[Congressional Record Volume 146, Number 24 (Tuesday, March 7, 2000)]
[Senate]
[Pages S1196-S1201]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             PERSONAL SECURITY AND WEALTH IN RETIREMENT ACT

  Mr. GRAMS. Mr. President, I want to take time this morning to talk 
about one of the most important issues I think is facing American 
society today; that is, the future of the retirement system in this 
country--not only for those who are on Social Security today or for 
those who are going to be on Social Security very soon, but basically 
to look down the road to our children and our grandchildren at what 
kind of Social Security or a retirement system we are going to leave 
the next generation. I think that is very important.
  I am very pleased this morning that President Clinton has finally 
accepted the Republican Social Security lockbox which would lock in 
every penny of the Social Security surplus, not for tax relief and not 
for Government spending but for the retirement program of millions of 
Americans.
  However, what most concerns me is that the President appears to be 
abandoning his ``Save Social Security First'' pledge. It was one thing 
to lock in Social Security surpluses last year and in the future and to 
further attempt to devote interest savings on a lower public debt to 
Social Security, but that alone will not save Social Security because 
we have spent too many years of the Social Security surplus prior to 
the year 2000.
  The President's budget does not address the future solvency of Social 
Security to ensure retirement benefits will be there for the baby 
boomers and also future generations. All he has proposed is to credit 
Social Security with more IOUs that do nothing but increase taxes on 
future generations.
  So my point is, the President's Social Security proposal does not 
push back the date that Social Security will run a deficit by a single 
year, and the transfer from the general fund to Social Security does 
not cover a fraction of the shortfall the system is going to face.
  Without reform, the unfunded liability of Social Security will crowd 
out all discretionary spending. It will create financial hardship for 
millions of baby boomers. It will impose a heavy burden for our future 
generations in the form of higher taxes. We must address this very 
vitally important issue and do it as quickly as we can.

[[Page S1197]]

  Just another note. Recently, a Social Security advisory panel found 
that the Social Security economic and demographic assumptions the 
Government uses to project the program's future economic status 
underestimate the unfunded liability. What that means is, if the 
panel's recommendations were adopted, Social Security projections would 
show a financial imbalance in the system that is much greater than 
currently forecast. In other words, the system is more likely to be in 
worse shape today financially than previously even thought. This means 
Social Security could go broke much sooner than we actually expect 
today.
  What I want to do is to look at the system itself and then look at a 
plan I have introduced called the Personal Security and Wealth in 
Retirement Act, which is personal retirement accounts, which I believe 
is the direction in which we should go in order to save Social Security 
and to have a safe, sound, and good retirement system for the future.
  In doing this, I have been across the State of Minnesota, holding 
many town meetings, talking to hundreds and thousands of Minnesotans, 
trying to explain to them what the problems are.  I think everybody 
agrees there are some problems in Social Security. In fact, more young 
people today believe Elvis Presley is still alive or believe in aliens 
than they believe that Social Security is going to be there for them. 
So there is a problem of perception.

  What Americans are looking for--and I found this out traveling across 
Minnesota--what they want is some information on what is happening and 
what are some of the options we are going to have in order to address 
this problem. That is why I have traveled across the State of Minnesota 
doing a number of town meetings, talking to Minnesotans about this.
  When we look at Social Security over the last 65 years, Social 
Security has basically done what we have asked the program to do; that 
is, to provide retirement benefits for millions of Americans over 65 
years. It has done the job. In some cases, if one looks at their Social 
Security check today, they will say it is not very good because it is 
only $700 a month, $600 a month, $800 a month. That is not the kind of 
retirement we want to leave to our children.
  If we look ahead to the next 30 years, the system is facing some real 
problems. We are going to strain the system to the point it will not be 
able to meet the benefits that have been promised. In fact, if we look 
out about 30 years, without any changes in Social Security, we will see 
a reduction in the benefits of about one-third. We might have to raise 
taxes; that is another option. We might have to raise the retirement 
age.
  If those are the options on the table, I don't think they are what we 
want to leave our children, that they are going to have a retirement 
system that is going to cost them more, going to give them less in 
benefits, and they are going to have to be older to retire. Is that 
what we are promising or hoping for our kids? I don't think it is. That 
is why I have gone across Minnesota holding town meetings and talking 
about this issue.
  When Franklin Roosevelt created the Social Security program over six 
decades ago, he wanted it also to feature a private sector component to 
build retirement income. In other words, he did not think only Social 
Security alone should do that. Social Security was supposed to be one 
leg of a three-legged stool: Social Security, pensions, and savings 
accounts.
  But Franklin Roosevelt did have some concerns. In fact, there was a 
Senator--I think from Missouri--who had passed on the floor of the 
Senate a proposal to include private retirement accounts as well as the 
public. When it got into conference, it was stripped out. They promised 
him they would bring it back on the floor again the next year, but they 
said: We have to pass this bill now. We are right at the height of the 
Depression, with all the problems the country is facing. They promised 
him they would bring this aspect back the next year. They never did. I 
always say that is one of the first big lies dealing with Social 
Security.
  Social Security is a system that is stretched to its limits. We have 
78 million baby boomers who are going to begin retiring by the year 
2008. The average is going to be around 2011 or 2012, but 80-plus 
percent of Americans retire at the age of 62, not at the age of 65. So 
we can push back when it is going to hit that limit by a couple of 
years to 2008. Social  Security spending will begin to exceed tax 
revenues by the year 2014.

