[Congressional Record Volume 146, Number 141 (Tuesday, October 31, 2000)]
[House]
[Pages H11710-H11714]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          A GENERATION AT RISK

  The SPEAKER pro tempore. As no Member is present to take the time 
reserved to the minority leader, the Chair recognizes the gentleman 
from Michigan (Mr. Smith) for 60 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, happy Halloween. This is probably 
as close as I am going to get to my grandchildren tonight, and they are 
sort of demonstrating their Halloween outfits. My daughter, Elizabeth, 
and her husband, Fred, are the mom and dad to Salena and James, and 
then everybody else comes from Brad and Diane, and Brad and Diane live 
with me on the farm. Brad is an attorney in Ann Arbor, but a farm guy 
at heart, and these guys are all 4-Hers. Just to prove to my wife that 
I can do this, this is Henry and George and Emily and Clair and Francis 
and Nick, and Alexander is missing from this picture.
  I start with this picture because, Mr. Speaker, I am going to make 
some comments tonight about Social Security. If there is a generation 
at risk, if we continue to fail to make the changes necessary to keep 
Social Security and Medicare solvent, this is the generation at risk.
  The next chart I am going to show is why they are at risk, because it 
represents what we have done on tax increases on Social Security in the 
past. In 1940, the rate was 2 percent, 1 percent for the employee and 1 
percent for the employer. The base was $3,000, so the total tax per 
year for employee and employer was $60.

                              {time}  2300

  By 1960, it got up to 6 percent of the first $4,800 for the total 
tax, employer and employee, $144 each, $288 combined. By 1980, we again 
increased taxes, and we were doing this as the number of workers per 
retiree kept going down.
  In 1940, we had 38 workers paying in their Social Security tax, 38 of 
them, to cover the benefits of one retiree. Today, as our tax rate has 
gone to 12.4 percent of the first $76,000 for a total of $9,448, we 
have three workers paying in that large tax to cover the benefits of 
every one retiree, and the guess is that within 20 years to 25 years, 
we will be down to two workers.
  Mr. Speaker, I am concerned about my grandkids and everybody's 
grandkids, in terms of the kind of tax they are going to be asked to 
pay if this country continues to give them the burden of a greater 
debt, a greater mortgage.
  I am a farmer from Michigan; and on the farm, we always had a goal of 
trying to pay down the mortgage so that our kids had a little better 
chance of having a good life, of having some income, as compared to 
their parents and their grandparents. This Chamber, this body, the 
Senate and the President has started borrowing money, because somehow 
we feel that we are so important in this generation that we can borrow 
more and more money.
  The debt of this country is now $5.6 trillion that we are justified 
in borrowing this additional money to satisfy what we consider very 
important needs of this existing generation, if you will; and we leave 
our kids with that larger mortgage, that larger debt. I think that is 
bad policy, what we have started doing of not using the Social Security 
surplus money coming in.
  After the 1983 taxes that drove this up to 12.4 percent and indexed 
the base rate, which is now $76,000 going with inflation, for a short 
period of time, there is more money coming in than is used for 
benefits; and what has been happening for the last 40 years is Congress 
has been spending that extra money on other government programs. So the 
money sort of disappears.
  We started 3 years ago, it was a bill I originally introduced, that 
said we have to have a recision. We cannot spend the Social Security 
surplus. With the bill of the gentleman from California (Mr. Herger) 
last year, we passed what was called a lockbox. And the lockbox simply 
said we are not going to use any of the Social Security surplus for any 
government programs, and it is going to be used for Social Security or 
to pay down the debt held by the public. That is what we did last year.
  It got popular support, so the President went along with it. This 
year we came up with another policy tool and said, look, the American 
people will support us if we say that we are going to take 90 percent 
of the surplus. Look, times are good now. There is extra money rolling 
in. And the danger is, of course, that this Chamber decides to spend it 
on government programs, rather than paying down the debt.
  We decided in our Republican Caucus about 4 weeks ago that we were 
going to draw the line in the sand on spending and say at least 90 
percent of that surplus is going to be used to pay down the debt held 
by the public, and that is what we are arguing about now is what to do 
with the other 10 percent. That is significant, because it still is 
going to increase spending substantially.
  Speaking of Halloween, I personally feel that we sort of got tricked 
by the President last night when he vetoed the Treasury Postal bill and 
Legislative Service branch bill. He vetoed it because he wanted 
something in the legislation that we are now debating that this 
Congress was not sure that they wanted to give him, so he decided to 
veto that bill.
  Mr. Speaker, it sets us farther behind. I think it was a disservice 
to the communication, to the cooperation between the Congress and the 
White House, and I think probably it is going to end up that we are 
going to have that much greater difficulty coming to a bipartisan 
agreement on these appropriation bills in the next couple of weeks.
  Social Security has been a debate with both Governor Bush and Vice 
President Gore. We have heard on the campaign trail what do we do about 
Social Security. And the Vice President has criticized Governor Bush 
for wanting to take some of this money and put it into privately owned 
retirement accounts that could be invested in safe investments.
  The criticism was that the Governor was taking a trillion dollars 
away from Social Security to pay benefits and he was trying to use it 
for both setting of personal retirement accounts and trying to pay 
benefits with it at the same time.
  I thought it would be good to review just what is happening over the 
next 10 years with Social Security revenues. Revenues coming in to 
Social Security over the next 10 years are going to be $7.8 trillion. 
The costs of benefits over this next 10-year period are going to be 
$5.4 trillion; that leaves a surplus or an extra amount of $2.4 
trillion.

