[Congressional Record Volume 147, Number 171 (Tuesday, December 11, 2001)]
[House]
[Page H9085]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        SOCIAL SECURITY SOLVENCY

  The SPEAKER pro tempore (Mr. Otter). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from Michigan (Mr. Smith) is 
recognized during morning hour debates for 5 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, I just returned from the 
Presidential Commission on Social Security meeting. This morning they 
released their plan that they will be reviewing and presenting to the 
President on the 21st of this month.
  They presented three proposals. Earlier this year, I encouraged the 
commission to come to agreement on one proposal. I am somewhat 
concerned, with three proposals, that we end up bickering in this 
Chamber about the advantages and disadvantages of each proposal and use 
it as an excuse to do nothing. It would have been much better if the 
commission had developed one proposal.
  Briefly, the three proposals allow optional, worker owned 
investments.
  The first proposal allows an investment of 2 percent of our taxable 
income and then offsets future Social Security benefits to the extent 
and with the assumption that that investment in private accounts will 
accumulate 3.5 percent return on investment. So they assume that that 
is 3.5 percent, and deduct that compounded earnings value from future 
benefits.
  The second proposal allows 4 percent of taxable income, not to exceed 
$1,000 a year, but provides that they are only assuming 2 percent 
return on that proposal to determine reductions in future benefits. 
Investments would be limited to safe investments, and all plans are 
optional. Everything that our personal account would accrue above the 2 
percent would be an increase in ultimate retirement benefits.
  These plans are especially beneficial for those individuals under 40 
years of age that have a period of time for the magic of compound 
interest to work.
  The third proposal is based on the premise that it is important to 
resolve Social Security, but it is more important to keep promised 
benefits. So it appears that it would take a tremendous amount of 
financing from other sources other than the payroll tax to accommodate 
that particular proposal.
  Mr. Speaker, earlier this year I told the commission that I was 
concerned that they must do a better job communicating to the American 
people the predicament that Social Security now finds itself in. Social 
Security is insolvent.
  We know how many people there are and when they are going to retire. 
We know that people will live longer in retirement. We know how much 
they will pay in and how much they will take out. We also know that 
payroll taxes will not cover benefits, starting in 2015, and that the 
shortfalls will add up to $120 trillion in the 75 years following 2015.
  Today's value of that shortfall is a little over $9 trillion. This 
graph simply represents our short-term benefit, because we have been 
increasing taxes, payroll taxes. Every time Social Security was in 
trouble, we would increase the taxes. So in the short run, until 2015, 
2016, 2017, someplace in those years, there is more money coming in 
than we need. But after that, the red portion of this graph represents 
the $120 trillion that will be needed in addition to Social Security 
taxes. Something needs to be done if we are going to keep this most 
important program secure and solvent.
  A lot of people have said that the economic growth will fix Social 
Security. That is not true, because as wages increase, so do the 
benefits. So increasing the economy of this country with more jobs and 
more benefits in the long run simply results in a greater requirement 
for payouts. When the economy grows, workers pay more in taxes, but 
they are going to get it out. Growth makes the number look better now, 
but leaves a larger hole later.
  I think this Social Security Commission has done a service by at 
least laying out three proposals, all of which eventually will add to 
the solvency of Social Security. The question is, do we want to allow 
some privately owned account for private investments?
  This is a graph that I made up just to show what has happened in the 
last 100 years in terms of the returns of stock investments. We see the 
ups and downs, but the average over the last 100 years is 6.7 percent. 
That compares to about 1.7 percent that the average retiree is going to 
receive as a return on the money they and their employer put into 
Social Security for them.
  So, that is the problem: there is not a very good return on your 
Social Security taxes. It is not a good investment. Everybody, on 
average, that is working now and paying in can expect at retirement 
time the equivalent of a 1.7 percent return.
  I would like to conclude by congratulating the commission for their 
work. I will help increase a understanding by the American people that 
there is a huge problem. We have come a long way since my first Social 
Security bill in 1994. I hope this report is the kind of stimulus and 
catalyst that will allow this Chamber to move forward to assure that we 
save Social Security.

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