  We have all heard about the Social Security surplus and why we are 
bringing in these surpluses every year. In 1983, a blue-ribbon panel, 
chaired by Alan Greenspan, decided the way to extend the life of Social 
Security was to begin overcharging for the FICA taxes. That excess 
overcharge would be put into a trust fund or a savings account, and we 
would then draw on that after the surpluses evaporated so we could meet 
the shortfall from the savings account which would extend the life of 
the program to the year 2032.
  We hear everybody in debates saying: Social Security will be here 
until the year 2032. Well, it will be here, but it won't be paying 
benefits to the max after the year 2014 unless we raise taxes somehow 
to retire some of the debt.
  To give a quick example: It is as if we were paying out $100 in 
benefits today. By the way, our Social Security system is a pay-as-you-
go system. In other words, the money brought in at the first of 
February went out at the end of February. There is not one account with 
your name on it with $1 in it in Washington for your retirement. You 
have been paying in all these dollars, but you do not have an account 
in Washington that has $1 for benefits for your retirement. All you can 
rely on or hope for is that there are people working when you retire so 
they can pay that benefit at the first of the month that you will 
collect at the end of the month. That is the way this system works. It 
is a pay-as-you-go system--no investments, no compound interest, no 
assets, only the hope that there are going to be enough workers paying 
into the system when you want to retire.
  So if we are paying out $100 in benefits, we are bringing in $110 
today. We put that $10 in the savings account. But by the year 2014, we 
will bring in $100 and pay $100. So we are going to be even. By the 
year 2015, estimates are we are going to bring in $98; we are going to 
have to pay out the $100. That is when we were going to go to the 
savings account or the trust fund to draw out $2 to make sure those 
benefits are paid.
  Then by the year 2020, for instance, we will only be bringing in $90 
and we will pay out $100. We will have to borrow $10. Between 2014 and 
2032, we would have evaporated that savings account. Then we will be 
facing the problem we were hoping to deal with at that time.
  The problem is, all that is in the trust fund today are IOUs. In 
other words, every time $1 has been collected from you to go into the 
trust fund, Washington has borrowed that money, put it into the general 
fund and spent it for other Government programs. They have spent your 
future retirement dollars. They have put in notes, IOUs, that say they 
will pay back. It would be similar to going to your kid's piggy bank, 
taking out 10 bucks and putting in an IOU. You are going to have to 
have future revenues to pay back that IOU. So the money you have 
already put in is gone. To replace it, we will have to go to current 
taxpayers and raise more taxes to pay it off. All the money has been 
used to increase Government spending. It hasn't gone for your 
retirement security at all.
  The Social Security trust fund goes broke in the year 2033. That is 
when all the IOUs will be gone. I always like to say, if you think 
these IOUs are good, go put a million-dollar IOU into your checking 
account and find out how many checks your banker allows you to write 
against that IOU. None. You are going to have to find additional 
revenues. I have $1 million in my checking account. It looks good on 
paper, but in reality there is nothing there to back it up but the good 
word and faith of the Federal Government to some day go back and 
collect more taxes to pay off this debt. So by 2014, we are going to 
have to begin raising taxes or cut spending in other areas to pay off 
an IOU. If we need $1 billion in the year 2014 and it is not in the 
budget, where do we go to get it? We are going to have to go out and 
get it from the taxpayers. So we are going to have to have a tax 
increase beginning as early as 2014 to pay the benefits being promised.