  Governor George Bush was suggesting that we take $1 trillion down 
here at the bottom green, $1 trillion out of that $2.4 trillion and use 
it for, if you will, transition, starting to set up these personally 
owned accounts for individuals that if they die it goes into their own 
estate. Unlike Social Security today, if you pay in all of your life 
and you die before you go into retirement, you do not get anything.
  This other chart sort of represents the problem, some of the rewards 
that some people would have if they were to invest with the magic of 
compound interest. This chart shows that a family that has $58,475, and 
that was figured an average for an area of Michigan, that if they put 
that into an investment and invested, the blue would be 2 percent of 
their income, the pink would be 6 percent of the income, purple would 
be 10 percent of their income. If they just invested it for 20 years 
with the magic of compound interest, in 20 years they would be at 2 
percent. It would be worth $55,000; and this is at 2 percent of the 
investing, 2 percent of their earnings. If they invested 10 percent, it 
would be worth $274,000 in 20 years.
  But most of us start working at 18, 20, 22, and we work for 40 years 
until we are 62 or 65 maybe even. So if you were to leave money for 40 
years, which is the far right-hand bar charts, and you were to do it 
for 2 percent of your income, you would accrue $278,000, if it was 6 
percent of your income. Remember, Social Security taxes are 12.4 
percent of everything you earn.
  If you were to do it for the 6 percent, it would be $833,000; or if 
you would invest 10 percent of that income and leave the 2.4 percent 
for the disability insurance part of the Social Security, if you were 
allowed to invest that, you would end up with a $1,389,000. At 5 
percent interest, you could have $70,000 a year and not even go into 
the principal.

[[Page H11711]]

  Social Security started with, of course, Franklin Delano Roosevelt in 
1935. When President Roosevelt created the Social Security program, he 
wanted it to feature a private sector component to build retirement 
income. And Social Security was supposed to be one leg of a three-
legged stool to support retirees. The other two legs were to be 
personal savings and private pension plans.
  It is interesting researching the archives and the debate in the 
House and the Senate. The Senate on two different votes in 1935 said 
that private investment savings, that could only be used for retirement 
purposes, but owned by the individual should be an option to a 
government-run program. When the House and the Senate went into 
conference, the House prevailed, and we ended up with a total 
government-run program.

