[Congressional Record Volume 148, Number 73 (Thursday, June 6, 2002)]
[Senate]
[Pages S5108-S5111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            SOCIAL SECURITY

  Mr. CORZINE. Madam President, this morning I would like to take a few 
moments to talk about one of my favorite subjects: Social Security and 
the privatization plans that have been developed by President Bush's 
Social Security Commission.
  As I have discussed in the past, I, like many Members, have serious 
concerns about these privatization plans, primarily because they 
involve deep cuts in guaranteed benefits. Those cuts would exceed 25 
percent for many current workers and would exceed 45 percent for 
seniors in the future. The cuts would apply even to those who choose 
not to participate in these privatized accounts. In effect, they would 
force many Americans to delay their retirement.
  Over the past few weeks, I have engaged in an ongoing dialogue with 
privatization supporters, including the Cato Institute and a few of the 
members of the Bush Commission. The Cato Institute criticized the 
national radio address I gave on April 27 describing the privatization 
program the Bush Commission proposed. I then responded with a critique 
of their critique. And then, most recently, I received a letter from 6 
of the 16 members of the President's Commission with a critique of my 
critique of the Cato critique.
  Unfortunately, their critique also is flawed, as I have outlined in a 
letter back to the six Commissioners, and as I want to discuss today.
  The most fundamental disagreement I have with the six Commissioners 
concerns the deep cuts in guaranteed benefits included in the 
Commission's report. The Commissioners state:

       The Commission proposals do not ``cut benefits'' for 
     anyone.

  I am troubled by this statement, which, at best, is highly 
misleading. Essentially, the Commissioners are arguing that reductions 
in benefit levels, relative to those proposed under current law, should 
not be considered cuts. That is just wrong on its face.
  The Commissioners reach this conclusion by assuming that the assets 
in the Social Security trust fund will be deleted in the future and 
Congress will refuse to take the steps necessary to honor the promises 
made to workers who now are paying into the system. They make this 
assumption even though they also assume that massive amounts of general 
revenue will be available to subsidize privatized accounts.
  In effect, the Commissioners are arguing that Congress, having used 
Social Security funds for other purposes, now should be able to break 
its promise to retirees because there is not enough money in the trust 
fund.
  To me, this is tantamount to a borrower telling a lender: I haven't 
saved enough, and therefore I have a right to default on your loan. 
And, moreover, the reduction in my payments to you should not be 
considered a cut or a loss to your income.
  I do not think that adds up. Surely the lender in such a situation 
would experience the loss and view it as a real cut--just as seniors 
would experience a reduction in their promised benefits as a cut.
  In my view, it is a distortion of the English language to claim that 
changing the law in order to reduce benefit levels, as the Commission 
has proposed, should not be considered a cut. This claim is especially 
problematic because the Commission's proposed cuts would be so deep for 
many beneficiaries--exceeding 25 percent for many current workers, and 
exceeding 45 percent in the future. By the way, these numbers are 
confirmed by the nonpartisan Social Security actuaries. The Commission 
should be open and honest about this. The numbers are in the report.
  It also is important to emphasize, as I noted earlier, that the 
benefit cuts proposed by the Commission apply even to those who choose 
not to participate in privatized accounts. This belies claims that the 
Commission's plan is based on voluntary choice. It's not. Even those 
who do not choose to use privatized accounts will get cuts.
  Supporters of privatization may believe that income from privatized 
accounts will offset the cuts in guaranteed benefits. That is the 
argument they make. However, this is problematic for at least two 
reasons.
  First, the combination of reduced guaranteed benefits and income from 
private accounts in many cases would be less than the benefits under 
current law, even under the assumptions used in the Commission's 
report.
  That is certainly one of the possibilities. And that is particularly 
true if one takes into account the administrative costs which are going 
to accompany these private accounts. In Great

[[Page S5109]]