[[Page S1198]]

  Why is the system now being stretched to the limit? Back in about 
1940, there were 100 workers for every retiree. Today, there are about 
2\1/2\ workers for every retiree. In 25 years, there are going to be 
less than two for every retiree. Why does this put a strain on the 
system? Say if you were going to have a $1,000-benefit in 1940. One 
hundred workers would only have to put $10 a month into the system to 
make sure it was solvent. Today, we are asking that you put nearly $500 
a month into the system in order to maintain the benefits for this 
retiree. In 2025, our grandchildren will have to pay more than $500 
apiece in order to maintain those benefits. So $10 compared to over 
$500 shows the strain that will be put on the Social Security system if 
we do nothing to improve it.
  Where are we today with the system? The numbers say the system is 
probably more in debt than we expected it to be. If we look at this 
chart, on this line is zero; this line shows the continuing surpluses 
we will be bringing in until about the years 2012 to 2014. But after 
that, we see the red line as it goes down. This is the debt the system 
is going to incur, and it is over $20 trillion of unfunded liabilities. 
In other words, this is after we have already collected Social Security 
taxes from your paychecks. This is what we are going to run short if we 
are to pay the benefits the Government promises. So if we are going to 
continue paying just today's level of benefits--adjusting this for 
inflation, of course--in today's dollars, we are going to be $20 
trillion short over the next 70 years.
  Again, others would say: Well, if we can't do that, we will lessen 
the retirement age, and that will lessen the debt; cut benefits by a 
third. That will lessen the debt even more, or we are going to raise 
taxes, which could eliminate it. But that is the plan they have 
proposed.
  The biggest risk to our Social Security system today is to do 
nothing. There are a lot of people who say we can't really touch it, or 
maybe we should raise taxes a little bit. Right now, proposals are 
floating around to raise your FICA taxes by another 2.2 percent in 
order to maintain these benefits. That is like putting a Band-Aid over 
cancer; you can wait 5 years, but when you pull that Band-Aid off, the 
cancer is probably going to be much worse than it is today. So that is 
no cure.
  In fact, to support Social Security we have raised taxes 52 or 53 
different times. People like to say they want to ``tinker'' with Social 
Security. If you get out the Washington dictionary and you open it up 
to ``tinker,'' it means a tax increase. They say, if we can only raise 
it 2.2 percent more, we can solve this problem. Well, if you believe 
that, why have they done it 52 or 53 times? This would be 54.
  How many more tax increases would have to be imposed in order to do 
that? To keep promising Social Security benefits, the payroll tax would 
have to be increased, some say, a minimum of 50 percent--a minimum of 
50 percent--not the 2.2, but a minimum of about 6.5 percent. Others say 
that could be more than double in order to maintain it.
  In fact, here are the payroll taxes on this chart. This is where we 
started in 1950. It was under 3 percent at that time. It started out, 
by the way, at 1 percent of the first $1,000 of earned income. It has 
grown now. So it is 12.4 percent on $70,200, or somewhere in that 
neighborhood.
  You can see how taxes have continued to increase to where we are 
today. But this red line shows the intermediate projections. These are 
the best-guess estimates of what could happen. By 2030, our children 
could be paying about 23.5 percent just for Social Security--not 
Medicare, just Social Security. You can add Medicare and then you are 
at about 28 or 30 percent. Then add in Federal taxes and it is 56 
percent because that averages 28 percent. Then add in local taxes, 
sales taxes, property taxes, excise taxes, and everything else, and in 
30 years our children are going to be looking at tax rates as high as 
70 percent or maybe even higher because high-cost projections show that 
this amount probably would not be 25 but it could actually be somewhere 
closer to 28 or 29 percent. That would put our children well over the 
70-percent mark.
  Is that what we want for our children, where, for every $100 they 
make, they will take $30 or $35 home and the Federal Government gets 
the remainder of it? I don't know how many children will vote in the 
year 2030 for a politician who will keep a system such as this.
  The diminishing return of Social Security: If you retired in 1960 or 
1955, you probably got back everything you had put into Social Security 
within the first year. It was a good investment for that generation. 
But today, the average return on Social Security is less than 2 
percent. If you are a young person today, by the time you retire, there 
is actually going to be a negative return. In other words, they would 
be better off to put their retirement money in a tin can and bury it in 
the backyard, and they would have more buying power in retirement than 
if they invested it in Social Security.

