social Security, that we do so in a bipartisan fashion, not bound by 
our history, but we also must be mindful of our history. And much of 
the history of the viewpoints brought to this debate about Social 
Security is really fairly recent.
  The current leader of the Republican House group, the majority 
leader, the gentleman from Texas (Mr. Armey), my colleague from Texas, 
has a far different attitude about Social Security and about Medicare 
than I have had and that our great President Lyndon Johnson had, and I 
believe that most Texans have about Social Security. He has referred to 
it, back in 1984, as ``a bad retirement'' and ``a rotten trick'' on the 
American people. And he said, just a few years ago, that ``I would 
never have created the Social Security System.''
  In addition to the comments about Social Security, he said of 
Medicare, after the Republicans took control of this House, ``I resent 
the fact that when I am 65 I must enroll in Medicare. I deeply and 
profoundly resent that,'' he said. ``It is an imposition on my life.''
  So we know that at least when some of the leadership of the 
Republican Party here in the House come to discuss Social Security and 
Medicare, though they profess an interest in the same bipartisan 
solution that ultimately will be necessary, they have a different 
perspective about Social Security and Medicare than those of us who 
come from a party that has made Medicare and Social Security a mainstay 
of our efforts.
  Likewise, I was troubled, just after coming to the House here in 
1995, to read the banner headline of the newspaper of the Progress in 
Freedom Foundation. This is the group that was created by our recent 
Speaker of the House Newt Gingrich. It said, ``For

[[Page H864]]

freedom's sake, eliminate Social Security.'' And it proceeded in this 
banner editorial, on the front page of this publication, to say, ``It 
is time to slay the largest entitlement program of all: Social 
Security. A more important reason than financial returns for 
privatizing Social Security is freedom. The government shouldn't be in 
the business of confiscating people's retirement money and giving them 
no say where it is invested.''
  That is perhaps a perspective that could be subject to debate here, 
but it is a perspective that has characterized the leadership of this 
Republican Party. So that when they come and offer a meaningless 
resolution, like that which the House adopted today, that has various 
platitudes but really does nothing to accomplish any real reform of the 
Social Security System, we cannot help but be mindful of the 
perspective and the rigid idealogy that they bring that is very 
negative towards Social Security and Medicare.
  I hope that over the course of this debate we can reflect on some of 
the, I guess the remainder, the leftovers of this rigid ideology that 
are continuing to serve to restrict our ability to get meaningful 
changes in Social Security, to preserve and strengthen it, rather than 
to reform and wreck it.
  Now, the leader of our efforts in this regard has been my colleague 
from California, who is the ranking member on the Subcommittee on 
Social Security of the Committee on Ways and Means, and I participated 
with him earlier today, with the National Committee to Preserve Social 
Security and Medicare, in a discussion of a new study to explore who 
the winners and losers are of the various proposals like that advocated 
by the Progress in Freedom Foundation and the other people that do not 
really believe in Social Security and want to abandon the system of the 
last 60-plus years, and I wonder if my colleague from California (Mr. 
Matsui) might focus some attention on the significance of this 
particular study to our ongoing discussion of Social Security.

