[Congressional Record Volume 145, Number 101 (Friday, July 16, 1999)]
[Senate]
[Pages S8714-S8734]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             BIPARTISAN SOCIAL SECURITY REFORM ACT OF 1999

  Mr. KERREY. Mr. President, the Senator from Georgia does not have to 
stay for this, but I agree with the fundamental principle the Senator 
from Georgia laid out. I may come at it slightly differently.
  There have been a lot of arguments about income tax cuts and why they 
are needed. I call to my colleagues' attention, one of the biggest 
reasons is the total amount of taxes we are currently taking from the 
American people which totals 20.7 percent of U.S. income. That is the 
highest it has been since 1945, and it continues to go up.
  I believe we need to measure and look at that very carefully as we 
decide how much in taxes we are going to take from the American people. 
I put myself on the side of I believe at least the fundamental 
principle about which the Senator from Georgia talked. There are many 
ways to cut taxes, and I want to talk about one way to do so this 
afternoon.
  I rise today to talk about the introduction of a bipartisan bill 
called the Bipartisan Social Security Reform Act of 1999. It is the 
only bipartisan, bicameral--it has been introduced in the House as 
well--Social Security reform bill, and it is the only bill that can 
claim to cut taxes, cut programmatic costs, leave current retirees' 
benefits untouched, and it substantially increases the benefit checks 
of women and low- and moderate-income workers. This reform plan is a 
reform plan for all generations.
  First, in our bill, current seniors--those who are eligible either 
for the old age, survivor, or disability benefits who have not had time 
to financially prepare for benefit changes--will not face any benefit 
cuts.
  Second, current workers--the baby boomers and the generation Xers--
will participate in a modernized and strengthened Social Security 
program. Our proposal gives all current and future workers a 2-
percentage point payroll tax cut which they can invest in individual 
investment accounts. That is a $928 billion tax cut over the next 10 
years.
  Indeed, as I will illustrate with my presentation, what Congress 
should consider, when we consider the payroll tax, is do we want to 
take that payroll tax and pay off the national debt.
  I favor a substantial debt reduction. Under our proposal, instead of 
going all for debt reduction, that $928 billion will be accumulated as 
an asset in 137 million working American households. That will add to 
the net worth of American working families. It is, in my view, a 
preferable way of dealing with the payroll taxes. It gives the baby 
boomers and generation Xers who have time to plan under our proposal 
not only a payroll tax cut, but it gives them an opportunity to invest 
in their future. At retirement, these workers will receive the 
traditional monthly benefit check. We preserve not only the old age 
benefit, but we preserve intact the survivor and disability benefit. 
This traditional defined benefit will be supplemented by the retirement 
wealth they have accumulated in their individual savings accounts.
  Third, future workers--that is, those who are born after 1995--will 
not only get to participate in individual savings accounts, but they 
will get to start saving for their retirement at birth through our 
bill's KidSave account program.
  Through KidSave accounts, all children will be given a stake in the 
American economy and a chance to build substantial retirement wealth at 
the same time. Each child born in the United States will receive $3,500 
to invest in their retirement. When a child takes his or her first job, 
he or she will be able to contribute 2 percentage points of their 
payroll tax to the KidSave account.
  Not only is this a plan for all generations--it is a plan for all 
income levels. Our plan has something for every wage earner. It will 
result in substantially higher benefit checks for low- and moderate-
income workers. It will result in substantially lower taxes for high-
income workers, and it has a combination of higher benefits and lower 
taxes for middle-income workers.
  I have brought with me some examples of how real Nebraskans would be 
affected by our legislation. These charts compare Social Security 
benefit checks under current law with Social Security benefit checks 
under the Senate bipartisan Social Security reform plan.
  The first example is a friend of mine by the name of Verner Magnuson, 
a retired farmer from Oakland, NE. This chart says, 75-plus. I do not 
think Verner would object to me telling you he was born in 1915. So 
Verner obviously is an individual who says: Well, what do I benefit 
from additional savings? He is exactly right. He does not have time to 
save and benefit from the buildup in cash that can occur by taking 
advantage of compounding interest rates.
  So under current law, Verner receives a benefit check of 
approximately $1,500 per month. Under our bill, his check will be 
exactly the same, $1,500--and it will continue to grow with inflation 
from year to year. We make no adjustment in Verner's CPI nor in 
anybody's CPI over the age of 62.
  The second example shows an Omaha resident and the divisional social 
services director for the Salvation Army, Linda Burkle. Linda, who has 
a relatively high income--although she may object to that description--
demonstrates how higher income individuals will experience somewhat 
lower monthly benefits under our Social Security plan--at least during 
the transition period. These temporary benefit reductions for high-
income people will only occur until the new Social Security program--
that is to say, with individual accounts--is fully phased in. At that 
point high-income people will not experience reductions in overall 
benefits. These are temporary benefit reductions for higher income 
people, and they will only occur until a new program with individual 
accounts is fully phased in.
  You can see from this chart that a baby boomer with a low or moderate 
income will still have a higher income benefit in our plan than under 
current law. A moderate-income worker, for example, will receive a 
monthly benefit check of $673 under current law. Since Linda will 
become eligible to retire for old-age benefits in 2020, her benefit 
check will not reflect the large benefit cuts that are expected to 
occur in 2034 under current law.
  I will not spend a great deal of time on this point, but one thing we 
all need to understand is if we do not change the law, people who are 
under the age of 45, under current law, according to the trustees of 
the Social Security Administration, will experience a 25- to 33-percent 
cut in benefits. Ask them. If any citizen doubts that, call the Social 
Security Administration. If you are under the age of 45, call them 
up and ask them: What will my benefits be unless Congress changes the 
law? And they will tell you that your benefits are going to be cut 25 
to 33 percent.

  I have listened to my colleagues from time to time who say: Gosh, it 
is not going to run out of money until 2034,

[[Page S8715]]

and that is a long time away. Why do anything now? Why should we act 
now, especially when the choices are hard and people are apt to get 
upset with you?
  The answer is, in 1983, when Congress fixed Social Security as it was 
about ready to not be able to pay benefits, it made a radical departure 
from the previous plan. In 1983, what Congress said is that we are not 
going to only fund current beneficiaries; we are going to fund all 
beneficiaries.
  That is what the 75-year mark does. It is not just 75 years; we are 
trying to write the law so that whatever your age, whether you are born 
this year or you are 16 years old or you are 76 years old, that we can 
keep the promise we have on the table.
  We cannot keep the promise we have on the table to the people under 
the age of 45. It is not just a small haircut they are going to take; 
it is a big haircut they are going to take. Or there is going to have 
to be a comparable--actually, a larger tax increase on their children 
and grandchildren. That is the current law--a big benefit cut for 
people under the age of 45.
  You can see from this chart that a baby boomer with a low- or 
moderate-income will have a higher benefit under our plan than under 
current law. A moderate-income worker will receive a monthly benefit 
check of $673 under current law. Under our plan, a low-income worker 
will receive a benefit of $813. That is a very important point.
  We believe that the current Social Security Program is not very 
generous to low- and moderate-income workers. We add what is called 
under law an additional benefit point. So for that lower wage 
individual, in my view, not only are there many of them today, but 
there are apt to be many of them in the future, who are both an 
important force for economic reasons as well as for moral reasons. We 
have to make sure that that defined benefit program is sufficient so 
they can live with some dignity in their retirement years.
  This plan not only provides them a higher benefit check, it also 
provides them the thing that I think produces real financial 
independence, and that is ownership of some financial assets.
  My third example shows how Kelly Walters, a 20-something generation 
Xer from Columbus, NE, will fare under our Social Security reform bill. 
Generation X is the first generation that will experience very 
significant benefit increases from our Social Security reform plan. If 
Kelly earns the average wage over her lifetime, she can expect to get a 
benefit check, under current law--assuming no tax increases--of $884 
per month. Under our reform plan, she can expect to get a Social 
Security benefit check worth $1,329 per month. That is a 50-percent 
increase in benefits over current law. If she turns out to be a low-
income worker throughout her lifetime, Kelly can expect to get a $536 
monthly check under current law but a $1,115 benefit under our new 
plan. That is more than double the benefit under current law.
  One of the very difficult things we are experiencing, as the occupant 
of the Chair knows--he was on the Ways and Means Committee in the 
House, and I look forward to the day when he is on the Finance 
Committee as well--but as the occupant of the Chair understands, what 
we have is a situation where people are living longer. Generation Xers 
are probably going to be looking forward to living to the age of 85 or 
90. So it is very important that that defined benefit program be solid 
for them. It is also very important that they have the financial assets 
and wealth that allows them to sustain themselves through to the course 
of their old-age years.

  My fourth and final example shows how the next generation of children 
will fare under our Social Security reform plan.
  Erin Kuehl, who is only 2 years old today, will benefit not only from 
the 2-percent account but also from the KidSave account I described 
earlier. Under the current Social Security system, Erin can expect to 
have a Social Security benefit worth $1,037 if she earns the average 
pay. Under our plan, she will receive a monthly benefit worth $2,693. 
If she becomes a low-income worker, Erin will receive a benefit worth 
$629 under the current system and $1,631 under the new system--again, 
more than one and a half times her current expected benefit.
  Many people get confused about this because they will look at the 
existing benefit plan and they will say: Well, that is not true. Under 
what shows up on her benefits, Erin is going to get a much larger 
check. But that assumes that Congress is going to raise taxes. The 
President said he is against raising payroll taxes. That presumes that 
Congress somehow is going to come up with some additional money. If 
anybody wants to do that, let them come down and argue for that. Let 
them come down and make a presentation or a proposal to raise taxes 
even more on people who get paid by the hour than we have under current 
law.
  The message with our proposal is very clear: Our bill provides better 
benefits for low- and moderate-income workers. And although some high-
income individuals will temporarily experience slightly lower benefits 
during the transition from the old system to the new system, all 
workers in America will eventually experience higher benefits and lower 
taxes than current law provides. In Nebraska alone, there are over 
283,000 Social Security beneficiaries: 182,000 have an old-age benefit; 
35,000 are taking the survivor or widower benefit; and the balance are 
in the disability program. The average monthly check under the old-age 
benefit is $753 for retired workers. For the widower, it is $740.

  Not only is $753 not a livable monthly benefit, that is an average. 
That means many are getting substantially lower than that. Even in 
Nebraska, that is not adequate, unless it is supplemented by additional 
wealth and income from pensions and personal savings. This is an even 
lower amount and not likely to provide that individual with what they 
are going to need, especially with longer lifespans projected out into 
the future.
  Our bill will ensure workers have larger benefits. Our bill also 
ensures they have wealth with which to supplement their retirement 
income.
  There are tradeoffs in our bill. Although our reforms will ensure 
lower taxes and higher benefits from future workers, our bill does call 
for programmatic changes which will lower the guaranteed defined 
benefit check for some middle and upper workers in the future.
  I don't want to sugarcoat this. Unless you are for a tax increase, if 
you want to walk out on the floor and say, let's raise taxes, you also 
favor at some point lowering benefit checks. If you don't like the idea 
that we are making some adjustments out in the future in benefit 
checks--and again, for emphasis, if you are watching this and you are 
over the age of 62, please don't call my office and say I am cutting 
your benefits. I am not. This proposal does not cut benefits for people 
over the age of 62. It makes adjustments out in the future. Again, if 
you don't like those adjustments, come down to the floor and say you 
want to raise taxes because that is the only option to making these 
kinds of adjustments.
  Our bill includes a provision which instructs the Bureau of Labor 
Statistics to study overestimates in the CPI and correct them 
accordingly. When the recommendation was made well over a year ago now, 
it was a commission that studied this. They came back and said that the 
CPI was overstated 1.1 and we ought to make an adjustment, and nothing 
happened. I guarantee you, if they had come back and said that it is 
understated 1.1, there would have been 535 votes for it. It would have 
been unanimous in the House and Senate. But because it is overstated, 
we recognize that the adjustment is going to mean somebody is going to 
have to give up something. We make that adjustment for beneficiaries 
out into the future.
  We think this will result in a downward adjustment in the CPI and 
COLAs of .5 percent. It brings the CPI much more closely in line with 
what real cost-of-living increases are. It doesn't reduce the cost-of-
living increase. It brings us a much more accurate cost of living. In 
addition, the CPI adjustments will affect income tax revenues. I do not 
argue that it will not. But our bill allows the Social Security 
Administration to recapture these initial income tax revenues for the 
Social Security trust fund.
  Another benefit change in our bill is the indexation of benefits to 
life expectancy. Earlier I introduced a bill with Senator Moynihan that 
would

[[Page S8716]]

have moved the eligibility age. It set off a howl, a protest, and 
concern. I listened to those concerns. By the way, in 1997, we had 1.3 
million old-age beneficiaries who became eligible for Social Security's 
old-age benefit. Of those 1.3 million, 1.1 million took the early 
benefits at 62. So when news commentators try to figure out what this 
does, they typically say: Kerrey is proposing to move the retirement 
age. Not true. We are talking about eligibility age, when you are 
eligible for the benefit. By the way, this bill would also eliminate 
the earnings test that is still present. That earnings test is gone. So 
whenever you are eligible, if you want to continue working, that is 
fine under our proposal.

  But this change to index benefits to life expectancy is a response to 
people saying: Don't move the eligibility age. We keep the eligibility 
age exactly as it is under current law. We do accelerate the move from 
65 to 67.
  Once the retirement age increases to 67, as under current law, our 
bill will provide for benefits that track the life expectancy of your 
birth cohort. I think we made that adjustment so we do not accelerate 
it until 67, or do we? We do? I was right the first time.
  Our bill will provide for benefits, as I said, that track the life 
expectancy of your birth cohort. The longer your birth cohort lives, 
the more years over which your benefits must be spread. This may mean 
that retirees far in the future may experience a lower defined benefit 
under our program, but again, it does not affect the value of their 
individual account.
  We have several other benefit changes in our bill, but those are the 
two big ones. I disclose them up front.
  There is a price. Again, I say, for the third time, for those who 
object to it, what is your alternative? What else do you want to do? I 
graduated from the University of Nebraska in 1965 with a B.S. in 
pharmacy. It is a land grant college. I am not a Rhodes scholar. I 
didn't go to Yale University. I don't have a Ph.D. behind my name.
  This is not difficult to figure out. The difficulty is looking at the 
10 or 12 options and saying: Oh, my gosh, I don't want to pick any of 
those because somebody is going to get mad at me. Somebody will object 
to it. Somebody will criticize it.
  Criticize the changes if you want, and there will be many who do, but 
if you are an elected official, if you are an elected representative, I 
hope people outside, after they have leveled their criticism will say: 
What is your solution? Or are you suggesting that people under the age 
of 45 should just be basically out of luck because we don't expect to 
have to worry about them in our political lifetimes or perhaps even in 
our physical lifetimes.
  Ultimately, the public must decide whether it is willing to risk some 
benefit adjustments and some benefit uncertainty for the long-term 
gains that come with a Social Security program that includes individual 
accounts. Furthermore, the public must weigh the costs and benefit 
adjustments against the cost of doing nothing. As I said, the cost of 
doing nothing, if you favor doing nothing, if you favor delay, what 
that means is you favor, unless you have an alternative, you favor a 25 
to 33 percent cut in benefits for people under the age of 45 because 
that is what current law provides.
  This is a reform proposal that Republicans and Democrats are 
supporting and should be supporting. If Congress wants to get serious 
about Social Security reform, this is the bill to mark up. If Members 
want to stop talking about saving Social Security--we just had a 
cloture vote on the lockbox proposal. Democrats have a lockbox 
proposal. Everybody wants to save Social Security. If you want to save 
Social Security, this is the bill to rally behind. If the President, 
who cannot run for reelection, wants to save Social Security, this is 
the bill for him to embrace as well. If the public wants the 
politicians to enact Social Security reform legislation that shares 
costs across generations, protects benefits and lowers tax burdens, 
this is the bill to write their Congressman about.

  You may detect frustration in my voice. I have been frustrated in 
recent weeks by our difficulty to come to a resolution of this problem. 
We do talk a great deal about it. I understand the difficulty. I do not 
underestimate the political difficulties of solving this problem. The 
difficulty, in my judgment, is not picking the solution. This is not 
like Medicare. This is not like youth violence. There are lots of 
things out there that are extremely complicated, that are very 
difficult to figure out. This one is not difficult to figure out. You 
just, in the end, must select which proposals, which solutions you 
want.
  The Congressional Budget Office, the office that dictates what we do 
far too often around here, and the Office of Management and Budget, the 
executive office, recently released their midsession review that 
projected surpluses of $2.9 trillion over the next 10 years, 65 percent 
of which comes from excess FICA taxes.
  What I find to be odd in our current debate is that from 1983 to 
1999, after we raised taxes on working people in 1983 to prefund all 
Americans who were going to be eligible in the future, we raised taxes 
then. Every single year what Treasury does is, any excess tax, it 
credits the Social Security Administration with a treasury bond, an 
asset that has real value. This year at the start of the year, that is 
about $860 billion that the Social Security Administration owns for 
future beneficiaries. It will be over $1 trillion at the end of this 
year because there will be $130 billion of revenue taxes, taxation of 
benefits and the interest off these bonds that flow into the Social 
Security trust fund. The Social Security trust fund will own over $1 
trillion of the bonds. It will build up to $4.5 trillion in the year 
2014. From 1983 to 1999, what we did was, we ended up, after the trust 
fund owns bonds, Treasury ends up with cash. It ends up with cash. And 
it has been using that cash for all sorts of things. It has to buy 
something.
  So basically what this excess did was made the deficit look smaller. 
So from 1983 to 1999, people who got paid by the hour--and 80 percent 
of Americans have higher FICA taxes than they have in income taxes--
people who get paid by the hour shouldered a disproportionate share of 
deficit reduction.
  Now, in 1999, that the deficit is gone and we are at a surplus, what 
the lockbox says is that people who get paid by the hour are going to 
shoulder all of the debt reduction. Every single penny of debt 
reduction under the President's proposal, the Democratic proposal, and 
the Republican proposal is paid for with payroll taxes, FICA taxes. So 
what we say with our proposal is not only do we want to give a tax cut 
to people who get paid by the hour--almost $1 trillion over a 10-year 
period--but what it effectively does is say that rather than paying 
down the national debt all of us owe, we will increase the net worth of 
Americans by transferring that to the asset side of their balance 
statement. That is basically what it does. At the end of the 10-year 
period, 137 million working families will have at least $1 trillion of 
new assets. That assumes no interest, no accumulation on that 
ownership.
  Furthermore, each day we let go by means this problem gets harder to 
solve. This body rarely takes the opportunity to solve future crises. I 
understand that. I have been in the situation many times before. I urge 
and beg my colleagues to let the issue of Social Security reform be the 
exception to the rule. This bipartisan, bicameral bill represents a 
real effort to work in a truly bipartisan fashion, not just to save 
Social Security, but to modernize it, strengthen it, and improve it.
  I urge my fellow Senators to cosponsor this bill and join with us in 
urging the chairman of the Finance Committee, the chairman of the Ways 
and Means Committee, and the President to take up and endorse a Social 
Security reform bill this year.
  In addition, I announce that I intend, when we mark up a tax bill in 
the Finance Committee, to offer this piece of legislation as a way to 
cut substantially more taxes than anybody is currently proposing.
  I thank my colleagues who are on this bill, including Senator Gregg 
and Senator Breaux who are both on the floor today. I am proud to be a 
cosponsor of it. I praise them for their leadership. They have been 
fearless and future-looking. When we talk about our kids and grandkids, 
sometimes we don't often back those words with actions. I praise them 
for being willing to back, in a very courageous way, their words with 
action.

