[Congressional Record Volume 145, Number 75 (Monday, May 24, 1999)]
[Senate]
[Pages S5834-S5837]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMS:
  S. 1102. A bill to guarantee the right of individuals to receive full 
social security benefits under title II of the Social Security Act in 
full with an accurate annual cost-of-living adjustment; to the 
Committee on Finance.


             SOCIAL SECURITY BENEFITS GUARANTEE ACT OF 1999

  S. 1103. A bill to reform Social Security by creating personalized 
retirement accounts, and for other purposes; to the Committee on 
Finance.


         PERSONAL SECURITY AND WEALTH IN RETIREMENT ACT OF 1999

  S. 1104. A bill to amend the Social Security Act to provide 
simplified and accurate information on the social security trust funds, 
and personal earnings

[[Page S5835]]

and benefit estimates to eligible individuals; to the Committee on 
Finance.


                SOCIAL SECURITY INFORMATION ACT OF 1999

  Mr. GRAMS. Mr. President, I want to take a little time this morning 
to talk about Social Security. I know our Nation has been engaged in 
Social Security reform discussions for about 2 years now kind of 
formally. But, informally, many have been talking about what we are 
going to do to ensure a safe, sound Social Security system in the 
future.
  We all expected that we could work in a bipartisan manner during this 
Congress to be able to complete the immense task of saving and 
strengthening Social Security for the American people.
  Unfortunately, President Clinton has failed to take leadership on 
this issue and has failed to present an honest plan to this Congress to 
address Social Security's rapid approaching crisis.
  There is widespread reluctance to move forward on reform due to 
political considerations. Yet, if we keep delaying essential reform 
until after the ``next election''--it is always after the next 
election--we will never be able to complete our goal of ensuring 
retirement security for future generations of Americans.
  Now, on the positive side, the debate has surely raised the public's 
awareness of their own retirement security shortcomings. It has brought 
attention to the Social Security crisis and has led to a variety of 
solutions to fix the system.
  I believe this is a healthy debate, one that we must continue to 
encourage. I am sure that when our elected officials muster the 
political will to make some of those hard choices we face, the Nation 
will be ready to support those choices.
  Regardless of when we actually consider Social Security reform, we 
must continue the job of educating Americans about the importance of 
savings and retirement planning. We must continue to debate the role of 
future Social Security benefits in our retirement security decisions.
  That is why I am here. I rise today to introduce three pieces of 
legislation as first steps to save Social Security. To outline the 
bills, my first bill, very simply, would grant every current and future 
Social Security beneficiary a legal right to those Social Security 
benefits.
  The second is a comprehensive plan to move Social Security from the 
current pay-as-you-go system to one that is a fully funded, 
personalized retirement system, to ensure a safe, sound, secure 
retirement program that maximizes benefits for the retiree.
  The third bill would provide real information about the costs and the 
benefits under the current Social Security system.
  Mr. President, each working American devotes his or her entire life 
to a job, or series of jobs, and pays hundreds of thousands of dollars 
in Social Security taxes into the retirement system. In fact, Social 
Security taxes are the largest tax that many families will ever pay, 
accounting for up to one-eighth of the total lifetime income that will 
go into Social Security.
  Many people, including myself, believe that Social Security benefits 
are our ``earned right.'' We think that because we have paid Social 
Security taxes, we are legally entitled to receive Social Security 
benefits. But this ``earned right'' is nothing but an illusion--an 
illusion created by politicians who call Social Security taxes 
``contributions'' and make Social Security sound like it is a regular 
insurance program.

  The truth is that the American people do not have any legal right to 
their Social Security benefits, though they pay Social Security taxes 
all of their lives. Their benefits are always at the mercy of the 
Government and politicians who can adjust them and can even spend them 
on unrelated Government programs. This fact--that Americans currently 
have no legal right to Social Security--was decided by the courts when 
the Social Security was just getting started.
  Mr. President, it was back in 1937, less than 2 years after the 
creation of Social Security, that the Supreme Court decided in the case 
of Helvering v. Davis that Social Security was not an insurance 
program.
  The court held:

       The proceeds of both the employee and employer taxes are to 
     be paid into the Treasury like any other internal revenue 
     generally, and are not earmarked in any way.

  So, basically, Social Security is just a tax, not a retirement 
system.
  The Court also pointed out:

       Congress did not improvise a judgment when it found that 
     the award of old-age benefits would be conducive to the 
     general welfare. The President's committee on economic 
     security made an investigation and report . . . with the loss 
     of savings inevitable in periods of idleness, the fate of 
     workers over 65, when thrown out of work, is little less than 
     desperate. . . . Moreover, laws of the separate States cannot 
     deal with this effectively. . . .Only a power that is 
     national can serve the interests of all.