                              {time}  1600

  Mr. MATSUI. Mr. Speaker, I thank the gentleman from Texas (Mr. 
Doggett) for yielding.
  The distinguished gentleman from Texas, as many people know, is on 
the Subcommittee on Social Security; and his expertise obviously is 
greatly needed for not only this entire institution but obviously for 
the country. I appreciate today that he has put together this 
opportunity for a number of us to speak on the floor of the House on 
this very, very critical and important issue of Social Security.
  I might just mention the importance of Social Security to all 
Americans. It is probably the most significant program that the Federal 
Government has put together in the last 100 years, perhaps in the 
history of our country.
  Every American is touched by Social Security; and, unlike what many 
people think, Social Security is not just a program for those people 62 
or 65 and older. One-third of the benefits of Social Security goes 
basically to women, surviving spouses, and minor children, either 
through the form of survivor's benefits when the breadwinner of a 
family dies before reaching the age of 65 or, alternatively, when the 
breadwinner becomes disabled.
  All of us understand and know the fact that, without Social Security, 
many young people in America today would not be able to go on to 
community college or State college or perhaps a university if, in fact, 
that breadwinner is injured or perhaps dies. So this program is perhaps 
the most important program that this Congress, perhaps in our lifetime 
as Members of Congress, will have to deal with.
  Yes, there is a problem with Social Security, demographically. When 
Social Security was first established, it was considered then a widows' 
and orphans' fund back in the 1930s, as the distinguished gentleman 
from Texas (Mr. Doggett) has said. There were about 30 people working 
for each retired individual. Today, there is about three in the 
workforce for every retired individual; and sometime in the year 2025 
there will only be a little over two.
  So we must change, we must make modifications, but we must also 
preserve Social Security as we know it in America today.
  I have to say that one area that has me greatly concerned is in the 
area of tax cuts. The story in the Washington Post and the New York 
Times, major newspapers throughout the country, over the weekend, is 
that the Republican leadership would like to lift the so-called 
spending caps so that we can accommodate additional spending in the 
defense budget, perhaps additional spending in other areas. That would 
be fine, I suppose, and we will have to debate that issue when we 
prepare the budget, hopefully by April 15 when it is due under the 
budget rules.
  There is also talk about a significant huge tax cut, and everyone 
relates this tax cut to the surplus. We heard the chairman of the 
Committee on the Budget talk about a $700 billion tax cut over the next 
6 or 10 years. We have heard the Senate Budget Committee chairman talk 
about an $800 billion or $900 billion tax cut over the next decade.
  The problem we have, of course, is that over the next 5 or 6 years 
only $86 billion of the hundreds of billions of dollars of surplus will 
be in the form of income tax, both income taxes from corporations and 
income taxes from individuals. The greatest percentage, 90 percent, of 
the surplus will be from the Social Security payroll taxes. We cannot 
afford to use those sums, basically coming out of that very regressive 
payroll tax, to pay for tax cuts that essentially go to higher income 
folks.
  The chairman of the Committee on Ways and Means already said that. It 
is going to go to people in the high income bracket because he says 
they pay more. In fact, we estimated that somebody that makes $300,000 
a year will get about a $30,000 tax cut, whereas somebody making 
$30,000 a year, one-tenth of that, will get about a $99 per year tax 
cut, or maybe $8 a month.
  Mr. DOGGETT. Some have suggested that this 10 percent tax cut is just 
principally designed to help the top 10 percent of Americans.
  Mr. MATSUI. There is no question about that.
  Mr. DOGGETT. Or maybe the top 1 percent.
  Mr. MATSUI. It just goes to the very, very high income groups.
  Mrs. THURMAN. Mr. Speaker, will the gentleman yield?
  Mr. DOGGETT. I yield to the gentlewoman from Florida.
  Mrs. THURMAN. Maybe another way to put this then is, if we take this 
surplus, the dollars that are coming in from the payroll taxes, which 
would be hard-earned folks' money that they spend out of their check, 
actually would then go to fund a tax cut across the board or 
potentially across the board, leaving us in a deficit for when they get 
ready to retire?
  Mr. MATSUI. Well, there is no question. I think the gentlewoman from 
Florida (Mrs. Thurman) is absolutely correct. They are basically taking 
money so there is immediate gratification but at the expense of folks 
down the road, 5, 10, 15, 20 years down the road.
  Mrs. THURMAN. It is out of their tax dollars?
  Mr. MATSUI. It is out of their tax dollars.
  I will conclude by being very brief, because I would like to talk a 
little bit about this program that the gentleman from Texas (Mr. 
Doggett) spoke about today very briefly. It is very interesting, 
because Martha McSteen is the chair of the National Committee to Save 
Social Security and Medicare. Martha McSteen had been a Social Security 
administrator for 39 years before she retired in 1986. She was the 
acting administrator of the entire Social Security program from 1983 to 
1986, just before she retired.
  Believe it or not, that was under the Reagan administration. She was 
part of this press conference.
  And also John Mueller. And I want to just mention John Mueller's 
background. He is an economist, and he was the chief economist for the 
Republican Conference, that is the Republican caucus, under the 
leadership of then chair of the caucus Jack Kemp. They put together 
this report to look into the whole concept of whether or not we should 
privatize Social Security. In other words, allow private accounts of 
either 2 percent or 5 percent or 4 percent, maybe 3 percent, whatever 
it might be, or maybe all of it.
  They have concluded, in their very comprehensive study, that in terms 
of winners and losers almost every American alive today will be losers 
under

[[Page H865]]