Britain up to 40 percent of the returns in private accounts are used 
just to pay for administering the accounts. This takes away from income 
and really does undermine the ability to maintain the same levels of 
benefits.
  Second, relying on the whims of the market is inconsistent with the 
principal goal of Social Security--guaranteeing a basic level of 
security, even when private investments fail.
  As one who worked personally as a trader and as the head of a major 
financial firm, I understand that stocks can move down, or sideways, 
for extended periods. While all workers should save on their own in 
private accounts, the purpose of Social Security is to establish a 
floor below which they will not be allowed to fall. The Commission's 
proposals would drastically lower that floor.
  This would be a mistake, especially when one considers that average 
benefit levels are now only about $10,000 a year--hardly enough to live 
on in many parts of the country. As I pointed out to the Chair on a 
number of occasions, the average benefit for women is closer to $9,000. 
That is not sufficient to provide a secure retirement in most parts of 
the country--certainly not in New Jersey and I suspect not in Michigan.
  Another argument in the letter I received from the six Commissioners 
focused on what some people have referred to as the ``clawback'' 
provisions in their proposals. The Commissioners don't like the term 
``clawback,'' and I am not going to get into a semantic debate with 
them about it. But my main point here is undisputed: each of the 
Commission's plans--there are three of them--would reduce guaranteed 
benefits based on amounts workers contribute to privatized accounts.
  These cuts would be in addition to the direct cuts in guaranteed 
benefits that would apply to all seniors, even those who do not 
contribute to privatized accounts.
  I think many Americans would see this as political sleight of hand--
giving with one hand, and taking away with another.
  Another issue addressed in the Commissioner's letter is whether this 
automatic benefit cut proposal would apply to ``near retirees.'' The 
six Commissioners argued that the Commission's plans ban persons older 
than 55 from participating in privatized accounts. However, this 
actually isn't clear from the text of the report. Nor have the 
Commissioners explained why older Americans should be banned from 
participating in privatized accounts if that is such a great idea. Why 
are they being left out of such a wonderful opportunity to reduce their 
guaranteed benefit?
  Next, the Commissioners dispute my point that the Commission's plans 
would force many Americans to delay their retirement. On this point, I 
acknowledge that their proposal does not explicitly raise the legal 
retirement age. And I have never claimed otherwise. But my point is 
that their proposals cut benefits so drastically that the effect is the 
same.
  Many people would be forced to work longer to build up more assets, 
in order to maintain the same level of retirement security. In fact, 
one of the Commission's plans would directly target benefit cuts at 
those who retire at 62. It seems clear that, as a practical matter, 
this will force many seniors to delay their retirement.
  Another point in the letter from the six Commissioners is that their 
proposals would reduce the amount of general revenues that would be 
required to maintain the solvency of the Social Security trust fund. To 
the extent that they are calling for deep cuts in guaranteed benefits, 
that's right. But, by that logic, we could eliminate the need for any 
general revenues by eliminating guaranteed benefits altogether.
  To me, this just isn't a good argument for the deep cuts in benefits.
  I will not go into each and every argument raised by the six 
Commission members. But I ask unanimous consent that a copy of my 
written response to the Commissioners be printed in the Record at the 
end of my statement.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  (See Exhibit I)
  Mr. CORZINE. Madam President, I have been very critical of the letter 
written by the six Commissioners, as I have been critical of materials 
prepared by the CATO Institute in the past. But I know they reflect 
deeply held beliefs, and I sincerely want to thank them for engaging in 
the debate. In my view, the debate that has begun here with the CATO 
Institute and the six Commissioners is a good thing because it 
highlights our differences for the American people. Every American has 
a stake in the future of Social Security.
  It is disappointing that the Bush administration is trying to push 
this matter under the rug, and seems to want to defer the debate until 
after the November election. That would be wrong. The American people 
have a right to be part of this process.
  Let me close and again emphasize the important points that Americans 
need to understand. The Bush Commission's privatization plans involve 
cuts in guaranteed benefits for many current workers of 25 percent, and 
future benefits for seniors could be cut as much as 45 percent. These 
cuts would apply even to those who choose not to invest in privatized 
accounts. And they would have the effect of forcing Americans to delay 
their retirement.
  For these reasons, I strongly oppose these proposals, and I look 
forward to continuing this dialogue with those who are supporters of 
privatization. The future of Social Security is too important to be 
left out of the limelight and negotiated behind closed doors. We need 
to have an open discussion.
  I thank the Presiding Officer for this opportunity to speak about 
privatization.