  What it meant was that Social Security was not and is not an 
insurance program at all, but a tax--a tax, pure and simple--that 
leaves retirement benefits to be actually determined by the political 
process--not the benefits of the plan, but the political process.
  This decision was later confirmed in another important case, Fleming 
v. Nestor. In this case, the Supreme Court more expressly ruled that 
workers have no legally binding contractual rights to their Social 
Security benefits, and that those benefits can be cut or even 
eliminated at any time.
  Mr. President, this is a very interesting and important case. Ephram 
Nestor was a Bulgarian immigrant who paid Social Security taxes from 
1936 until he retired in 1955. He received a $55.60-per-month Social 
Security check during his retirement. But in 1956, Nestor was deported 
for having been a member of the Communist Party in the 1930s. His 
Social Security checks were stopped in accordance with the law.
  Nestor sued the Secretary of Health, Education, and Welfare, claiming 
that because he had paid Social Security taxes, he had a right to 
Social Security benefits.
  The Supreme Court rejected his claim, clearly stating:

       To engraft upon the Social Security system a concept of 
     ``accrued property rights'' would deprive it of the 
     flexibility and boldness in adjustment to ever changing 
     conditions which it demands.

  The Court also held:

       It is apparent that the non-contractual interest of an 
     employee covered by the [Social Security] Act cannot be 
     soundly analogized to that of the holder of an annuity, whose 
     right to benefits is bottomed on his contractual premium 
     payments.

  It strikes me that these Supreme Court decisions prove that if Social 
Security is considered more of a welfare program, there is no assurance 
that retirees will receive benefits now or in the future if they are 
judged unworthy, or if the IOUs owed to the Social Security Trust Funds 
are deemed unnecessary to repay. It also shows, contrary to common 
belief, that Social Security is not backed by the full faith and credit 
of the government and is not a government-guaranteed investment. I 
believe these decisions--which we rarely see referenced, for obvious 
reasons--are unfair and wrong, and must be corrected.
  In my view, workers must have a full legal right to receive 
government-guaranteed Social Security benefits. The reason is simple: 
despite these court cases, I believe most people think that the federal 
government should provide benefits to the American people for their 
retirement, if those people have paid into the system. It's our moral 
and contractual duty to honor that commitment, and ensure the program 
is more of an insurance policy than a welfare program. Coming 
demographic changes will soon create huge cracks in the Social Security 
program--if the government fails to make the changes necessary to 
address the crisis ahead, it would be wrong to let current or future 
beneficiaries bear that burden.
  As a first step to saving Social Security, legislation I am 
introducing today would grant every current and future Social Security 
beneficiary an ``earned right,'' or legal right, to their Social 
Security benefits plus an accurate inflation adjustment. This could be 
achieved by requiring the government to issue U.S. Treasury-backed 
certificates specifying the level of guaranteed benefits.

  Mr. President, this legislation, the Social Security Benefits 
Guarantee Act, is not at all complicated. All it does is to create an 
``earned right'' to Social Security, which every American deserves and 
should be given in the first place. It shows that regardless of how we 
may reform the system in the

[[Page S5836]]