                              {time}  2310

  And now, because of the demographics, because people are living 
longer life spans, when we started Social Security the average life 
span was 62\1/2\ years. That meant that most people paid into Social 
Security all their life, but did not get anything out of it. The system 
worked very well then.
  But now, people are living longer and, at the same time, the birth 
rate has decreased substantially after the baby boomers, and so we 
ended up with fewer workers for more retirees, which makes the pay-as-
you-go program not workable anymore. Social Security is now insolvent 
as scored by the Social Security actuaries.
  So the problem facing this Congress is how do we come up with the 
extra dollars to pay the benefits? I think we have made a commitment to 
retirees. We take their money while they are working and the implied 
commitment is that they are going to get something when they retire. 
However, when this was challenged to the Supreme Court, when government 
refused payment at one time, the Supreme Court on two different 
occasions now has ruled that there is no entitlement for Social 
Security. That Social Security is simply a tax that Washington has 
imposed on workers and any benefits are simply another law that is 
passed to give some benefits, but there is no relationship, no 
entitlement.
  So the argument for at least some of that money being in private-
owned accounts where Washington cannot reduce benefits, or yet again 
increase taxes, I think has a great deal of merit, above and beyond the 
fact that we can get a lot better return on our investment with some of 
those investments.
  Let me just briefly show the predicament that Social Security is in. 
Seventy-eight million baby boomers begin retiring in 2008. They are now 
paying in at maximum earning. These are big earners paying in a heavy 
tax on that higher base and they are going to go out of the paying-in 
mode and start taking out. Because benefits are directly related to 
what we paid in and what we earned, their benefits are going to be 
higher than average.
  So the actuaries are now predicting that we are going to be short of 
money and not having enough money by 2015. Social Security trust funds 
go broke in 2037, although the crisis arrives much sooner. The crisis 
arrives in 2015 when there is less money coming in in taxes than there 
is needed to pay benefits.
  So the question is for Social Security, how do we come up with that 
extra money? It is not just speculation from people with green 
eyeshades on, economists making some predictions. It is an absolute. 
Insolvency is certain. We know how many people there are. We know when 
they are going to retire. We know people will live longer in 
retirement. We know how much they will pay in and how much they will 
take out. And we know payroll taxes will not cover benefits starting in 
2015.
  The shortfall will add up to $120 trillion between 2015 and 2075. 
$120 trillion. To put that in some kind of perspective, our current 
budget that we are just passing for this year is $1.9 trillion. The 
$120 trillion is in tomorrow's dollars. The way Alan Greenspan, 
Chairman of the Federal Reserve, expressed it is the unfunded liability 
is $9 trillion. In other words we would need $9 trillion today to come 
up with the tomorrow dollars that are going to be the inflated dollars 
to cover the $120 trillion needed over and above what is coming in in 
Social Security taxes.
  So, Mr. Speaker, we know there is a huge problem, and yet we have 
avoided dealing with it because there is a fear by maybe both sides of 
the aisle, maybe by the President, that they would be criticized for 
making some changes in Social Security. And that is obvious. As we 
listen to the campaigners for the Congress, for the Senate, for the 
presidency, they want to criticize the other person's Social Security 
plan. They want to scare people. And it is easy to scare people, 
because we have almost one-third of our retirees today that depend on 
Social Security for 90 percent or more of their income. So we can 
understand, Mr. Speaker, why and how it is easy to demagogue this issue 
of Social Security.
  As I mentioned before, this chart shows the number of workers per 
each one retiree. In 1940, there were 38 workers paying in their Social 
Security tax to cover the benefits of each one retiree. Today, there 
are three. By 2025, there is going to be two. So an extra burden, an 
extra tax on my grandkids, on everybody's kids and grandkids, and on 
young workers today if we do not face up to the problem.
  This represents the short-term surplus in the blue, and that is 
because we dramatically increased the Social Security taxes in 1983. We 
also reduced benefits when Congress dealt with the program in 1983 and 
we did that in 1977 also. In 1977, when push came to shove on needing 
additional money, we reduced benefits and increased taxes.
  It seems to me that those have got to be part of the criteria of 
everybody's proposal, they are of Governor Bush's. No tax increases. No 
cuts in benefits for existing retirees or near-term retirees. And we 
could have it optional to allow other workers to either stay in the old 
program or have the opportunity to have some of that money in their 
name that could be invested in a limited number of safe accounts such 
as the Thrift Savings Plan, such as the 401(k)s, but even with more 
restrictions because it could only be used for retirement.
  The red represents the $120 trillion I talked about or the $9 
trillion unfunded liability today that would have to go in a savings 
account earning a real return of 6.7 percent.
  Some have suggested economic growth. In fact I read in Investors 
Business Daily yesterday the suggestion if economic growth continues, 
it is going to help solve the problem of Social Security. Not so. Here 
is what happens with economic growth. As wages increase and the economy 
expand, because of the fact that we index Social Security benefits to 
wage inflation, which is substantially higher than normal inflation, 
Social Security goes up faster than normal inflation.
  My proposal, in one of the three Social Security bills that I have 
introduced, the last one and the one before that, over the last 5 years 
it changes the wage inflation to traditional economic inflation so 
benefits grow with inflation instead of at the faster rate of wage 
inflation. When the economy grows, workers pay more in taxes, but also 
they will earn more in benefits when they retire. Growth makes the 
numbers look better now, but leaves a larger hole to fill in later.
  So when we have more employment, and the unemployment is at record 
lows right now, more people are working, more people are paying in 
their Social Security taxes. The higher wage earners are, because taxes 
are directly related to earnings, the higher wage earners are even 
paying in higher taxes. But because Social Security is indexed to wage 
inflation, everybody is going to get a higher benefit. Those higher 
wage earners, because Social Security benefits are also directly 
related to the wages and the Social Security taxes we pay in, in the 
future are going to get the higher benefits.
  So even though it helps in the short run, ultimately benefits have to 
pay out to accommodate those higher wages. So a strong economy does not 
cure the Social Security problem.
  Mr. Speaker, I just wanted to mention that the administration has 
used these short-term advantages as an excuse to do nothing. I think we 
have missed a real opportunity in the last 8 years not to move ahead 
with Social Security. I thought we were close, and in this Chamber I 
stood up and cheered and clapped when President Clinton said he was 
going to put Social Security first and we were going to do