this program of private accounts, private individual accounts. The only 
winners will be single males born in the year 2025, 25 years from now 
and beyond.
  The reason for that is because, as all of us know, we have an $8 
trillion unfunded liability because Social Security is basically a pay-
as-you-go system. It is a system in which current generations pay for 
the retirement of past generations, and it is not funded. It is paid 
out of the payroll taxes and immediately paid out of the Treasury.
  As a result of that, if one moves to a new system, where there are 
private accounts, essentially what happens is that the current 
generation of workers will be paying two taxes: one for their own 
retirement maybe 20 or 30 years down the road and the retirement of 
their mothers and fathers, aunts and uncles and perhaps even their 
grandparents.
  So once we move over to private accounts, we are going to end up 
doing great damage to every American that is alive today and probably 
will be alive, born in the next 20 years. The only beneficiary will be 
somebody who will be born in the year 2025 and beyond. It will be 
basically a male who is single.
  The gentlewoman from Florida (Mrs. Thurman) can talk about the impact 
of this on women.
  It is a major study. We hope that people will look at it because it 
confirms the Galveston plan, which the gentleman from Texas (Mr. 
Doggett) is so familiar with, in which they do private accounts. A GAO 
study showed that the Galveston plan is not working.
  Mr. DOGGETT. Mr. Speaker, I know the gentleman has some constituents 
that he is going to meet with now, but I appreciate his comments and 
his leadership.
  I think the kind of participation that Mr. Mueller provides as an 
economist, as a Republican, is the very kind of Republican 
participation that we need. He conceded in his comments that he began 
with a strong ideological predisposition against our current Social 
Security system, but he was willing to let the facts overcome that 
ideological predisposition.
  That is really what we are saying to some of our Republican 
colleagues who have made these very harsh criticisms of Social 
Security, to look at the facts; and when they show, as this study that 
the gentleman referred to, they show that no one alive in the world 
today would gain from wrecking the system and changing it so much that 
we would not recognize it, then we ought to try to improve the system 
rather than to reject it.
  I appreciate the gentleman's participation.
  I know that the gentleman from Washington State (Mr. McDermott), one 
of the few physicians here in the House, serving on the Medicare 
Commission as well as working on Social Security, has some insight on 
this issue as well.
  Mr. McDERMOTT. Mr. Speaker, the gentleman from Texas (Mr. Doggett) is 
to be commended for having scheduled this the day that we passed the 
most irrelevant resolution that I can imagine. It was empty in all its 
aspects.
  I would say to the gentleman from Texas, as I sit here and think 
about this, I was thinking about my grandfather. He was a second 
generation American who went to the second grade. He could read the 
newspaper and he could write, basically, but had no assets. But in the 
investment industry in the 1920s there was a guy named Samuel Insole 
who had the electrical industry all locked up, and he was selling stock 
all over the United States. This was the time when we had private 
retirement. Everybody had their own retirement. There was no Social 
Security. So someone saved their own money.
  Well, Insole came down into central Illinois, where my grandfather 
was, selling this stock. My grandfather, no economist, no great 
education, said to his wife, if this stuff is so good why are they 
selling it in the cornfields of Illinois? Why don't they sell it in 
Chicago?
  When it crashed and all the old people in this country had nothing, 
that is when Franklin Delano Roosevelt came with Social Security. 
Because when people tried to invest their own money in the stock 
market, some people made it and some people got clobbered.
  So this has been a system now in place for 70-some years, I guess 60 
years, that has basically been protecting senior citizens. When people 
come here talking about let us privatize it, let us get away from a 
situation where we all pay into the same pot and we take out as long as 
we live and we share the risk, all Americans share the risk together, 
the move in the Committee on Ways and Means now is, let us privatize it 
and give everybody a little book, and they will put their money in 
their little book, and they will know how much they have, and they can 
get rich or they can go in the ditch. That will be their choices. Who 
knows?
  The model they use comes out of Chile. People in this country ought 
to take a very careful look at the Chilean example.
  First of all, it took a dictator, Augusto Pinochet, to wipe out the 
system in Chile of a universal system and give everybody individual 
books. They had to wipe out the labor unions, and they ultimately set 
this system up.
  Two years ago, when the stock market was not doing well, the Chilean 
government said to people, please do not retire because the stock 
market is down and people will not have enough to live on.
  My view is that we ought to be creating a solid system that goes into 
the future and not go back to the 1920s in this country.
  Mrs. THURMAN. Mr. Speaker, will the gentleman yield?
  Mr. DOGGETT. I yield to the gentlewoman from Florida.
  Mrs. THURMAN. There is another fallacy within the Chilean issue and I 
think it is one that all of us are very comfortable with and one that 
certainly the gentleman from California (Mr. Matsui) has spoken about 
and that is, what happens to women and children, to this family issue? 
What happens to people who become disabled? If one looks at that 
system, there is in no way any kind of a benefit built into their 
system; where in ours we have a guaranteed benefit for those particular 
folks that find themselves in those very difficult situations.
  Mr. MATSUI. Mr. Speaker, will the gentleman yield?
  Mr. DOGGETT. I yield to the gentleman from California.
  Mr. MATSUI. If I may just indulge for a minute, I noticed that 
sitting in the Speaker's seat, as Speaker pro tempore for the day 
today, is a new colleague of ours, the gentleman from California (Mr. 
Ose). Actually, he comes from the Sacramento area, as many of my 
colleagues know who have met him. He has just taken our distinguished 
colleague Vic Fazio's seat, who retired.
  I would just like to acknowledge the gentleman from California (Mr. 
Ose) and say that I am honored to be on the floor of the House in the 
gentleman's first opportunity, since he has been elected to the 
Congress, as Speaker pro tempore of the House. So I just wanted to say, 
and probably breaching some kind of rule here, but I just wanted to 
acknowledge the gentleman this evening and say I am very, very pleased 
that he is here and part of this. It is a very historic moment, 
obviously, for the gentleman from California (Mr. Ose) and his family.
  Mr. DOGGETT. We are pleased to have the gentleman from California 
(Mr. Ose) presiding over us this afternoon. And we are going to keep 
talking to the gentleman and with the gentleman, because we do need 
everybody from California joining in to help us get Social Security 
legislation here, a piece of legislation that we can all be proud of 
that will be there for our retirees.

                              {time}  1615

  As the gentlewoman from Florida is pointing out, for what I believe 
is about 16.7 million children and adults here in the United States 
that are not relying on Social Security as the retirement system but it 
is absolutely vital to them that Social Security is there for people 
with disabilities or family members with disabilities.
  I believe she was pointing out that it does not work that way under 
this great model that some of our colleagues have been advocating.
  Mrs. THURMAN. The other thing that I might add to that is the issue 
of an independent business owner. About 80 percent of them are covered 
under no kind of retirement plan and were actually given an option not 
to participate at all. We have no clue or idea

[[Page H866]]

