[Congressional Record Volume 147, Number 25 (Wednesday, February 28, 2001)]
[House]
[Pages H474-H479]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1315
PAYING DOWN THE PUBLIC DEBT
The SPEAKER pro tempore (Mr. Linder). Under the Speaker's announced
policy of January 3, 2001, the gentleman from Michigan (Mr. Smith) is
recognized for 60 minutes as the designee of the majority leader.
Mr. SMITH of Michigan. Mr. Speaker, last night we heard a new
President talk about some of the priorities of this country and some of
the potential problems with the economy which could eventually affect
jobs, not only the number of jobs, but the kind of incomes that are
offered for those jobs.
To me the important thing is not whether or not we have a tax cut. To
me I think the most important thing we can do to strengthen the economy
is to hold down the increase in Federal Government spending. We have
seen a Federal Government over the years that has ballooned in size,
and the political situation is that when Members of Congress, both the
House and the Senate, come up with new programs, new spending, take
home pork-barrel projects, they end up on television, the front page of
papers and it is announced on the radio; and it probably increases
their chances of being reelected.
Mr. Speaker, the problem is having a government growing bigger and
bigger, which is bad for the economy when we take more and more money
out of worker's pockets and send it to Washington; but the problem is
also taking away the empowerment from individuals and sending it to
Washington, so Washington ends up with more rules and more governing of
your lives and how you live it and take care of your family. I see that
moving the question of how big should government be to the top of my
personal list.
Now the question is: In a situation now where we have more money
coming into government than is currently used or is currently
anticipated of being used over the next 10 years, what do we do with
those extra dollars.
What happened last year is we increased discretionary spending by
approximately 8 percent. The three bills that we finished in December
had an increase of almost 14 percent. So government and the tendency
for government to get bigger and bigger and control more and more of
our lives is very real.
Mr. Speaker, I want to talk about this chart that I have beside me
that relates to a lot of talk these days about debt, about paying down
the debt. There are three parts to the $5.7 trillion of total public
debt in this country. And the three elements that make up the total of
$5.7 trillion are:
The debt held by the public, $3.4 trillion. This is the Treasury
paper that is loaned out, that is borrowing money for government needs;
and so I call it the Wall Street debt.
The other debt is the debt to approximately 119 trust funds, that is
about $1.2 trillion; and the debt to the Social Security trust fund,
and that is now $1.1 trillion.
So when people talk, when Washington talks about paying down the
public debt, they are talking about borrowing money from Social
Security trust funds and the other trust funds and using those dollars
to pay down the debt held by the public.
Let me briefly go through that again. There is extra money coming
into Social Security right now, approximately $150 billion that Social
Security taxes will bring in more than is required to send out
immediately for Social Security benefits. So what do you do with that
$150 billion. Mr. Speaker, we have said look, we are going to take
those dollars and write out an IOU and we are going to use that to pay
down the so-called Wall Street debt, the debt held by the public.
But over the years, what is anticipated is the total debt, the total
debt, the total public debt subject to the debt limit under law is not
going to go down. All we do is increase the size of the debt to Social
Security, increase the size of the debt to the other 118 trust funds
that we have, the largest being civil service, veterans, et cetera, and
we decrease the amount of debt held by the public. There are some 20-
and 30-year bills out here that would be very difficult to bid up and
pay down so we are saying now you can only go so far in paying down the
public debt.
Mr. Speaker, the question is what do we do with the extra surplus
dollars coming out of the Federal Government. The danger is if we leave
this money, if you will, on the counter, available for politicians to
spend, the tendency is to spend that extra money.
Mr. Speaker, let me give one example of our trying, our effort. In
1997, with the caps on spending that we set in 1997 and we passed into
law, passed by this House, passed by the Senate, signed by the
President, that we were going to limit how much discretionary funding
we spent over the next 5 years; if we had stuck to those spending caps
through those years, that level of spending that is going to exist for
the next 10 years that were talked about last night, that we talk about
in the 10-year budget, that we talk about in the 10-year savings, if we
had stuck to those caps that we set for ourselves instead of violating
those caps, we would have spending over the next 10 years that is $1.7
trillion less than what we anticipate for spending because of the new
spending levels and the giant increases in spending every year. That
could double the tax cut.