[[Page S8717]]

  I ask unanimous consent that letters in support of the bill be 
printed in the Record.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

               [From the Concord Coalition, June 9, 1999]

 Concord Coalition Commends Bipartisan Social Security Plans That Make 
                  Tough Choices and Offer Real Reform

       Washington.--With the U.S. House Committee on Ways and 
     Means holding hearings today and tomorrow on plans to reform 
     Social Security, The Concord Coalition commends the Members 
     of Congress who had the courage to submit bipartisan Social 
     Security proposals that are both fiscally responsible and 
     generationally sound. Concord singled out for praise the 
     sponsors of the Kolbe-Stenholm bill (21st Century Retirement 
     Security Act, H.R. 1793) and the Gregg-Breaux plan (the 
     Senate Bipartisan Social Security Agreement).
       Concord Coalition Co-Chairs and former U.S. Senators Warren 
     Rudman (R-NH) and San Nunn (D-GA) draw three conclusions in 
     letters addressed to Congressmen Jim Kolbe (R-AZ) and Charlie 
     Stenholm (D-TX), and Senators Judd Gregg (R-NH), John Breaux 
     (D-LA), Bob Kerrey (D-NE) and Charles Grassley (R-IA). 
     ``First, changing demographics make the current pay-as-you-go 
     benefit structure unsustainable. Absent change, the system 
     will either burden future workers with steep tax hikes, or 
     betray future retirees with deep benefit cuts.
       ``Second, there are only two roads to genuine reform, and a 
     workable plan must pursue both. Reform must reduce Social 
     Security's long-term burden by reducing its long-term costs. 
     And it must make the remaining burden more bearable by 
     increasing national savings, and hence the size of tomorrow's 
     economic pie. Doing so requires the hard choices of fiscal 
     discipline. In short, there are no magic bullets. . . . 
     Third, the time for action is now. The longer reform is 
     delayed, the worse the problem will become and the more 
     draconian the solutions will be.
       ``The Concord Coalition commends your efforts because your 
     plan recognizes each of these conclusions. We are 
     particularly pleased that you have resisted the temptation to 
     rely on speculative gains such as projected budget surpluses 
     and higher market returns to close Social Security's fiscal 
     gap. Either strategy is fraught with peril,'' Rudman and Nunn 
     warn.
       ``The Concord Coalition supports the approach taken by 
     Kolbe-Stenholm and by Gregg-Breaux because both plans are 
     powerful antidotes to the free lunch disease that is gripping 
     the Social Security debate. Compared with the other proposals 
     being considered, these plans come closest to meeting the 
     Concord Coalition's criteria. They reduce future benefits on 
     a progressive basis, modestly raise the eligibility age, 
     provide a more accurate Consumer Price Index, create 
     individually owned retirement accounts without relying on 
     projected budget surpluses, and they have bipartisan 
     support,'' said Concord Coalition Policy Director Robert 
     Bixby.
       ``The Concord Coalition also commends Chairman Archer and 
     all of the witnesses at this week's hearings for putting 
     forth the specifics of their Social Security reform plans. 
     The safest place is always on the sidelines. However, if the 
     end result of the Social Security debate is to avoid all the 
     hard choices, we might as well launch a new government 
     program to find the fountain of youth because otherwise we 
     will never be able to meet all of our future benefit 
     obligations,'' Bixby said.
                                  ____



                                        The Concord Coalition,

                                      Washington DC, June 9, 1999.
     Hon. Judd Gregg,
     Hon. John Breaux,
     Hon. Robert Kerrey,
     Hon. Charles Grassley,
     U.S. Senate,
     Washington, DC.
       Dear Mr. Gregg, Mr. Breaux, Mr. Kerrey, and Mr. Grassley: 
     The Concord Coalition heartily commends you and the other co-
     sponsors of the Bipartisan Social Security Agreement. 
     Together, you have demonstrated political courage by making 
     the kind of hard choices that must be made to preserve Social 
     Security in a fiscally responsible and generationally fair 
     manner.
       For the past two years the Concord Coalition has devoted 
     much of its time and resources to promoting bipartisan 
     dialogue on the key long-term challenges facing Social 
     Security, and evaluating potential solutions.
       Three conclusions stand out:
       First, changing demographics make the current pay-as-you-go 
     benefit structure unsustainable. Absent change, the system 
     will either burden future workers with steep tax hikes, or 
     betray future retirees with deep benefit cuts. Take the year 
     2033 as an example. While the Social Security trust fund will 
     still be officially solvent in that year, the program is 
     projected to be running a cash deficit of some $280 billion 
     in today's dollars--an amount roughly equal to this year's 
     entire budget for national defense. Closing the gap that year 
     would require a Social Security payroll tax hike of 40% or a 
     nearly 30% cut in benefits.
       Second, there are only two roads to genuine reform, and a 
     workable plan must pursue both. Reform must reduce Social 
     Security's long-term burden by reducing its long-term costs. 
     And it must make the remaining burden more bearable by 
     increasing national savings, and hence the size of tomorrow's 
     economic pie. Doing so requires the hard choices of fiscal 
     discipline. In short, there are no magic bullets.
       Third, the time for action is now. The longer reform is 
     delayed, the worse the problem will become and the more 
     draconian the solutions will be. Moreover, delay risks losing 
     a valuable opportunity to act while the economy remains 
     strong, the huge baby boom generation is still in its peak 
     earning years, and the Social Security trust fund is running 
     an ample cash surplus.
       The Concord Coalition commends your efforts because the 
     Bipartisan Agreement recognizes each of these conclusions. We 
     are particularly pleased that you have resisted the 
     temptation to rely on speculative gains such as projected 
     budget surpluses and higher returns to close Social 
     Security's fiscal gap. Either strategy is fraught with peril.
       Projected budget surpluses may never come to pass. And even 
     if they do, there are many other competing claims on this 
     hoped for windfall. Market gains can certainly help workers 
     earn a higher return on their payroll contributions. But it 
     would be irresponsible to ignore structural reforms in favor 
     of simply ``playing the spread'' between the expected returns 
     on stocks and bonds.
       Another advantage of your plan is that it does not rely on 
     double counting assets by crediting funds both to the Social 
     Security trust fund and to some other purpose such as debt 
     reduction or individual accounts. Money cannot be spent 
     twice. Plans that purport to do so are ducking the real 
     question of how future benefits will actually be paid.
       As the President's Office of Management and Budget (OMB) 
     has observed about the trust funds:
       . . . [T]hey are claims on the Treasury that, when 
     redeemed, will have to be financed by raising taxes, 
     borrowing from the public, or reducing benefits or other 
     expenditures. The existence of large trust fund balances, 
     therefore, does not, by itself, have any impact on the 
     Government's ability to pay benefits.
       Analytical Perspectives, Budget of the United States 
     Government, Fiscal Year 2000 p. 337.
       Given the difficult choices ahead, it is all too easy for 
     elected officials to lament the problems while remaining 
     silent on the solutions. Clearly, the authors of the 
     Bipartisan Social Security Agreement have answered this 
     challenge.
       The Concord Coalition is currently developing its own 
     Social Security reform proposals. While in the end Concord 
     may not endorse every element of your plan, we recognize that 
     there is no such thing as a ``perfect'' plan. Trade-offs will 
     always need to be made. But we fully support the bipartisan, 
     fiscally responsible, generationally fair path you have 
     chosen. As the process of Social Security reform moves 
     forward we hope that an increasing number of your colleagues 
     will do what you have done--make the hard choices.
       The Concord Coalition stands ready to assist in any way 
     that we can.
       Sincerely,
     Warren Rudman,
       Co-Chairman.
     Sam Nunn,
       Co-Chairman.
                                  ____



                        National Association of Manufacturers,

                                     Washington, DC, June 3, 1999.
     Hon. Judd Gregg,
     U.S. Senate,
     Washington, DC.
       Dear Senator Gregg: American workers and future retirees 
     would have much to gain under your bipartisan Social Security 
     modernization plan that would allow workers the opportunity 
     to invest a portion of their Social Security payroll taxes in 
     personal retirement accounts. Not only does the plan help 
     workers accumulate adequate resources for retirement, but it 
     also restores the 75-year solvency of the Social Security 
     Trust Fund. Individuals would own the accounts and could pass 
     the money on to their heirs.
       Thank you for your outstanding leadership as an original 
     cosponsor of this plan; it would achieve real Social Security 
     reform without a tax increase, accounting gimmicks or 
     dependence on budget surpluses. This reform plan will help 
     prepare for the retirement of the baby boom generation when 
     the Trust Fund begins paying out more than it received in 
     payroll taxes by 2014. At the same time, the plan would 
     maintain a safety net for all workers, while establishing a 
     guaranteed minimum benefit for low-income workers not 
     available under current law.
       The NAM and its 14,000 member companies appreciate your 
     leadership of the 1997-98 bipartisan National Commission on 
     Retirement Policy, on S. 2313 and your work this year to 
     broaden cosponsors for the 1999 plan. Thank you for your 
     commitment to reform and we look forward to working with you 
     toward passage of Social Security legislation that assures 
     retirement security for all workers and promises a viable 
     economy for America's future.
           Sincerely,
                                                 Sharon F. Canner,
     Vice President.
                                  ____

                                               Alliance for Worker


                                          Retirement Security,

                                    Washington, DC, July 15, 1999.
     Hon. Judd Gregg,
     U.S. Senate,
     Washington, DC.
       Dear Senator Gregg: On behalf of the thirty organizations 
     that comprise the

[[Page S8718]]

     AWRS, I would like to extend congratulations on the 
     introduction of your Bipartisan Social Security Reform bill. 
     While acknowledging the financial shortfall ahead, you and 
     the other co-sponsors have succeeded in developing a plan 
     that saves Social Security and is fair for American workers, 
     employers, and retirees alike.
       The members of AWRS are committed to the responsible reform 
     of Social Security--not just accounting gimmicks. We are 
     pleased to see that your bill meets all of the principles for 
     reform set forth by the AWRS, including the creation of 
     Personal Retirement Accounts from a portion of the FICA taxes 
     with no FICA tax increases, no government ownership of 
     private enterprise, and a strong safety net for all retirees 
     while preserving the benefits of existing retirees. In fact, 
     your bill is more progressive than the existing system and 
     will result in more of our elderly being lifted out of 
     poverty. As the debate moves forward, we will have 
     suggestions for modest changes or elaborations, but we 
     support your bill as an excellent staring point for reform.
       We are especially pleased that your legislation 
     restructures the existing system and reduces the huge 
     unfunded liabilities ahead of us. Workers and employers 
     already pay an astounding 12.4% of earnings to fund Social 
     Security. They cannot be asked to also carry the burden of a 
     projected $20 trillion shortfall over the next 75 years! The 
     weight of this burden would certainly have a very negative 
     impact on wage growth, workers' ability to save, and the 
     overall economy.
       Instead, you have wisely chosen to follow the course 
     already charted by countries all over the world that have 
     faced similar demographic problems in their public pension 
     systems. More than fifteen countries--who were also facing 
     huge future funding shortfalls--have voted to restructure 
     their pay-as-you-go system to allow workers to invest their 
     payroll taxes in the growing economic market. And, no country 
     has chosen  to simply raise taxes, create a new entitlement 
     system, or hide the problem behind accounting gimmicks.
       Along with your other co-sponsors, we commend for your 
     courage and your ability to find responsible answers to 
     difficult entitlements' problems. We will urge your 
     colleagues in the Senate to get involved with you and work in 
     a bi-partisan manner to achieve reform now. There is no 
     better time--and the children, the workers, and the elderly 
     in our country deserve nothing less.
           Sincerely,
     Leanne J. Abdnor.
                                  ____

                                          National Association for


                                            the Self-Employed,

                                    Washington, DC, July 13, 1999.
     Hon. Judd Gregg,
     U.S. Senate,
     Washington, DC.
       Dear Senator Gregg: On behalf of the more than 330,000 
     members of the National Association for the Self-Employed, as 
     well as millions of other independent entrepreneurs in 
     America, we commend you for introducing the Senate Bipartisan 
     Social Security Plan.
       The bill that you and six of your Senate colleagues are 
     introducing meets the criteria that the NASE has long sought 
     for Social Security reform:
       It does not increase payroll taxes or add to the current 
     Social Security tax inequities of the self-employed.
       It avoids changing retirement benefits for current and near 
     retirees.
       It actually increases the defined benefit safety net for 
     future retirees.
       It reduces the huge unfunded liability of the Social 
     Security system, and
       It permits a portion of Social Security taxes to be 
     allocated to personal retirement accounts that workers 
     themselves would own and control.
       In addition to these noteworthy achievements, your bill 
     would keep Social Security solvent for at least 75 years, 
     according to the Social Security Administration's own 
     actuaries. And it would do so without raising the retirement 
     age, creating an entirely new entitlement system, or relying 
     on government IOU's to prop up the Social Security Trust 
     Fund.
       This is genuine and thorough reform. It would put the 
     nation's moral obligation to its retirees on the soundest 
     financial footing that it's had in at least a generation.
       We hope your bill will lead the way in the forthcoming 
     effort to reform Social Security.
           Sincerely,
                                                 Bernie L. Thayer,
     President and CEO.
                                  ____



                                       Economic Security 2000,

                                    Washington, DC, July 15, 1999.
     Hon. Judd Gregg,
     Hon. John Breaux,
     Hon. Bob Kerrey,
     Hon. Charles Grassley,
     Washington, DC.
       Dear Senators Gregg, Breaux, Kerrey and Grassley: Economic 
     Security 2000 applauds the introduction of your 
     comprehensive, fiscally responsible Bipartisan Social 
     Security Agreement. This plan saves Social Security for 75 
     years and beyond, without placing future tax burdens on 
     younger generations. More importantly, it addresses the 
     broader issue of retirement security by creating Personal 
     Retirement Accounts, which open up meaningful savings and 
     ownership to all Americans.
       We commend the Bipartisan Social Security Agreement for 
     strengthening the safety net guarantees that have been the 
     bedrock of Social Security. In maintaining the progressive 
     structure of the guaranteed Social Security benefit, the plan 
     increases the defined benefit for lower-income workers whom 
     otherwise have little or no opportunity for saving.
       The Bipartisan Agreement provides a real opportunity for 
     working Americans to build a nest egg for themselves and 
     their children. Fifty-three percent of Americans earn less 
     than $18,000. Yet, the $18,000 workers pays over $2,200 in 
     payroll taxes each year. By allowing a portion of the current 
     FICA tax to be diverted into an individually owned and 
     controlled savings account, every American is given the 
     opportunity to accumulate meaningful savings and real 
     retirement security. Moreover, these accounts mirror the 
     progressive nature of Social Security through government 
     savings matches for lower-wage workers.
       As a grassroots organization, we have a unique 
     understanding of the American public's desire for a Social 
     Security solution that provides real ownership and control 
     over their retirement assets. You have demonstrated great 
     leadership and courage by making the tough decisions 
     necessary to preserve Social Security for today's seniors as 
     well as future generations. We thank you for your efforts.
           Sincerely,
                                                        Sam Beard,
     Founder/President.
                                  ____

                                           National Association of


                                        Women Business Owners,

                                Silver Springs, MD, July 14, 1999.
     Hon. Judd Gregg,
     Hon. John Breaux,
     Hon. Bob Kerrey,
     Hon. Charles Grassley,
     U.S. Senate, Washington, DC.
       Dear Senators Gregg, Breaux, Kerrey, and Grassley: The 
     National Association of Women Business Owners (NAWBO) 
     commends you for the introduction of the Senate Bi-Partisan 
     Social Security Reform Bill. NAWBO's membership represents 
     9.1 million women business owners who employ 27.5 million 
     workers, and we believe this legislation would be good for 
     all those whom we represent.
       NAWBO has extensively reviewed the Social Security reform 
     measures being discussed in Congress, and developed a set of 
     principles which include giving all workers the opportunity 
     to use a portion of their FICA taxes to create Personal 
     Retirement Accounts. No one knows better the importance of 
     personal ownership and control than the millions of women who 
     own businesses. We strongly support extending this principle 
     of ownership and control to all workers through the creation 
     of thes PRAs. Likewise, we believe the Social Security 
     Administration must continue to provide a strong safety net-
     guaranteed minimum benefit-for all retirees. We must lift 
     even more of our elderly, most of whom are women, out of 
     poverty.
       Your legislation achieves these goals and more. It reduces 
     the unfunded liability of the Social Security System 
     (currently set by SSA at $20 trillion over the next 75 
     years), saves Social Security and puts it on a permanently 
     sustainable path. Your bill is strongly bi-partisan, which is 
     required for any reform measure to pass Congress. In other 
     words, it is fair to all constituencies, not just a segment 
     of the population.
       NAWBO is a member of the Alliance for Worker Retirement 
     Security. We will continue to work with AWRS and you to 
     secure our future.
           Sincerely,

                                                  Terry Neese,

                                       Past President, Corporate &
     Public Policy Advisor.
                                  ____



                                      The Business Roundtable,

                                    Washington, DC, July 16, 1999.
     Hon. Judd Gregg,
     U.S. Senate, Washington, DC.
       Dear Senator Gregg: I would like to congratulate you on 
     your efforts to move forward this critical debate on the 
     future of Social Security. The ``Senate Bi-Partisan Social 
     Security Bill'' is largely consistent with the principles The 
     Business Roundtable developed to guide its members as we 
     participate in this important debate.
       Based on the information we have reviewed, there are 
     several positive elements of your plan that deserve special 
     recognition. The plan is more progressive than the current 
     system in that low-wage workers will receive a higher defined 
     benefit than is promised from the current Social Security 
     system. It insures that general revenues would be used 
     responsibly to save Social Security, not create a new 
     entitlement system. You have also stepped up to the plate and 
     addressed the hard choices we all know must be faced. The 
     bill would reduce the unfunded liability of the Social 
     Security System, currently set by the Social Security 
     Administration at $20 trillion, over the next 75 years. In 
     addition, all workers under age 62 would receive Personal 
     Retirement Accounts that they own, control, and can pass on 
     to their heirs.
       Of course, there are issues we would like to explore in 
     more depth as this and other proposals are debated. For 
     example, we have concerns about how individual accounts are 
     invested, and would like to learn more about your proposal to 
     model the accounts on the federal Thrift Savings Plan. We 
     would encourage as many investment options as possible to 
     allow individuals to diversify their accounts and prevent 
     undue market concentration. It also is inclear how corporate 
     governance concerns, such as the voting of

[[Page S8719]]

     proxies, would be handled. Finally, we would like to explore 
     the interaction between individuals accounts and employer-
     sponsored retirement plans. The ability of individuals to 
     make additional voluntary contributions to their accounts 
     under your plan may inadvertently have a negative impact on 
     private plans. Again, this is an issue we would like to 
     discuss with you as your proposal is fleshed out.
       These issues are not meant to overshadow the critical 
     contribution you have made to advance this debate. Most 
     importantly, the proposal enjoys bipartisan support. The only 
     way we will, or should, adopt comprehensive Social Security 
     reform is if we all work together as a nation to develop a 
     plan that keeps its promises to current retirees and those 
     near retirement while meeting the needs of future 
     generations.
       The Business Roundtable looks forward to working with you, 
     and with every other member of Congress as well as the 
     Clinton Administration, to promote responsible reform of our 
     Social Security system.
           Sincerely,
                                                 M. Anthony Burns,
         Chairman & CEO, Ryder System, Inc., Chairman, Health and 
           Retirement Task Force, The Business Roundtable.
                                  ____



                                Council for Government Reform,

                                      Arlington, VA, July 8, 1999.
     Senator Judd Gregg,
     Senator John Breaux,
     Senator Bob Kerrey,
     Senator Charles Grassley,
     Washington, DC
       Dear Senators Gregg, Breaux, Kerrey, and Grassley: On 
     behalf of the Council for Government Reform's 350,000 
     supporters, let me congratulate you on your hard work and 
     diligence in preparing the Senate Bipartisan Social Security 
     bill. You are very courageous to offer a detailed plan that 
     actually addresses some of the long-term structural and 
     demographic problems that unquestionably confront our current 
     pay-as-you-go system. The Council for Government Reform 
     strongly agrees with many of the principles put forth in your 
     legislation.
       The introduction of your legislation indicates that 
     prospects for true Social Security reform are not dead in the 
     106th Congress. Rather, you offer the hope that some short-
     sighted, new entitlement system that would even further 
     saddle our most recently born children, as well as future 
     generations, with high taxes will not be adopted.
       Although this is not the first major proposal in the 106th 
     Congress, the Senate Bipartisan Social Security bill actually 
     addresses some of the underlying programs in the Social 
     Security system. It avoids the pitfalls of adding-on 
     additional taxes, creating new entitlement programs, or 
     sabotaging personal retirement accounts. This legislation 
     will spark the Social Security reform debate towards a 
     dynamic, solvent, and efficient Social Security system for 
     the 21st century.
       The keys to bipartisan legislative potential are individual 
     ownership of retirement accounts, guaranteed minimum 
     benefits, and a reliance on a ``carve-out,'' rather than an 
     ``add-on.'' The carve-out vs. add-on distinction is crucial 
     because add-ons carry with them implicit tax increases while 
     carve-outs allow for better investment of funds already taxed 
     away from American workers.
       The Council for Government Reform is very pleased that the 
     Senate Bipartisan Social Security bill would eliminate the 
     earning test. This is important to CGR's supporters 
     nationwide, many of whom want to continue to earn income 
     without suffering a loss in their Social Security benefits.
       Equally important, this is a bipartisan bill which 
     indicates its appeal can cross party lines and gain 
     widespread support on Capital Hill. Given the poisonous 
     political environment and the election coming up, only 
     bipartisan bills stand a chance of going anywhere. The only 
     question is whether common sense, political courage, and the 
     public interest can prevail in bringing this debate to the 
     forefront.
       Gentleman, on behalf of the Council, I sincerely thank you 
     for your efforts and stand ready to assist you in creating a 
     retirement income security system that protects current 
     retirees while saving our children and grandchildren from 
     bankruptcy.
           Very truly yours,
                                                Charles G. Hardin,
     President.
                                  ____



                             United Seniors Association, Inc.,

                                       Fairfax, VA, July 15, 1999.
     Hon. John Breaux,
     Hon. Judd Gregg,
     Hon. Charles Grassley,
     Hon Bob Kerrey,
     U.S. Senate,
     Washington, DC.
       Dear Senators Breaux, Gregg, Grassley, and Kerrey: United 
     Seniors Association (USA) greatly appreciates your efforts to 
     save Social Security. The legislation you are introducing is 
     timely and a significant step toward improving the program.
       With Social Security in serious financial trouble, you 
     recognize that the status quo is unacceptable. No later than 
     2014--just 15 years away--the program will begin to pay out 
     more than it collects in payroll tax revenue. That is when 
     Social Security's financial crisis really begins.
       According to the 1999 Trustees Report, to keep Social 
     Security solvent for the next 75 years will require raising 
     the payroll tax to over 18% (a 50% increase), reducing 
     benefits by at least one-third, or some combination of the 
     two.
       USA has long advocated that the current pay-as-you-go 
     system must be redesigned to maintain solvency and to assure 
     higher benefits for future retirees. The creation of Personal 
     Retirement Accounts (PRAs), owned and controlled by workers, 
     will help achieve these goals. While we favor allowing 
     workers to privately invest at least 5 percentage points of 
     their payroll taxes, your legislation is an excellent start.
       There are many other attractive features of the legislation 
     that will draw widespread support. These include: protecting 
     current beneficiaries to whom promises have been made; 
     rewarding work by eliminating the earnings test; and 
     encouraging workers to increase savings.
       On behalf of USA's 685,000 members, thank you for your 
     concern about the retirement security of all Americans. We 
     look forward to working with you to pass this important 
     legislation.
           Sincerely,

                                              Dorcas R. Hardy,

                            Former Commissioner of Social Security
     and Policy Advisor to USA.
                                  ____



                                      The 60 Plus Association,

                                     Arlington, VA, July 13, 1999.
     Hon. Judd Gregg,
     U.S. Senate,
     Washington, DC.
       Dear Senator Gregg: The 60 Plus Association strongly 
     endorses your proposal to safeguard Social Security. 
     Especially significant, we believe, is that your proposal is 
     bipartisan co-sponsored by your colleagues Senators Bob 
     Kerrey, John Breaux and Charles Robb. Clearly, any reform 
     must be palatable to both parties. Your measure reduces the 
     unfunded liability of the Social Security system (currently 
     set by the Social Security system) and saves Social Security 
     for 75 years and even longer.
       Significantly, all workers under the age of 62 would 
     receive Personal Retirement Accounts that they own, control, 
     and, most importantly, can pass on to their heirs.
       60 Plus believes it is more progressive than the current 
     system in that low-wage workers will receive a higher defined 
     benefit than is promised from Social Security.
       Your proposal doesn't raise the age at which you can get 
     benefits although it accelerates the current law increase to 
     67. Also, it does not rely on IOUs in the Social Security 
     Trust Fund. We hope that Congress will act on it soon.
           Sincerely,
                                                  James L. Martin,
                                                        President.