  For many of the minority groups today, they are already in a negative 
cash-flow for Social Security because of age expectancy. So already it 
is beginning to hurt that portion of our population. To compare it, 
what if we invested it in the markets? The markets traditionally, over 
the last 80 years, including the crash of 1929 and all the ups and 
downs of the markets over the last 80 years, averaged a little over 7 
percent in real rate of return. That is after inflation and all of the 
adjustments. It averaged over 7 percent in real rate of return. I don't 
know how many people would line up at the window to invest in an 
account that said: We are going to pay you less than 1 percent; in 
fact, it may be a negative percent. Right now, that is the only option 
you have. You have no choice as to where your money is going.
  What have we done in Washington? Everybody now agrees--the President, 
Democrats and Republicans, the Senate and the House--that we need to 
lock it away to make sure all money collected for Social Security goes 
to pay for Social Security. We have introduced the lockbox. That means 
all the additional surpluses now are going to be set aside for Social 
Security retirement. That is very important. We need to continue to do 
that.
  Stop raiding the trust fund. The Social Security Protection Act, 
which I introduced, would automatically reduce nonentitlement spending 
of Social Security dollars. Our spending and revenues now are based on 
the best estimates we can put together. The question is, Are we really 
serious about making sure we don't spend Social Security surplus money, 
even by accident?
  We should have a protective mechanism in place. So if we estimate we 
are going to spend $1.8 trillion and we bring in a billion dollars less 
than that, right now, the only option is to go to the trust funds to 
make up the difference in spending. My bill would say we don't do that. 
We would reduce spending across the board evenly by that amount to make 
sure we did not take any money from the Social Security trust fund.
  Again, if that is our promise, if we are serious about doing that, we 
should not say ``except to'' or make an exception. If we made an 
exception for $1 billion, you know there would be exceptions for $50 
billion. So we have to be honest in what we are doing. It might only be 
.0003 percent; it might be .01 percent. If instead of getting $100 we 
would get $99, if that is what we need to do to protect Social Security 
funds, I think we should do that. If that is our top priority, we 
should live up to that priority.
  When I was putting together the six principles of saving Social 
Security, I asked, what do we need to do if we are going to at 
reforming our securing retirement benefits for the future? First and 
foremost, we have to protect current and future beneficiaries. That 
means if you are on Social Security today, or plan to retire in the 
near future, you should be assured that the Government is not going to 
reduce the promises it has made. In other words, you can retire at the 
same age the Government says now, and your benefits will be there and 
protected, and we are not going to raid your taxes between now and then 
in order to do this.
  You basically made a contract with the Government when you started 
working and you said, all right, I am going to put money into the 
system, and I expect to get the benefits when I retire. It is a 
contract. You said you were going to do this, and the Government said 
you are going to have the

[[Page S1199]]

benefits. Late in the game, when you sit down and plan for retirement, 
in Washington they say: We don't have enough money in the budget 
anymore. We are going to have to make changes here and raise your 
retirement age, or cut your benefits, or maybe we need to raise your 
taxes a little more. That is not the fair way to do that.