One way to help make sure that Washington does not spend that money
is to say look, let us set some of this money aside to do nothing
except pay down part of that debt held by the public. So even though we
borrow some money from Social Security and the other trust funds, at
least we do not expand government spending, we use it to pay down the
debt held by the public.
Mr. Speaker, the other way is to get some of that money out of town.
You would do that by a tax reduction. So can we have the kind of tax
reduction that is going to increase fairness, a kind of tax reduction
that is going to stimulate the economy during this downswing or at
least leveling off of the economy? The answer is absolutely, yes.
There are two ways that we can be significant in helping for this
economic recovery in the short term. One is lowering interest rates.
Alan Greenspan and the Feds can do that by issuing a rule on what the
discount rate is for interest. That lowers interest for everybody.
[[Page H475]]
The other way is government can start reducing the bidding up of
available dollars. In other words, paying down the Federal debt to
leave more money available for everybody else. So as you decrease the
demand for that money, then interest rates are also going to tend to go
down.
Let me show my colleagues this next chart. This is what has happened
to the total public debt. The public debt is defined in law as the
total debt, public debt, subject to the debt limit that includes what
we are borrowing from the trust funds in addition to the Treasury
paper, the Treasury notes that we are issuing.
As my colleagues see, we did very well from 1940 to about 1982. In
1982, the debt of this country just expanded by leaps and bounds. And
how bad is going into public debt? The reason the debt was increased is
because, politically, it is easier to increase borrowing than it is to
go out and raise taxes.
So to expand government, a decision was made to increase borrowing.
So we substantially increase the borrowing, making it tough for our
kids and our grandkids because someday, somehow, somewhere, future
generations are going to have to pay back this debt, whether it is an
obligation to Social Security, whether it is an obligation to Medicare,
or whether it is an obligation to the Treasury bills where government
has borrowed money.
The next chart sort of starts relating to a particular interest of
mine, and that is Social Security. What do we do about the problem of
Social Security when the baby boomers retire. They start retiring 8
years from now, and they go out of the, if you will, the mode of paying
in their FICA taxes to support Social Security; and they become
recipients as they retire. Social Security is going to start, if you
will, going broke, start having to have less dollars coming in in taxes
than is needed to pay benefits.
It is estimated by Greenspan and others that the unfunded liability
of Social Security right now is $9 trillion; that we would have to come
up with $9 trillion today to put it in a savings account earning an
interest rate of at least 2.2 percent to accommodate keeping our
promise to future retirees.
So if we simply continue to borrow Social Security dollars and other
trust fund dollars to pay down the debt held by the public, this
represents the debt held by the public when the baby boomers retire,
and we start needing that money to pay benefits again, then we
substantially increase our borrowing to start paying back some of the
money. So it is just a temporary downswing and then a giant increase in
the debt that will be required if we continue to borrow money in the
future.
Back to this chart. So if my colleagues can visualize, if my
colleagues can visualize a projection of the increase in debt up till
this year, what we are looking at if we borrow money from Social
Security and write out an IOU and then pay back the debt, we would have
a downswing. But then it would go dramatically upward to increase the
debt of the country.
I am a farmer from Michigan. It has always been the tradition for
farmers to try to pay off some of the mortgage, to pay it down so that
their kids could have a little better chance. In this body, we are not
doing our job. We are increasing the debt. We are increasing the
obligation to our kids and our grandkids.
Then let me go over this last chart. The President last night
suggested maybe some private investment. A lot of people have said,
well, gosh, how can one talk about equity investments when the stock
market is so volatile right now? What about the downswings?
This chart that I made up represents what has happened to stock
investments in the last 100 years. Some downswings, definitely
downswings, up, down, up, down, up, down. But with a long-term
investment, there has never been a 12-year period where stocks did not
have a positive return.
So if one is going to put some of that money into some kind of an
equity investment, then the only way it is reasonable, is if one starts
talking to younger workers of America, number one; number two, you say
one can have the option. One can have some of this money if one puts it
into an IRA type investment for one's retirement.