[[Page H11712]]

something about solving the Social Security problem.
  There is no Social Security account with our name on it. A lot of 
people think that somehow the money they pay in is into their own 
private account. These trust fund balances are available to finance 
future benefit payments and other trust fund expenditures, but only in 
a bookkeeping sense. 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 reducing some other expenditures.
  What we have done in the past is increased taxes. So that is why I am 
concerned that it could develop into almost generational warfare if we 
start asking our future workers to start contributing a 50 percent 
increase in their current taxes. The economic predictors are suggesting 
that within the next 40 years, without changes in the programs, even if 
we do not add extra benefits such as prescription drugs or whatever, 
simply to cover the existing program promises of Social Security, 
Medicare and Medicaid, it is going to take a 47 percent payroll tax.

                              {time}  2320

  So payroll taxes would have to go to 47 percent to cover Social 
Security needs and the Medicare and Medicaid. I think of what would we 
do today if we were workers paying that kind of tax in addition to an 
income tax to finance the other operations and functions of Federal 
Government. I think there would be a rebellion.
  That is what we have got to start looking at is how do we start 
paying down the debt, how do we start making corrections while we have 
a surplus coming in so that we do not run into this huge problem in the 
future. The longer we put off the solution to fix Social Security, the 
more drastic the changes are going to have to be. I know that for a 
fact.
  I introduced my first bill when I came to Congress in 1993, my second 
bill and every term since. So I have introduced four Social Security 
bills. The last three were scored by the Social Security Administration 
that, in their determination, that these bills kept Social Security 
solvent for the next 75 years.
  I was appointed as chairman of the Committee on the Budget's 
bipartisan task force on Social Security. So we brought in experts 
from, not only this country, but around the world to discuss what the 
problems of Social Security were, how they work, what was the internal 
operation of Social Security, what was the real problem of Social 
Security, what were some of the ways that we might fix Social Security.
  The Vice President has suggested one way to fix Social Security would 
be to pay down the debt and use the interest savings to help pay for 
benefits, and that would keep Social Security solvent over the next 57 
years. So he is suggesting, over the next 57 years, there is a 
shortfall of $46.6 trillion that will be needed in addition to the 
money coming in from the Social Security tax to cover the benefits that 
we say we are going to cover. He is suggesting, by paying down this 
$3.4 trillion debt and using that interest, it will keep Social 
Security solvent. That is, well I hate to say it, but that is fuzzy 
math. That is not going to work.
  Here is another chart, trying to portray this in a different way. The 
interest that we are paying on the debt held by the public is $260 
billion a year. So there is some reasonableness to add another IOU to 
the trust fund or to use this money, instead of paying it on interest, 
to dedicate it to Social Security. But if we dedicate that $260 billion 
to Social Security, then we are still left with a shortfall of $35 
trillion.
  So the Vice President's program is not going to accommodate the needs 
to keep Social Security solvent over the next 57 years.
  Again, the problem is how do we come up with the money when we run 
out of tax money and tax revenues coming in? The biggest risk is doing 
nothing at all.
  Social Security has a total unfunded liability, as I mentioned, of $9 
trillion. The Social Security Trust Funds contain nothing but IOUs. To 
keep paying promised Social Security benefits, the payroll tax will 
have to be increased by nearly 50 percent, or benefits will have to be 
cut by 30 percent. Neither one of those options I think is reasonable. 