what would happen if their business failed in some way when they reach 
that magical year of retirement for themselves, of what would happen to 
them. Would they become a ward of the country? What happens to this 
person?
  Mr. DOGGETT. The gentlewoman is saying in Chile if we followed that 
model, there would be businesses in California, in Florida, in Texas 
that would be totally outside of the system.
  Mrs. THURMAN. And that is exactly what happened in Chile. In fact, 
they said I think 80 percent of the small businesses in fact do not 
even participate. We do not know, as I said, if they have no income. I 
think that takes us right back to where we are and have been such 
strong supporters of Social Security, because when it was developed, it 
was specifically developed to lift people up and have some dignity in 
their retirement years. In this case we do not know where that dignity 
would be, which is why I would be very concerned. It is also happening 
in some of the other countries that we are seeing, with privatization, 
in the UK and in France and in some other areas where they are looking 
at 5 years, they could go bust in those areas and do not have a clue as 
to what they are going to do at this point, quite frankly because of 
administrative costs in these retirement issues.
  Mr. McDERMOTT. I think there is one other thing that I want to 
emphasize. Sometimes you cannot say something too many times. That is, 
this whole disability business, because I have got an incident in my 
own district right now that is right in the middle of my mind. This is 
the best disability income program in the world. You cannot buy one any 
better than this. We had a policeman who was injured and subsequently 
died, 38 years old, a wife, kids 5 and 3. Now, they go into the Social 
Security system and she is guaranteed a benefit for herself and those 
children for the rest of her life and for the kids up to the age of 18. 
Most young people in this country do not know that they are walking 
around with this insurance policy in their pocket. It is not one you 
want to collect on but it is like your fire insurance. You buy fire 
insurance on your house hoping you will never collect on it. The same 
is true in terms of this. To make this appear that this is just a 
program for old people is simply to misrepresent what the Social 
Security system is all about.
  Mr. DOGGETT. Let me, if I might, just on that point quantify, because 
we had some excellent testimony the other day in our Ways and Means 
Subcommittee on Social Security from Marty Ford representing the 
Consortium for Citizens with Disabilities. She pointed out that for the 
average wage earner, much as the gentleman was saying for the law 
enforcement officer, for the average wage earner with a family, Social 
Security that we have today, the insurance benefits, are the equivalent 
of a $300,000 life insurance policy or a $200,000 disability insurance 
policy. I think that is the kind of benefit that we are talking about 
that many people, a small business owner of the type our colleague from 
Florida was mentioning, an individual employee could not go out and 
afford to buy that kind of policy. But with all of us working together 
in this government program, everyone gets that policy of disability 
insurance and of life insurance.
  Mr. McDERMOTT. I think there is one other thing that the gentlewoman 
from Florida (Mrs. Thurman) brought up and I think needs to be 
emphasized, and that is the effect on women. If you have individual 
accounts and you work and on the basis of your job you put in whatever 
percentage, most women in this society make less than men do.
  Mrs. THURMAN. If the gentleman will yield, we make about 74 cents on 
a dollar as versus a male. However, I will say that during the State of 
the Union, it seemed to be one of the areas where there was a lot of 
bipartisan support, that we should have parity in the workforce. I am 
ready to work on that issue any time the gentleman is ready.
  Mr. McDERMOTT. But there is another way in which women, if you have 
individual accounts, not only do they make less but they work less 
numbers of quarters, for reasons of childbirth and for reasons of 
staying home and taking care of family members. Generally men do not 
leave their job and take care of their mother or their father or their 
in-laws.
  Mrs. THURMAN. The average is about 11 years less than what men work 
in the workforce.
  Mr. McDERMOTT. And then women live longer. So they have less money as 
income, they have worked less number of years and then they live 
longer, so that they are impoverished or they will be impoverished by 
this kind of system.
  Mrs. THURMAN. The way that that would work is they would have to buy 
under an individual account an annuity and when they buy that annuity 
it would be based on an actuarial life span. Because women are 
predicted to live longer, so when they bought theirs at 64, 65, 
whenever they were ready to retire, when the insurance folks would 
settle this out, they would say you would actually get a lesser per 
month check than the male would just because of your life span issue, 
which is the reason that that would happen.
  Mr. McDERMOTT. Anybody who looks at this with an open mind realizes 
that women will suffer if we go to privatization and do not have this 
generalized program we have today. That reason alone ought to be enough 
to make us keep this program together, if we care about our mothers and 
our sisters and our aunts and all the rest.
  Mr. DOGGETT. The gentlewoman from Florida was at this briefing today 
with the National Committee to Preserve Social Security and Medicare. 
The Republican economist who did that simulation on these various 
privatization schemes, his conclusion was that no group in our society 
would be a bigger loser than women, and that it did not make any 
difference, well, it makes a difference in degree, I guess, but 
regardless of income class, regardless of race, regardless of marital 
status, because of the factors that the two of you have just been 
describing, women will lose more than any other part of our society if 
we reject the Social Security system that has served us so well and go 
off with some of these ideological experiments.
  Mrs. THURMAN. If the gentleman will yield, just from the synopsis and 
summary of findings, it said women would be particularly affected by 
the loss of spousal and widows benefits, the lack of 
benefit progressivity, and the loss of unisex annuities provided under 
our Social Security system as we know it today. And the Social Security 
benefit for surviving widows is higher than the benefit widows would 
receive under a privatized system. This is true in married couples when 
the wife is college educated with even full earnings. So there are 
really some issues that would have to be particularly looked at.

  I will say, even in the resolution that was passed today, women was 
an area that was considered under this and one of the things that I 
would like to say to my colleagues is that it is okay to put it in 
words but now let us make sure it turns into action and that we do not 
reduce these benefits or these concerns.
  If the gentleman will let me just say something else, too, because 
this goes into another area but still I think is the whole idea of 
security in your retirement years and specifically with the issue of 
Medicare and the idea that we would add this additional 15 percent to 
take us into the year 2020. I think the gentleman from Texas mentioned 
the security of health care. In one of our same hearings, and I know we 
are not going to get much into this, but one of the things that was 
said during one of our committee hearings, Mr. Lew said basically if 
Congress fails to enact this legislation, 15 percent, we have only 
three options in the Medicare issue and I hope that we are all 
listening to this because he stated that we would have to reduce 
provider payments, raise payroll taxes or cut benefits. I am just 
adding that in because that is another part of the whole Social 
Security issue as we are looking at this debate.
  Mr. McDERMOTT. I think one of the things that we need to talk about a 
little bit so people really understand it, because sometimes I know 
that I think I understand about something until I really begin to feel 
about or actually look at it. This Social Security issue really, if you 
want to take a point when it got acute was in 1983. We in the Congress, 
not any of us, but the Congress decided they were going to save Social 
Security, so they raised the contribution rate so that people were 
putting more money into the pot that was