There is going to be limits on where one can invest that money. It is
not going to be a situation where some snake-oil salesman can say,
look, put your money with me, and then we will double with it. It is
going to be limited investments, such as 401(k)s, such as the Thrift
Savings accounts that Federal Government employees have. Probably there
is also going to be an obligation that half of it or 40 percent or a
certain amount goes into bonds or interest-bearing accounts. So only
part of that investment can go into growth funds or equity investments.
I think the important thing to realize is the comparison of the
average of 6.7 percent a year return on equities as compared to what
you are going to get from Social Security. Right now, if one is an
average Social Security recipient retiree, one is getting back 1.7
percent return on the money that one and one's employer paid into
Social Security.
So then the logical question is, can we do better than a 1.7 percent
return? The answer of course is, if one has checked one's CDs or
checked most any savings account or checked the school loans that are
tax free, there are a lot of ways that we can do much better than a 1.7
percent return that one is going to get from Social Security.
I have got a chart that I will show my colleagues a little bit later;
that the average retiree starting next year is going to have to live 22
years after they retire simply to break even on the money that they
have sent into Social Security. Social Security is not a good
investment.
Ben Snyder is a page helping me put up these charts. Ben is from
Northwestern Pennsylvania. We have a page program. Everybody should
know and maybe start applying for a page job. It is very interesting. I
think we have got about 80 total pages. They come during their junior
year in high school, and they work like heck. They get up, I think, at
5:30 in the morning to accommodate both going to school and working as
a page in the United States Congress.
{time} 1330
This pie chart represents how we are now spending money. The largest
piece of pie, if that is visible, roughly 20 percent, is what is being
paid out in Social Security. Social Security is the largest Federal
Government expenditure and it is growing. Medicare is growing faster.
If we go ahead with prescription drug coverage to add to the cost of
Medicare, then we are looking at a Medicare expense that could very
easily equal the cost of Social Security within the next 50 years.
We argue in this Chamber a good part of the year over discretionary
spending. There are 13 appropriation bills. Twelve of those
appropriation bills represent 19 percent. The 13th appropriation bill
is defense. Defense, by itself, represents 17 percent. In both cases
that is still smaller than what is being paid out in Social Security.
So how do we fix the problem when we know eventually that we are
going to run out of tax money coming in for Social Security? One
possible recourse is to increase taxes on workers. One possibility is
to reduce benefits. I do not think either one of those options is
acceptable and should not even be considered.
When Franklin Delano Roosevelt created the Social Security program
over 6 decades ago, he wanted it to be sort of a part of a three-legged
stool, where there would be private pensions, personal savings, plus
Social Security. So instead of people going over the hill after the
Great Depression to the poor house, the Congress passed a law saying,
look, we are going to have forced savings and we are going to take some
money out of taxpayers' paychecks while they are working to ensure that
they have a little Social Security when they retire. That is the
program that we have been operating under since 1934.
Right now, Social Security is a system stretched to its limits. There
are 78 million baby boomers who begin retiring 7 years from now. They
go out of the paying-in mode and into the recipient or taking-money-
out-of-Social Security mode. Social Security spending exceeds tax
revenues starting in 2015. Social Security trust funds go broke
technically in 2037. We are going to have a new trustee's report soon,
and that might even go up to 2040.
The question is, with all of this money, the $1.1 trillion so far,
and by that year it will be another $4 trillion,
[[Page H476]]
how does government pay back this money? Maybe there are three options,
maybe four: we can increase taxes again on workers or on the general
public; we can cut other benefit programs or cut Social Security
benefits; we can dramatically increase borrowing to put this country
further in debt and put our kids and our grandkids at greater jeopardy
and also risk economic development in this country with that kind of
negative savings; we can start looking at a fix for the program now.
And that is what we should be doing.
I was encouraged that President Clinton said, ``Let us put Social
Security first,'' but he did not come up with a bill. I was encouraged
last night that this President said, ``Let us give a priority to Social
Security.'' But what I wonder and am concerned with regarding this
commission is does that just put off the question into the future. I
would hope we could move aggressively ahead.