  Allow freedom of choice. If you want to stay with the current system 
of Social Security, you have the option to do that. But also if you 
want to move into a personal retirement account, be in control of your 
retirement and your investments and maximize those dollars, you should 
have the freedom of choice to do that. Today, the Government gives you 
no choice. Washington knows better. Washington tells you what you have 
to do with your retirement. Somehow Washington doesn't believe you are 
smart enough to plan for retirement. You might be smart enough to make 
the money but not smart enough to put it away for yourself.
  Preserve the safety net. That means you have to have a net there for 
disability and survivor's benefits. Let's make Americans better off, 
not worse off. So when you retire, you are going to have at least the 
benefits promised, but even better if we can. My plan does that.
  Create a fully funded system. We have proposed personal retirement 
accounts in the Private Security and Wealth in Retirement Act. Bottom 
line: No tax increases in order to do this. The easiest way is always 
to raise taxes. The hardest way is to make real reforms. The Personal 
Security and Wealth in Retirement Act provides for personal retirement 
accounts. I introduced it in the 105th Congress and last May 24. It is 
S. 1103; the Personal Security and Wealth in Retirement Act allows for 
personal retirement accounts.
  The plan provides for retirement security. I think it offers better 
options for you. In other words, right now you have no options. The 
Government tells you what you are going to do. They tell you what you 
are going to pay in from your check. They tell you what your benefits 
are going to be when you retire.
  You don't have an option on that. They also tell you at what age you 
can retire. They give you more options.
  Workers under my plan would pay 10 percent of their income. Right now 
they are paying 12.4. That goes to Social Security. My plan would take 
10 percent of your income and put it into personal retirement accounts. 
The other 2.4 percent we still have to collect.
  That is part of the funding mechanism for those who wish to remain on 
Social Security. That 2.4 percent, plus other means of financing, is 
going to have to go into the current Social Security Administration in 
order to fund that. We are going to talk about taking 10 percent of 
your money and putting it into a retirement account, or a PRA, that 
will be managed by a government-approved private investment company.
  Firms will set up these retirement accounts--whether it is U.S. 
banks, whether it is Citibank, Travelers, whether it is Lutheran 
Brotherhood, whether it is Norwest Bank, or whatever. They would set up 
these retirement accounts based on safety and soundness--such as the 
FDIC account in which you put your savings accounts in a bank.
  There would be very rigid safety and soundness measures to make sure 
the money put into this account is going to be there when you retire. 
So safety and soundness is first and utmost.
  A couple of examples: On $30,000 of income, you are putting $3,720 a 
year in to support Social Security. Under my plan you would put $3,000 
of that into your personal retirement account, and the rest of it would 
then go to the Government.
  Just to show you the difference on this, they would be taking $3,720 
and putting it into Social Security and then being allowed to take 
$3,000 and put it into a personal retirement account based on the 
market and what you could then hope to receive at retirement.
  Under this example, this is what you would do. If you made $30,000 a 
year for a lifetime and went to draw your benefits from Social 
Security, you would get about $10,668 a month. But if you could take 
that $3,000 and put it into a personal retirement account and get the 
average market return, you would have about $54,500 per year in 
benefits. Compare 10.6 to 54.5. That is a big difference in what 
retirement accounts invested in the market could do compared to pay as 
you go.
  Let's take a couple of other income examples. This would be for an 
average income family which has $42,000 or $43,000 a year in average 
income. This is one spouse earning the average income in a household, 
one spouse not employed outside the home, a one-worker family. If you 
paid in a lifetime the average earnings into Social Security, you could 
expect to get about $29,000 a year in benefits. If you would have 
invested these same dollars from the personal retirement account into a 
private mixed stock and bond market--in other words, more 
conservatively and maybe not the highest returns but more conservative 
investments--you would get at least $66,000 in return. If you had 
invested in the market, you would have a return of nearly $140,000 per 
year compared to $30,000 a year in return.
  Let's take the same for a two-income, low-income family with both 
spouses working with an average low income over their lifetime. They 
would get about $18,400 in benefits. But if they could put the dollars 
into the personal retirement account and invest it in, say, the market, 
they could get over $100,000 a year in benefits, or about $45,000--if 
they put it into a mixed type and more conservative investment account. 
But, either way, they are still much better off.

  The reason Albert Einstein was labeled as ``the man of the century'' 
by Time magazine was because Albert Einstein at one time said the most 
powerful force on Earth is compounded interest.
  That is what we are trying to show, because if you are working and 
doing a pay-as-you-go system, you are getting $18,500. But if you use 
this most powerful force on Earth--compounding interest--you can see 
how it would compound. So your benefits would increase fivefold over 
your lifetime in order to draw better Social Security benefits.
  Is this a pipe dream or is this just speculation or whatever? No. 
This is actual. Galveston County, TX, has a personal retirement 
account, as does the entire country of Chile, as does about 120 other 
countries in the world. Thirty other countries are doing this.
  If you had a little history on our Social Security system, it is all 
based or duplicated off of one that was started in Germany in 1880. 
Bismarck at that time designed the system we have adopted as the model 
that Chile had, and many other countries. In fact, in 1880, Bismarck 
set the retirement age at 65 years. The average worker in Germany in 
1880 was 49.5 years. When we adopted the Social Security system in this 
country, we set the retirement age at 65. The average life of a worker 
in this country was 59.5 years.
  You can see what happened because as we have extended the life line, 
as people now enjoy 20-plus years of healthy retirement. The system was 
never designed to do that. That is why so many limits are being placed 
on it.
  Let's look at Galveston County, TX, and how the employees there are 
reaping the benefits of a private retirement account instead of Social 
Security.
  In about 1980, one of the administrators in Galveston County saw the 
loophole in the law. At that time, if you were a public employee and 
you already had a retirement system, you did not have to join Social 
Security. You could remain with your own private retirement account.
  By the way, the President's plan to reform Social Security is to make 
sure that all those accounts are closed, and everybody would be drawing 
from Social Security.
  But in Galveston County, they saw this loophole and opted out of 
Social Security, although the Government quickly closed that door so 
nobody else could. But that is what happened in Galveston County over 
the last 20 years.
  According to today's schedules, under Social Security a death benefit 
is $253.
  My father died at the age of 61. For all of the money he paid in over 
his lifetime, when he passed away his heirs received $253. That was 
all. In Galveston County the minimum death benefit is $75,000.
  Disability benefits per month, if you are disabled under Social 
Security,