future, retirees will earn a return on the investment they make in the 
form of payroll taxes.
  By granting Americans this legal right, we are taking away 
uncertainties resulting from the growing political debate. Social 
Security will no longer be subject to Washington's manipulation, and 
the IOUs will be repaid. Implementing my legislation would force 
Congress and the Administration to come up with an honest plan to save 
and strengthen the Social Security system.
  But more importantly, it would put millions of current and future 
Social Security beneficiaries at ease, allowing them to sleep at night 
without fearing the loss or reduction of their retirement benefits.
  Mr. President, once we have secured Social Security benefits, taking 
the difficult steps to reform the Social Security system will be 
easier. The current system has served us well until now. The changing 
demographics of our society makes it impossible for the system to 
survive without reform. I believe a fully-funded, market-based, 
personalized retirement system would give all workers full property 
rights to their retirement investment.
  Not only could personal retirement account, or PRA, benefits be three 
to five times higher than current Social Security benefits, workers 
would actually own the money in their account and could pass the assets 
on to their children. It would be part of your estate, which today, as 
you know, Social Security does not transfer. Congress would no longer 
spend the surplus money.
  That's the reason I am today re-introducing my legislation, the 
``Personal Security and Wealth in Retirement Act.''
  Mr. President, Americans today are living longer and retiring earlier 
than ever before. American retirement security is supposedly built on a 
three-legged stool: Social Security, private pensions, and personal 
savings. These are the three cornerstones of a secure retirement.
  Unfortunately, today these cornerstones have eroded. Without major 
repair, the stool will collapse, causing serious financial hardship for 
millions of Americans.
  Most Americans rely increasingly on Social Security for their 
retirement income. Not everyone has a private pension and some are 
unable to save. Yet Social Security, upon which rests their hopes for a 
secure retirement, is headed for bankruptcy.
  Benefits for 76 million baby boomers and future generations of 
retirees will not be there unless something is done soon.
  I believe the best solution to our retirement crisis is to reform 
Social Security by moving it from a pay-as-you-go retirement system to 
a fully-funded, market based system. The legislation I am introducing 
today will do just that.
  The first criticism you will hear is that a market-based retirement 
system is too risky. However, my plan would guarantee benefits for 
current and future beneficiaries, while retaining and expanding the 
current safety net under Social Security.
  At the same time, workers would have the freedom to control their 
funds and resources for their own retirement security within certain 
safety and soundness parameters. Workers and their employers could 
divert 10 percent of a worker's income into personal retirement 
accounts.
  In addition, workers could also contribute to personal retirement 
accounts they've established for their non-working children.
  Let me focus on the proposed safety net provisions under my plan: One 
key component of my proposal is to ensure that a safety net will be 
there at all times for disadvantaged individuals. This can be done 
without government guarantees of investments or overly strict 
regulation of investment options.
  Under this legislation, a safety net would be set up and would 
involve a guaranteed minimum benefit level: 150 percent of the poverty 
level. When a worker retires, if his or her PRA fails to provide the 
minimum retirement benefits for whatever reason the government would 
make up the difference. So nobody would retire into poverty. They would 
retire at least with a minimum of 150 percent of the poverty level.

  The same applies to survivor and disability benefits. If a worker 
dies or becomes disabled, and his or her PRA doesn't accumulate 
sufficient funds to provide minimum survivor and disability benefits, 
the government would match the shortfalls.
  This simple safety net is necessary, and the minimum benefit would 
guarantee that no one in our society would be left impoverished in 
retirement, while still allowing workers to enjoy the freedom and 
prosperity achievable under a market-based retirement system.
  This would operate in a manner similar to the federal government's 
Thrift Savings program, which includes safe investments and a far 
higher return than Social Security. If the system works for us, others 
should also be able to benefit from it.
  Another feature of the fully funded retirement system I'm outlining 
could provide better survivor and disability benefits than the current 
Social Security system offers.
  Under my plan, for instance, when a worker dies, his family would 
inherit all the funds accumulated in his PRA.
  I use my father as an example. He died at the age of 61, and from 
Social Security received a check for $253 as a death benefit. But that 
was all. Under our system, all the money that you have paid in during a 
lifetime of working would be yours. And, if you happen to die early, it 
would then be a part of your estate and transferred to your heirs. The 
savings wouldn't disappear into the black hole of the Social Security 
trust funds, or become tangled in a survivors' benefit bureaucratic 
debate.
  The system would also provide, besides the retirement savings, a 
survivors benefit package.
  My plan requires the funds that manage PRAs to use part of their 
annual contribution or yield to buy life and disability insurance, 
supplementing their accumulated funds to at least match the promised 
Social Security survivors and disability benefits.
  By requiring retirement funds to purchase life and disability 
insurance for everyone, all workers in each individual fund would be 
treated as a common pool for underwriting purposes. The insurance would 
be purchased as a group policy not by individual workers by investment 
firms or financial institutions, thus avoiding insurance policy 
underwriting discrimination while providing the largest amount of 
benefits at the lowest possible cost.
  Mr. President, again, a major criticism of a market-based personal 
retirement account system is that it's inherently volatile, subject to 
the whims of investors and the market, exposing a worker's retirement 
income to unnecessary risks.
  My plan specifically addresses this concern by requiring the approved 
investment firms and financial institutions that manage PRAs to have 
insurance against investment loss.
  By approximating the role of the FDIC, we ensure that every PRA would 
generate a minimum rate of return of at least 2.5 percent, which is 
more than current Social Security benefits. In fact, Social Security is 
paying less than 1 percent today, and for future generations it would 
actually be a negative rate of return.