[[Page H867]]

being paid out in that year, the so-called pay-as-you-go idea. You put 
in as much as you have to pay out. Well, we were putting in more than 
we had to pay out, so a surplus developed in there. During the 1980s, 
under Mr. Reagan, for the Cold War reasons and a lot of reasons, we 
borrowed all of that. We borrowed that money out of the Social Security 
and we have been paying--we meaning the government borrowed it--and we 
have been paying interest. Every year, one dollar out of seven in the 
Federal budget goes to pay interest to the Social Security system. It 
is almost our biggest expenditure outside of Social Security itself, 
just a little less than we spend on defense, we are spending in 
interest on this money.
  The President's proposal in his State of the Union message was 
absolutely a stroke of genius, because he is not only paying off the 
national deficit but he is also strengthening the Social Security 
system by putting 62 percent of the surplus until the year 2014, and 
the amount of national debt will be markedly reduced. I personally 
think that it is inconceivable that if you have any conservative bones 
anyplace in your body that you would, having received this benefit, 
say, well, let us spend it on a tax break rather than pay this enormous 
debt that faces this country. I think the people have to understand, 
the Congress created the debt, and it is now when we have surplus the 
time to pay it off. It is like your credit card. If you get a Christmas 
bonus and you say, well, let us just buy some more rather than paying 
down your credit card, you would say that person was irresponsible. The 
Congress will be irresponsible in my view if it does not use this money 
to pay down that debt.
  Mr. DOGGETT. That is the whole meaning of the phrase ``save Social 
Security first.'' We save Social Security first, ahead of anything 
else, and we do it by the very fiscally responsible step of paying down 
these trillions of dollars of Federal debt that has been accumulated 
over the last many decades.
  Mrs. THURMAN. Again through the hearings that we have had, if anybody 
has been watching the news or reading the newspaper or looking at 
Newsweek or any one of the organizations that have been writing about 
what is going on up here, Greenspan both in the Senate Finance 
Committee and Ways and Means, Banking, wherever he has appeared over 
the last couple of months in his report to Congress has been, this is 
the best thing you can do for this country. And then the beneficiaries 
are all Americans, because we continue to see a robust economy with 
jobs being created, businesses having capital to expand and extend 
their businesses, we have lower interest rates or continued lower 
interest rates. We know how that has been spurring this economy, the 
fact that people have been able to refinance their mortgages so they 
have more money in their pockets for disposable income, maybe for 
possibly even putting a little money aside for children to go to 
college or buy health care or help with long-term care for an elderly 
person, whatever that case may be. We all recognize that that is what 
we should be doing.
  I have to tell you, it was interesting, I am going to try to get it 
right. This morning I was going back over some clips. It seemed that 
there was this continuing, ``Well, if we don't do this, we've got all 
this surplus, should we then give this tax cut?'' And Greenspan said, 
``Well, you know, it is the last thing I would like you to do, but the 
worst thing you need to do is be spending it on new programs. So if you 
can't save it and use it to pay down the debt, well, then maybe you 
should do that.''
  But quite frankly the first thing we should be doing with this money 
is paying down our debt.
  Mr. McDERMOTT. The actual quote, if the gentlewoman will yield for a 
second, ``My first preference,'' he said, ``is to allow the surpluses 
to run for a while and unwind a good deal of the debt to the public 
which we have accumulated over the years.'' Here is the man that has 
brought in large measure the present economy to its present state. He 
is saying, pay off the debt. I do not see how anybody can be against 
this. It is going to be interesting to hear the debate that will go on 
while they try and justify, ``Well, since we've got the money, rather 
than pay it off, we'll just give it back.''

                              {time}  1630

  It is the people are the ones who are going to benefit from 
stabilizing Social Security and Medicare. There is a tie between these 
two. Because when we talk about these older women, there are about 6 
million women in this country living on $8,000 of Social Security, and 
it is those people that we are talking about raising the premiums on 
Medicare.
  Mrs. THURMAN. Sixty percent of the Social Security recipients are 
women in this country.
  Mr. McDERMOTT. Yes.
  Mr. DOGGETT. Let me ask you in that regard from your service on the 
Medicare Commission. Now I have heard some people on our Committee on 
Ways and Means say that they, as Republicans, would agree with the 
President to set aside 60-62 percent of future surpluses to take care 
of Social Security, but they wanted the rest of it, I guess, for 
various other schemes, and they did not want to focus on the Medicare 
aspect. If we only do the 62 percent and we do not have any long-term 
solution otherwise to Social Security and we do not address Medicare, 
what would be the effect on the health security of our seniors?
  Mr. McDERMOTT. Well, I think that, first of all, anybody who would 
try and separate them and say one is important and the other is not 
simply is not old, because if you are old, you think about two things: 
How you are going to pay for your house and your food and how you are 
going to pay for your doctor bills. And when Medicare started, 1965, 
less than 50 percent of people had health insurance above the age of 
65. Now 100 percent are covered. It is the second leg of the economic 
security for senior citizens in this country, and you have to stabilize 
that plan. Otherwise, the Social Security check is going to go simply 
to pay for more health care benefits.
  Seniors already spend $2,500 on average in this country out of pocket 
on Medicare for medical things that are not covered by Medicare. So the 
Social Security and the Medicare are linked very tightly, but it is 
absolutely crucial that people have an income to live on. If you do not 
have that one stabilized and you start making that one unstable and 
then make their health care unstable, you will have taken away all the 
emotional security that senior citizens feel in this country because of 
these two programs.
  Mr. DOGGETT. A colleague of ours who was a leader even before coming 
to this House as a State official in dealing with pensions, retirement 
security, insurance, is Earl Pomeroy of North Dakota. And I am pleased 
that you join us this afternoon, also now as the co-chair of our entire 
Democrat Caucus Task Force on Social Security, and I know you have some 
thoughts about this ongoing debate.
  Mr. POMEROY. I certainly do, Congressman, and I want to thank you for 
your leadership as well as, Congressman McDermott and Congresswoman 
Thurman, for your leadership on the Committee on Ways and Means. I know 
that you have been having many hearings on this topic awaiting the 
reform proposal of the majority.
  While it is difficult to try and see what they may be proposing, I 
know, as you have told me, the thrust of the debate seems to be shaping 
up to be between those that want to reform and reduce Social Security 
protections and those that want to strengthen and protect and extend 
those protections so that the next generation has the same protections 
that our parents, grandparents and we will have as well.
  I think that, as we see this take focus, it appears as though those 
who want to reduce Social Security will be advancing a proposal of 
individual accounts replacing the guarantees and assurances that today 
protect one in six families in this country, one in six Americans in 
this country receiving a Social Security payment in exchange for an 
individual account proposal.
  You have mentioned earlier a study that was released today, and I 
also want to call it to the attention of the body, a study authorized 
by the Committee to Preserve Social Security and Medicare conducted by 
a Republican economist that shows there are distinct winners and losers 
under a proposal to go to the individual account. But most of us, 
virtually all of us living today, fall in the losing category. The 
individual account winner fell to one narrow class of males in affluent