We have Democrat Senators, like Senator Moynihan, Senator Kerry,
Democrats in the House, like the gentleman from Texas (Mr. Stenholm),
and a lot of Republicans that have come up with proposals on how we can
keep Social Security solvent. But, Mr. Speaker, here is what everybody
should remember: that the longer we put off the decision on fixing
Social Security, the more dramatic and drastic those changes are going
to have to be. So the quicker we do it, the better. So let us move
ahead. If it is a commission, hopefully we can move quickly.
Insolvency is certain. We know how many people there are, and we know
when they are going to retire: 62, 65 and, in some cases, 67. We know
that people will live longer in retirement.
I chaired the Social Security task force, a bipartisan task force,
made up of Republicans and Democrats. We ended up, after hearing all of
the testimony, agreeing on 18 different parts of the solution that both
Republicans and Democrats could agree to. But on the part of living
longer, I wanted to mention what some of the medical profession were
suggesting in terms of our longevity, our long life-span. They suggest
that within 20 to 25 years, anybody that wants to live to be 100 years
old will have that option. Within 30 to 35 years, anybody that wants to
live to be 120 years old could very well have that option.
What does that do to an individual's personal savings now? Is there
going to be enough money in their savings accounts to accommodate any
kind of a decent retirement if they are to live that extra 20 years or
30 years over the average today? And what is it going to do to programs
that industry has that have guaranteed a fixed income on retirement? It
is going to be tremendously expensive. What is it going to do to Social
Security and Medicare? A tremendous imposition, a tremendous danger of
asking American taxpayers to dig deeper into their pockets in the
future to accommodate that growing senior population.
The last point. Taxes will not cover benefits starting in 2015, and
the shortfalls will add up to $120 trillion between 2015 and 2075; $120
trillion more is going to be required over and above what is coming in
from the payroll tax. One hundred twenty trillion dollars in the future
dollars is the same way as expressing the current $9 trillion unfunded
liability that we need today to put into an investment account to
return at least a 2.2 percent interest rate to accommodate future
retirees.
Here is part of the problem: there are fewer workers. It is a program
that was designed in 1934 to be a pay-as-you-go program. Like a chain
letter, it depended on expansion. It depended on more and more workers
paying in part of their payroll tax to accommodate retirees. In 1940,
for example, we had 38 workers paying in their Social Security tax for
every retiree. In 1940, 38 workers paying in their Social Security tax
for every retiree.
Today, it is down to three workers, working with that increased tax
and paying in their Social Security tax to accommodate every one
retiree. The estimate is that by 2025 there will be just two workers.
Because people are living longer, because the birthrate went down
substantially after the baby boomers, and the life-span is dramatically
increasing, there are fewer workers. So we have fewer workers and more
retirees, which makes it tough on those two guys left that are going to
end up having to pay that kind of tax, especially if we do not start
planning now for the long-term solvency of Social Security.
This represents the long-term solvency up until 1975. Because we
increased taxes on Social Security substantially in 1983, the so-called
Greenspan Commission in 1983 got together as a commission, what we are
talking about now, and they decided to do two things: reduce benefits
and increase taxes. They increased taxes so dramatically that there has
been a huge surplus since that time coming in from Social Security
taxes over and above what was needed for paying out benefits. And let
us remind ourselves that it is a pay-as-you-go program. Most of that
money comes in at the end of the month; and within the next week, most
of the money is sent out in terms of paying benefits for existing
retirees. So a huge imposition.
The red part of this chart represents the $120 trillion that Social
Security is going to be short of paying benefits over and above what is
coming in in Social Security taxes. So I should make my point, Mr.
Speaker, and the point is let us not waste this short-term opportunity
that we have to make some use of this money to start getting a better
return on that money coming in.
There is no Social Security account with our name on it. I have made
maybe between 200, 250 speeches around the United States and a lot of
people think somehow that there is an entitlement there, that there is
an account with their name on it which they are entitled to. This is a
quote from the President's Office of Management and Budget and it says:
``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 other expenditures.''
That is the problem. A lot of people, say, ``Well, we have a trust
fund that is going to take care of us until 2035, maybe 2040 when the
trustee's report comes out. The question is where does the money come
from? The money is gone. Over the last 40 years we have taken the extra
Social Security surplus and spent it on other programs, which have
almost become entitlements.