That is why we have got to get a better return on the investment of the 
dollars that are now being sent in in the way of taxes.
  Social Security lockbox, we passed it out of this Chamber. It says we 
are not going to spend any of the Social Security surplus. For the last 
40 years, we have spending the Social Security surplus money for other 
government programs. We put a stop to that with a lockbox. We passed it 
out of this Chamber. Now it is lagging in the other Chamber. I am sure 
if the President of that Chamber, the Vice President of the United 
States, would say, look, let us move this bill out, it would go out. I 
am sure the President would sign it into law. Then it would be an 
absolute lockbox.
  The diminishing returns of one's Social Security investment. The 
average retiree now gets 1.9 percent back on the money that they and 
their employer send in on Social Security. That is over and above the 
2.4 percent that are needed for the disability insurance.
  The disability insurance is really an insurance program. It is proper 
that that strictly be a total Federal Government operation. One pays in 
one's 2.4 percent to cover the insurance that says, look, if one gets 
hurt or disabled, then one is going to get these kind of benefits out 
of the Social Security Administration.
  So there is no proposals in Congress or in the Senate that suggest 
that we reach in in any way to that part of the disability insurance 
program. So when I suggest that 1.9 percent return, I am talking about 
the rest of one's Social Security contribution taxes that one and one's 
employer puts in.
  On the average, we get 1.9 percent, the middle bar. But over here, we 
see some people get a negative return. As it happens, minorities, for 
example, are one group that gets a lower return on their particular 
investments.
  The average return of the marketplace, by the way, is running 7 
percent. So the question is, can we do better than the 1.9 percent real 
return? I think even CDs are paying much better than that now.
  So how do we make the transition? If we were to have some private 
investment, what would that do to the economy of this country? The 
estimate is that, if we would allow 2 percent out of the 12.4 percent 
of one's Social Security tax to be invested, maybe 60 percent in 
equities, 40 percent in indexed equities, 40 percent in indexed bonds, 
within 15 years, there would be an extra additional $3 trillion 
invested.
  What happens to these investments? It goes into companies and 
businesses to allow them to buy the state-of-the-art equipment, to 
allow them to do the research to make sure that they are producing the 
kind of products that people around the world want to buy and the kind 
of technology that is going to allow us in the United States to produce 
them more efficiently than any other country. I mean, that is what we 
have been doing.
  I chair the Subcommittee on Basic Research in the Committee on 
Science. Research is vital. But for the private sector to have the 
impetus to do that kind of research and develop that kind of equipment 
that keeps us productive, efficient, and competitive means that they 
have got to have that investment.
  So savings and investment is key. That is why I first became 
interested in Social Security. I was chairman of the Michigan Senate 
Finance Committee, and I wrote my first Social Security bill actually 
while I was in the Michigan Senate because of the fact that our savings 
and investment in the United States are one of the lowest in the 
industrialized world.
  If we expect that we are going to continue to motivate and have the 
money for these businesses to do the research and the development, then 
we have got to have that kind of savings and investment. We give some 
encouragement by saying to the average worker in this country we are 
going to allow one to invest part of that tax money. It is going to be 
in one's name. It is going to be limited, safe investments. One can 
only use it for retirement. But it means that there is going to be more 
savings and investment, which is going to spur our economy.
  This graph, this bar chart is another way of describing that Social 
Security is a bad investment for the American worker.