[[Page H868]]

earnings that will be born in about 20 years. All of the rest of us 
lose, and we lose for one fundamental reason: You have to continue 
making payments on the existing structure, the structure that today is 
meeting the needs of more than 40 million Americans, even while you 
begin to create these individual accounts and direct money to those so 
that that is going to work to replace the Social Security payments in 
the future.
  The thought behind this economist's study was a very simple but 
straightforward one. It is always, always more expensive to pay for 
retirement twice than once. And so if we fund the existing system and 
fund the individual account system, we are in essence paying twice, and 
that is the cost that ultimately reduces what Social Security offers to 
Americans.
  Mrs. THURMAN. Mr. Pomeroy, within that, and so we can kind of look at 
this debate and maybe kind of give the audience or whoever is out there 
listening to us the word or the captured word that what you are talking 
about, and this is the transition tax. It may be called something else, 
but the fact of the matter is it is the dollars that are going to have 
to be spent to cover those people that are on Social Security today and 
within the system.
  Now to that, Mr. Pomeroy, one of the things that John Mueller talked 
about specifically was these other studies and why these other studies 
were wrong when looking at the Social Security system, specifically as 
we privatize or if it were to be privatized. And they said that these 
are some of the issues that were left out of their models.
  And maybe you can help me with this, that they have left out or 
underestimated transition costs, which would be this transition tax, 
and administrative fees for private accounts, that they have used a so-
called typical household that in reality does not parallel the actual 
earnings or employment history of most workers. And, three, they have 
used exceptionally high projections for market returns that do not 
track with the extremely slow economic growth or cash used by the 
Social Security actuaries when we are predicting the future of Social 
Security funding.
  Mr. POMEROY. That is precisely correct. The gentlewoman is exactly 
right. These earlier studies have been flawed, and they are being 
corrected by a spate of recent studies done by all perspectives out 
there analyzing this very important issue. I cite for the gentlewoman's 
attention a November, 1998, EBRI study.
  Now EBRI is the Employee Benefits Research Institute, a business-
funded research group assessing the impact of administrative fees on 
these individual accounts. The thrust of the study, quite likely the 
administrative fees certainly eclipse any enhanced earning opportunity 
under the individual account proposal, if they are administratively 
possible in the first place.
  Mr. McDERMOTT. What is the administrative cost under Social Security? 
Do you know?