  Mr. GREGG. Mr. President, I rise today to introduce what I truly 
believe is Congress's ``last, best hope'' to place Social Security on a 
course of long-term health in this session of Congress. I strongly urge 
my colleagues to look carefully at this bipartisan, bicameral, fiscally 
responsible plan, and to give their support to this, our best chance to 
meet our important responsibility to take action so as to enable Social 
Security to continue to meet its historic mission of providing senior 
citizens with insurance against poverty in old age.
  The proposal that I will discuss was negotiated over several months 
between a bipartisan group of committed reformers in the Senate. It 
already has more cosponsors than any other competing proposal. Those 
cosponsors include myself, Senator Bob Kerrey, Senator John Breaux, 
Senator Chuck Grassley, Senator Fred Thompson, Senator Chuck Robb, and 
Senator Craig Thomas.
  What I want to do in my remarks is to describe what our proposal 
would achieve, and then to provide some details as to how it achieves 
these goals. It would: s
  Make Social Security solvent. Not simply for 75 years, but 
perpetually, as far as SSA can estimate. Our proposal would leave the 
system on a permanently sustainable path.
  Increase Social Security benefits beyond what the current system can 
fund. I will follow up with some details as to why and how.
  It would drastically reduce taxes below current-law levels. Again, I 
will provide details as to why and how it does this.
  It will make the system far less costly than current law, and also 
less costly than competing reform proposals.
  It will not touch the benefits of current retirees.
  It will strengthen the ``safety net'' against poverty and provide 
additional protections for the disabled, for widows, and for other 
vulnerable sectors of the population.
  It will vastly reduce the federal government's unfunded liabilities.
  It would use the best ideas provided by reformers across the 
political spectrum, and thus offers a practical opportunity for a 
larger bipartisan agreement.
  It will provide for fairer treatment across generations, across 
demographic

[[Page S8720]]

groups. It would improve the work incentives of the current system.
  I would like now to explain how our proposal achieves all of these 
objectives:
  Our system would make the system solvent for as far as the Social 
Security Actuaries are able to estimate.
  How does it do this? Above all else, it accomplishes this through 
advance funding.
  As the members of this Committee know, our population is aging 
rapidly. Currently we have a little more than 3 workers paying into the 
system for every 1 retiree taking out of it. Within a generation, that 
ratio will be down to 2:1.
  As a consequence, if we did nothing, future generations would be 
assessed skyrocketing tax rates in order to meet benefit promises. The 
projected cost (tax) rate of the Social Security system, according to 
the Actuaries, will be almost 18% by 2030.
  The Trust Fund is not currently scheduled to become insolvent until 
2034, but as most acknowledge, the existence of the Trust Fund has 
nothing to do with the government's ability to pay benefits. President 
Clinton's submitted budget for this year made the point as well as I 
possibly could:

       These balances are available to finance future benefit 
     payments and other trust fund expenditures--but only in a 
     bookkeeping sense . . . They do not consist of real economic 
     assets that can be drawn down in the future to fund benefits. 
     Instead, they are claims on the Treasury that, when redeemed, 
     will have to be financed by raising taxes, borrowing from the 
     public, or reducing benefits or other expenditures. The 
     existence of large Trust Fund balances, therefore, does not, 
     by itself, have any impact on the Government's ability to pay 
     benefits.

  In other words, we have a problem that arises in 2014, not in 2034, 
and it quickly becomes an enormous one unless we find a way to put 
aside savings today. This does not mean simply adding a series of 
credits to the Social Security Trust Fund, which would have no positive 
impact, as the quote from the President's budget clearly shows.
  What we have to do is begin to advance fund the current system, and 
that means taking some of that surplus Social Security money today out 
of the federal coffers and into a place where it can be saved, 
invested--owned by individual beneficiaries. That money would belong to 
them immediately, even though they could not withdraw it before 
retirement. But it would be a real asset in their name.
  By doing this, we can reduce the amount of the benefit that needs to 
be funded in the future by raising taxes on future generations. This is 
the critical objective, but it allows for flippant political attacks. 
If you give someone a part of their benefit today, in their personal 
account, and less of it later on, some will say that it is a ``cut'' in 
benefits. It is no such thing. Only in Washington can giving people 
ownership rights and real funding for a portion of their benefits, and 
increasing their total real value, be construed as a cut. Accepting 
such terminology can only lead to one conclusion--that we can't advance 
fund, because we simply have to be sure that every penny of future 
benefits comes from taxing future workers. So we need to get out of 
that rhetorical trap.
  Our proposal has been certified by the actuaries as attaining 
actuarial solvency, and in fact it goes so far as to slightly 
overshoot. We are ``overbalanced'' in the years after 2050, and have 
some room to modify the proposal in some respects and yet still stay in 
balance.
  I would note the consensus that has developed for some form of 
advance funding. This was one of the few recommendations that united an 
otherwise divided Social Security Advisory Council in 1996. The major 
disagreements today among policymakers consist only in the area of who 
should control and direct the investment opportunities created within 
Social Security. I believe strongly, and I believe a Congressional 
majority agrees, that this investment should be directed by individual 
beneficiaries, not by the federal government or any other public board.
  We have worked with the Social Security actuaries and the 
Congressional Research Service to estimate the levels of benefits 
provided under our plan.
  There are certain bottom-line points that should be recognized about 
our plan. Among them:
  (1) Low-wage earners in every birth cohort measured would experience 
higher benefits under our plan than current law can sustain, even 
without including the proceeds from personal accounts.
  (2) Average earners in every birth cohort measured would experience 
higher benefits under our plan than current law can sustain, even if 
their personal accounts only grew at the projected bond rate of 3.0%.
  (3) Maximum earners in some birth cohorts would need either to 
achieve the historical rate of return on stocks, or to put in 
additional voluntary contributions, in order to exceed benefit levels 
of current law. However, the tax savings to high-income earners, which 
I will outline in the next section, will be so great that on balance 
they would also benefit appreciably from our reform plan.
  Under current law, a low-wage individual retiring in the year 2040 at 
the age of 65 would be promised a monthly benefit of $752. However, due 
to the pending insolvency of the system, only $536 of that can be 
funded. We cannot know in advance how future generations would 
distribute the program changes between benefit cuts and tax increases. 
But we do know that our plan, thanks to advance funding, would offer a 
higher benefit to that individual, from a fully solvent system that 
would eliminate the need for those choices.
  I will provide tables that are based on the research of the 
Congressional Research Service that make clear all of the above points. 
The CRS makes projections that assume that under current law, benefits 
would be paid in full until 2034, and then suddenly cut by more than 
25% when the system becomes insolvent. CRS can make no other 
presumption in the absence of advance knowledge of how Congress would 
distribute the pain of benefit reductions among birth cohorts. In order 
to translate the CRS figures into a more plausible outcome, we added a 
column showing the effects that would come from the benefit reductions 
under current law being shared equally by all birth cohorts.

    BENEFIT TABLE NO. 1.--THE BIPARTISAN PLAN'S BENEFITS WOULD BE HIGHER FOR LOW-INCOME WORKERS EVEN WITHOUT
                                           COUNTING PERSONAL ACCOUNTS
        [(Assumes Steady Low-Wage Worker) (Monthly Benefit, 1999 Dollars) (Assumes Retirement at Age 65)]
----------------------------------------------------------------------------------------------------------------
                                                                          Bipartisan
                                                                          plan (bond  Bipartisan    Bipartisan
     Yr. and current law (benefit cuts begin in 2034)        Current law    rate no    plan (w/o    plan (w/1%
                                                            sustainable*     vol.       account      voluntary
                                                                           contrib.)   benefits)  contributions)
----------------------------------------------------------------------------------------------------------------
2000    626...............................................          517          615         606           627
2005    624...............................................          515          620         601           645
2010    652...............................................          539          698         667           738
2015    673...............................................          556          733         687           790
2020    660...............................................          545          754         691           832
2030    690...............................................          570          776         694           877
2035    512...............................................          595          798         693           926
2040    536...............................................          621          821         689           981
2050    582...............................................          678          869         710          1051
2060    611...............................................          739          920         749         1107
----------------------------------------------------------------------------------------------------------------
* The Congressional Research Service, in the left-hand column, assumes that all of the burden of benefit changes
  under current law will commence in 2034. In order to produce a more realistic prediction of how the changes
  required under current law would be spread, the ``current law sustainable'' column assumes that they have been
  spread equally among birth cohorts throughout the valuation period.


 BENEFIT TABLE NO. 2: THE BIPARTISAN PLAN'S BENEFITS WOULD BE HIGHER FOR AVERAGE-INCOME WORKERS EVEN IF ACCOUNTS
                                     EARN ONLY A BOND RATE OF RETURN (3.0%)
      [(Assumes Steady Average-Wage Worker) (Monthly Benefit, 1999 Dollars) (Assumes Retirement at Age 65)]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Bipartisan
                                                                          Bipartisan  Bipartisan    plan (w/1%
      Yr and current law (benefit cuts begin in 2034)        Current law  plan (bond     plan          vol.
                                                             sustainable   rate, no     (stock    contributions,
                                                                  *        voluntary     rate)      bond rate)
----------------------------------------------------------------------------------------------------------------
2000    1032..............................................          852         1014        1016          1029
2005    1031..............................................          852          973         982          1006
2010    1076..............................................          889          991        1014          1046
2015    1111..............................................          918          977        1024          1057
2020    1090..............................................          900         1005        1092          1115
2030    1139..............................................          941         1083        1183          1179
2035    845...............................................          982         1063        1307          1250
2040    884...............................................         1026         1093        1476          1329
2050    961...............................................         1119         1157        1672          1442
2060    1007..............................................         1221         1225        1778         1531
----------------------------------------------------------------------------------------------------------------
* The Congressional Research Service, in the left-hand column, assumes that all of the burden of benefit changes
  under current law will commence in 2034. In order to produce a more realistic prediction of how the changes
  required under current law would be spread, the ``current law sustainable'' column assumes that they have been
  spread equally among birth cohorts throughout the valuation period.

  The alternative course is that current benefit promises would be met 
in full by raising taxes, both under current law and under proposals to 
simply transfer credits to the Social Security Trust Fund. I have also 
provided a table that shows the size of these tax costs, and will 
comment further upon them in the next portion of my statement.
  I would like to point out that these figures apply to individuals 
retiring at

[[Page S8721]]

the age of 65. Thus, even with the increased actuarial adjustment for 
early retirement under our plan, and even though our plan would 
accelerate the pace at which the normal retirement age would reach its 
current-law target of 67, benefits under our proposal for individuals 
retiring at 65 would still be higher.
  Our tables also show that the progressive match program for low-
income individuals will also add enormously to the projected benefits 
that they will receive.
  If there is a single most obvious and important benefit of enacting 
this reform, it is in the tax reductions that will result from it.
  I am not referring to the most immediate tax reduction, the payroll 
tax cut that will be given to individuals in the form of a refund into 
a personal account.
  The greatest reduction in taxes would come in the years from 2015 on 
beyond. At that time, under current law--and under many reform plans--
enormous outlays from general revenues would be needed to redeem the 
Social Security Trust Fund, or to fund personal accounts. The net cost 
of the system would begin to climb. The federal government would have 
to collect almost 18% of national taxable payroll in the year 2030, 
more than 5 points of that coming from general revenues.
  The hidden cost of the current Social Security system is not the 
payroll tax increases that everyone knows would be required after 2034, 
but the general tax increases that few will admit would be required 
starting in 2014.
  With my statement, I include a table showing the effective tax rate 
costs of current law as well as the various actuarially sound reform 
proposals that have been placed before the Congress. These figures come 
directly from the Social Security actuaries. They include the sum of 
the costs of paying OASDI benefits, plus any mandatory contributions to 
personal accounts. (Under our proposal, additional voluntary 
contributions would also be permitted. But any federal ``matches'' of 
voluntary contributions from general revenues would be contingent upon 
new savings being generated.)
  Let me return to our individual who is working in the year 2025 under 
current law. In that year, a tax increase equal to 3.61% of payroll 
would effectively need to be assessed through general revenues in order 
to pay promised benefits. As a low-income individual, his share of that 
burden would be less than if it were assessed through the payroll tax, 
but it would still be real. Under current law, his income tax burden 
comes to about $241 annually.

                          COMPARISON OF COST RATES OF CURRENT LAW AND ALTERNATIVE PLANS
    [(As a percentage of taxable payroll) (Annual cost includes OASDI outlays plus contributions to personal
                                      accounts.) Peak cost year in italic]
----------------------------------------------------------------------------------------------------------------
                                                     Senate          Kolbe/
      Year and current law        Archer/  Shaw    Bipartisan       Stenholm          Gramm           Nadler
----------------------------------------------------------------------------------------------------------------
2000    10.8...................           12.8            12.7            12.9            15.0   10.4*
2005    11.2...................           13.3            13.2            13.0            15.2   10.6
2010    11.9...................           13.9            13.4            13.4            15.6   11.2
2015    13.3...................           15.0            14.0            14.0            16.4   12.5
2020    15.0...................           16.4            14.7            14.8            17.3   12.8 (14.2)
2025    16.6...................           17.4            15.4            15.6            17.6   14.4 (15.8)
2030    17.7...................           17.8            15.7            15.7            17.1   15.5 (16.9)
2035    18.2...................           17.3            15.5            15.2            16.4   15.9 (17.4)
2040    18.2...................           16.2            14.8            14.5            15.2   16.0 (17.5)
2045    18.2...................           14.9            14.3            13.8            14.1   16.1 (17.5)
2050    18.3...................           13.8            13.9            13.3            13.4   16.3 (17.7)
2055    18.6...................           13.1            13.7            13.2            13.0   16.6 (18.0)
2060    19.1...................           12.6            13.7            13.1            12.8   16.9 (18.5)
2065    19.4...................           12.3            13.6            13.4            12.5   17.1 (18.8)
2070    19.6...................           12.1            13.5            13.7            12.4   17.3 (19.0)
----------------------------------------------------------------------------------------------------------------
(Figures come from analyses completed of each plan by Social Security actuaries. Archer/Shaw plan memo of April
  29, 1999. Senate bipartisan plan (Gregg/Kerrey/Breaux/Grassley et al) memo of June 3, 1999. Kolbe/Stenholm
  plan memo of May 25, 1999. Gramm plan memo of April 16, 1999. Nadler plan memo of June 3, 1999. Nadler plan
  total cost given in parentheses, cost estimate given on assumption that stock sales reduce amount of bonds
  that must be redeemed from tax revenue. Due to construction of plans, cost rates for the Archer/Shaw, Gramm,
  and Nadler plans would vary according to rate of return received on stock investments.)
 
*Tax rate of Nadler plan is lower than current law not because total costs are less but because amount of
  national income subject to tax is greater. In order to compare total costs of Nadler plan to other plans, cost
  rate given in Nadler column must be multiplied by a factor that varies through time. This factor would be
  close to 1.06 in the beginning of the valuation period, and would gradually decline to 1.03 at the end. For
  example, the tax rate given as 11.2% in 2010 under the Nadler column would equate to the same total tax cost
  as the 11.9% figure in the current law column.


 PART II--COMPARISON OF COST RATES OF CURRENT LAW AND ALTERNATIVE PLANS
 [As a percentage of taxable payroll--annual cost includes OASDI outlays
   plus contributions to personal accounts--peak cost year in italic]
------------------------------------------------------------------------
                                               Current      Moynihan/
                    Year                         law          Kerrey
------------------------------------------------------------------------
2000........................................       10.8    * 11.1 (13.1)
2005........................................       11.2      11.0 (13.0)
2010........................................       11.9      10.9 (12.9)
2015........................................       13.3      11.5 (13.5)
2020........................................       15.0      12.2 (14.2)
2025........................................       16.6      13.2 (15.2)
2030........................................       17.7      13.8 (15.8)
2035........................................       18.2      14.0 (16.0)
2040........................................       18.2      14.0 (16.0)
2045........................................       18.2      14.0 (16.0)
2050........................................       18.3      14.2 (16.2)
2055........................................       18.6      14.5 (16.5)
2060........................................       19.1      14.7 (16.7)
2065........................................       19.4      14.8 (16.8)
2070........................................       19.6     14.9 (16.9)
------------------------------------------------------------------------
* (Analysis of Moynihan/Kerrey plan is based on SSA actuaries' memo of
  January 11, 1999, and is listed separately because it is the only
  projection provided here based on the 1998 Trustees' Report. 1999 re-
  estimates would vary. Unlike the other personal account proposals, the
  accounts in Moynihan/Kerrey plan are voluntary. The figure without
  parentheses assumes no contributions to, and thus no income from,
  personal accounts. The figure inside parentheses assumes universal
  participation in 2% personal accounts, for comparison with other
  personal account plans.)
*--Like the Nadler plan, the Moynihan/Kerrey plan would increase the
  share of national income subject to Social Security taxation, but to a
  lesser degree. Thus, tax rates will appear lower than would an
  equivalent amount of tax revenue collected under the Archer/Shaw,
  Gramm, or Kolbe/Stenholm plans. The correction factor required to
  translate one cost rate into another would be between 1.03-1.06 for
  the Nadler proposal, 1.01-1.02 for the Senate bipartisan proposal, and
  1.01-1.04 for the Moynihan/Kerrey proposal.