[[Page H11713]]

  It only took 2 months in 1940. But in 1960, one had to live 2 years 
after retirement to get back all of the money to break even, to get 
back all the money one and one's employer put in. By 1980, one has to 
live 4 years after he retired. By 1995, one has to live 16 years after 
one retired. So that is living 4 years after one retired in 1980, 
living 16 years after one retired in 1995, living 23 years after one 
retired in 2005, just to break even. It is a bad investment on Social 
Security.

                              {time}  2330

  Can we do better on that investment? Can we have a system that allows 
an average income worker to make some of those investments, to benefit 
from the magic of compound interest and become a wealthy retiree? The 
answer is yes, we can do that.
  Here is another problem. We kept upping the taxes on the American 
workers to the point where 78 percent of American workers today pay 
more in the Social Security tax than they do in the income tax. And 
that is a very regressive tax.
  The six principles of saving Social Security: Protect current and 
future beneficiaries. Allow freedom of choice. Freedom of choice means 
you can either take the option of having some of that money in your own 
name and having the Government say, okay, you can invest it in an 
indexed stock or an indexed bond or an indexed global fund but safe 
investments, as determined by the Social Security Administration or by 
Congress, when they pass the law.
  It preserves the safety net. It never touches the disability 
insurance portion. Makes Americans better off, not worse off. And 
creates a fully funded system and no tax increases and no reduction in 
benefits for existing or near-term retirees.
  Personal retirement accounts. They do not come out of Social 
Security. They stay in the system. Some have suggested that you can 
have these personal retirement accounts and invest them in some of 
these limited investments and for every $6 you make in your equity 
investments you would lose $5 in Social Security benefits. So it is a 
no-lose situation if you were to devise something like that.
  In my last piece of legislation, what we did is say that we are going 
to assume that you can get at least 3\1/2\ percent interest real return 
on your investment and, so, you would offset Social Security benefits.
  The other thing I do in my legislation to help keep the Social 
Security system solvent is I change it from wage inflation to normal 
economic inflation as far as indexing the increase in benefits. And the 
third thing I do, I slow down the increase in benefits for high income 
recipients of Social Security.
  It ends up being scored to keep Social Security solvent for the next 
75 years with the extra return that can come in from these privately-
owned personal retirement accounts.
  Personal retirement accounts. I think the important part is that a 
worker will own his own retirement account and it will not be subject 
to decisions made by the United States Congress or the President and it 
is limited to the safe investments and they can earn more than 1.9 
percent paid now by Social Security.
  Here is an example of some of the personal retirement accounts. If 
John Doe makes an average of $36,000 a year, he could expect $1,280 a 
month from Social Security or $6,514 from his personal retirement 
account.
  Galveston, Texas. When we passed Social Security in 1935, there was 
an option for local and State to not go into the Social Security 
program and to set up their own personal retirement accounts. 
Galveston, Texas, ended up doing that. In Galveston, Texas, if you die, 
your death benefits in Galveston under their personal retirement 
investment plan is $75,000. Social Security would pay 253, the 
disability benefits for a month, and Social Security $1,280. The 
Galveston plan is $2,749. Retirement benefit per month $1,280, same as 
disability. The Galveston plan, on their personal retirement 
investments, the way they have come out with their investments, is 
$4,790 a month.
  I am trying to just show the advantages and the magic of compound 
interest compared to a Government-run programs, the pay as you go, that 
does not have any savings, that does not have any real investment. It 
does the same thing with their PRAs, personal retirement accounts.
  A 30-year-old employee who earns a salary of $30,000 for 35 years and 
contributes 6 percent to his PRA would receive $3,000 per month in 
retirement. Under the current system, he would contribute twice as much 
but receive only $1,077 from Social Security.
  The U.S. trails other countries. And I was concerned. I represented 
the United States in describing our Social Security our public pension 
system in a meeting in London 4 years ago, and I was impressed at the 
number of countries around the world that are much more advanced than 
we are in terms of getting some real return on that tax contribution 
for their senior citizens.
  In the 18 years since Chile offered PRAs, 95 percent of the Chilean 
workers have created accounts. Their average rate of return has been 
11.3 percent per year. And, among others, Australia, Britain, 
Switzerland offer workers PRAs and they have gone into that system with 
a better rate of return.
  The British worker who chose PRAs is now averaging a 10-percent 
return. And two out of three British workers that are enrolled in the 
second tier they call it, allowing you to have some options with half 
of your Social Security taxes, have invested in that system and the 
British workers have enjoyed a 10-percent return on their pension 
investment. The pool of PRAs now in Britain is $1.4 trillion, larger 
than the rest of the economy of the whole of Europe.