  Mr. POMEROY. The administrative cost under Social Security is under 1 
percent. It is truly the most efficient mechanism of getting benefits 
available to Americans.
  Mr. McDERMOTT. And the administrative costs in an investment house, 
Wall Street Journal kind of private investment account, what would that 
be?
  Mr. POMEROY. Well, they run considerably more than that. In fact, the 
least expensive individual account structure could be brought on line 
potentially for 8 percent, 800 times what we are presently paying; and 
a more likely scenario could be 30 to 40 percent in a completely 
privatized environment, reducing benefits in favor of administrative 
costs while you reduce the assurances. It is just not the way to go.
  Mr. DOGGETT. And while the study that we heard about today was a 
simulation using an economic model by a Republican economist, is there 
not some experience in some of the foreign countries that have moved to 
these private systems that they have actually experienced 
administrative costs of the level that you are referring to?
  Mr. POMEROY. Well, the fact of the matter is is you are precisely 
right, and pensioners and near-to-be pensioners have lost millions, all 
told. In the experience of Chile, in the experience of the United 
Kingdom, two prevalent examples asserted by those that want to create 
individual accounts, look a little deeper and you see that the 
administrative expense component is really coming home to roost in 
those experiments.
  The other real-life example we have is a private alternative to a 
Social Security program being run down in Galveston, Texas.
  Mr. DOGGETT. We usually think everything is a little bigger and 
better down in Texas, but in fact the study that you referred to in 
Galveston, Texas, most everybody there that was left out of Social 
Security. According to the objective study on it, they came out a 
looser; did they not?
  Mr. POMEROY. Well, this is a study by the General Accounting Office, 
and this is not a group with any stake in this debate. They are 
providing the strict analysis, and they find precisely that those that 
have gone not with the Social Security but with this alternative plan 
for the local public employees have not fared as well as they would 
have done under Social Security.
  As we approach this vitally important program, it is really 
important, because of its critical importance to American families, 
that we not deal with, you know, ideology and theories and concepts. If 
we would make this change, we would not be able to change back, and so 
it is vitally important that the research come up a good measure from 
what those favoring individual accounts are presently asserting.
  For example, they say that African Americans would benefit under a 
move to individual accounts. Today's study shows quite conclusively 
that African Americans would lose and lose big. They hold this out as 
an opportunity for modest income workers to accumulate wealth. Today's 
study shows that middle income, modest income workers lose and lose 
significantly, as opposed to the assurances they now have with Social 
Security. And then finally women, the biggest losers of all under the 
shift to individual accounts.
  I look at the perspective from my own family. I cite the three women 
in my life: my 78-year-old mother, my 46-year-old wife and my 5-year-
old daughter spanning three generations. All lose, moving away from the 
guarantees of our Social Security program into the untested 
uncertainties of the individual account environment. The study today 
shows it is a loser and we leave people less well off, with greater 
risk and lower benefits.
  Clearly, this is absolutely not the way to go with a program as 
important to Social Security. I think at this point in time, if the 
majority wants to continue to pursue this radical reform proposal, 
reducing the assurances of Social Security in exchange for the 
individual account proposal, it is time for them to stop shooting at 
the framework advanced by President Clinton that preserves the 
guarantees and advances specific proposals that would establish the 
individual accounts. I am convinced, in light of what these studies 
have shown, that when analysis is run on any individual account 
proposal they will bring forward, we will show reduced benefits, higher 
risk, lower assurances and a step backwards in terms of providing 
retirement, income security for American families.
  I thank the gentleman for this discussion.
  Mr. McDERMOTT. Before you walk away, I would like to ask you a 
question. You quote that Galveston study. What were the reasons why 
people who choose not to go into Social Security but to do their own 
investing, why did they come out worse off? I mean, my son has given 
that argument to me. He said, dad, we do not need Social Security. Just 
give me my money, and I will invest it, and I will be just fine. I 
would like to hear what happened to them.
  Mr. POMEROY. Well, in fact, they run into the things that we have 
been discussing, higher administrative fees, greater investment return 
uncertainty, the same things that would face, in fact, the reform of 
Social Security.
  The fact of the matter is that I think we need to appreciate the fact 
that as individuals deal with at-work retirement plans, they are 
already taking on a good deal more risk than they traditionally have. 
In the past you had your pension, the assets were managed elsewhere, 
and you put in your time, and you got your retirement check.
  Presently, you have a 401(k) plan. Workers in the work force today 
struggle to make a matching contribution

[[Page H869]]

so they get some money accumulating in their 401(k) accounts. We know 
that over half the 401(k) accounts in the marketplace have less than 
$10,000 in them, hardly anything that is going to sustain a comfortable 
retirement.
  We also know that those 401(k) accounts carry a level of investment 
risk, and quite often workers are mystified, bewildered by the 
investment choices that confound them. The last thing they want to do 
is take the one piece of security they have in retirement, Social 
Security, the bedrock, the foundation, and put risk into the foundation 
as well.