[[Page S1200]]

total about $1,280. In Galveston County, the disability benefits are 
$2,750 a month.
  Retirement benefits per month: Social Security--again, currently we 
are basing this on average income--$1,280 a month would be about the 
best you could get out of Social Security. In Galveston County, you are 
at nearly $4,800 a month--nearly four times greater in benefits in 
Galveston County than if you are on Social Security today.

  There was a young woman who wrote an editorial to the Wall Street 
Journal about 2 years ago. Her husband passed away suddenly of a heart 
attack at 44. She was 42. They had three children. She received the 
death benefit, plus the benefits she receives from Social Security and 
from her private retirement account, which allows her to maintain her 
home. If she had been on Social Security, her family would have been in 
poverty with the payments she would have gotten. Today, she can 
maintain the home as she did before. In the article, all she could say 
was: Thank God for Galveston County and the system they have.
  What about moving to this new retirement account? If we move to the 
personal retirement account, somebody 45 years old would say: I have 
worked now for 40 years. What happened to all that money I paid into 
Social Security? What am I going to do? I can't afford to lose that--
although you hear some people say: You can keep everything I have paid 
in; let me out of the system.
  We have said those are dollars the Government has collected with the 
promise of paying you benefits. We know exactly how much we have 
collected in Washington from you for Social Security. If it is $20,000, 
we would give you a $20,000 recognition bond. That would be deposited 
into your private account. Adjusted for inflation and interest over the 
years, you could then cash this bond when you are 65, because that is 
the way everything is based right now. If it is $30,000, you get a 
$30,000 bond. If it is $44,220, we would give you that as a recognition 
bond. But it would be one of your options to say: I am going to have 
this credited to my account, and then I am going to begin my personal 
retirement system.
  Again, taking care of today's Social Security recipients means that 
if an individual chooses to remain within the current system, the 
Government should and will guarantee the benefits--no age increase, no 
reduction in benefits, no tax increase, no ifs, ands, or buts. If one 
decides to stay within the current system, this is what to expect your 
government to do at the minimum, to guarantee your benefits, and not 
hear 5 or 20 years from now: I am sorry, we don't have the funds; we 
will have to reduce your benefits.