  This chart demonstrates what has happened in equity investments over 
the last 100 years. And so, some have suggested the market is too risky 
to invest with the ups and downs. That is why I think it is important 
that you have indexed investments where you have part of the investment 
in equities and part of the investment in bonds and part of it would 
depend on the age that you start these private investments.
  The average for the last 100 years has been a real return of 6.7 
percent. In the lowest years, in 1917 and 1918, still it was three and 
a half percent, well above the 1.9 percent return that you are getting 
from Social Security. But again, if you leave the money in an indexed 
type of investment, there has never been a period, even around the 
worst recessions of ever 1918 or 1929, there has never been any 30-year 
period where there was not a positive return on your investment greater 
than what can be made from Social Security. And again, the average of 
6.7 percent real return.
  I want to conclude by suggesting that maybe we should be positive in 
our outlook. We have come a long way. We have made a decision to stop 
the spending of the Social Security surplus. That was good.
  When Republicans came in in 1995 after being in the minority in this 
chamber for I think almost 38 years, we came in very aggressively 
determined that we were going to balance the budget.

                              {time}  2340

  When President Clinton came in in 1993, he and the Democrats decided 
to increase taxes, so an increase in Social Security tax, an increase 
in gas tax and other increases in taxes that ended up being one of the 
largest tax increases in history, 2 years later the American people 
decided that they were going to give the Republicans a chance in the 
majority, and what Republicans did is they did not spend that increased 
revenue.
  We caught heck from the Dems. They suggested that we were going to 
throw hungry children out in the street and there were going to be 
people without shelters as we suggested that there should be welfare 
reform. We sent that welfare reform bill twice to President Clinton and 
Vice President Gore. Both times they vetoed it. Then the public 
pressure built, so in the spring of 1996, we passed welfare reform. 
What was amazing about that, I think, is that it started putting people 
to work, and it started giving them respect for themselves. Instead of 
just a hand out, it was a hand up. We made a tremendous change in this 
country. We were fortunate, I think, to have economic growth.
  Now the question before us is how do we save Social Security, how do 
we save Medicare for future generations without putting our kids and 
our grandkids at risk in terms of the obligation of potentially higher 
taxes. The

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 way we do it is start dealing with this problem today, start making 
the changes necessary, stopping the talk and the promises and going 
ahead with solving Social Security. Several bills have been introduced 
in this Chamber, several bills in the Senate. I am disappointed that 
the President has not presented legislation that could be scored as 
keeping Social Security solvent by the actuaries. And so the challenge 
for the next President is going to be to face up to some of these tough 
issues of keeping Social Security solvent. I am optimistic about the 
idea of at least some of that money being allowed to be used for 
personal retirement accounts, not only to have some ownership from 
those individual American workers but also to have some of the magic of 
compound interest so you can retire as an even richer retiree than you 
might have been an average worker.
  Of course, the third issue is the increased savings investment and 
its impact on economic expansion and development and making sure that 
this great country continues to be the greatest country in the world.

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