                               Exhibit I


                                                  U.S. Senate,

                                     Washington, DC, June 6, 2002.
     Ms. Leanne Abdnor, et al.,
     Boulder, CO.
       Dear Ms. Abdnor, Mr. Penny, Mr. Saving, Mr. Vargas, Mr. 
     Cogan and Ms. Mitchell: Thank you for your letter of May 23.
       I appreciate your apparent willingness to engage in a 
     dialogue with respect to the report of the President's Social 
     Security commission, and trust you agree that the future of 
     Social Security deserves nothing less than a full public 
     debate. Although we obviously disagree strongly about the 
     merits of privatizing the program, I look forward to hearing 
     more from you as we seek to educate the public about the 
     plans you helped produce last December, along with the 10 
     other members of the Commission who did not sign your letter.
       Having said that, I was disappointed by your letter and 
     believe it presents several arguments about the Commission's 
     report and my reactions to it that are, at best, misleading.
       Perhaps our most fundamental disagreement concerns the deep 
     cuts in guaranteed benefits included in the Commission's 
     proposals. You attempt to obscure these cuts by arguing that 
     reductions in benefit levels, relative to those promised 
     under current law, should not be considered cuts. Instead, 
     you begin by assuming that the trust fund's assets will be 
     depleted and Congress will refuse to take the steps necessary 
     to honor these promises in the future (even though you also 
     assume that massive amounts of general revenue will be 
     available to subsidize privatized accounts). You then use 
     this assumption to claim that if Congress affirmatively 
     reduces benefits through a change in current law, this should 
     not be considered a ``cut.''
       To me, this is tantamount to a borrower telling a lender: I 
     haven't saved enough, and therefore I have a right to default 
     on your loan--and, moreover, the reduction in my payments to 
     you should not be considered a ``cut'' in your income. Surely 
     the lender in such a situation would experience the loss of 
     income as a real cut--just as seniors would experience a 
     reduction in their promised benefits as a cut.
       In my view, it is a distortion of the English language to 
     claim that a change in the law that intentionally reduces 
     benefit levels, as the Commission has proposed, should not be 
     considered a cut. This claim is especially problematic 
     because the Commission's proposed cuts would be so deep for 
     many beneficiaries--exceeding 25 percent for many current 
     workers, and exceeding 45 percent in the future. The 
     Commission should be open and honest about this.
       Furthermore, it is important to emphasize that cuts 
     proposed by the Commission apply even to those who choose not 
     to participate in the option of privatized accounts. This 
     belies claims that the Commission's plan is based on 
     voluntary choice.
       The Commission's report also includes proposals for deep 
     cuts in benefits for disabled individuals. These Americans 
     would not be able to save in privatized accounts when they 
     were disabled and not working. In any case, under the 
     Commission's proposals, such disabled individuals would not 
     have access to the privatized accounts until they reached 
     retirement age. The treatment of the disabled again belies 
     claims that the Commission's plan is based on voluntary 
     choice. While I understand that the Commission expressed 
     concern about the impact of its own proposals on the 
     disabled, it nevertheless relied on savings from these cuts 
     to make its numbers add up. Without these savings, the 
     Commission's plans would not restore the Trust Fund to long-
     term solvency.

[[Page S5110]]