So it increases the size of government and perpetuates itself because
on almost every new spending that is developed there now becomes an
interest group, a special interest group, that starts doing everything
they can to lobby Congress to continue that spending. And if we
continue it the second year, then there is a feeling, well, we are
entitled to it. So a strong public political pressure to continue that
spending. That is one of the problems that we have seen in this
country, is that government has continued to grow.
The public debt now, as I mentioned earlier, is $3.4 trillion. So
what we hear is the suggestion that if we pay down this $3.4 trillion
it will accommodate the $120 trillion over the next 75 years, or the
$46.6 trillion over the next 55, 56 years. The fact is that that little
block of money, or the interest savings, worse yet, the interest
savings that we save from paying off this $3.4 trillion is going to
somehow accommodate the shortfall that we are facing in Social
Security.
Some have suggested economic growth will help take care of the Social
Security problem. Not so. Because there is a direct relation between
the wages we make and the taxes we pay in, in relation to the benefits
we will ultimately receive, short-term economic growth and increased
wages means that in the short run there is extra money coming into the
Social Security Trust Fund; but in the long run, when eventually that
person retires, their entitlement for benefits is going to be
significantly larger. We increase benefits not based on inflation
increases but based on wage inflation. So at some point it ends up
catching up with us and simply costing more.
Let me just read through this chart. Social Security benefits are
indexed to wage growth. When the economy grows, workers pay more in
taxes but also will earn more in benefits when they retire. Growth
makes the numbers look better currently now, but
[[Page H477]]
leaves a larger hole to fill later. And the administration has used
these short-term advantages, I think, over the last 8 years, to do
nothing. Very disappointing.
What I have decided, Mr. Speaker, I have decided that it is going to
take the bully pulpit of the President; it is going to take that
information going out to America so more and more people know the
seriousness of the Social Security problem.
Medicare is also going broke, but right now we are talking about
adding a prescription drug coverage to Medicare. There is no question a
lot of people need that prescription drug benefit. But, again, it is
like a cargo ship that is already overloaded that we know if we are not
careful it is going to sink, and yet we are adding more cargo to that
ship.
{time} 1345
I hope we are very, very careful in the way we design any kind of a
prescription drug program or any kind of benefit expansion, whether it
is Social Security or Medicare or any of the other benefits. We should
not be allowed to do that in any way that simply says that we will
borrow more money later or we will tax the younger generation later
when we need it or we will pretend that we are going to cut other
benefits. My guess is that we do not have the intestinal fortitude to
cut Social Security benefits or Medicare benefits significantly or any
other government expenditures to accommodate the need in the future.
The biggest risk is doing nothing at all. Social Security has a total
unfunded liability of over $9 trillion. The Social Security trust fund
contains nothing but IOUs and 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 30 percent. That is just in the
next 30 or 40 years.
Here is the average return on what you get on Social Security. Over
the last 25 years, the average return on equities, for example,
combined with some kind of investment in interest income, such as bonds
or other securities, has been 6.7 percent over the last 100 years. It
has been approximately 7 percent over the last 25 years. The real
return of Social Security is less than 2 percent, or 1.7 percent for
most workers, it shows a negative return for some, compared to over 7
percent for the market. Some minority groups and some people that are
put in unhealthy environments in their working lives end up dying
earlier, so they end up paying into Social Security but never getting
anything back really. For example, a young black male, because their
life expectancy is earlier than even when they start drawing benefits,
is going to have a negative return on average for what they and their
employer are putting into Social Security. The average again is 1.7
percent and the market for the last 25 years has given a return of 7
percent.
Even those who oppose PRAs, personal retirement accounts, agree that
they offer more retirement security. This is a letter written by
Senator Barbara Boxer and Dianne Feinstein and Senator Ted Kennedy to
then President Clinton. They said, ``Millions of our constituents will
receive higher retirement benefits from their current public pensions
than they would under Social Security.''
What we did in 1934 is we left it an option to local government and
to State government whether they wanted to participate in the Social
Security program or whether they wanted to have their own payroll
deduction with their own investments.