                              {time}  1645

  This is what we build on for retirement security. We do not want to 
crack the bedrock assurances social security has offered, creating even 
more uncertainty as to the ability to make it in retirement years.
  Mrs. THURMAN. One of the other things we have found, not maybe with 
the Galveston but just generally, particularly when we are using 
another form of an IRA 401(k), those kinds of issues, again, this comes 
back to women. In many cases, if they only work maybe 4.7 years at one 
job, therefore, for many companies they cannot even vest or participate 
in any kind of a retirement system outside of social security, which 
creates one problem for them.
  Then say that they get into that situation and they do have an 
opportunity to vest in something like this, or they have put some money 
aside in an IRA. Women are the first ones that give up that security to 
give security to their other family members. So if they have a child 
that needs to go to school, it becomes an education benefit for their 
child. If maybe they need a house or a down payment, they are the first 
ones to give up that security that would be used for themselves in that 
later time of retirement. So again, here is another little pitfall that 
happens for women in these situations.
  I think the one about the 4.7 years, so much of this is based on 
vesting in any one system. Sometimes it takes as much as 10 years. We 
just do not stay at a job for that period of time.
  Mr. McDERMOTT. I think Earl really put his finger on it. It is there 
and we know it is there, and our job has got to be to stabilize it and 
make it so that there is no question that it will be there for our 
kids.
  I think all of us my age or around my age have kids who say, well, I 
heard that this is not going to be there when I get to be old. The 
first thing we have to get out to them is the message that if we did 
nothing, if we did nothing, there would be three-quarters of the 
benefits in social security forever. There is no question that we can 
do that. The question is whether we are going to have to reduce the 
benefits if we do not do something about it.
  I think that the mythology of those people who want to privatize it 
and get rid of the Federal program has been to say to our kids in an 
advertising campaign over and over again, social security is not going 
to be there when you get there, so why are you paying for it? You are 
paying in, but you are not going to get anything out of it, you know. 
That has begun to take effect among young people in this country, when 
in fact it is not true. It is a lie that is being pushed by people who 
want to destroy the social security system as we have come to know it.
  I personally think our biggest job will be, and if we fail in 
educating the public about this, at some point they may buy this kind 
of mythology, about if they had their own money. But the thing we have 
to remember about the United States is that we are not a country which 
has done things individually. We do not put out fires individually. We 
do not build highways individually. We do not build schools 
individually. A social security system, some may be able to build one, 
but for everybody who can, there is going to be somebody who cannot. 
Our problem here is to make sure that everybody has something. 
Otherwise we will be back in the thirties.
  Mr. DOGGETT. Mr. Speaker, a couple of points there that I think are 
really important, because I have gotten some of those same kinds of 
communications. I expect every Member has, particularly from younger 
Americans, saying, just show me the money and I will do it on my own.
  One of the things we know from the study that came out today that we 
have referred to, prepared by a Republican economist who had a leading 
staff position with House Republicans in this House during the Reagan 
administration, is finding that every one of those people, the young 
person that wrote you, the young person that talked with you at a town 
meeting in Florida, the young person who contacted me in Austin, Texas, 
every one of those people and every single person alive today is going 
to come out worse under these experimental plans, according to this 
simulation, is going to come out worse than if we maintain and 
strengthen the system that we have right now.
  Mr. McDERMOTT. How do people get that report? Where is that report?
  Mr. DOGGETT. This report is available from the National Committee to 
Preserve Social Security and Medicare. I am sure they will have it up 
for many of our young people who are web literate on their website. I 
know my office will be pleased to supply information, and I am sure 
yours, as well, to people from your part of this country who want to 
get more information about how they would be affected.
  Then I would just add, with reference to what you said about going 
back to the thirties, I have to feel that one of the reasons that some 
of these Washington think tank ideologues want to break apart the 
social security system is that they are so committed ideologically 
against anything that has government in it. They do not agree with the 
government highways, they certainly do not agree with government 
schools. They want to voucher some students out. They will not vouch 
for public education. They feel if they can tear apart the bonds that 
have tied Americans together around social security, then they can 
eliminate any government program.
  I think it is that ideological fervor, it is the kind of thing I was 
referring to at the beginning of this special order in the Newt 
Gingrich Progress and Freedom Foundation, that it was not just about 
financial returns, but it was about some very distorted idea of 
freedom; that if you could break apart the social security system, you 
could break apart anything else.
  I think when we stand up for social security, we are not only 
standing for the security of our seniors and our disabled Americans, 
but we are standing for some common bonds that tie us together; that I 
have an interest in what happens to your family, you have an interest 
in what happens to mine; in our retirement, if we are faced with the 
loss of a breadwinner, if we are faced with an unexpected disability, 
that there is something there to provide us with a little bit of a 
safety net in that kind of tragic situation.
  I know the gentlewoman has some observations on this.
  Mrs. THURMAN. I was just going to say, when the gentleman was talking 
about the young person and the report, if we go to page 11 of that 
report, and under conclusions, No. 2, and the gentleman from Washington 
can say this back to his son, because of the transition tax, and again, 
I go back to that, inherent in any move away from pay-as-you-go social 
security, no cohort now alive could avoid serious economic losses from 
partly or fully privatizing social security, even under the most 
unrealistic set of assumptions. All cohorts now living would be 
substantially better off with even a scaled-back, balanced, pay-as-you-
go retirement program.
  Mr. McDERMOTT. May I ask a question?
  Mrs. THURMAN. Certainly.
  Mr. McDERMOTT. What is a cohort?
  Mrs. THURMAN. I would think that would be one of us; a people, a 
person.
  Mr. McDERMOTT. A group, right?
  Mrs. THURMAN. These are scientific terms they use when they are 
putting together these reports.
  But also the question that has to go back to that young person today 
is, if they are relying on a study, they need to ask the hard question, 
too, because this is about their security. Just as important, it is 
about their mother's or father's security, so that that does not fall 
upon them when they have children and are trying to rear their 
children, and all of a sudden they have a parent who has no income, or 
any of those kinds of things that could happen to them.

[[Page H870]]

  But the hard questions go back to why the other studies are 
fundamentally flawed. Why were those questions not asked? Again, they 
left out the underestimated transition costs, they have used a so-
called typical household, and the fact that they look at exceptionally 
high projections for market returns. Those are the questions we need to 
send back to our children.
  I would also say, I am not giving up on our children, our sons and 
our daughters. They see the benefit to their parents or, in some cases, 
their grandparents. They understand that their parents are being able 
to pay for their education. They are able to help them buy that first 
home, because their parents' parents are not reliant on them for their 
everyday household needs. I think that that is very important.
  So if we just let them kind of capture back in, look around and see 
the benefits social security has provided in their own family, in their 
own family today, and then look at friends who might have had a loss of 
a parent, or if they have had somebody who has been on disability at an 
early age, they can truly look and see what this program has provided. 
I hope we will continue to do these kinds of things, to continue to 
bring these issues to the American people.
  The gentleman from Texas (Mr. Doggett) has been great, and I have 
enjoyed this, I say to the gentleman from Washington (Mr. McDermott).
  Mr. DOGGETT. I thank both Members for their continuing work on this 
topic.
  I would just summarize in these closing minutes and say that the 
first thing is to put social security first. We say, save social 
security first. Do not engage in a bunch of new spending programs. Do 
not dissipate the surplus with some politically-motivated changes in 
the tax code. Use the resources that are available at this great time 
in the American economy to see that social security is saved first.
  Then second, it is a matter of our working towards a bipartisan 
agreement. I believe that we can do that in a constructive way. We must 
do that. We should move forward immediately with the President's 
program and see how we can make it even better to preserve this very 
valuable system.

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