       I recognize that you believe that privatized accounts will 
     offset the cuts in guaranteed benefits. However, this is 
     wrong for at least two reasons. First, the combination of 
     reduced guaranteed benefits and income from private accounts 
     in many cases would be less than the benefits under current 
     law, even under the assumptions used in the Commission's 
     report. Second, relying on the whims of the market is 
     inconsistent with the principal goal of Social Security--
     guaranteeing a basic level of security, even when private 
     investments fail.
       As one who worked personally as a trader and as the head of 
     a major financial firm, I understand that stocks can move 
     down, or sideways, for extended periods. While all workers 
     should save on their own in private accounts, such as 401(k) 
     plans and IRAs, the purpose of Social Security is to 
     establish a floor below which they will not be allowed to 
     fall. The Commission's proposals would drastically lower that 
     floor. This would be a mistake, especially when one considers 
     that average benefit levels are now only about $10,000 a 
     year--hardly enough to live on in many parts of the country.
       You also argue that I wrongly accuse the Commission of 
     adopting a ``clawback'' proposal. But yours is a semantic 
     argument that rests on a very narrow and arguably incorrect 
     interpretation of this colloquial term. Your claim is that 
     this term applies only to reductions in privatized accounts, 
     not to reductions in guaranteed benefits. However, even if 
     one accepts this narrow definition, my basic point remains 
     undisputed. Each of the Commission's plans would reduce 
     guaranteed benefits based on amounts contributed to 
     privatized accounts. These cuts would be in addition to the 
     direct cuts in guaranteed benefits that would apply to all 
     seniors, even those who do not contribute to 
     privatized accounts. To many Americans, this will seem 
     like giving with one hand, but taking away with another.
       To defend your proposal for automatic cuts, you cite a 
     quote from page 99 of the Commission's report that is highly 
     misleading as presented. That quote states that ``no 
     adjustments to traditional Social Security benefits would be 
     made as a function of the accumulations in [privatized] 
     accounts.'' This is technically true, but it obscures the 
     more important point: traditional guaranteed Social Security 
     benefits would be cut based on workers' contributions to 
     privatized accounts. Thus, regardless of whether the market 
     rises or falls, guaranteed benefits will be cut just as 
     deeply, undermining the value of Social Security as a 
     backstop against possible destitution.
       Next, you argue that I was wrong to conclude that this 
     automatic benefit cut proposal would apply to ``near 
     retirees.'' More specifically, you argue that the 
     Commission's plans ban persons older than 55 from 
     participating in privatized accounts.
       However, while the descriptions of two of the plans in the 
     Commission's report prominently include the ban, in the 
     description of Model 1, the ban is conspicuously absent. You 
     may want to check pages 110, 119, and 131 in the Commission's 
     report to see this clear difference in the descriptions of 
     the three plans. If one were to apply basic principles of 
     statutory construction to the text of the Commission's 
     report, the obvious conclusion would be that Model 1 does not 
     contain the same age limitation as do the other models.
       I understand your claim that it was not the intent of the 
     signers of your letter to apply the automatic cuts to those 
     who contribute to privatized accounts under Model 1. However, 
     given the language of the Commission's report, this still 
     seems a reasonable interpretation of the intent of the 
     Commission as a whole. You may want to raise this with the 
     other members of the Commission and have the entire 
     Commission submit a modification of its report to the 
     Congress, if they share your intent. Such a submission might 
     include an explanation of why older Americans are banned from 
     participating in privatized accounts if, as you seem to 
     suggest in your letter, such accounts do not put the 
     guaranteed benefits of participants at risk.
       You also dispute my point that the Commission's plans would 
     force many Americans to delay their retirement. To clarify, I 
     never said, nor did I mean to imply, that your proposal 
     explicitly raises the legal retirement age. My point is that 
     cutting the level of guaranteed benefits so drastically could 
     have the same effect. This is because individuals would be 
     forced to work longer to build up more assets, in order to 
     maintain the same level of retirement security. Note that one 
     of the Commission's plans would target benefit cuts at those 
     who retire at 62. It seems clear that, as a practical matter, 
     this will force many seniors to delay their retirement.
       Another point you make in your letter is that the 
     Commission's proposals would reduce the amount of general 
     revenues that would be required to maintain the solvency of 
     the Social Security Trust Fund. To the extent that you are 
     calling for deep cuts in guaranteed benefits, I acknowledge 
     that your proposals would have this effect, and have never 
     argued otherwise. In fact, the benefit cuts associated with 
     the change in indexing are so substantial that, by 
     themselves, they would restore long-term balance. However, 
     the high cost of privatized accounts then forced the 
     Commission to rely on massive general revenue subsidies to 
     achieve long-term solvency.
       Your letter also complains about critiques that ``count 
     `current law benefits' but not the taxes required to pay 
     them''. This complaint seems disingenuous, considering that 
     the Commission itself depends on substantial transfers from 
     the rest of the budget without making clear how those would 
     be financed. Under the Commission's plans, these transfers 
     would be necessary to fully fund privatized accounts and 
     partially address trust fund solvency. Yet given projections 
     of deficits outside of Social Security for the foreseeable 
     future, one might have expected the Commission to explain 
     whose taxes would be raised and whose services would be cut 
     to generate the need savings. The Commission's report 
     includes no such explanation. However, one way to reduce the 
     need for such taxes is to not subsidize privatized accounts 
     in the first place.
       I do accept your point that investing in broadly 
     diversified funds reduces risks. That is true and, again, I 
     have never argued otherwise. However, while diversification 
     reduces risks, significant risks remain. The value of even a 
     diversified account can decline significantly at any time, 
     and can stay depressed for years. If this were to happen when 
     an individual is retiring, the consequences could be 
     catastrophic without Social Security's basic level of 
     guaranteed benefits.
       Finally, it is hard to argue that the Commission 
     represented a balanced forum for the open consideration of 
     differing points of view. After all, the membership of the 
     Commission was stacked from the beginning with those who 
     support a shift to privatized accounts, and the Commission 
     was specifically directed to promote such accounts. That is 
     not your fault, and I do not blame you for holding policy 
     beliefs in good faith. But it seems to many observers that 
     the basic recommendations of the Commission were largely 
     predetermined by President Bush when he selected such a one-
     sided group of members and then limited the scope of options 
     they were allowed to consider.
       In sum, I stand by my critique of the Commission's report 
     and believe that the benefit cuts it proposes would be a 
     serious mistake for our nation, and the millions of Americans 
     who will depend on Social Security in the future.
       I look forward to continuing our dialogue in the months 
     ahead, and hope you will be able to convince the White House 
     and the Republican congressional leadership to join in the 
     discussion before this fall's elections.
           Best regards,
                                                   Jon S. Corzine,
                                                     U.S. Senator.