  Under our proposal, that tax burden would drop by roughly 37%, from 
$241 to $153.
  Middle and high-income workers would not experience benefit increases 
as generous as those provided to low-income individuals under our plan. 
But we have determined that by the year 2034, an average wage earner 
would save the equivalent of $650 a year (1999 dollars) in income 
taxes, and a maximum-wage earner, $2,350 a year. I want to stress that 
these savings are net of any effects of re-indexing CPI upon the income 
tax rates. These are net tax reductions, even including our CPI 
reforms.
  I would also stress that 2025 is not a particularly favorable example 
to select. Our relative tax savings get much larger after that point, 
growing steadily henceforth.
  A look at our chart showing total costs reveals how quickly our 
proposal, as well as the Kolbe-Stenholm proposal, begins to reduce tax 
burdens.
  A plan as comprehensive as ours can be picked apart by critics, 
provision by provision. It is easy to criticize a plan's parts in 
isolation from the whole, and to say that one of them is 
disadvantageous, heedless of the other benefits and gains provided. One 
reason for the specific choices that we made is revealed in this 
important table. The result of not making them is simply that, by the 
year 2030, the effective tax rate of the system will surpass 17%, an 
unfortunate legacy to leave to posterity.
  How would current retirees be affected by our proposal?
  Only in one way. Their benefits would come from a solvent system, and 
therefore, political pressure to cut their benefits will be reduced. 
Our proposal would not affect their benefits in any way. Even the 
required methodological corrections to the Consumer Price Index would 
not affect the benefits of current retirees.
  Under current law, there is no way of knowing what future generations 
will do when the tax levels required to support this system begin to 
rise in the year 2014. We do not know whether future generations will 
be able to afford to increase the tax costs of the system to 18% of the 
national tax base by the year 2030, or whether other pressing national 
needs, such as a recession or an international conflict will make this 
untenable. Current law may therefore contain the seeds of political 
pressure to cut benefits. Moreover, as general revenues required to 
sustain the system grow to the levels of hundreds of billions each 
year, there is the risk that upper-income individuals will correctly 
diagnose that the system has become an irretrievably bad deal for them, 
and that they will walk away from this important program.

[[Page S8722]]

  By eliminating the factors that might lead to pressure to cut 
benefits, our proposal would keep the benefits of seniors far more 
secure.
  Poverty would be reduced under our proposal, even if the personal 
accounts do not grow at an aggressive rate. The reason for this is that 
our proposal would increase the progressivity of the basic defined, 
guaranteed Social Security benefit. It would also gradually phase in 
increased benefits for widows.
  Moreover, our plan would protect the disabled. They would be 
unaffected by the changes made to build new saving into the system. 
Their benefits would not be impacted by the benefit offsets 
proportional to personal account contributions. If an individual 
becomes disabled prior to retirement age, they would receive their 
current-law benefit.
  It is important to recognize that we do not face a choice between 
maintaining Social Security as a ``social insurance'' system and as an 
``earned benefit.'' It has always served both functions, and it must 
continue to do so in order to sustain political support. The system 
must retain some features of being an ``earned benefit'' so as not be 
reduced to a welfare program only. This is why proposals to simply bail 
out the system through general revenue transfusions alone--to turn it 
into, effectively, another welfare program in which contributions and 
benefits are not related--are misguided and undermine the system's 
ethic.
  Again, I would repeat that our proposal contains important benefits 
for all individuals. Guaranteed benefits on the low-income end would be 
increased. High income earners would be spared the large current-law 
tax increases that would otherwise be necessary. If we act responsibly 
and soon, we can accomplish a reform that serves the interests of all 
Americans.
  By putting aside some funding today, and reducing the proportion of 
benefits that are financed solely by taxing future workers, our 
proposal would vastly reduce the system's unfunded liabilities.
  Consider such a year as 2034. Under current law, the government would 
have a liability from general revenues to the Trust Fund equal to an 
approximately 5 point payroll tax increase. By advance funding 
benefits, our plan would reduce the cost of OASDI outlays in that year 
from more than 18% to less than 14%. The pressure on general revenue 
outlays would be reduced by more than half.
  The Social Security system would be left on a sustainable course. The 
share of benefits each year that are unfunded liabilities would begin 
to go down partway through the retirement of the baby boom generation. 
By the end of the valuation period, the actuaries tell us, the system 
would have a rising amount of assets in the Trust Fund.
  Mr. President, I would stress to you that our plan is not the work of 
any one single legislator. It is the product of painstaking 
negotiations conducted over several months. The seven names that you 
see on the proposal are not the only ones who contributed to it. We 
took the best ideas that we could find from serious reform plans 
presented across the political spectrum. Each of us had to make 
concessions that we did not like. But we did this in the interest of 
reaching a bipartisan accord.
  We believe that our plan is indicative of the product that would 
result from a larger bipartisan negotiation in the Congress. 
Accordingly, we believe that it provides the best available vehicle for 
negotiations with the President if he chooses to become substantively 
involved. It was our hope to put forth a proposal on a bipartisan 
basis, so that the President would not have to choose between 
negotiating with a ``Republican plan'' or a ``Democratic plan.'' 
Stalemate will not save our Social Security system.
  The changes effected in our bipartisan bill do not, all of them, 
relate solely to fixing system solvency.
  One area of reforms includes improved work incentives. Our proposal 
would eliminate the earnings limit for retirees. It would also correct 
the actuarial adjustments for early and late retirement so that 
beneficiaries who continue to work would receive back in benefits the 
value of the extra payroll taxes they contributed. The proposal would 
also change the AIME formula so that the number of earnings years in 
the numerator would no longer be tied to the number of years in the 
denominator. In other words, every year of earnings, no matter how 
small, would have the effect of increasing overall benefits (Under 
current law, only the earnings in the top earnings years are counted 
towards benefits, and the more earnings years that are counted, the 
lower are is the resulting benefit formula.)
  We also included several provisions designed to address the needs of 
specific sectors of the population who are threatened under current 
law. For example, we gradually would increase the benefits provided to 
widows, so that they would ultimately be at least 75% of the combined 
value of the benefits that husband and wife would have been entitled to 
on their own.
  We also recognized the poor treatment of two-earner couples relative 
to one-earner couples under the current system. Our proposal includes 
five ``dropout years'' in the benefit formula pertaining to two earner 
couples, in recognition of the time that a spouse may have had to take 
out of the work force.
  Unveiling a proposal as comprehensive as ours invariably creates 
misunderstanding as to the effect of its various provisions.
  First, let me address the impact of our reforms on the Consumer Price 
Index. Most economists agree that further reforms are necessary to 
correct measures of the Consumer Price Index, and our proposal would 
instruct BLS to make them. Correcting the CPI would have an effect on 
government outlays as well as revenues. This is not a ``benefit cut'' 
or a ``tax increase,'' it is a correction. We would take what was 
incorrectly computed before and compute it correctly from now on. No 
one whose income stays steady in real terms would see a tax increase. 
No one's benefits would grow more slowly than the best available 
measure of inflation.
  However, we wanted to be doubly certain that any effects of the CPI 
change upon federal revenues not become a license for the government to 
spend these revenues on new ventures. Accordingly, we included a ``CPI 
recapture'' provision to ensure that any revenues generated by this 
reform be returned to taxpayers as Social Security benefits, rather 
than being used to finance new government spending. This is the reason 
for the ``CPI recapture'' provision in the legislation.
  Our proposal would not increase taxes in any form. The sum total of 
the effects of all provisions in the legislation that might increase 
revenues are greatly exceeded by the effects of the legislation that 
would cut tax levels. The chart showing total cost rates makes this 
clear.
  Our provision to re-index the wage cap is an important compromise 
between competing concerns. Fiscal conservatives are opposed to 
arbitrarily raising the cap on taxable wages. The case made from the 
left is that, left unchanged, the proportion of national wages subject 
to Social Security taxation would actually drop.
  Our proposal found a neat bipartisan compromise between these 
competing concerns. It would maintain the current level of benefit 
taxation of 86% of total national wages. This would only have an effect 
on total revenues if the current-law formulation would have actually 
caused a decrease in tax levels. If total wages outside the wage cap 
grow in proportion to national wages currently subject to taxation, 
there would be no substantive effect. This proposal basically asks 
competing concerns in this debate to ``put their money where their 
mouth is.'' If the concern is that we would otherwise have an indexing 
problem, this proposal would resolve it. If the concern is that we 
should not increase the proportion of total wages subject to taxation, 
this proposal meets that, too. I would further add that the figure we 
choose--86%--is the current-law level. Some proposals would raise this 
to 90%, citing the fact that at one point in history it did rise to 
90%. The historical average has actually been closer to 84%, and we did 
not find the case for raising it to 90% to be persuasive. Keeping it at 
its current level of 86% is a reasonable bipartisan resolution of this 
issue.
  In conclusion, this proposal represents our best hope to achieve 
meaningful and responsible bipartisan reform of Social Security in this 
Congress. It does not represent a partisan

[[Page S8723]]

``statement.'' It has not been drawn up in the spirit of ideological 
``purity.'' Rather, it combines the best ideas of the most committed 
reformers in the Senate. I am grateful to the other negotiators who 
worked so hard to put together this package, and I thank them--Senator 
Bob Kerrey, Senator John Breaux, Senator Chuck Grassley, Senator Fred 
Thompson, Senator Chuck Robb, and Senator Craig Thomas--for their 
tireless efforts to get this job done.
  It is not the plan that I would have drawn up by myself. It is not 
the plan that Senator Kerrey would have drawn up by himself. Each of us 
had to give up something in the interest of crafting a proposal that 
truly represented a bipartisan compromise. Without such compromise, we 
will never be able to take action to safeguard benefits for our senior 
citizens.
  I hope that my colleagues will join our bipartisan team and cosponsor 
this critically important legislation to reduce the unfunded 
liabilities of our Social Security system and to put critical funding 
and investment behind the benefits that it promises. I thank my 
colleagues and I ask unanimous consent that the full text of the bill 
be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1383

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Bipartisan 
     Social Security Reform Act of 1999.''
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                  TITLE I--INDIVIDUAL SAVINGS ACCOUNTS

Sec. 101. Individual savings accounts.
Sec. 102. Social security KidSave Accounts.
Sec. 103. Adjustments to primary insurance amounts under part A of 
              title II of the Social Security Act.

              TITLE II--SOCIAL SECURITY SYSTEM ADJUSTMENTS

Sec. 201. Adjustments to bend points in determining primary insurance 
              amounts.
Sec. 202. Adjustment of widows' and widowers' insurance benefits.
Sec. 203. Elimination of earnings test for individuals who have 
              attained early retirement age.
Sec. 204. Gradual increase in number of benefit computation years; use 
              of all years in computation.
Sec. 205. Maintenance of benefit and contribution base.
Sec. 206. Reduction in the amount of certain transfers to Medicare 
              Trust Fund.
Sec. 207. Actuarial adjustment for retirement.
Sec. 208. Improvements in process for cost-of-living adjustments.
Sec. 209. Modification of increase in normal retirement age.
Sec. 210. Modification of PIA factors to reflect changes in life 
              expectancy.
Sec. 211. Mechanism for remedying unforeseen deterioration in social 
              security solvency.

                  TITLE I--INDIVIDUAL SAVINGS ACCOUNTS

     SEC. 101. INDIVIDUAL SAVINGS ACCOUNTS.

       (a) Establishment and Maintenance of Individual Savings 
     Accounts.--Title II of the Social Security Act (42 U.S.C. 401 
     et seq.) is amended--
       (1) by inserting before section 201 the following:

                    ``Part A--Insurance Benefits'';

     and
       (2) by adding at the end the following:

                 ``Part B--Individual Savings Accounts


                     ``individual savings accounts

       ``Sec. 251. (a) Establishment.--
       ``(1) In general.--
       ``(A) Establishment in absence of kidsave account.--Except 
     as provided in subparagraph (B), the Commissioner of Social 
     Security, within 30 days of the receipt of the first 
     contribution received pursuant to subsection (b) with respect 
     to an eligible individual, shall establish in the name of 
     such individual an individual savings account. The individual 
     savings account shall be identified to the account holder by 
     means of the account holder's Social Security account number.
       ``(B) Use of kidsave account.--If a KidSave Account has 
     been established in the name of an eligible individual under 
     section 262(a) before the date of the first contribution 
     received by the Commissioner pursuant to subsection (b) with 
     respect to such individual, the Commissioner shall 
     redesignate the KidSave Account as an individual savings 
     account for such individual.
       ``(2) Definition of eligible individual.--In this part, the 
     term `eligible individual' means any individual born after 
     December 31, 1937.
       ``(b) Contributions.--
       ``(1) Amounts transferred from the trust fund.--The 
     Secretary of the Treasury shall transfer from the Federal 
     Old-Age and Survivors Insurance Trust Fund, for crediting by 
     the Commissioner of Social Security to an individual savings 
     account of an eligible individual, an amount equal to the sum 
     of any amount received by such Secretary on behalf of such 
     individual under section 3101(a)(2) or 1401(a)(2) of the 
     Internal Revenue Code of 1986.
       ``(2) Other contributions.--For provisions relating to 
     additional contributions credited to individual savings 
     accounts, see sections 531(c)(2) and 6402(l) of the Internal 
     Revenue Code of 1986.
       ``(c) Designation of Investment Type of Individual Savings 
     Account.--
       ``(1) Designation.--Each eligible individual who is 
     employed or self-employed shall designate the investment type 
     of individual savings account to which the contributions 
     described in subsection (b) on behalf of such individual are 
     to be credited.
       ``(2) Form of designation.--The designation described in 
     paragraph (1) shall be made in such manner and at such 
     intervals as the Commissioner of Social Security may 
     prescribe in order to ensure ease of administration and 
     reductions in burdens on employers.
       ``(3) Special rule for 2000.--Not later than January 1, 
     2000, any eligible individual that is employed or self-
     employed as of such date shall execute the designation 
     required under paragraph (1).
       ``(4) Designation in absence of designation by eligible 
     individual.--In any case in which no designation of the 
     individual savings account is made, the Commissioner of 
     Social Security shall make the designation of the individual 
     savings account in accordance with regulations that take into 
     account the competing objectives of maximizing returns on 
     investments and minimizing the risk involved with such 
     investments.
       ``(d) Treatment of Incompetent Individuals.--Any 
     designation under subsection (c)(1) to be made by an 
     individual mentally incompetent or under other legal 
     disability may be made by the person who is constituted 
     guardian or other fiduciary by the law of the State of 
     residence of the individual or is otherwise legally vested 
     with the care of the individual or his estate. Payment under 
     this part due an individual mentally incompetent or under 
     other legal disability may be made to the person who is 
     constituted guardian or other fiduciary by the law of the 
     State of residence of the claimant or is otherwise legally 
     vested with the care of the claimant or his estate. In any 
     case in which a guardian or other fiduciary of the individual 
     under legal disability has not been appointed under the law 
     of the State of residence of the individual, if any other 
     person, in the judgment of the Commissioner, is responsible 
     for the care of such individual, any designation under 
     subsection (c)(1) which may otherwise be made by such 
     individual may be made by such person, any payment under this 
     part which is otherwise payable to such individual may be 
     made to such person, and the payment of an annuity payment 
     under this part to such person bars recovery by any other 
     person.


   ``definition of individual savings account; treatment of accounts

       ``Sec. 252. (a) Individual Savings Account.--In this part, 
     the term `individual savings account' means any individual 
     savings account in the Individual Savings Fund (established 
     under section 254) which is administered by the Individual 
     Savings Fund Board.
       ``(b) Treatment of Account.--Except as otherwise provided 
     in this part and in section 531 of the Internal Revenue Code 
     of 1986, any individual savings account described in 
     subsection (a) shall be treated in the same manner as an 
     individual account in the Thrift Savings Fund under 
     subchapter III of chapter 84 of title 5, United States Code.


               ``individual savings account distributions

       ``Sec. 253. (a) Date of Initial Distribution.--Except as 
     provided in subsection (c), distributions may only be made 
     from an individual savings account of an eligible individual 
     on and after the earliest of--
       ``(1) the date the eligible individual attains normal 
     retirement age, as determined under section 216 (or early 
     retirement age (as so determined) if elected by such 
     individual), or
       ``(2) the date on which funds in the eligible individual's 
     individual savings account are sufficient to provide a 
     monthly payment over the life expectancy of the eligible 
     individual (determined under reasonable actuarial 
     assumptions) which, when added to the eligible individual's 
     monthly benefit under part A (if any), is at least equal to 
     an amount equal to \1/12\ of the poverty line (as defined in 
     section 673(2) of the Community Services Block Grant Act (42 
     U.S.C. 9902(2) and determined on such date for a family of 
     the size involved) and adjusted annually thereafter by the 
     adjustment determined under section 215(i).
       ``(b) Forms of Distribution.--
       ``(1) Required monthly payments.--Except as provided in 
     paragraph (2), beginning with the date determined under 
     subsection (a), the balance in an individual savings account 
     available to provide monthly payments not in excess of the 
     amount described in subsection (a)(2) shall be paid, as 
     elected by the account holder (in such form and manner as 
     shall be prescribed in regulations of the Individual Savings 
     Fund Board), by means of the purchase of annuities or equal 
     monthly payments over the life expectancy of the eligible

[[Page S8724]]

     individual (determined under reasonable actuarial 
     assumptions) in accordance with requirements (which shall be 
     provided in regulations of the Board) similar to the 
     requirements applicable to payments of benefits under 
     subchapter III of chapter 84 of title 5, United States Code, 
     and providing for indexing for inflation.
       ``(2) Payment of excess funds.--To the extent funds remain 
     in an eligible individual's individual savings account after 
     the application of paragraph (1), such funds shall be payable 
     to the eligible individual in such manner and in such amounts 
     as determined by the eligible individual, subject to the 
     provisions of subchapter III of chapter 84 of title 5, United 
     States Code.
       ``(c) Distribution in the Event of Death Before the Date of 
     Initial Distribution.--If the eligible individual dies before 
     the date determined under subsection (a), the balance in such 
     individual's individual savings account shall be distributed 
     in a lump sum, under rules established by the Individual 
     Savings Fund Board, to the individual's heirs.


                       ``individual savings fund

       ``Sec. 254. (a) Establishment.--There is established and 
     maintained in the Treasury of the United States an Individual 
     Savings Fund in the same manner as the Thrift Savings Fund 
     under sections 8437, 8438, and 8439 (but not section 8440) of 
     title 5, United States Code.
       ``(b) Individual Savings Fund Board.--
       ``(1) In general.--There is established and operated in the 
     Social Security Administration an Individual Savings Fund 
     Board in the same manner as the Federal Retirement Thrift 
     Investment Board under subchapter VII of chapter 84 of title 
     5, United States Code.
       ``(2) Specific investment and reporting duties.--
       ``(A) In general.--The Individual Savings Fund Board shall 
     manage and report on the activities of the Individual Savings 
     Fund and the individual savings accounts of such Fund in the 
     same manner as the Federal Retirement Thrift Investment Board 
     manages and reports on the Thrift Savings Fund and the 
     individual accounts of such Fund under subchapter VII of 
     chapter 84 of title 5, United States Code.
       ``(B) Study and report on increased investment options.--
       ``(i) Study.--The Individual Savings Fund Board shall 
     conduct a study regarding ways to increase an eligible 
     individual's investment options with respect to such 
     individual's individual savings account and with respect to 
     rollovers or distributions from such account.
       ``(ii) Report.--Not later than 2 years after the date of 
     enactment of the Bipartisan Social Security Reform Act of 
     1999, the Individual Savings Fund Board shall submit a report 
     to the President and Congress that contains a detailed 
     statement of the results of the study conducted pursuant to 
     clause (i), together with the Board's recommendations for 
     such legislative actions as the Board considers appropriate.


     ``budgetary treatment of individual savings fund and accounts

       ``Sec. 255. The receipts and disbursements of the 
     Individual Savings Fund and any accounts within such fund 
     shall not be included in the totals of the budget of the 
     United States Government as submitted by the President or of 
     the congressional budget and shall be exempt from any general 
     budget limitation imposed by statute on expenditures and net 
     lending (budget outlays) of the United States Government.''.
       (b) Modification of FICA Rates.--
       (1) Employees.--Section 3101(a) of the Internal Revenue 
     Code of 1986 (relating to tax on employees) is amended to 
     read as follows:
       ``(a) Old-Age, Survivors, and Disability Insurance.--
       ``(1) In general.--
       ``(A) Individuals covered under part a of title ii of the 
     social security act.--In addition to other taxes, there is 
     hereby imposed on the income of every individual who is not a 
     part B eligible individual a tax equal to 6.2 percent of the 
     wages (as defined in section 3121(a)) received by him with 
     respect to employment (as defined in section 3121(b)).
       ``(B) Individuals covered under part b of title ii of the 
     social security act.--In addition to other taxes, there is 
     hereby imposed on the income of every part B eligible 
     individual a tax equal to 4.2 percent of the wages (as 
     defined in section 3121(a)) received by such individual with 
     respect to employment (as defined in section 3121(b)).
       ``(2) Contribution of oasdi tax reduction to individual 
     savings accounts.--
       ``(A) In general.--In addition to other taxes, there is 
     hereby imposed on the income of every part B eligible 
     individual an individual savings account contribution equal 
     to the sum of--
       ``(i) 2 percent of the wages (as so defined) received by 
     such individual with respect to employment (as so defined), 
     plus
       ``(ii) so much of such wages (not to exceed $2,000) as 
     designated by the individual in the same manner as described 
     in section 251(c) of the Social Security Act.
       ``(B) Inflation adjustment.--
       ``(i) In general.--In the case of any calendar year 
     beginning after 2000, the dollar amount in subparagraph 
     (A)(ii) shall be increased by an amount equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year, determined by 
     substituting `calendar year 1999' for `calendar year 1992' in 
     subparagraph (B) thereof.