  We need to rely on this in order to make sure the system is well.
  Preserving the safety net is my plan. The Personal Security and 
Wealth in Retirement Act preserves the safety net for disadvantaged 
Americans, so that no covered person is forced to live in poverty. 
Today, poverty is recognized at about $8,240. My plan says workers 
cannot retire with less than 150 percent of poverty. They have to have 
income of at least $12,400--that is what workers receive in retirement.
  We don't want anybody retiring in poverty. In fact, today about 18 to 
20 percent of Americans who retire--mostly women--retire into poverty. 
We think we should have at least a safety net. Retirees have to have at 
least 150 percent in order to retire so they don't go into poverty.
  Funds that manage PRAs are required to buy life and disability 
insurance to cover those minimum benefits. As with Social Security 
today, they are the safety nets for survivor and disability benefits, 
as I showed earlier with Galveston benefits. The Federal Government 
will make up the difference for those who fall short of the minimum 
benefits.
  Perhaps someone has been in and out of the workforce or doesn't have 
enough money in that account, or they have had a minimum-wage job all 
their life and they cannot come up with the money to buy an annuity to 
pay the $12,400 a year. For those individuals, which we believe is a 
very small percentage, the Government will, in the only part that is 
any kind of entitlement or involvement by the Government at all, fill 
that glass full so benefits are paid.
  Perhaps a worker only had the dollars to buy an $11,000 benefit plan. 
The Government would put in the additional dollars to make sure when 
they retire their minimum benefit would be $12,400 a year.
  Providing a safety net and soundness: The rules are similar to those 
who apply to today's IRAs or 401(k)s and would apply to personal 
retirement accounts, as well. As banks operate under very strict rules 
of safety and soundness, the same type of rules are applied to the 
personal retirement accounts to make sure the money in their account is 
going to be there at retirement, don't worry about it.
  By the way, workers can't invest their money into a gold mine that 
evaporates and then be left with no retirement benefits. Again, this is 
the safety net, the Government-sponsored plan, to guarantee retirement 
benefits so you are not a ward of the State, you have the wherewithal 
to pay your way in retirement.
  Now, workers can still have other IRAs, other savings accounts, they 
can still have a stock portfolio. Only this narrow area will have the 
safety net or the Government set-aside to make sure individuals have a 
retirement.
  Investment companies that manage PRAs are required to have an 
insurance plan to ensure at least a minimum of a 2\1/2\ percent return 
on each account. That is not much, but compare that to today's less 
than 2 percent and a growing number of less than zero in 20 or 30 
years. This maintains at least a floor for the return on your 
investment. That also would be written into the law.

  Workers decide when to retire and when to withdraw their retirement. 
As I said earlier, today workers don't have the choice or the options; 
they have to do what the Federal Government says. They cannot retire 
until they reach a certain age. Benefits are determined by the Federal 
Government. The Government says what each person is going to receive as 
a benefit. They have decided over the years what your contributions to 
this package has been.
  With our retirement plan, when one can buy an annuity to provide 
income of 150 percent of poverty, anyone can retire anytime once that 
obligation is met. Once you have met the obligation to be able to buy 
an annuity that pays at least 150 percent of poverty, anyone can 
retire, or stop paying into the system and use that 10 percent of 
income to do what you want, use it for other investments, or spend it. 
Once an individual has met the threshold, they do not become a ward of 
a State. Anyone can arrange regular, periodic withdrawals of money in 
the account.
  An individual 21 today making an average income--about $42,000 a year 
today--their whole life, tucking away those dollars, would have about 
$1.5 million in a bank account when they decided to retire. Annuities 
cost about $100,000 per $1,000 a month of annuity. If one buys an 
annuity to pay $1,300, one needs $130,000 in order to buy that annuity 
today. That leaves $1.27 million left in the bank account, in the 
savings account. You can do whatever you want with that. You can take 
out periodic withdrawals; you can take a trip to Europe, and write a 
check to do it. This is your money, not the Government's money.
  An individual can withdraw the portion of the PRA that is above the 
minimum retirement benefits, free of income taxes and earning tests. 
All of these dollars placed into the retirement accounts are taxed 
before we put them in, as they are today.
  I don't know if many realize this, but the Government taxes everyone 
on the Social Security moneys that taxpayers put into the Social 
Security system today. It is taxed before the Government takes it out 
of their check. We do the same. The Government today, when an 
individual withdraws Social Security, much of that is exposed to 
additional Federal taxes, and it could be exposed to even more taxes as 
part of an estate. We are saying, once you have it in the account, it 
is your money tax free.
  More choices for families with PRAs. In divorce cases, they are 
treated as community property. Upon death, PRA benefits go to the 
heirs, without estate taxes. There are no taxes. If you pass away with 
$1.2 million in your account, that goes to your heirs when you die, not 
like when my father passed away.

[[Page S1201]]