  (Mr. NELSON of Nebraska assumed the chair.)
  Ms. STABENOW. Mr. President, will my colleague from New Jersey yield?
  Mr. CORZINE. Yes.
  Ms. STABENOW. I appreciate my colleague stepping in the Chair so I 
might come down for a moment before my good friend from New Jersey 
leaves.
  I wanted to indicate my personal thanks to him--as well as my 
colleagues whom I know share this gratitude--for his willingness to 
come to the floor and articulate in such a precise way and an 
understandable way what the challenge is to this whole question of 
Social Security and privatization of Social Security; and the fact the 
Senator has been willing to put the time in to really make it clear 
what is at stake for people, I am very grateful. I thank him on behalf 
of the people of Michigan for doing that.
  I wanted to ask one question before the Senator left. I know one of 
the things we talked about before is that Social Security is not just 
retirement. It is also a disability policy. If you are a worker and 
become disabled, your family is able to receive assistance, as a 
disability policy. If you, unfortunately, lose your life on the job, it 
is a life insurance policy.
  Isn't it also true that we really have three parts to that system? I 
know the Senator from New Jersey spoke to that as well. This is not 
only a question of retirement, but it is a question of a security 
system--disability, life insurance, and retirement. That is why it is 
so critical that it remain in place.
  I would appreciate it if the Senator might speak to that for a 
moment.
  Mr. CORZINE. Mr. President, I very much appreciate the comments of my 
colleague from Michigan, whom I know has been so vocal about the need 
for a prescription drug benefit and the cost containment issue. 
Actually, we need a whole list of approaches to make sure our seniors 
in America have access to the American promise, and we need to work to 
make that happen. Prescription drugs must be part of that. Protecting 
Social Security must be, as well.
  As it relates to the disability benefits, the proposals in the 
Commission's report would be even more devastating to disabled 
individuals than to retirees. Disabled people would not be able to 
build up assets in a privatized account if they are unable to work. And 
to the extent that they have assets in such an

[[Page S5111]]

account, they would not be available until an individual retires. Even 
the Commission expressed discomfort with their own cuts in disability 
benefits, though in the end they relied on the savings from such cuts.
  I very much appreciate the distinguished Senator from Michigan 
speaking out on this aspect of the Bush Commission's cuts. Because, as 
she suggests, these cuts do go beyond retirees, and also jeopardize the 
disabled and those young people who lose a parent. That needs to be 
understood by the American people.
  Mr. President, privatized accounts can provide some benefits, if 
trees grow to the sky and the market never goes down or sideways. But 
if history is any guide, that is not really how the world works. In the 
real world, privatization would put at serious risk Social Security's 
floor level of support for the disabled, children, and our retirees.
  Again, I thank the Senator for her question and for her support. I 
hope she will also see that same kind of support with regard to her 
efforts to contain the costs of prescription drugs, and to provide 
prescription drug benefits, both of which are serious and important 
issues for our country.

  The PRESIDING OFFICER (Mrs. Murray). The Senator is recognized.
  Mr. NELSON of Nebraska. Madam President, I ask unanimous consent that 
I be able to speak until about 6 minutes after 10.

                          ____________________