       ``(ii) Rounding.--If any dollar amount after being 
     increased under clause (i) is not a multiple of $10, such 
     dollar amount shall be rounded to the nearest multiple of 
     $10.''.
       (2) Self-employed.--Section 1401(a) of the Internal Revenue 
     Code of 1986 (relating to tax on self-employment income) is 
     amended to read as follows:
       ``(a) Old-Age, Survivors, and Disability Insurance.--
       ``(1) In general.--
       ``(A) Individuals covered under part a of the social 
     security act.--In addition to other taxes, there shall be 
     imposed for each taxable year, on the self-employment income 
     of every individual who is not a part B eligible individual 
     for the calendar year ending with or during such taxable 
     year, a tax equal to 12.40 percent of the amount of the self-
     employment income for such taxable year.
       ``(B) Individuals covered under part b of title ii of the 
     social security act.--In addition to other taxes, there is 
     hereby imposed for each taxable year, on the self-employment 
     income of every part B eligible individual, a tax equal to 
     10.4 percent of the amount of the self-employment income for 
     such taxable year.
       ``(2) Contribution of oasdi tax reduction to individual 
     savings accounts.--
       ``(A) In general.--In addition to other taxes, there is 
     hereby imposed for each taxable year, on the self-employment 
     income of every individual, an individual savings account 
     contribution equal to the sum of--
       ``(i) 2 percent of the amount of the self-employment income 
     for each individual for such taxable year, and
       ``(ii) so much of such self-employment income (not to 
     exceed $2,000) as designated by the individual in the same 
     manner as described in section 251(c) of the Social Security 
     Act.
       ``(B) Inflation adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning after 2000, the dollar amount in subparagraph 
     (A)(ii) shall be increased by an amount equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 1999' 
     for `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding.--If any dollar amount after being 
     increased under clause (i) is not a multiple of $10, such 
     dollar amount shall be rounded to the nearest multiple of 
     $10.''.
       (3) Part b eligible individual.--
       (A) Taxes on employees.--Section 3121 of such Code 
     (relating to definitions) is amended by inserting after 
     subsection (s) the following:
       ``(t) Part B Eligible Individual.--For purposes of this 
     chapter, the term `part B eligible individual' means, for any 
     calendar year, an individual who is an eligible individual 
     (as defined in section 251(a)(2) of the Social Security Act) 
     for such calendar year.''.
       (B) Self-employment tax.--Section 1402 of such Code 
     (relating to definitions) is amended by adding at the end the 
     following:
       ``(k) Part B Eligible Individual.--The term `part B 
     eligible individual' means, for any calendar year, an 
     individual who is an eligible individual (as defined in 
     section 251(a)(2) of the Social Security Act) for such 
     calendar year.''.
       (4) Effective dates.--
       (A) Employees.--The amendments made by paragraphs (1) and 
     (3)(A) apply to remuneration paid after December 31, 1999.
       (B) Self-employed individuals.--The amendments made by 
     paragraphs (2) and (3)(B) apply to taxable years beginning 
     after December 31, 1999.
       (c) Matching Contributions.--
       (1) In general.--Part IV of subchapter A of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to credits 
     against tax) is amended by adding at the end the following:

            ``Subpart H--Individual Savings Account Credits

``Sec. 54. Individual savings account credit.''.

     ``SEC. 54. INDIVIDUAL SAVINGS ACCOUNT CREDIT.

       ``(a) Allowance of Credit.--Each part B eligible individual 
     is entitled to a credit for the taxable year in an amount 
     equal to the sum of--
       ``(1) $100, plus
       ``(2) 100 percent of the designated wages of such 
     individual for the taxable year, plus
       ``(3) 100 percent of the designated self-employment income 
     of such individual for the taxable year.
       ``(b) Limitations.--
       ``(1) Amount.--The amount determined under subsection (a) 
     with respect to such individual for any taxable year may not 
     exceed the excess (if any) of--
       ``(A) an amount equal to 1 percent of the contribution and 
     benefit base for such taxable year (as determined under 
     section 230 of the Social Security Act), over
       ``(B) the sum of the amounts received by the Secretary on 
     behalf of such individual under sections 3101(a)(2)(A)(i) and 
     1401(a)(2)(A)(i) for such taxable year.
       ``(2) Failure to make voluntary contributions.--In the case 
     of a part B eligible individual with respect to whom the 
     amount of wages designated under section 3101(a)(2)(A)(ii) 
     plus the amount self-employment income designated under 
     section 1401(a)(2)(A)(ii) for the taxable year is less

[[Page S8725]]

     that $1, the credit to which such individual is entitled 
     under this section shall be equal to zero.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Part b eligible individual.--The term `part B 
     eligible individual' means, for any calendar year, an 
     individual who--
       ``(A) is an eligible individual (as defined in section 
     251(a)(2) of the Social Security Act) for such calendar year, 
     and
       ``(B) is not an individual with respect to whom another 
     taxpayer is entitled to a deduction under section 151(c).
       ``(2) Designated wages.--The term `designated wages' means 
     with respect to any taxable year the amount designated under 
     section 3101(a)(2)(A)(ii).
       ``(3) Designated self-employment income.--The term 
     `designated self-employment income' means with respect to any 
     taxable year the amount designated under section 
     1401(a)(2)(A)(ii) for such taxable year.
       ``(d) Credit Used Only for Individual Savings Account.--For 
     purposes of this title, the credit allowed under this section 
     with respect to any part B eligible individual--
       ``(1) shall not be treated as a credit allowed under this 
     part, but
       ``(2) shall be treated as an overpayment of tax under 
     section 6401(b)(3) which may, in accordance with section 
     6402(l), only be transferred to an individual savings account 
     established under part B of title II of the Social Security 
     Act with respect to such individual.''.
       (2) Contribution of credited amounts to individual savings 
     account.--
       (A) Credited amounts treated as overpayment of tax.--
     Subsection (b) of section 6401 of such Code (relating to 
     excessive credits) is amended by adding at the end the 
     following:
       ``(3) Special rule for credit under section 54.--Subject to 
     the provisions of section 6402(l), the amount of any credit 
     allowed under section 54 for any taxable year shall be 
     considered an overpayment.''.
       (B) Transfer of credit amount to individual savings 
     account.--Section 6402 of such Code (relating to authority to 
     make credits or refunds) is amended by adding at the end the 
     following:
       ``(l) Overpayments Attributable to Individual Savings 
     Account Credit.--In the case of any overpayment described in 
     section 6401(b)(3) with respect to any individual, the 
     Secretary shall transfer for crediting by the Commissioner of 
     Social Security to the individual savings account of such 
     individual, an amount equal to the amount of such 
     overpayment.''.
       (4) Conforming amendments.--
       (A) Section 1324(b)(2) of title 31, United States Code, is 
     amended by inserting before the period at the end ``, or 
     enacted by the Bipartisan Social Security Reform Act of 
     1999''.
       (B) The table of subparts for part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 is amended by 
     adding at the end the following:

``Subpart H. Individual Savings Account Credits.''.
       (5) Effective date.--The amendments made by this subsection 
     shall apply to refunds payable after December 31, 1999.
       (d) Tax Treatment of Individual Savings Accounts.--
       (1) In general.--Subchapter F of chapter 1 of the Internal 
     Revenue Code of 1986 (relating to exempt organizations) is 
     amended by adding at the end the following:

            ``PART IX--INDIVIDUAL SAVINGS FUND AND ACCOUNTS

``Sec. 531. Individual Savings Fund and Accounts.

     ``SEC. 531. INDIVIDUAL SAVINGS FUND AND ACCOUNTS.

       ``(a) General Rule.--The Individual Savings Fund and 
     individual savings accounts shall be exempt from taxation 
     under this subtitle.
       ``(b) Individual Savings Fund and Accounts Defined.--For 
     purposes of this section, the terms `Individual Savings Fund' 
     and `individual savings account' means the fund and account 
     established under sections 254 and 251, respectively, of part 
     B of title II of the Social Security Act.
       ``(c) Contributions.--
       ``(1) In general.--No deduction shall be allowed for 
     contributions credited to an individual savings account under 
     section 251 of the Social Security Act or section 6402(l).
       ``(2) Rollover of inheritance.--Any portion of a 
     distribution to an heir from an individual savings account 
     made by reason of the death of the beneficiary of such 
     account may be rolled over to the individual savings account 
     of the heir after such death.
       ``(d) Distributions.--
       ``(1) In general.--Any distribution from an individual 
     savings account under section 253 of the Social Security Act 
     shall be included in gross income under section 72.
       ``(2) Period in which distributions must be made from 
     account of decedent.--In the case of amounts remaining in an 
     individual savings account from which distributions began 
     before the death of the beneficiary, rules similar to the 
     rules of section 401(a)(9)(B) shall apply to distributions of 
     such remaining amounts.
       ``(3) Rollovers.--Paragraph (1) shall not apply to amounts 
     rolled over under subsection (c)(2) in a direct transfer by 
     the Commissioner of Social Security, under regulations which 
     the Commissioner shall prescribe.''.
       (2) Clerical amendment.--The table of parts for subchapter 
     F of chapter 1 of such Code is amended by adding after the 
     item relating to part VIII the following:

``Part IX. Individual savings fund and accounts.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 102. SOCIAL SECURITY KIDSAVE ACCOUNTS.

       Title II of the Social Security Act (42 U.S.C. 401 et 
     seq.), as amended by section 101(a), is amended by adding at 
     the end the following:

                       ``Part C--KidSave Accounts


                           ``kidsave accounts

       ``Sec. 261. (a) Establishment.--The Commissioner of Social 
     Security shall establish in the name of each individual born 
     on or after January 1, 1995, a KidSave Account upon the later 
     of--
       ``(1) the date of enactment of this part, or
       ``(2) the date of the issuance of a Social Security account 
     number under section 205(c)(2) to such individual.

     The KidSave Account shall be identified to the account holder 
     by means of the account holder's Social Security account 
     number.
       ``(b) Contributions.--
       ``(1) In general.--There are authorized to be appropriated 
     and are appropriated such sums as are necessary in order for 
     the Secretary of the Treasury to transfer from the general 
     fund of the Treasury for crediting by the Commissioner to 
     each account holder's KidSave Account under subsection (a), 
     an amount equal to the sum of--
       ``(A) in the case of any individual born on or after 
     January 1, 2000, $1,000, on the date of the establishment of 
     such individual's KidSave Account, and
       ``(B) in the case of any individual born on or after 
     January 1, 1995, $500, on the 1st, 2nd, 3rd, 4th, and 5th 
     birthdays of such individual occurring on or after January 1, 
     2000.
       ``(2) Adjustment for inflation.--For any calendar year 
     after 2009, each of the dollar amounts under paragraph (1) 
     shall be increased by the cost-of-living adjustment 
     determined under section 215(i) for the calendar year.
       ``(c) Designations Regarding KidSave Accounts.--
       ``(1) Initial designations of investment vehicle.--A person 
     described in subsection (d) shall, on behalf of the 
     individual described in subsection (a), designate the 
     investment vehicle for the KidSave Account to which 
     contributions on behalf of such individual are to be 
     deposited. Such designation shall be made on the application 
     for such individual's Social Security account number.
       ``(2) Changes in investment vehicles.--The Commissioner 
     shall by regulation provide the time and manner by which an 
     individual or a person described in subsection (d) on behalf 
     of such individual may change 1 or more investment vehicles 
     for a KidSave Account.
       ``(d) Treatment of Minors and Incompetent Individuals.--Any 
     designation under subsection (c) to be made by a minor, or an 
     individual mentally incompetent or under other legal 
     disability, may be made by the person who is constituted 
     guardian or other fiduciary by the law of the State of 
     residence of the individual or is otherwise legally vested 
     with the care of the individual or his estate. Payment under 
     this part due a minor, or an individual mentally incompetent 
     or under other legal disability, may be made to the person 
     who is constituted guardian or other fiduciary by the law of 
     the State of residence of the claimant or is otherwise 
     legally vested with the care of the claimant or his estate. 
     In any case in which a guardian or other fiduciary of the 
     individual under legal disability has not been appointed 
     under the law of the State of residence of the individual, if 
     any other person, in the judgment of the Commissioner, is 
     responsible for the care of such individual, any designation 
     under subsection (c) which may otherwise be made by such 
     individual may be made by such person, any payment under this 
     part which is otherwise payable to such individual may be 
     made to such person, and the payment of an annuity payment 
     under this part to such person bars recovery by any other 
     person.


                    ``definitions and special rules

       ``Sec. 262. (a) Kidsave Accounts.--In this part, the term 
     `KidSave Account' means any KidSave Account in the Individual 
     Savings Fund (established under section 254) which is 
     administered by the Individual Savings Fund Board.
       ``(b) Treatment of Accounts.--
       ``(1) In general.--Except as provided in paragraph (2), any 
     KidSave Account described in subsection (a) shall be treated 
     in the same manner as an individual savings account under 
     part B.
       ``(2) Distributions.--Notwithstanding any other provision 
     of law, distributions may only be made from a KidSave Account 
     of an individual on or after the earlier of--
       ``(A) the date on which the individual begins receiving 
     benefits under this title, or
       ``(B) the date of the individual's death.''.

     SEC. 103. ADJUSTMENTS TO PRIMARY INSURANCE AMOUNTS UNDER PART 
                   A OF TITLE II OF THE SOCIAL SECURITY ACT.

       (a) In General.--Section 215 of the Social Security Act (42 
     U.S.C. 415) is amended by adding at the end the following:


[[Page S8726]]



 ``Adjustment of Primary Insurance Amount in Relation to Deposits Made 
          to Individual Savings Accounts and KidSave Accounts

       ``(j)(1) Except as provided in paragraph (2), an 
     individual's primary insurance amount as determined in 
     accordance with this section (before adjustments made under 
     subsection (i)) shall be equal to the excess (if any) of--
       ``(A) the amount which would be so determined without the 
     application of this subsection, over
       ``(B) the monthly amount of an immediate life annuity, 
     determined on the basis of the sum of--
       ``(A) the total of all amounts which have been credited 
     pursuant to section 251(b) (indexed in the same manner as is 
     applicable with respect to average indexed monthly earnings 
     under subsection (b)) to the individual savings account held 
     by such individual, plus
       ``(B) 50 percent of the accumulated value of the KidSave 
     Account (established on behalf of such individual under 
     section 261(a)) determined on the date such KidSave Account 
     is redesignated as an individual savings account held by such 
     individual under section 251(a)(1)(B), plus
       ``(C) accrued interest on such amounts compounded 
     annually--
       ``(i) assuming an interest rate equal to the projected 
     interest rate of the Federal Old-Age and Survivors Trust 
     Fund, and
       ``(ii) using the mortality table used under 
     412(l)(7)(C)(ii) of the Internal Revenue Code of 1986.
       ``(2) In the case of an individual who becomes entitled to 
     disability insurance benefits under section 223, such 
     individual's primary insurance amount shall be determined 
     without regard to paragraph (1).
       ``(3) For purposes of this subsection, the term `immediate 
     life annuity' means an annuity--
       ``(A) the annuity starting date (as defined in section 
     72(c)(4) of the Internal Revenue Code of 1986) of which 
     commences with the first month following the date of the 
     determination, and
       ``(B) which provides for a series of substantially equal 
     monthly payments over the life expectancy of the 
     individual.''.
       (b) Conforming Amendment to Railroad Retirement Act of 
     1974.--Section 1 of the Railroad Retirement Act of 1974 (45 
     U.S.C. 231) is amended by adding at the end the following:
       ``(s) In applying applicable provisions of the Social 
     Security Act for purposes of determining the amount of the 
     annuity to which an individual is entitled under this Act, 
     section 215(j) of the Social Security Act and part B of title 
     II of such Act shall be disregarded.''
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to computations and recomputations 
     of primary insurance amounts occurring after December 31, 
     1999.

              TITLE II--SOCIAL SECURITY SYSTEM ADJUSTMENTS

     SEC. 201. ADJUSTMENTS TO BEND POINTS IN DETERMINING PRIMARY 
                   INSURANCE AMOUNTS.

       (a) Additional Bend Point.--Section 215(a)(1)(A) of the 
     Social Security Act (42 U.S.C. 415(a)(1)(A)) is amended--
       (1) in clause (ii), by striking ``and'' at the end;
       (2) in clause (iii)--
       (A) by striking ``15 percent'' and inserting ``32 
     percent'';
       (B) by striking ``clause (ii),'' and inserting the 
     following: ``clause (ii) but do not exceed the amount 
     established for purposes of this clause by subparagraph (B), 
     and''; and
       (3) by inserting after clause (iii) the following:
       ``(iv) 15 percent of the individual's average indexed 
     monthly earnings to the extent that such earnings exceed the 
     amount established for purposes of clause (iii),''.
       (b) Initial Level of Additional Bend Point.--Section 
     215(a)(1)(B)(i) of such Act (42 U.S.C. 415(a)(1)(B)(i)) is 
     amended--
       (1) by striking ``clause (i) and (ii)'' and inserting 
     ``clauses (i) and (iii)''; and
       (2) by adding at the end the following: ``For individuals 
     who initially become eligible for old-age or disability 
     insurance benefits, or who die (before becoming eligible for 
     such benefit), in the calendar year 2000, the amount 
     established for purposes of clause (ii) of subparagraph (A) 
     shall be equal to 197.5 percent of the amount established for 
     purposes of clause (i).''.
       (c) Adjustments to PIA Formula Factors.--Section 
     215(a)(1)(B) of such Act (42 U.S.C. 415(a)(1)(B)) is amended 
     further--
       (1) by redesignating clause (iii) as clause (iv);
       (2) by inserting after clause (ii) the following:
       ``(iii) For individuals who initially become eligible for 
     old-age or disability insurance benefits, or who die (before 
     becoming eligible for such benefits), in any calendar year 
     after 2005, effective for such calendar year--
       ``(I) the percentage in effect under clause (ii) of 
     subparagraph (A) shall be equal to the percentage in effect 
     under such clause for calendar year 2005 increased the 
     applicable number of times by 3.8 percentage points,
       ``(II) the percentage in effect under clause (iii) of 
     subparagraph (A) shall be equal to the percentage in effect 
     under such clause for calendar year 2005 decreased the 
     applicable number of times by 1.2 percentage points, and
       ``(III) the percentage in effect under clause (iv) of 
     subparagraph (A) shall be equal to the percentage in effect 
     under such clause for calendar year 2005 decreased the 
     applicable number of times by 0.5 percentage points.

     For purposes of the preceding sentence, the term `applicable 
     number of times' means a number equal to the lesser of 10 or 
     the number of years beginning with 2006 and ending with the 
     year of initial eligibility or death.''; and
       (3) in clause (iv) (as redesignated), by striking 
     ``amount'' and inserting ``dollar amount''.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to primary insurance amounts of 
     individuals attaining early retirement age (as defined in 
     section 216(l) of the Social Security Act), or dying, after 
     December 31, 1999.

     SEC. 202. ADJUSTMENT OF WIDOWS' AND WIDOWERS' INSURANCE 
                   BENEFITS.

       (a) Widow's Benefit.--Section 202(e)(2)(A) of the Social 
     Security Act (42 U.S.C. 402(e)(2)(A)) is amended by striking 
     ``equal to'' and all that follows and inserting ``equal to 
     the greater of--
       ``(i) the primary insurance amount (as determined for 
     purposes of this subsection after application of 
     subparagraphs (B) and (C)) of such deceased individual, or
       ``(ii) the applicable percentage of the joint benefit which 
     would have been received by the widow or surviving divorced 
     wife and the deceased individual for such month if such 
     individual had not died.

     For purposes of clause (ii), the applicable percentage is 
     equal to 50 percent in 2000, increased (but not above 75 
     percent) by 1 percentage point in every second year 
     thereafter.''.
       (b) Widower's Benefit.--Section 202(f)(3)(A) of the Social 
     Security Act (42 U.S.C. 402(b)(3)(A)) is amended by striking 
     ``equal to'' and all that follows and inserting ``equal to 
     the greater of--
       ``(i) the primary insurance amount (as determined for 
     purposes of this subsection after application of 
     subparagraphs (B) and (C)) of such deceased individual, or
       ``(ii) the applicable percentage of the joint benefit which 
     would have been received by the widow or surviving divorced 
     husband and the deceased individual for such month if such 
     individual had not died.

     For purposes of clause (ii), the applicable percentage is 
     equal to 50 percent in 2000, increased (but not above 75 
     percent) by 1 percentage point in every second year 
     thereafter.''.

     SEC. 203. ELIMINATION OF EARNINGS TEST FOR INDIVIDUALS WHO 
                   HAVE ATTAINED EARLY RETIREMENT AGE.