 There was nothing after a lifetime of investment into Social Security 
except a $253 death benefit.
  Under this plan, all the money remaining in the account goes to 
heirs--your children, your spouse, your church, wherever desired. That 
is what happens: Build up an estate that can be passed on to the next 
generation.
  Workers may arrange PRAs for nonworking children, with workers able 
to put up to 20 percent of their income. We say now a minimum of 10 
percent, with an option of up to 20 percent can be put into their own 
account.
  If one wants to retire at 55, put more money in to make sure you have 
enough to buy this minimum retirement benefit. Do it quicker and retire 
earlier. Do what you want, or put it into the account for nonworking 
children. A parent with five children could put 10 percent aside for 
himself and 2 percent in each child's account. This gives your children 
a headstart on retirement benefits.
  To demonstrate how this money mounts up, by placing $1,000 into an 
average account when a child is born, by the time that child reaches 
65, that $1,000 would be worth nearly $250,000 with just that one 
investment into the retirement account. For grandparents, that is a 
good gift for grandchildren. That shows how it can grow. Additional 
accounts for children give a real leg up on their retirement benefits 
in the future.
  No new taxes. Bottom line, we say we do not want to raise taxes. 
There are things we need to do to finance this transition. As I said, 
there is $20 trillion in unfunded liabilities out there. Somebody has 
to pay that. We have made the commitment to them. The question is, How 
do we do that over the next 70 years so we do not put a tremendous 
strain on any one generation? As I said, in the next 25 or 30 years 
alone, we could put a strain on our children or grandchildren of up to 
a 70-percent tax rate in order to support the system if we don't make 
some changes now.
  Again, what this all means, the bottom line, is retirement income 
will be there for all, whether one decides to stay within the current 
Social Security system--that is a choice, if that is what you want to 
do--or whether one chooses to build a personal retirement account. 
Again, there is a choice. Individuals don't have to do what Washington 
says; you can have a choice in what you want to do. Citizens can decide 
which retirement options work for them.
  How do you want to do this? When the dollars are taken from your 
check, as they are today, deducted from Social Security, when the 
dollars are taken from you, you dedicate where you want the dollars to 
be sent, which retirement fund is going to handle your dollars--whether 
it be Citibank, Lutheran Brotherhood, Norwest, or whatever it might be. 
You decide where the dollars go. It goes into your account.
  Also, you can tell that account holder: I want 65 percent in the 
market; I want 35 percent in Government bonds and securities. You can 
do that. Each individual has control over how the investments are 
handled.
  Any person visiting the country of Chile, just ride in a taxicab and 
ask the cabdriver: How much do you have in your retirement account? He 
will pull out a retirement account passbook and state to the penny how 
much he has in the retirement account. That is his money.
  They do not have their hands on it anymore. This takes Social 
Security out of the control of Washington and it puts it into the 
people's control. They make the decisions of what to do and how to 
build their retirement.
  Everybody is different. Families are different. Everybody's hopes and 
expectations are different. Right now, Washington gives us that cookie-
cutter, one system, and that is it. Our plan gives all the options so 
the American people can provide and create a retirement system they 
want.
  With a PRA, an average Minnesotan could receive at least three times 
their current projected Social Security income, at least, and some of 
the projections go as high as 5, 6, maybe even 10 percent.
  The bottom line is, the system is under tremendous strain and we are 
going to have to do something to protect retirement benefits in this 
country. The question is, What type of retirement system do we want to 
leave our children and our grandchildren?
  Again, there are going to be those out there and some on the campaign 
trail today for President who are going to be talking about maintaining 
the status quo. In other words, let's put a Band-Aid over this cancer, 
let's raise taxes a little bit, and we will get by for a while. When 
that Band-Aid is pulled off, that cancer is going to be even worse than 
it is today.
  We have an opportunity today to make a decision that is going to be 
better for retirement; in other words, it is going to cost less and 
there will be less pain in the transition. The longer we wait, it is 
going to be harder and more costly to make any kind of decision. We 
need to do this soon.
  Are we going to get it done this year? No, there is not enough time 
this year to do it. It should be on the front burner when we come back 
in the 107th Congress in 2001, with a new President and the next 
Congress. It should be one of the first items we should look at: How 
are we going to save and support future retirement for our kids and 
grandchildren in the future.

  I am 52 years old today, but I have very few options. I might be 
stuck with the plan we have today because by the time we implement it, 
I will be 55, 56 years old. At that time, will I have the option to 
move into personal retirement accounts? Maybe not.
  We have to give our children and grandchildren at least the option to 
provide a better retirement for themselves than what we have today. For 
many people on retirement, if they are getting $800 a month and they 
think that is great, maybe that is what they want their grandchildren 
to have. But if they have retirement benefits three or four times that, 
I think that is an option to give our children and grandchildren.
  I hope to talk about this again in the near future.
  I yield back the remainder of my time and suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BROWNBACK. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Under the previous order, the Senator from Kansas is recognized to 
speak for up to 30 minutes.

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