The U.S. trails other countries in terms of coming up with some
programs that are owned by the worker, that they have control over.
Let me just point out, Mr. Speaker, that the Supreme Court on two
decisions now has said that there is no entitlement to Social Security.
Social Security is a tax on one hand that Congress has passed and the
President has signed and the benefit package is simply another benefit
package that is not related and otherwise no obligation on the part of
government. So government can change any time they want to. When we ran
into problems in 1977, when we ran into problems in 1983, in both of
those situations government made the decision to lower benefits and
increase taxes. I see that as a danger but I see it as a plus if we can
have a personal retirement savings account that is in the control of
the individual where politicians cannot, if you will, mess around with
them in future years.
I see an absolute in our Social Security Task Force that I chaired.
We had different vendors come in suggesting that they could guarantee a
return much higher than the 1.7 percent that Social Security has, a
guaranteed return with part of the investment in equities. With that
guarantee you have a little less risk but like in our thrift savings
account for the Federal Government, our thrift savings account gives
individual Federal employees the option of putting some of the money in
index stocks or index bonds or Treasury paper. And so you have some
choice but it is limited to more safe investments. If we have a Social
Security account, I visualize that as having similar characteristics
where you would have a limit on where you could invest that money and a
requirement that a certain percentage go into securities that would be
interest-bearing and absolute. Look at what can be paid at your local
bank on a CD or a government savings bond or any kind of investments
that are available out there and very secure in terms of interest, none
of which are as low as the 1.7 percent.
This just says that in the 18 years since Chile offered the PRAs, 95
percent of the Chilean workers have created accounts. They have their
own passbook. Their average rate of return has been 11.3 percent a
year. British workers chose PRAs with 10 percent returns. I was over in
Europe representing what our country's public pension program was, and
I was surprised to learn that so many countries around the world are so
much further ahead in the private investments that give a much greater
retirement benefit package than our current Social Security plan does
in this country.
For this chart we came up with a dollar amount of $58,475. If the
total family income were this $58,000, the return on a PRA is even
better. We broke it down into 20 years, 30 years and 40 years, with a
decision of whether or not to invest 2 percent of the money, 6 percent
of the money or 10 percent of the money. You can see if you go all the
way on purple, invest it in a working career for 40 years, you end up
putting 10 percent of your money in for 40 years, it ends up being
$1,389,000. This is the magic of compound interest. It is another
demonstration that you cannot just go in and out of the market. It has
got to be more of a long term.
There has never been any period in American history, even around the
greatest recession and depression, any 15-year period anyplace you want
to put it on the map that has not shown a positive return in equities.
For example, if you have 40 percent of your money in investment
accounts and not more than 60 percent in equities and you left that
money in for 35 years, guess how bad the market would have to drop for
you to be worse off than Social Security. The stock market would have
to drop 100 percent. That is, of course, never going to happen. It is
never going to go to zero. That is because even the 40 percent that are
in investment funds are going to end up giving you more than you are
going to end up with Social Security.
This is my legislation for Social Security, and I am just going to
briefly go through the highlights of the bill. When I first came to
Congress in 1993, I wrote my first Social Security bill. I have written
three Social Security bills now in each of the last three sessions.
They have all been scored to keep Social Security solvent. I have spent
a lot of time because I think it is a very, very important program, and
I think the consequences of doing nothing, of continuing to put this
off, are going to tremendously jeopardize future retirees and going to
put a huge burden on future workers. The bill that I introduced, the
Solvency Act for 2000, allows workers to invest a portion of their
Social Security taxes in their own personal retirement savings account,
the PRSAs that start at 2.5 percent of wages and gradually over the
next 50 years increase that amount. We do not touch, nor does any
proposal that has been introduced in Congress, touch any part of Social
Security that is designed as an insurance program for disability and
survivors. Nobody is talking about doing anything with that program.
That would continue totally
[[Page H478]]
to be a Federal Government program to ensure against disability on the
job and the need of survivors if something happened to that particular
worker.