       (a) In General.--Section 203 of the Social Security Act (42 
     U.S.C. 403) is amended--
       (1) in subsection (c)(1), by striking ``the age of 
     seventy'' and inserting ``early retirement age (as defined in 
     section 216(l))'';
       (2) in paragraphs (1)(A) and (2) of subsection (d), by 
     striking ``the age of seventy'' each place it appears and 
     inserting ``early retirement age (as defined in section 
     216(l))'';
       (3) in subsection (f)(1)(B), by striking ``was age seventy 
     or over'' and inserting ``was at or above early retirement 
     age (as defined in section 216(l))'';
       (4) in subsection (f)(3)--
       (A) by striking ``33\1/3\ percent'' and all that follows 
     through ``any other individual,'' and inserting ``50 percent 
     of such individual's earnings for such year in excess of the 
     product of the exempt amount as determined under paragraph 
     (8),''; and
       (B) by striking ``age 70'' and inserting ``early retirement 
     age (as defined in section 216(l))'';
       (5) in subsection (h)(1)(A), by striking ``age 70'' each 
     place it appears and inserting ``early retirement age (as 
     defined in section 216(l))''; and
       (6) in subsection (j)--
       (A) in the heading, by striking ``Age Seventy'' and 
     inserting ``Early Retirement Age''; and
       (B) by striking ``seventy years of age'' and inserting 
     ``having attained early retirement age (as defined in section 
     216(l))''.
       (b) Conforming Amendments Eliminating the Special Exempt 
     Amount for Individuals Who Have Attained Age 62.--
       (1) Uniform exempt amount.--Section 203(f)(8)(A) of the 
     Social Security Act (42 U.S.C. 403(f)(8)(A)) is amended by 
     striking ``the new exempt amounts (separately stated for 
     individuals described in subparagraph (D) and for other 
     individuals) which are to be applicable'' and inserting ``a 
     new exempt amount which shall be applicable''.
       (2) Conforming amendments.--Section 203(f)(8)(B) of the 
     Social Security Act (42 U.S.C. 403(f)(8)(B)) is amended--
       (A) in the matter preceding clause (i), by striking 
     ``Except'' and all that follows through ``whichever'' and 
     inserting ``The exempt amount which is applicable for each 
     month of a particular taxable year shall be whichever'';
       (B) in clauses (i) and (ii), by striking ``corresponding'' 
     each place it appears; and
       (C) in the last sentence, by striking ``an exempt amount'' 
     and inserting ``the exempt amount''.
       (3) Repeal of basis for computation of special exempt 
     amount.--Section 203(f)(8)(D) of the Social Security Act (42 
     U.S.C. 403(f)(8)(D)) is repealed.
       (c) Additional Conforming Amendments.--
       (1) Elimination of redundant references to retirement 
     age.--Section 203 of the Social Security Act (42 U.S.C. 403) 
     is amended--
       (A) in subsection (c), in the last sentence, by striking 
     ``nor shall any deduction'' and

[[Page S8727]]

     all that follows and inserting ``nor shall any deduction be 
     made under this subsection from any widow's or widower's 
     insurance benefit if the widow, surviving divorced wife, 
     widower, or surviving divorced husband involved became 
     entitled to such benefit prior to attaining age 60.''; and
       (B) in subsection (f)(1), by striking clause (D) and 
     inserting the following: ``(D) for which such individual is 
     entitled to widow's or widower's insurance benefits if such 
     individual became so entitled prior to attaining age 60,''.
       (2) Conforming amendment to provisions for determining 
     amount of increase on account of delayed retirement.--Section 
     202(w)(2)(B)(ii) of the Social Security Act (42 U.S.C. 
     402(w)(2)(B)(ii)) is amended--
       (A) by striking ``either''; and
       (B) by striking ``or suffered deductions under section 
     203(b) or 203(c) in amounts equal to the amount of such 
     benefit''.
       (3) Provisions relating to earnings taken into account in 
     determining substantial gainful activity of blind 
     individuals.--The second sentence of section 223(d)(4) of 
     such Act (42 U.S.C. 423(d)(4)) is amended by striking ``if 
     section 102 of the Senior Citizens' Right to Work Act of 1996 
     had not been enacted'' and inserting the following: ``if the 
     amendments to section 203 made by section 102 of the Senior 
     Citizens' Right to Work Act of 1996 and by the Bipartisan 
     Social Security Reform Act of 1999 had not been enacted''.
       (d) Study of the Effect of Taking Earnings Into Account in 
     Determining Substantial Gainful Activity of Disabled 
     Individuals.--
       (1) In general.--Not later than February 15, 2001, the 
     Commissioner of Social Security shall conduct a study on the 
     effect that taking earnings into account in determining 
     substantial gainful activity of individuals receiving 
     disability insurance benefits has on the incentive for such 
     individuals to work and submit to Congress a report on the 
     study.
       (2) Contents of study.--The study conducted under paragraph 
     (1) shall include the evaluation of--
       (A) the effect of the current limit on earnings on the 
     incentive for individuals receiving disability insurance 
     benefits to work;
       (B) the effect of increasing the earnings limit or changing 
     the manner in which disability insurance benefits are reduced 
     or terminated as a result of substantial gainful activity 
     (including reducing the benefits gradually when the earnings 
     limit is exceeded) on--
       (i) the incentive to work; and
       (ii) the financial status of the Federal Disability 
     Insurance Trust Fund;
       (C) the effect of extending eligibility for the Medicare 
     program to individuals during the period in which disability 
     insurance benefits of the individual are gradually reduced as 
     a result of substantial gainful activity and extending such 
     eligibility for a fixed period of time after the benefits are 
     terminated on--
       (i) the incentive to work; and
       (ii) the financial status of the Federal Hospital Insurance 
     Trust Fund and the Federal Supplementary Medical Insurance 
     Trust Fund; and
       (D) the relationship between the effect of substantial 
     gainful activity limits on blind individuals receiving 
     disability insurance benefits and other individuals receiving 
     disability insurance benefits.
       (3) Consultation.--The analysis under paragraph (2)(C) 
     shall be done in consultation with the Administrator of the 
     Health Care Financing Administration.
       (e) Effective Date.--The amendments and repeals made by 
     subsections (a), (b), and (c) shall apply with respect to 
     taxable years ending after December 31, 2002.

     SEC. 204. GRADUAL INCREASE IN NUMBER OF BENEFIT COMPUTATION 
                   YEARS; USE OF ALL YEARS IN COMPUTATION.

       (a) In General.--Section 215(b)(2)(A) of the Social 
     Security Act (42 U.S.C. 415(b)(2)(A)) is amended--
       (1) in clause (i), by striking ``5 years'' and inserting 
     ``the applicable number of years for purposes of this 
     clause''; and
       (2) by striking ``Clause (ii),'' in the matter following 
     clause (ii) and inserting the following:

     ``For purposes of clause (i), the applicable number of years 
     is the number of years specified in connection with the year 
     in which such individual reaches early retirement age (as 
     defined in section 216(l)(2)), or, if earlier, the calendar 
     year in which such individual dies, as set forth in the 
     following table:

The applicable number of years is:
  2002...............................................................4.
  2003...............................................................4.
  2004...............................................................3.
  2005...............................................................3.
  2006...............................................................2.
  2007...............................................................2.
  2008...............................................................1.
  2009...............................................................1.
  After 2009.........................................................0.
     Notwithstanding the preceding sentence, the applicable number 
     of years is 5, in the case of any individual who is entitled 
     to old-age insurance benefits, and has a spouse who is also 
     so entitled (or who died without having become so entitled) 
     who has greater total wages and self-employment income 
     credited to benefit computation years than the individual. 
     Clause (ii),''.
       (b) Use of All Years in Computation.--
       (1) In general.--Section 215(b)(2)(B) of the Social 
     Security Act (42 U.S.C. 415(b)(2)(B)) is amended by striking 
     clauses (i) and (ii) and inserting the following:
       ``(i)(I) for calendar years after 2001 and before 2010, the 
     term `benefit computation years' means those computation base 
     years equal in number to the number determined under 
     subparagraph (A) plus the applicable number of years 
     determined under subclause (III), for which the total of such 
     individual's wages and self-employment income, after 
     adjustment under paragraph (3), is the largest;
       ``(II) for calendar years after 2009, the term `benefit 
     computation years' means all of the computation base years; 
     and
       ``(III) for purposes of subclause (I), the applicable 
     number of years is the number of years specified in 
     connection with the year in which such individual reaches 
     early retirement age (as defined in section 216(l)(2)), or, 
     if earlier, the calendar year in which such individual dies, 
     as set forth in the following table:

The applicable number of years is:
  Before 2002........................................................0.
  2002...............................................................1.
  2003...............................................................1.
  2004...............................................................2.
  2005...............................................................2.
  2006...............................................................3.
  2007...............................................................3.
  2008...............................................................4.
  2009...............................................................4.
       ``(ii) the term `computation base years' means the calendar 
     years after 1950, except that such term excludes any calendar 
     year entirely included in a period of disability; and''.
       (2) Conforming amendment.--Section 215(b)(1)(B) of the 
     Social Security Act (42 U.S.C. 415(b)(1)(B)) is amended by 
     striking ``in those years'' and inserting ``in an 
     individual's computation base years determined under 
     paragraph (2)(A)''.
       (c) Effective Date.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply with respect to individuals attaining early 
     retirement age (as defined in section 216(l)(2) of the Social 
     Security Act) after December 31, 2001.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to benefit computation years beginning after 
     December 31, 1999.

     SEC. 205. MAINTENANCE OF BENEFIT AND CONTRIBUTION BASE.

       (a) In General.--Section 230 of the Social Security Act (42 
     U.S.C. 430) is amended to read as follows:


            maintenance of the contribution and benefit base

       ``Sec. 230. (a) The Commissioner of Social Security shall 
     determine and publish in the Federal Register on or before 
     November 1 of each calendar year the contribution and benefit 
     base determined under subsection (b) which shall be effective 
     with respect to remuneration paid after such calendar year 
     and taxable years beginning after such year.
       ``(b) For purposes of this section, for purposes of 
     determining wages and self-employment income under sections 
     209, 211, 213, and 215 of this Act and sections 54, 1402, 
     3121, 3122, 3125, 6413, and 6654 of the Internal Revenue Code 
     of 1986, and for purposes of section 4022(b)(3)(B) of Public 
     Law 93-406, the contribution and benefit base with respect to 
     remuneration paid in (and taxable years beginning in) any 
     calendar year is an amount equal to 86 percent of the total 
     wages for the preceding calendar year (within the meaning of 
     section 209).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to remuneration paid in (and taxable years 
     beginning in) any calendar year after 1999.

     SEC. 206. REDUCTION IN THE AMOUNT OF CERTAIN TRANSFERS TO 
                   MEDICARE TRUST FUND.

       Subparagraph (A) of section 121(e)(1) of the Social 
     Security Amendments of 1983 (42 U.S.C. 401 note), as amended 
     by section 13215(c)(1) of the Omnibus Budget Reconciliation 
     Act of 1993, is amended--
       (1) in clause (ii), by striking ``the amounts'' and 
     inserting ``the applicable percentage of the amounts''; and
       (2) by adding at the end the following: ``For purposes of 
     clause (ii), the applicable percentage for a year is equal to 
     100 percent, reduced (but not below zero) by 10 percentage 
     points for each year after 2004.''.

     SEC. 207. ACTUARIAL ADJUSTMENT FOR RETIREMENT.

       (a) Early Retirement.--
       (1) In general.--Section 202(q) of the Social Security Act 
     (42 U.S.C. 402(q)) is amended--
       (A) in paragraph (1)(A), by striking ``\5/9\'' and 
     inserting ``the applicable fraction (determined under 
     paragraph (12))''; and
       (B) by adding at the end the following:
       ``(12) For purposes of paragraph (1)(A), the `applicable 
     fraction' for an individual who attains the age of 62 in--
       ``(A) any year before 2001, is \5/9\;
       ``(B) 2001, is \7/12\;
       ``(C) 2002, is \11/18\;
       ``(D) 2003, is \23/36\;
       ``(E) 2004, is \2/3\; and
       ``(F) 2005 or any succeeding year, is \25/36\.''.
       (2) Months beyond first 36 months.--Section 202(q) of such 
     Act (42 U.S.C. 402(q)(9)) (as amended by paragraph (1)) is 
     amended--
       (A) in paragraph (9)(A), by striking ``five-twelfths'' and 
     inserting ``the applicable fraction (determined under 
     paragraph (13))''; and
       (B) by adding at the end the following:
       ``(13) For purposes of paragraph (9)(A), the `applicable 
     fraction' for an individual who attains the age of 62 in--

[[Page S8728]]

       ``(A) any year before 2001, is \5/12\;
       ``(B) 2001, is \16/36\;
       ``(C) 2002, is \16/36\;
       ``(D) 2003, is \17/36\;
       ``(E) 2004, is \17/36\; and
       ``(F) 2005 or any succeeding year, is \1/2\.''.
       (3) Effective date.--The amendments made by paragraphs (1) 
     and (2) shall apply to individuals who attain the age of 62 
     in years after 1999.
       (b) Delayed Retirement.--Section 202(w)(6) of the Social 
     Security Act (42 U.S.C. 402(w)(6)) is amended--
       (1) in subparagraph (C), by striking ``and'' at the end;
       (2) in subparagraph (D), by striking ``2004.'' and 
     inserting ``2004 and before 2007;''; and
       (3) by adding at the end the following:
       ``(E) \17/24\ of 1 percent in the case of an individual who 
     attains the age of 62 in a calendar year after 2006 and 
     before 2009;
       ``(F) \3/4\ of 1 percent in the case of an individual who 
     attains the age of 62 in a calendar year after 2008 and 
     before 2011;
       ``(G) \19/24\ of 1 percent in the case of an individual who 
     attains the age of 62 in a calendar year after 2010 and 
     before 2013; and
       ``(H) \5/6\ of 1 percent in the case of an individual who 
     attains the age of 62 in a calendar year after 2012.''.

     SEC. 208. IMPROVEMENTS IN PROCESS FOR COST-OF-LIVING 
                   ADJUSTMENTS.

       (a) Annual Declarations of Persisting Upper Level 
     Substitution Bias, Quality-Change Bias, and New-Product 
     Bias.--Not later than December 1, 1999, and annually 
     thereafter, the Commissioner of the Bureau of Labor 
     Statistics shall publish in the Federal Register an estimate 
     of the upper level substitution bias, quality-change bias, 
     and new-product bias retained in the Consumer Price Index, 
     expressed in terms of a percentage point effect on the annual 
     rate of change in the Consumer Price Index determined through 
     the use of a superlative index that accounts for changes that 
     consumers make in the quantities of goods and services 
     consumed.
       (b) Modification of Cost-of-Living Adjustment.--
     Notwithstanding any other provision of law, for each calendar 
     year after 1999 any cost-of-living adjustment described in 
     subsection (f) shall be further adjusted by the greater of--
       (1) 0.5 percentage point, or
       (2) the correction for the upper level substitution bias, 
     quality-change bias, and new-product bias (as last published 
     by the Commissioner of the Bureau of Labor Statistics 
     pursuant to subsection (a)).
       (c) Funding for CPI Improvements.--
       (1) In general.--There is hereby appropriated to the Bureau 
     of Labor Statistics in the Department of Labor, for each of 
     fiscal years 2000, 2001, and 2002, $60,000,000 for use by the 
     Bureau for the following purposes:
       (A) Research, evaluation, and implementation of a 
     superlative index to estimate upper level substitution bias, 
     quality-change bias, and new-product bias in the Consumer 
     Price Index.
       (B) Expansion of the Consumer Expenditure Survey and the 
     Point of Purchase Survey.
       (2) Reports.--The Commissioner of the Bureau of Labor 
     Statistics shall submit reports regarding the use of 
     appropriations made under paragraph (1) to the Committee on 
     Appropriations of the House of Representative and the 
     Committee on Appropriations of the Senate upon the request of 
     each Committee.
       (d) Information Sharing.--The Commissioner of the Bureau of 
     Labor Statistics may secure directly from the Secretary of 
     Commerce information necessary for purposes of calculating 
     the Consumer Price Index. Upon request of the Commissioner of 
     the Bureau of Labor Statistics, the Secretary of Commerce 
     shall furnish that information to the Commissioner.
       (e) Administrative Advisory Committee.--The Bureau of Labor 
     Statistics shall, in consultation with the National Bureau of 
     Economic Research, the American Economic Association, and the 
     National Academy of Statisticians, establish an 
     administrative advisory committee. The advisory committee 
     shall periodically advise the Bureau of Labor Statistics 
     regarding revisions of the Consumer Price Index and conduct 
     research and experimentation with alternative data collection 
     and estimating approaches.
       (f) Cost-of-Living Adjustment Described.--A cost-of-living 
     adjustment described in this subsection is any cost-of-living 
     adjustment for a calendar year after 1999 determined by 
     reference to a percentage change in a consumer price index or 
     any component thereof (as published by the Bureau of Labor 
     Statistics of the Department of Labor and determined without 
     regard to this section) and used in any of the following:
       (1) The Internal Revenue Code of 1986.
       (2) The provisions of this Act (other than programs under 
     title XVI and any adjustment in the case of an individual who 
     attains early retirement age before January 1, 2000).
       (3) Any other Federal program.
       (g) Recapture of CPI Reform Revenues Deposited Into the 
     Federal Old-Age and Survivors Insurance Trust Fund.--Section 
     201 of the Social Security Act (42 U.S.C. 401) is amended by 
     adding at the end the following:
       ``(n) On July 1 of each calendar year specified in the 
     following table, the Secretary of the Treasury shall 
     transfer, from the general fund of the Treasury to the 
     Federal Old-Age and Survivors Insurance Trust Fund, an amount 
     equal to the applicable percentage for such year, specified 
     in such table, of the total wages paid in and self-employment 
     income credited to such year.

The applicable percentage for the year is--
0.6 percent.nd before 2020.............................................
0.8 percent.nd before 2040.............................................
1.0 percent.nd before 2060.............................................
1.2 percent.''.........................................................

     SEC. 209. MODIFICATION OF INCREASE IN NORMAL RETIREMENT AGE.

       (a) In General.--Section 216(l)(1) of the Social Security 
     Act (42 U.S.C. 416(l)(1)) is amended--
       (1) in subparagraph (B)--
       (A) by striking ``2005'' and inserting ``2011''; and
       (B) by adding ``and'' at the end; and
       (2) by striking subparagraphs (C), (D), and (E) and 
     inserting the following:
       ``(C) With respect to an individual who attains early 
     retirement age after December 31, 2010, 67 years of age.''.
       (b) Conforming Amendment.--Paragraph (3) of section 216(l) 
     of the Social Security Act (42 U.S.C. 416(l)) is amended to 
     read as follows:
       ``(3) The age increase factor for any individual who 
     attains early retirement age in the period consisting of the 
     calendar years 2000 through 2010, the age increase factor 
     shall be equal to two-twelfths of the number of months in the 
     period beginning with January 2000 and ending with December 
     of the year in which the individual attains early retirement 
     age.''.

     SEC. 210. MODIFICATION OF PIA FACTORS TO REFLECT CHANGES IN 
                   LIFE EXPECTANCY.

       (a) Modification of PIA Factors.--Section 215(a)(1) of the 
     Social Security Act (42 U.S.C. 415(a)(1)(B)) is amended by 
     redesignating subparagraph (D) as subparagraph (F) and by 
     inserting after subparagraph (C) the following:
       ``(D)(i) For individuals who initially become eligible for 
     old-age insurance benefits in any calendar year after 2011, 
     each of the percentages under clauses (i), (ii), (iii), and 
     (iv) of subparagraph (A) shall be multiplied the applicable 
     number of times by the applicable factor.
       ``(ii) For purposes of clause (i)--
       ``(I) the term `applicable number of times' means a number 
     equal to the lesser of 54 or the number of years beginning 
     with 2012 and ending with the year of initial eligibility; 
     and
       ``(II) the term `applicable factor' means .988 with respect 
     to the first 6 applicable number of times and .997 with 
     respect to the applicable number of times in excess of 6.
       ``(E) For any individual who initially becomes eligible for 
     disability insurance benefits in any calendar year after 
     2011, the primary insurance amount for such individual shall 
     be equal to the greater of--
       ``(i) such amount as determined under this paragraph, or
       ``(ii) such amount as determined under this paragraph 
     without regard to subparagraph (D) thereof.''.
       (b) Study of the Effect of Increases in Life Expectancy.--
       (1) Study plan.--Not later than February 15, 2001, the 
     Commissioner of Social Security shall submit to Congress a 
     detailed study plan for evaluating the effects of increases 
     in life expectancy on the expected level of retirement income 
     from social security, pensions, and other sources. The study 
     plan shall include a description of the methodology, data, 
     and funding that will be required in order to provide to 
     Congress not later than February 15, 2006--
       (A) an evaluation of trends in mortality and their 
     relationship to trends in health status, among individuals 
     approaching eligibility for social security retirement 
     benefits;
       (B) an evaluation of trends in labor force participation 
     among individuals approaching eligibility for social security 
     retirement benefits and among individuals receiving 
     retirement benefits, and of the factors that influence the 
     choice between retirement and participation in the labor 
     force;
       (C) an evaluation of changes, if any, in the social 
     security disability program that would reduce the impact of 
     changes in the retirement income of workers in poor health or 
     physically demanding occupations;
       (D) an evaluation of the methodology used to develop 
     projections for trends in mortality, health status, and labor 
     force participation among individuals approaching eligibility 
     for social security retirement benefits and among individuals 
     receiving retirement benefits; and
       (E) an evaluation of such other matters as the Commissioner 
     deems appropriate for evaluating the effects of increases in 
     life expectancy.
       (2) Report on results of study.--Not later than February 
     15, 2006, the Commissioner of Social Security shall provide 
     to Congress an evaluation of the implications of the trends 
     studied under paragraph (1), along with recommendations, if 
     any, of the extent to which the conclusions of such 
     evaluations indicate that projected increases in life 
     expectancy require modification in the social security 
     disability program and other income support programs.