  Regardless of the ups and downs of the markets, workers would still 
do better under this system than under the current Social Security 
program.
  This is another safety net built into my plan to give the American 
people peace of mind when it comes to their retirement investment.
  To further reduce risks to a worker's PRA, my legislation also 
requires that rules, regulations, and restrictions similar to those 
governing IRAs would apply to personal retirement accounts.
  PRAs must be properly structured and follow strict, sensible 
guidelines set forth by the independent federal board that will oversee 
the system.
  In choosing qualified investment firms and financial institutions to 
manage the PRAs, the oversight board is responsible for examining the 
credibility and ability of these companies, and then approving them as 
PRA managers accordingly. In other words, to put in place a very safe 
and sound retirement system, much like the FDIC is in banks. People are 
confident their savings is protected. This would be the same with their 
retirement accounts. They would be protected. This will generate much 
better returns, as much as three to five times more at retirement

[[Page S5837]]

than today's Social Security--three to fives times more benefits when 
you retire than under the current Social Security plan because personal 
retirement accounts, unlike Social Security, make real investments 
which produce new income and produce wealth.

  That means improved benefits for everybody, including low-wage 
earners, without the redistribution of private income.
  Mr. GRAMS. The third bill I am introducing today deals with the flow 
of information related to an individual's Social Security contribution.
  Most working Americans are poorly prepared for their retirement. That 
is because of a disturbing lack of information. Congress needs to help 
them better plan for retirement by providing useful and accurate 
information about the Social Security benefits they are going to 
receive.
  In other words, let people know exactly what the system is, how much 
is in the trust fund, how much money they can expect to receive at 
retirement, and what will be the rate of return of their investment.
  Americans currently receive Social Security information through the 
personal earnings and benefits estimate statements or the PEBES, 
provided by the Social Security Administration. However, a recent GAO 
report shows that the report, although useful, is actually incomplete 
and it is difficult for many Americans to understand exactly what is in 
the account for them at Social Security.
  As a result, many workers, even those near retirement, continue to 
overestimate their likely Social Security benefits, which, bottom line, 
threatens their quality of life throughout their retirement years.
  Social Security taxes are the largest tax that many families will 
ever pay. It will account for up to one-eighth of the total lifetime 
income they will make. Few Americans know the value or the yield of 
their investment, because the Government never tells them the whole 
truth about Social Security by providing them with this key 
information. Reliable information on Social Security is crucial to 
enable Americans to better understand the value of their Social 
Security investment and to help them determine exactly how much they 
should supplement their expected Social Security benefits with other 
savings in order to have a certain level of retirement security.
  This is particularly important for some ethnic minorities, because 
research shows that African Americans have lower rates of return from 
Social Security. They get less back from the system than others who pay 
in. Low-income, single, African American males have a negative rate of 
return today. As I said, overall it is about a 1 percent rate of 
return. For many, it will be a negative rate of return. But for low-
income, single, African American males today, they already have a 
negative rate of return on the money they pay into the system.
  My bill would improve the reports by requiring the Social Security 
Administration to provide an estimate of the Social Security benefits a 
worker is going to receive in terms of inflation-adjusted dollars, as 
well as an estimated rate of return the worker is projected to receive 
from Social Security.
  In real dollars, it means today if you are 20 years old, the report 
says when you retire you could expect to receive about $98,000 a year 
in retirement benefits. You say, that is great, 98,000 a year; but if 
you take in the inflation-adjusted amount throughout those 40 years in 
buying power, it would be less than $14,000 in today's money.
  So you need to know exactly what you are going to get at retirement 
and what the buying power of those dollars is going to be 40 years from 
now so that you can make better plans on how you are going to plan for 
your retirement.
  Given the crucial role of information about Social Security in 
retirement planning and the fact that, beginning this year, the 
statements from Social Security will be mailed annually to every 
eligible individual over 25, immediate improvement of these standards 
is imperative. These numbers are already going to be sent out, so this 
isn't an added cost, this isn't asking for a new program from the 
Government; this is saying that the report the Social Security 
Administration is going to send to every American over 25 needs to be 
more accurate than the information provided today.
  Information will not solve all the problems we have with Social 
Security, but I think it will surely give working Americans some useful 
tools to help them better plan for retirement.
  In closing, American workers labor mightily to put money aside for 
retirement. They should have full property rights to their money. They 
deserve the security of owning their retirement benefits and savings. 
My legislation gives American workers legal protection to their 
retirement savings. It will stop politicians from cutting their 
benefits to spend money in other unrelated programs out of our Social 
Security trust fund. It also allows American workers maximum freedom to 
better plan for their retirement by giving them more accurate 
information on their Social Security benefits.
  In closing, retirement security is essential to millions of Americans 
and we must do everything we can to help them achieve that security and 
the peace of mind that will go along with it.
  My legislation charts a course which I believe will lead us there.
                                 ______