My bill does not increase taxes. It repeals the Social Security
earnings test for someone 62 years old. It gives workers the choice to
retire as early as 59\1/2\ years old, and as late as 70. In my
proposal, which interestingly I use the word actuarially sound, it does
not cost any more to tell a person, Look, if you want to put off your
benefits after age 65, we will increase future benefits 8 percent a
year in what you otherwise would have gotten from Social Security for
every year that you put off retiring. If you wanted to put off the
whole 5 years, you could have a 40 percent increase in benefits. It is
actuarially balanced simply because your life expectancy, some people
might die at 69 or 70, on the average it is not going to cost any more
if we allow people to put off their retirement. More and more seniors
are in good health and are willing to continue working and that should
be a flexible program of choice that is available.
My bill that I introduced this last session takes a portion of the
on-budget surplus over the next 10 years. It takes $800 billion over
and above the Social Security surplus. So we go into the, if you will,
on-budget surplus, some of the surplus that we are talking about.
Remember now, this is a pay-as-you-go program. The money comes in, most
of it goes out by the end of the week that it comes in, so how do you
change that to allow some real investments, some personal investments?
That is the cost of transition. To accommodate that cost of transition,
to put the money in accounts that are going to give a better return
than Social Security does by far, then you need some extra money. Part
of that is going to be the Social Security surplus money, but in
addition, it is going to take money from the general fund surplus.
So when you hear Washington talk about paying down the debt in the
next 10 years, again the debt they are talking about is not the total
debt. The debt they are talking about is the Treasury bills, the
Treasury paper debt. Here again, the only way that is going to be paid
down is if you take the Social Security surplus dollars, write an IOU
and use that money to pay down the other debt. By definition, that
means that if you are using that money to pay down the Treasury bill
debt, you are not using that money to accommodate a transition so that
we can have a Social Security program that is going to be solved
forever.
I resist and I urge my colleagues and the White House to not suggest
that we are going to pay down the debt held by the public over the next
10 years, because by definition that means that we are not going to
solve Social Security.
My bill uses the capital market investment to increase the Social
Security rate of return, and it is interesting, when I wrote this it
was 1.8 percent, today it is 1.7 percent, that workers are now
receiving from Social Security. Over time, PRSAs grow and the Social
Security fixed benefit is reduced. It indexes future benefit increases
to the cost of living increases instead of wage growth. Future benefits
would be indexed and increased to a COLA that represents inflation
rather than the higher increase due to inflation. That goes a long way
in solving the problem.
This is another way of representing that Social Security is a bad
investment. To get back what you and your employer put in, or what you
put in if you are a private business, in 1940 you had to stay alive 2
months after you retired to get everything back you had put in. By
1960, you had to stay alive 2 years to get everything back. Today when
you retire, you have to live 23 years after you retire to break even
getting the money back that you and your employer put into Social
Security. Not a good investment. We can do better.
This represents what this government has done on tax increases when
we have gotten into trouble, Mr. Speaker, in past years. In 1940, the
Social Security rate was 2 percent. The employer paid 1 percent, the
employee paid 1 percent on the first $3,000. The maximum payment for
both employee and employer was $60. In 1960, we raised the rate to 6
percent. We raised the base to $4,800 for a maximum payment, employer
and employee, of $288. In 1980, we jumped it to 10.16 percent of the
first $26,000. And, of course, after the 1983 changes, we are up to
12.4 percent on the first $78,000. That is about a $10,000 a year
payment going into Social Security. The danger is, is what is going to
happen in this line and in this line if we do not do anything to fix
Social Security and if we put it off, then the likelihood is, is that
we are going to put the imposition of more taxes on the American worker
to accommodate those existing retirees.
With those tax increases, here is the situation that we have found
ourselves in. Now 78 percent of families pay more in the payroll tax
than they do in the income tax.
{time} 1400
So part of the discussion on a tax cut, how do we accommodate a break
for those individuals that pay more in the FICA tax, the payroll
withholding tax, than they do in the income tax? My suggestion is that
we tell these workers that if they want, it is their choice, but if
they want, they can take a part of their Social Security tax and invest
it in an IRA, to ultimately increase their retirement benefits.
So I would like to see that part of this tax package that starts that
opportunity with the limitation on safe investments, with a requirement
that a certain amount go into interest-bearing accounts.