     SEC. 211. MECHANISM FOR REMEDYING UNFORESEEN DETERIORATION IN 
                   SOCIAL SECURITY SOLVENCY.

       (a) In General.--Section 709 of the Social Security Act (42 
     U.S.C. 910) is amended--
       (1) by redesignating subsection (b) as subsection (c); and
       (2) by striking ``Sec. 709. (a) If the Board of Trustees'' 
     and all that follows through ``any

[[Page S8729]]

     such Trust Fund'' and inserting the following:
       ``Sec. 709. (a)(1)(A) If the Board of Trustees of the 
     Federal Old-Age and Survivors Insurance Trust Fund and the 
     Federal Disability Insurance Trust Fund determines at any 
     time, using intermediate actuarial assumptions, that the 
     balance ratio of either such Trust Fund for any calendar year 
     during the succeeding period of 75 calendar years will be 
     zero, the Board shall promptly submit to each House of the 
     Congress and to the President a report setting forth its 
     recommendations for statutory adjustments affecting the 
     receipts and disbursements of such Trust Fund necessary to 
     maintain the balance ratio of such Trust Fund at not less 
     than 20 percent, with due regard to the economic conditions 
     which created such inadequacy in the balance ratio and the 
     amount of time necessary to alleviate such inadequacy in a 
     prudent manner. The report shall set forth specifically the 
     extent to which benefits would have to be reduced, taxes 
     under section 1401, 3101, or 3111 of the Internal Revenue 
     Code of 1986 would have to be increased, or a combination 
     thereof, in order to obtain the objectives referred to in the 
     preceding sentence.
       ``(B) In addition to any reports under subparagraph (A), 
     the Board shall, not later than May 30, 2001, prepare and 
     submit to Congress and the President recommendations for 
     statutory adjustments to the disability insurance program 
     under title II of this Act to modify the changes in 
     disability benefits under the Bipartisan Social Security 
     Reform Act of 1999 without reducing the balance ratio of the 
     Federal Disability Insurance Trust Fund. The Board shall 
     develop such recommendations in consultation with the 
     National Council on Disability, taking into consideration the 
     adequacy of benefits under the program, the relationship of 
     such program with old age benefits under such title, and 
     changes in the process for determining initial eligibility 
     and reviewing continued eligibility for benefits under such 
     program.
       ``(2)(A) The President shall, no later than 30 days after 
     the submission of the report to the President, transmit to 
     the Board and to the Congress a report containing the 
     President's approval or disapproval of the Board's 
     recommendations.
       ``(B) If the President approves all the recommendations of 
     the Board, the President shall transmit a copy of such 
     recommendations to the Congress as the President's 
     recommendations, together with a certification of the 
     President's adoption of such recommendations.
       ``(C) If the President disapproves the recommendations of 
     the Board, in whole or in part, the President shall transmit 
     to the Board and the Congress the reasons for that 
     disapproval. The Board shall then transmit to the Congress 
     and the President, no later than 60 days after the date of 
     the submission of the original report to the President, a 
     revised list of recommendations.
       ``(D) If the President approves all of the revised 
     recommendations of the Board transmitted to the President 
     under subparagraph (C), the President shall transmit a copy 
     of such revised recommendations to the Congress as the 
     President's recommendations, together with a certification of 
     the President's adoption of such recommendations.
       ``(E) If the President disapproves the revised 
     recommendations of the Board, in whole or in part, the 
     President shall transmit to the Board and the Congress the 
     reasons for that disapproval, together with such revisions to 
     such recommendations as the President determines are 
     necessary to bring such recommendations within the 
     President's approval. The President shall transmit a copy of 
     such recommendations, as so revised, to the Board and the 
     Congress as the President's recommendations, together with a 
     certification of the President's adoption of such 
     recommendations.
       ``(3)(A) This paragraph is enacted by Congress--
       ``(i) as an exercise of the rulemaking power of the Senate 
     and the House of Representatives, respectively, and as such 
     it is deemed a part of the rules of each House, respectively, 
     but applicable only with respect to the procedure to be 
     followed in that House in the case of a joint resolution 
     described in subparagraph (B), and it supersedes other rules 
     only to the extent that it is inconsistent with such rules; 
     and
       ``(ii) with full recognition of the constitutional right of 
     either House to change the rules (so far as relating to the 
     procedure of that House) at any time, in the same manner, and 
     to the same extent as in the case of any other rule of that 
     House.
       ``(B) For purposes of this paragraph, the term `joint 
     resolution' means only a joint resolution which is introduced 
     within the 10-day period beginning on the date on which the 
     President transmits the President's recommendations, together 
     with the President's certification, to the Congress under 
     subparagraph (B), (D), or (E) of paragraph (2), and--
       ``(i) which does not have a preamble;
       ``(ii) the matter after the resolving clause of which is as 
     follows: `That the Congress approves the recommendations of 
     the President as transmitted on ____ pursuant to section 
     709(a) of the Social Security Act, as follows: ________', the 
     first blank space being filled in with the appropriate date 
     and the second blank space being filled in with the statutory 
     adjustments contained in the recommendations; and
       ``(iii) the title of which is as follows: `Joint resolution 
     approving the recommendations of the President regarding 
     social security.'.
       ``(C) A joint resolution described in subparagraph (B) that 
     is introduced in the House of Representatives shall be 
     referred to the Committee on Ways and Means of the House of 
     Representatives. A joint resolution described in subparagraph 
     (B) introduced in the Senate shall be referred to the 
     Committee on Finance of the Senate.
       ``(D) If the committee to which a joint resolution 
     described in subparagraph (B) is referred has not reported 
     such joint resolution (or an identical joint resolution) by 
     the end of the 20-day period beginning on the date on which 
     the President transmits the recommendation to the Congress 
     under paragraph (2), such committee shall be, at the end of 
     such period, discharged from further consideration of such 
     joint resolution, and such joint resolution shall be placed 
     on the appropriate calendar of the House involved.
       ``(E)(i) On or after the third day after the date on which 
     the committee to which such a joint resolution is referred 
     has reported, or has been discharged (under subparagraph (D)) 
     from further consideration of, such a joint resolution, it is 
     in order (even though a previous motion to the same effect 
     has been disagreed to) for any Member of the respective House 
     to move to proceed to the consideration of the joint 
     resolution. A Member may make the motion only on the day 
     after the calendar day on which the Member announces to the 
     House concerned the Member's intention to make the motion, 
     except that, in the case of the House of Representatives, the 
     motion may be made without such prior announcement if the 
     motion is made by direction of the committee to which the 
     joint resolution was referred. All points of order against 
     the joint resolution (and against consideration of the joint 
     resolution) are waived. The motion is highly privileged in 
     the House of Representatives and is privileged in the Senate 
     and is not debatable. The motion is not subject to amendment, 
     or to a motion to postpone, or to a motion to proceed to the 
     consideration of other business. A motion to reconsider the 
     vote by which the motion is agreed to or disagreed to shall 
     not be in order. If a motion to proceed to the consideration 
     of the joint resolution is agreed to, the respective House 
     shall immediately proceed to consideration of the joint 
     resolution without intervening motion, order, or other 
     business, and the joint resolution shall remain the 
     unfinished business of the respective House until disposed 
     of.
       ``(ii) Debate on the joint resolution, and on all debatable 
     motions and appeals in connection therewith, shall be limited 
     to not more than 2 hours, which shall be divided equally 
     between those favoring and those opposing the joint 
     resolution. An amendment to the joint resolution is not in 
     order. A motion further to limit debate is in order and not 
     debatable. A motion to postpone, or a motion to proceed to 
     the consideration of other business, or a motion to recommit 
     the joint resolution is not in order. A motion to reconsider 
     the vote by which the joint resolution is agreed to or 
     disagreed to is not in order.
       ``(iii) Immediately following the conclusion of the debate 
     on a joint resolution described in subparagraph (B) and a 
     single quorum call at the conclusion of the debate if 
     requested in accordance with the rules of the appropriate 
     House, the vote on final passage of the joint resolution 
     shall occur.
       ``(iv) Appeals from the decisions of the Chair relating to 
     the application of the rules of the Senate or the House of 
     Representatives, as the case may be, to the procedure 
     relating to a joint resolution described in subparagraph (B) 
     shall be decided without debate.
       ``(F)(i) If, before the passage by one House of a joint 
     resolution of that House described in subparagraph (B), that 
     House receives from the other House a joint resolution 
     described in subparagraph (B), then the following procedures 
     shall apply:
       ``(I) The joint resolution of the other House shall not be 
     referred to a committee and may not be considered in the 
     House receiving it except in the case of final passage as 
     provided in subclause (II).
       ``(II) With respect to a joint resolution described in 
     subparagraph (B) of the House receiving the joint resolution, 
     the procedure in that House shall be the same as if no joint 
     resolution had been received from the other House, but the 
     vote on final passage shall be on the joint resolution of the 
     other House.
       ``(ii) Upon disposition of the joint resolution received 
     from the other House, it shall no longer be in order to 
     consider the joint resolution that originated in the 
     receiving House.
       ``(b) If the Board of Trustees of the Federal Hospital 
     Insurance Trust Fund or the Federal Supplementary Medical 
     Insurance Trust Fund determines as any time that the balance 
     ratio of either such Trust Fund''.
       (b) Conforming Amendments.--
       (1) Section 709(b) of the Social Security Act (as amended 
     by subsection (a) of this section) is amended by striking 
     ``any such'' and inserting ``either such''.
       (2) Section 709(c) of such Act (as redesignated by 
     subsection (a) of this section) is amended by inserting ``or 
     (b)'' after ``subsection (a)''.

  Mr. GREGG. Mr. President, I have enjoyed working with the Senators 
from Nebraska and Louisiana and, recently the Senator from Iowa, in 
developing this bipartisan plan. The Senator from Nebraska and the 
Senator from Louisiana have truly done an extraordinary job of bringing 
to the attention

[[Page S8730]]

of the American public the essential needs to address soon, quickly, 
and substantively the issue of Social Security reform.
  I had the pleasure of serving 15 months as cochair, along with the 
Senator from Louisiana, of a commission of folks put together--a large 
cross-section of people--who are truly expert in the area of Social 
Security. As a result of that commission, we produced a bill that was 
an excellent piece of legislation. We were joined, in a bipartisan way, 
by Congressmen Kolbe and Stenholm, Members of the House, on that bill.
  The Senator from Nebraska has been on his own bill, along with the 
Senator from New York. They have developed another bill here. Months 
ago, we decided to get together and see if we could develop an even 
bigger coalition of membership around one concept of how to reform the 
Social Security system. That is what we accomplished. It has been 
accomplished because of the strong and vibrant leadership of those two 
Senators who are on the floor today, Senators Breaux and Kerrey, and 
also Senator Grassley, who is not here but may be coming in on a number 
of other issues that are involved in the Social Security reform matter. 
His leadership has been excellent.
  So, first of all, we do have a bipartisan bill. It has been pointed 
out by the Senator from Nebraska that this bill goes across the aisle, 
across ideology, and it is a substantive bill. It is a proposal that 
has been scored by the Social Security actuaries as creating solvency 
in the Social Security system for the next 100 years, at a minimum. It 
goes to infinity, but I like to say the next century because it is a 
more definable event. That is very important. It is a bipartisan 
effort, which shows it can be done. Second, it works, as scored by the 
Social Security actuaries.
  Why is it important? You don't have to look very far to see why. I 
notice we have many Senate pages with us. These folks are juniors in 
high school who come here to work. They are either rising juniors, or 
have completed their junior year in most instances. They come here to 
work and see Congress in action. When they get finished with their 
schooling, most of them will go to college. When they get out of 
college, they are going to go to work. They are going to find that 
probably the biggest amount that comes out of their paychecks is the 
FICA tax, a big chunk that comes out of paychecks. They are going to 
pay that for all their working lives. What are they going to get back 
under the present system? These wonderful young people are probably 
hoping I won't speak too long so they can get off for the weekend. But 
what are they going to get out of this? Actually, they are going to get 
very little out of it. They will pay out a tremendous amount of taxes 
during their working lives and they will virtually get nothing back for 
it.
  In fact, a person coming into the workforce in their early twenties 
today--the rate of return on what they pay into Social Security taxes 
over their working lives, or how much they get back for the amount of 
taxes they pay, is essentially a wash. They are not going to get any 
more back than they pay in. That is not much of a return for all the 
taxes they will pay over all those years. If you happen to be an 
African American, you actually will get less back, as a group of 
individuals, than you will end up paying.
  So the system is broken. Why? It is broken because we have this huge 
bubble in our society, this huge population bubble called the postwar 
baby boom generation, of which Bill Clinton is a member, I am a member, 
the Senator in the Chair is a member, and the Senator from Louisiana is 
a member. This postwar baby boom generation is the largest demographic 
group in the history of our country. When Social Security was 
originally designed, and for all the years it has worked so well, it 
has always been conceived as a pyramid. It was essentially perceived 
that there would be many more people paying into the system than would 
be taking out. So you would have many people earning in order to 
support the people getting the benefit--a pyramid.

  In fact, as late as 1950, there were about 15 people paying into the 
system for every 1 person taking out. By the late part of this 
century--right about now, in fact--we are down to about 3\1/2\ people 
paying in for every 1 person taking out. When the baby boomers retire, 
beginning in the year 2008, it starts to accelerate and it becomes an 
acute situation by 2014, where 2 people will be paying into the system 
for every 1 taking out.
  In that sort of a structure, you can see we simply can't support the 
benefits. Instead of having a pyramid, we basically have some sort of 
rectangle. The older generation that will be retired--myself included--
will be demanding too much in the way of benefits for the younger 
generation to support. As a result, we end up bankrupting the system. 
To express it in another way, even though there is a lot of debt in the 
trust fund, even though the Social Security trust fund, as the Senator 
from Nebraska pointed out, has literally billions of dollars of IOUs in 
it, they are simply that; they are paper IOUs.
  What drives the Social Security problem is the fact that when the 
baby boom generation retires, there is a benefit that is guaranteed, a 
defined benefit. As a retiree, under Social Security, when we hit 2010, 
or whenever I take retirement, I am guaranteed a benefit, a fixed sum 
of money that I will get under our system of Social Security, a defined 
benefit.
  Is there something there to pay that benefit? No, nothing. There are 
notes held by the Social Security trust, but those notes are not assets 
in the sense that there is something to back them up that is a physical 
asset. What backs it up is the taxing of power of the United States. 
The only way you can pay that defined benefit is to raise taxes on the 
earners of America to pay the benefits of the retired in America.
  Because this generation is so huge and the defined benefit becomes so 
huge, we will have a massive tax increase on the earners of America, 
starting about the year 2014, and it accelerates radically to the point 
where we are literally talking, under the President's proposal on 
Social Security, about $1 trillion annually in new taxes, simply to 
support those people who are retired by the year 2035--I think it might 
be a little later. The fact is, it is a huge tax increase. Where do the 
taxes come from? The earnings of American people. They will come from 
the general fund, and they will end up essentially bankrupting this 
country.
  Something needs to be done. Why have we put this plan forward? You 
say: It won't happen until the year 2014; that is a long way away; I 
don't have to worry about that.
  We have to worry today because we can't answer this type of problem 
when it happens. We have to anticipate; we have to work to try to 
correct the problem before we hit the problem. Unfortunately, we are 
not doing much to get ready for this problem.
  To address this, we have put forward this bill. What is the basic 
theme of this bill? The basic theme of this bill is that the way to 
address the problem of the Social Security liability in the outyears is 
to begin to save in the early years, say to the American worker today: 
Start saving for retirement and have some ownership in that savings. 
Today you think you are saving for retirement under Social Security 
because you are paying the Social Security taxes, but that doesn't mean 
anything. The Social Security taxes are being spent by the Federal 
Government. There is no asset we are building up which the retiree will 
own.
  We say under our bill to the wage earner, people earning money in the 
marketplace--whether the job is a restaurant, a computer store, or 
whether they are working for the Government--we are going to let you 
start to save some of the assets you are paying in taxes today for your 
Social Security. We will allow you to start saving and owning those 
assets. We will take 2 percent of your present payroll tax and put it 
in a savings account which you control--you, the wage earner control, 
which you own. You own that account. You make the decision in a broad 
term as to how that is invested.

  We do put limitations on the investment structure so you can't take 
high-risk investments or speculate. We take an asset, for all Americans 
paying Social Security tax, which they will physically have and own 
throughout their earning life, which will grow as they put more into it 
and which, when they retire, will be available to support

[[Page S8731]]

their retirement and to support the costs of the Social Security 
system.
  This concept, which is called personal savings accounts, is at the 
core of what we are proposing as a solution to the problem. These 
personal savings accounts don't solve the problem completely. I wish we 
could do it completely with these accounts, but we can't.
  As the Senator from Nebraska so eloquently and effectively pointed 
out--I won't retread that water--the fact is, you have to make 
decisions on the benefit side or you have to make decisions on the tax 
increase side. That is the only way you can get long-term solvency, 
unless you have the capacity to refund liability dramatically at a 
level you can't do because of the cost of supporting the present 
beneficiaries under the system.
  There are three ways to solve the Social Security outyear problem: 
You can raise taxes, cut benefits, or ``prefund'' the liability. What 
we do is combine two of those. We prefund the liability and adjust the 
benefit structure. We adjust it in a constructive and effective way, as 
pointed out by the Senator from Nebraska.
  The fundamental philosophical change in our bill is giving people 
ownership over part of their Social Security taxes. We say to folks: 
You can invest that, you can save it, and when you retire, it will be 
yours. In fact, it will be yours before you retire.
  Under the present law, you pay all these Social Security taxes, and 
if you are unlucky enough to get hit by a train when you are 59 years 
old, you get nothing, absolutely nothing, from all the taxes you have 
paid in. What an unfair system that is.
  We say to people: You are going to have that asset; it will be yours. 
If you are, unfortunately, hit by a train when you are 59, your family 
will own that asset. Whoever you want to pass it on to will own that--
your wife, your children, cousins, nephews. We give people the 
opportunity to participate in that extraordinary thing called American 
capitalism, the marketplace where people can create wealth.
  Is there a risk? Very little. The way we structured this, we tracked 
what Federal employees have been doing for years in the Federal Thrift 
Savings Plan. Any Federal employee can participate in it and have an 
option of placing some of their pension plan into the marketplace by 
choosing four different funds in which to invest. Those funds are 
managed by trustees under the Federal Thrift Savings Plan. One is very 
conservative, one is a moderate investment, and one is a more 
aggressive investment.
  We will use the same type of structure. It will be the Social 
Security trustees investing these funds. Wage earners will have the 
right to choose whether they want to aggressively invest, moderately 
invest, or very conservatively invest. It is your choice. In any event, 
the rate of return on those assets is going to be dramatically better 
than the rate of return on the amount of taxes presently paid in the 
Social Security system. The average rate of return on taxes paid into 
Social Security is 2.7 percent. As I mentioned, for an earner in their 
twenties it is essentially zero, and for certain groups it is negative. 
Under our bill, the lowest rate of return possible is the rate of 
return of Treasury bills, which is about 3 percent. One could get 
significantly better than that, obviously. The average rate of return 
of the equities market over any 20-year period, including the 
Depression period, has been about 5\1/2\ percent. So presume 5\1/2\ 
percent is a number by which one reasonably assumes their assets will 
increase.
  That is the essence of what we are doing. We are setting up a plan 
which, first, is bipartisan; second, it creates solvency in the trust 
fund for 100 years, the next century; third, it gives people ownership 
over parts of the assets which they are now paying in taxes over which 
they have absolutely no ownership.
  A couple of other points should be made. We do not impact anybody 
presently in the Social Security system or about to come in the Social 
Security system. We say to those folks: The system is in place; you are 
comfortable with it; that is your system; we are not going to touch you 
in any way.
  When the scare letters come out from the various groups which use 
Social Security as a way to try to raise money so people can drive 
around the city in their limousines and go to fancy restaurants, when 
the scare letters come out in envelopes looking like Social Security 
checks, and the letters say they will devastate your Social Security 
benefits, and they are directed at people already on Social Security, 
unfortunately, we don't have the wherewithal to send a counter letter. 
But if people have time to listen, they will know that is not case. We 
don't impact anyone presently on the Social Security system.
  Our bill, more than any other that is presently pending on Social 
Security reform, is progressive. In other words, people at the lower 
income levels get a much better benefit under the proposal we put 
forward than people at the higher levels, and they get a better benefit 
than they would get in the present Social Security system or under any 
other Social Security proposal out there today, whether they have been 
scored as solvent or not. It is a progressive system.
  In fact, a low-income person not only gets to save 2 percent, they 
can save about 3\1/2\ percent in the personal savings account because 
we set up a system for the next dollar after the 2 percent. They get a 
$100 match by the Federal Government. It works out so you basically can 
almost save 3.5 percent if you are in a low-income bracket, and that is 
a big increase in your net worth over 40 years, a huge increase in your 
net worth over 40 years, which is the average earning experience in 
America today.

  In addition, our plan most importantly treats generations fairly. We 
are headed into a period, when our generation retires, the baby boom 
generation retires, when we are simply going to be unfair to younger 
generations. What we are going to do to them under the present Social 
Security system is absolutely wrong. We are going to tax this younger 
generation into a much lower level quality of life in order to support 
our retirement. Is that right? Of course, it is not right, but that is 
exactly what is going to happen if we do not address the Social 
Security problem and address it soon so we can start to build the 
assets necessary to prefund the liabilities, as I mentioned earlier.
  Our bill addresses that issue. Our bill tries to right that shift of 
fairness between our generation and the younger generation, and it does 
it very effectively, and it is an important effort.
  Importantly, our bill creates an atmosphere where people will have 
confidence in the Social Security system. There are a lot of people who 
say: I am not going to get anything when I retire. I am just going to 
pay a lot of taxes. I am not going to get anything.
  And they are right if they happen to be a certain ethnic group or 
certain age level. Our bill will restore the confidence in the Social 
Security system, and that is absolutely critical.
  In addition, we understand women have especially been 
disproportionately impacted by the present system. They are not treated 
as fairly as they should be. There are two reasons: No. 1, because many 
women weren't in the workforce, and No. 2, because they live longer. 
Our bill makes some very significant efforts in order to address the 
special needs of women, especially widows, in the Social Security 
benefits area. These were put together by the Senator from Iowa, to a 
large extent.
  They are positive efforts to give women the opportunity to get the 
benefit structure that is fair to them and also encourage women to 
raise children at home. It could be a man, of course, but in most cases 
it would be a woman who wants to leave her job and raise her child for 
up to 5 years. She will be able to do that without being penalized by 
the Social Security system for having taken those 5 years out of the 
workforce and then coming back into the workforce. It is a very 
important step towards fairness towards women and especially women who 
decide to raise children.
  I know the Senator from Louisiana wants to speak on this. He has 
certainly been a core player, a key player on this issue, as well as so 
many others. But on Medicare specifically, let me say this. We, as 
policy people, have an absolute obligation to pursue and accomplish 
Social Security reform in this Congress. There is no way we can justify 
passing up this opportunity. We have a President who does not have to

[[Page S8732]]

run for reelection, so he is under no political pressure to make a 
political decision. He has the flexibility and freedom to make the 
decisions that should be made in order to resolve this type of problem.
  We know if we do not act, we will begin to run out of time quickly. 
We know if we cannot set up these personal accounts to start creating 
assets and letting those assets grow through compounded interest--which 
Einstein said was the greatest force known to mankind--we know if we do 
not get those assets started and get those accounts begun, we are going 
to end up running out of time, and we will not be able to solve the 
problem effectively. So we know we have to act. It is similar to that 
old oil filter ad, ``You can pay me now or pay me later.'' We know we 
have to act now, so we should be taking action.
  We know it can be done because this bill proves it. It can be done in 
a bipartisan way and it can be done in a way that can be scored and 
approved by the Social Security trustees as working, so there is no 
argument about doing it and being able to do it. All we need now is the 
political will to do it, and that is going to take Presidential 
leadership.
  Although the President has spoken on this issue a number of times, he 
has not given us the type of leadership we need to accomplish the goal. 
But if he wants to step forward, this is a great opportunity to do it. 
This bill gives him the vehicle to do it. I certainly hope he will take 
advantage of that chance.
  In any event, I thank my fellow Senators who have worked so hard on 
this. I believe we have laid out a method that can control and move 
this forward in a positive way. I hope we can move from only the 
academic discussion of a bill to the passage of a law.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Louisiana.
  Mr. BREAUX. Mr. President, I yield myself 10 minutes under the 
previous order.
  Mr. GRAHAM. Will the Senator from Louisiana yield for purposes of a 
unanimous consent request?
  Mr. BREAUX. I yield.
  Mr. GRAHAM. I ask unanimous consent immediately after completion of 
the time controlled by the Senator from Louisiana, that I be given 10 
minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BREAUX. Mr. President, let me first congratulate the 
distinguished Senator from New Hampshire for his remarks and his major 
contribution in this effort to bring to the floor of the Senate a 
proposal on reforming Social Security that, first of all, is real; it 
is serious, it is bipartisan. A lot of the credit goes to the Senator 
from New Hampshire for his diligent work in this area.
  Previous to the work of the Senator from New Hampshire, we had the 
words of Senator Bob Kerrey of Nebraska, who also joins with all of us 
as lead sponsors on this Social Security reform legislation. Senator 
Kerrey has been involved in this issue of entitlement reform for a long 
time. He chaired the Entitlement Reform Commission and his work in the 
Social Security area has truly been outstanding.
  It is interesting that what is happening today on the floor is this 
is the first time, certainly in my memory and probably in a long time, 
we have actually had a bipartisan proposal on reforming Social Security 
introduced in the Senate. Not only is it unique that it is the first 
time in this body, it is also even more surprising that this proposal, 
in addition to being bipartisan, is also bicameral. By that, of course, 
I mean the same proposal has also been introduced on the other side of 
the Capitol, over in the House, by our colleagues over there, also in a 
bipartisan fashion.
  This is truly historic in the sense that Members of both parties and 
both Houses can join together in addressing an issue as important, yet 
at the same time as politically divisive, as Social Security has been. 
Yet we have been able to do that and have been joined by a number of 
our colleagues, particularly on the Senate Finance Committee. We have 
come together to make a recommendation on Social Security which I think 
is one that bears favorable consideration of our colleagues.
  We just had a very strenuous and sometimes somewhat heated debate on 
the question of the Social Security lockbox, which we just voted on. We 
will have future debate on that. I think it is very important for all 
Americans to know that while we debated on this concept of a lockbox, 
it does not do a single thing to restore the Social Security program. 
It does not change the program in any way. It does not make any 
structural changes to Social Security. It does not increase any 
American's retirement options. It does not give them any additional 
choices about how they want to plan for their retirement future. It 
does not increase widows' benefits. It does not address the problems 
the Senator just spoke of regarding the female population in the 
country and the special concerns they have. It does not allow low- and 
middle-income workers to access any Government contributions to help 
them in their retirement planning and to build up a larger nest egg. 
The lockbox does not do anything regarding the current unfunded 
liabilities in the Social Security program. It certainly doesn't 
restore the confidence in the Social Security system.
  We have heard the statements that more young people believe in flying 
saucers than believe Social Security is going to be there for them. So 
while we had a great, interesting debate on this lockbox concept, it is 
very important to know it does not do a single thing to take care of 
the problems that are facing this country in regard to the Social 
Security system. But this bill does. This bill has been scored by the 
people who have to do this for us professionally as restoring solvency 
to the Social Security program to the year 2075, and that is a fact. 
There is no debate about that. How we do it, I think, is the substance 
of our bill. I think it is very positive.
  Let me point out, why do we have a problem in Social Security? We 
have been rocking along since 1935 in a pretty fortunate situation. 
Most people got their Social Security benefits, everything they 
contributed, back very quickly.
  If someone retired in 1980, for instance, they got back everything 
they put into the Social Security system in a little over 2 years. They 
got back everything they put into the program. Retirees in 1980, at the 
age of 65, took 2.8 years to recover everything they put into the 
program. That is a heck of a deal for anyone. I know my father has said 
many times: I will never get back what I put into Social Security. He 
got it back in about 2.8 years. It was a very good deal for most 
Americans, and that is changing.
  The question is, Why? Very simple: People live a lot longer and there 
are a lot more of them. Life expectancy--thank goodness and thank 
medical science and thank God--has dramatically increased over the 
years so people live a lot longer than they used to.
  The second point is there are a lot more people. There are 77 million 
people in the so-called baby boom generation, those Americans born 
between 1946 and 1964. We have about 40 million people on Social 
Security today. We are getting ready to add 77 million more people into 
this program. It does not take rocket science to figure out why we are 
having problems.
  We have a lot more people who are living a lot longer and earning 
retirement benefits through Social Security. We have fewer and fewer 
people left who are working to pay for those benefits. When Social 
Security was passed under Franklin Roosevelt, there were about 16 
people working for every 1 person who was retiring. Because people live 
a lot longer now and there are a lot more of them, it is now down to 
about 3 people working for every 1 person who is earning retirement 
benefits and getting retirement benefits. We cannot continue on this 
trend. The so-called lockbox does not do a single thing to help reform 
the program or allow it to generate more funds to make sure the program 
is going to be there for the 77 million baby boomers.
  For those who are on Social Security retirement now, the good news 
for them is it is there; they do not have to worry about it. We have 
never missed a payment. They will be guaranteed their payments.
  Unless we do something, we are in danger of letting the program go 
broke. We have presented to the Senate today, and it had been presented 
to the other

[[Page S8733]]

body earlier, our recommendation in the form of a specific bill that 
has been scored by the people who do this work as restoring the 
solvency to this program to the year 2075.
  How do we do it? It is not that complicated. One of the things we 
have done is to say that every American who pays Social Security will 
be required to divert 2-percentage points of their payroll tax--which 
is 12.4 percent payroll tax of which they pay 6.2 percent--to an 
individual retirement account, which is strongly supported by most 
Americans.
  Almost two-thirds of Americans in the polls I have seen have said yes 
to the question: Would you like to be able to save a portion of your 
payroll tax in an individual retirement account that you would be able 
to control? There is strong support for that. I do not think they want 
to privatize the whole program, but they would like to have some of the 
money to invest for themselves, as we do as Federal employees.
  I do not know if a lot of Americans realize it, those who are not 
Federal employees, but I can do that as a Member of the Senate. We 
establish our own Federal employees Thrift Savings Plan, and we can put 
up to 10 percent in that savings plan. We can earn interest on the 
market, and we get a lot better return than we get as a Government with 
Social Security funds. The Federal Government invests the Social 
Security surplus in Government bonds. It has been earning about 3 
percent. That is not a good return in today's market. We need to allow 
individuals to do a better job with their own tax dollars.

  Our plan creates a savings plan for people on Social Security where 
they can put 2 percent of their payroll tax into an individual 
retirement account which they will own, and when they pass away, it can 
be inherited. It will be theirs and they can invest it and hopefully 
get 10 percent or 15 percent or more return on their money, and they 
will be able to get the advantage of that higher investment when they 
retire and add it to the rest of their Social Security program.
  It will put more money into the program. It will strengthen the 
program. It will allow people to become more involved in their own 
retirement. A lot of young people do not think it is going to be there. 
They think the Government does not do it very well.
  This changes all of that and, I think, in a very important way. 
Individuals will own those proceeds, and I believe that is extremely 
important.
  That is one of the features of our program I wanted to highlight.
  In addition, we also say you can do more than that. People in lower- 
and middle-income brackets will be able to put an additional amount of 
money for an additional $1 over this 2 percent that they would put into 
their account. The Federal Government would match it with $100.
  The PRESIDING OFFICER. The time of the Senator has expired.
  Mr. BREAUX. Mr. President, I yield myself 2 additional minutes.
  The Government will match it with $100. They can make additional 
voluntary contributions, up to 1 percent of the total wage base of 
$72,600, which means they will be able to get a maximum contribution of 
about $626 from the Federal Government.
  This is a good plan. It is a solid plan. It restores Social Security 
viability to the year 2075, and it is something of which we need to 
take advantage and do it in this Congress. We cannot continue to wait.
  The big problem is this has always been a political football. This 
effort, this bill, is bipartisan and it is bicameral. I urge my 
colleagues to look at the substance of our legislation. I think they, 
too, will find, when they review it carefully, that this is the right 
approach, it makes sense, it is balanced and one that can be considered 
favorably by this Congress this year.
  Mr. President, I yield the floor.
  Mr. ROBB. Mr. President, I am pleased to join my colleagues on the 
floor today to introduce the Bipartisan Social Security Reform Act of 
1999. As one who has been involved in various reform efforts over the 
past three Congresses, I can honestly say that the legislation we are 
introducing today is, in my view, the best product we have submitted to 
date.
  I would like to take a moment to talk about the dedication of the 
members who are here on the floor today. They have all demonstrated a 
tireless commitment to get this body to take seriously solving the 
tough issue of financing this program through the Baby Boom generation 
and beyond. This is not an easy task. Under current law, the program 
faces a shortfall that would require either an 18 percent payroll tax 
rate or a 30 percent cut in benefits. Either option would be 
devastating to the future workers financing the program or the future 
Social Security beneficiary.
  This group has united around a common purpose. Instead of trying to 
dress up so-called lock-boxes as Social Security reform, and instead of 
undertaking massive Federal borrowing to finance individual accounts on 
top of the current system, and instead of committing future taxpayers 
to fix the problem, we have actually sought to solve the long-term 
financing dilemma in this important program. And I'm proud to say that 
we have done this without adopting any payroll tax increase.
  By allowing all workers to take 2 percentage points of their payroll 
tax into individual retirement savings accounts that workers own, we 
ensure that not only is today's Social Security surplus being set aside 
for today's workers who will become tomorrow's retirees, but we also 
advance fund some of our future liabilities. In addition, we also use 
some of the surplus to boost contributions for lower income workers, 
ensuring that these individuals have a comparable opportunity to build 
wealth in their personal savings accounts. The accumulation in these 
accounts will supplement future Social Security benefits under the 
traditional program.
  While we make some revisions to future benefits to bring down the 
financing cost of the program, we do so in a way that doesn't affect 
anyone currently over the age of 62, that increases the traditional 
Social Security benefit for low income earners, that protects women who 
have taken time out to raise children, and that increases the benefit 
for widows and widowers.
  Mr. President, this is a credible plan that solves the financing 
challenge presented by Social Security in a truly progressive manner. I 
hope other colleagues who are serious about tackling the issue will not 
only take a close look at this proposal, but will also help us make 
real reform a top priority.
  Mr. THOMAS. Mr. President, I am pleased to join my colleagues today 
in introducing a bipartisan bill to protect, preserve and improve the 
Social Security system for the challenges of the 21st Century.
  We all know that Social Security faces massive demographic changes. 
For example, our population is aging rapidly. As a result, the ratio 
between the number of workers paying taxes into the system as compared 
to the number of retirees taking funds out of the system is falling 
swiftly. Soon, we will have fewer than two workers for each retiree. 
Other demographic trends are that Americans are living longer and 
retiring earlier.
  The combined effect of these changes is that future generations will 
face tremendous tax burdens or massive benefit cuts in order to 
preserve Social Security. The longer Congress waits before reforming 
the law, the more painful and difficult these changes will be.
  That's why I am pleased this bipartisan group has come together with 
credible reform legislation that will preserve Social Security in 
perpetuity. It achieves this important goal in large part through 
advance funding of the program. The bill allows workers to divert a 
portion of their existing Social Security taxes into a personal 
retirement account that they would own. This feature would enable all 
Americans to accumulate a cash nest egg for their retirement and would 
improve the rate of return on their Social Security taxes.
  Currently, Congress is considering legislation to create a 
``Lockbox'' that would reserve Social Security surplus revenues for 
Social Security alone, not other government spending as is currently 
the case. I support this legislation and believe it is an important 
first step toward saving Social Security. But to me, the true 
``Lockbox'' is private retirement accounts. These accounts ensure that 
individual Americans, not the Federal Government, are in charge of 
their retirement nest egg. If the worker dies before retirement,

[[Page S8734]]

the accounts could be left to his or her heirs. In addition, these 
private accounts ensure that the Federal Government can't come back at 
a later time and reduce benefits. Another key feature of these accounts 
is that low income workers, most for the first time, will have an 
opportunity to own assets and create wealth.
  Another way the bill makes Social Security more progressive is by 
increasing the guaranteed benefits for those with low incomes. Other 
important provisions in the legislation will improve the Social 
Security benefits of widows, repeal the earnings test, and correct 
perverse work incentives inherent in the current system.
  Finally, our proposal doesn't affect current retirees. They would 
continue under the current system. But by reducing the tremendous 
unfunded liability the system faces and restoring solvency to Social 
Security, current retirees are protected from the potential tax 
increases and benefit cuts that would be necessary to preserve the 
system. Seniors' benefits are far more secure under this plan than they 
are under current law.
  Again, I am pleased to join Senators Gregg, Kerrey, Breaux, Grassley, 
Thompson and Robb in introducing this important legislation. And I 
encourage the rest of our colleagues to examine this bill carefully 
because I think it has the elements necessary to achieve a bipartisan 
agreement to save Social Security. The sooner we act, the better. Time 
is not on our side.
  Mr. GRASSLEY. Mr. President, I rise today to join my colleagues in 
introducing the Bipartisan Social Security Reform Act of 1999.
  We have crafted a responsible plan to save Social Security for 
generations to come. By making incremental, steady changes to the 
Social Security system, we will be able to ensure the long-term 
solvency of the program without taking Draconian measures.
  Not only have we designed a responsible plan, but a bipartisan plan 
as well. No change to the Social Security system can be made without 
support from both sides of the aisle. Our bill represents a true 
bipartisan effort to save Social Security. The Bipartisan Social 
Security Reform Act is co-sponsored by four Republicans and three 
Democrats. Similar legislation has been introduced in the House of 
Representatives by Congressmen Kolbe and Stenholm. This bipartisan, 
bicameral support is an excellent foundation on which to build, 
ensuring that the basis of the American retirement system remains 
financially sound for future generations.
  The bipartisan plan would maintain a basic floor of protection 
through a traditional Social Security benefit, but two percentage 
points of the 12.4 percent payroll tax would be redirected to 
individual accounts. Individuals could invest their personal accounts 
in any combination of the funds offered through the Social Security 
system. An individual who invested his or her personal account in a 
bond fund would receive a guaranteed interest rate. However, 
individuals who wish to pursue a higher rate of return through 
investment in a fund including equities could do so.
  Our proposal would eliminate the need for future payroll tax 
increases by advance funding a portion of future benefits through 
personal accounts. With individual accounts, we provide Americans with 
the tools necessary to build financial independence in retirement--
especially to those who previously had limited opportunities to create 
wealth. Under our plan, they will be able to save for retirement and 
benefit from economic growth.
  In putting together this legislation, this group has been conscious 
of how changes to Social Security would affect different populations. 
One group that I have been particularly concerned about is women. Let 
me explain how our bill addresses women's needs:
  Women are more likely to move in and out of the workforce to care for 
children or elderly parents. They should not be punished for the time 
that they dedicate to dependents. Our proposal provides five ``drop-
out'' years to the spouse with lower earnings in every two-earner 
couple.
  Women, on average, earn less than men. The Bipartisan Social Security 
Reform Act would ensure that workers with wages below the national 
average would receive an additional $100 contribution annually to their 
personal accounts when they make a contribution of at least $1. Any 
subsequent contributions would receive a dollar-for-dollar match so 
that all workers would be guaranteed a minimum contribution of one 
percent of the taxable wage base. For this year, that contribution 
would be $726. Furthermore, all wage-earners would be permitted to save 
up to an additional $2,000 annually through voluntary contributions to 
personal accounts.
  In addition, our proposal creates an additional bend point to the 
benefit formula to boost the replacement rate for low-income workers, 
many of whom are women.
  Women live longer than men. At age 65, men are expected to live 15 
more years, whereas women are expected to live almost 20 more. Our 
proposal addresses that reality by allowing money accumulated in 
individual accounts to be passed on to surviving spouses and children. 
Furthermore, our proposal would increase the widow's benefit to 75 
percent of the combined benefits that a husband and wife would be 
entitled to based on their own earnings.
  Congressional Republicans and Democrats and the administration all 
have established saving Social Security as a top priority. Now we must 
move ahead with the process and provide leadership. Each year that we 
wait to enact legislation to save Social Security, the changes must be 
more pronounced to make up for the lost time. I urge my colleagues to 
cosponsor the Bipartisan Social Security Reform Act.
  The PRESIDING OFFICER. The Senator from Florida is under a previous 
order to speak for up to 10 minutes.
  Mr. DOMENICI. Parliamentary inquiry. Is there any order subsequent to 
that?
  The PRESIDING OFFICER. Yes. The Senator from New Mexico will be 
recognized, following the Senator from Florida, for up to 10 minutes.
  Mr. DOMENICI. I thank the Chair.
  The PRESIDING OFFICER. The Senator from Florida is recognized for 10 
minutes.
  Mr. DORGAN. Mr. President, I ask unanimous consent to follow the 
Senator from New Mexico.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from Florida.

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