There are six principles of saving Social Security: Protect current
and future beneficiaries; allow freedom of choice; preserve the safety
net; make Americans better off, not worse off; and create a fully
funded system; and no tax increases.
Again, if I come back to my concern of the danger of increasing
spending and almost demanding that this body is faced with the kind of
lobbyists and special interest pressure to continue that expanded
spending, expanding the spending of the Federal Government is the
greatest negative, the greatest potential to making our economy worse,
than almost anything else we can do.
When we talk about this tax increase, we talk about a situation where
this tax increase does not even offset the projected 1993 tax increase.
The tax reduction, the tax cut, that President Bush is talking about
that our Committee on Ways and Means is taking up tomorrow does not
offset those past tax increases.
I think the question we should ask ourselves is, how high should
taxes be in the United States? How high should taxes be? And then when
we make that decision, we say, look, we do not want them too high. That
is going to discourage entrepreneurs. It is going to discourage
somebody from going out and getting a second job if they want to do
better for their family because government takes more and more of it
away. Then after we set that limit, let us discipline ourselves to set
priorities on how to spend that amount of money.
There is an unlimited need. We are going to hear Republicans and
Democrats suggest that we should not have tax cuts because there are
all those needs out there for more government spending. I think this is
dangerous. I think we should not let ourselves fall into the trap of
trying to fix every problem there is from Washington and simply asking
all taxpayers to pay a greater tax on what they might earn.
How would Members react, Mr. Speaker, if they were thinking of
starting a new business that would employ workers and give them a good
salary if government told them if they are a success we are going to
take half of the money that they make and if they fail then tough luck,
they do not have any money to send their kids to piano lessons and do
not have the money to have a decent vacation? If we increase taxes too
high, it is a negative on the economy. If we let the debt grow too
much, then it becomes the kind of negative savings that we are seeing
in this country.
By the way, this country has a lower savings rate than any other
industrial country in the world.
Finishing up, personal retirement accounts, they do not come out of
Social Security. They would simply come out of the additional funds
that are now coming into government, the so-called surplus. They become
part of Social Security retirement benefits. A worker will own his or
her own retirement account and it is limited to safe investments that
will earn more than the 1.7
[[Page H479]]
percent that we now see as an average return coming back in.
Social Security personal retirement accounts offer more retirement
security. For example, if John Doe makes $36,000 a year, in Social
Security he can expect $1,280 a month in a personal retirement account
compared to what has happened in the last 100 years with no more than
60 percent in equities. He would have $6,514 per month retirement from
his PRAs. As I mentioned, States and local governments had the option
of going into the Social Security program or doing their own
investments. Galveston County, Texas, decided they wanted to do their
own investment so they are not paying into Social Security.
Just a comparison in Galveston, death benefits $253 in Social
Security, $7,500 under the Galveston plan. Social Security benefits for
disability, $1,280; Galveston plan, $2,749. Social Security payments
$1,280 a month compared to the Galveston plan now paying $4,790 a
month.
I just simply demonstrate this to say that we can do better than the
1.7 percent return we are now getting on Social Security. San Diego did
the same thing.
Mr. Speaker, I would conclude by urging this body to hold the limit
on spending. Again, we have tried to set caps on spending. We did that
last in 1997 with the 1997 caps on spending. If we would have had the
discipline to hold down spending, to do what we said we were going to
do when we passed those 1997 caps, the baseline, what is projected for
increased spending over the years, that is roughly inflation plus 1
percent, the projected spending if we would have stuck with those caps
that we set for ourselves, would be $1.7 trillion less than is now
projected under the new baseline. So we could have doubled the tax cut.
So the danger and the question is, how do we keep government from
continuing to grow at the rate that it has been growing? How do we make
sure we pay down the total debt of this country, including the debt
that is owed to the trust funds, Social Security, Medicare and the
other trust funds, to make sure we keep Medicare and Social Security
solvent? It is a huge challenge.
Mr. Speaker, I appreciate the time; and I urge the President, I urge
my colleagues, to move aggressively to solving Social Security and
developing ways that we can discipline ourselves. A lot of this has to
come from the White House. Discipline the Federal Government from
continuing to increase spending like we have in the past.
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