Congressional Record, Volume 149 Issue 130 (Monday, September 22, 2003)

[Congressional Record Volume 149, Number 130 (Monday, September 22, 2003)]
[Senate]
[Pages S11739-S11746]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

SOCIAL SECURITY

Mr. SUNUNU. Mr. President, I welcome the remarks of the Senator from
Arizona and my colleagues tonight for what I hope will be an enjoyable
evening and will set the tone for further debates to follow.
Tonight we are talking about the important issue of Social Security.
Let us begin by recognizing together that this is an important issue,
one that deserves to be talked about with substance and in a direct and
clear way. It is also an issue that we need to address with substantive
legislation, because the one thing I think we can agree on is that not
acting provides us with the greatest risk of all.
If we look at what the Social Security actuaries have said, the
President's bipartisan commission has said, and countless committees in
Congress which have looked at this issue have said and recognize that
if we don't act, we are faced with the stark choices of raising taxes
or cutting benefits, which is not something any of us wish to do.
We need to strengthen Social Security by improving the rate of return
of investments made within the system, and strengthen Social Security
by extending the solvency of the trust fund by, I believe, empowering
individuals.
Tonight, I want to talk about that important notion, empowering
individuals and allowing them, as part of the Social Security reform
package, to invest a portion of what they pay in taxes every week in a
personal retirement account. We are going to hear a lot tonight about
how these personal retirement accounts might be risky, how we cannot
trust individuals or count on individuals to make good choices or
decisions, how we cannot count on the Government to enact a substantive
regulatory regime that protects the markets or the individual
investors, and how this is risky because it takes money out of the
Social Security trust fund. But I believe we need to recognize that
empowering individuals to make such investments and control their
retirement accounts is central to strengthening the rate of return I
talked about, to improving the solvency of the Social Security system,
and making a stronger retirement system for future generations.
Let's be clear about what we are talking about here. The kinds of
investment options that most all of the legislation that has been
introduced deals with offer voluntary accounts but don't touch the
benefits of anybody who is retired today or any near-retirees, and they
still provide a guaranteed minimum benefit. If you look at the
legislation introduced by Congressman Kolbe or Congressman Stenholm in
the House, or Senators Gregg and Breaux in the Senate, or Congressman
Nick Smith from Michigan in the House as well, these are pieces of
legislation that reflect and respect the individual's strength to make
good decisions, and the potential to improve the rate of return of the
system, but at the same time protects the guaranteed minimum benefit
that our retirees, and especially those without a strong economic
means, have come to count on.

[[Page S11740]]

There are two issues I want to focus on in my remarks. First is this
notion of empowerment and why it is so important to the strength of a
retirement system that allows personal accounts. Second is the issue of
solvency, on which I am sure we will get into some detail.
First, empowerment. When I talk about power, I think it is hard not
to talk about money. Money is power; we all understand that working
here in Washington. Any time we can take money out of Washington and
return it to the individual or give the individual more control of
their own money, we are strengthening and empowering them. In
particular, these personal investment accounts--all of them I have seen
structured in legislation more often than not increase opportunities
for low-income people.
Those with high incomes in America have IRAs and 401(k)s; they have
access to personal retirement accounts or retirement security
investments that are independent from Government. Why is it that we are
afraid to give that same economic empowerment to those at the lower
side of the income scale?
These personal accounts create a real asset. Why are we afraid to
allow individuals to control and own a real asset, a tangible asset
that they can pass on to their family when they die? The opponents of
personal retirement accounts say: We make a promise; we have a
retirement promise within Social Security; we don't need to allow the
individual to own the asset.
Well, I maintain that a promise is something very different than
owning an asset. If you don't believe that, you can go to developing
countries where they don't have private property rights, to former
Communist countries where the state always promised to allow them to
keep their land or promised to provide a pension. Owning something is
very different indeed than simply having a government promise.
We want to empower them with a real asset that they can count on to
be there when they retire. Over time, with a higher, stronger rate of
return, the solvency of the overall retirement security system will be
strengthened. The worst thing is to do nothing.
Between 2017 and 2041, we will begin paying out of Social Security.
We may have Social Security surpluses today, and the trust fund may be
growing today, but come 2017 it will stop growing and begin to shrink.
There will be $6 trillion in outflows from general revenues in that
timeframe and a $25 trillion unfunded liability over the next 75 years.
If we don't take action, we will be forced to increase taxes or
forced to cut benefits. But thoughtful, substantive action that
includes the power of personal retirement accounts will make a
difference for the individuals across the entire country.
There is a lot of opposition here because these are not Government-
controlled investments. There is a lot of opposition because the
individuals won't be beholden to the whims of the Government. There is
a lot of opposition here because some people don't want to harness the
power of private markets, the power of compound interest, and the power
of economic growth in order to create something that the Federal
Government no longer controls.
I submit that those individuals and workers who are paying 13 percent
today in payroll taxes will benefit greatly from this change. I think
the risk is not to act. I think we need to act, and I look forward to
hearing from the other side.
The PRESIDING OFFICER. The Senator from New Jersey is recognized.
Mr. CORZINE. Mr. President, I thank the leadership on both sides of
the aisle for sponsoring this debate on the future of America's Social
Security system. It is one of the most important debates I think we can
have as a nation, and I think many on this side of the aisle believe
Social Security is the clearest expression of our Nation's values.
The Social Security system, for 70 years, has provided a promise, a
commitment between generations, that if you work hard, pay your taxes,
and play by the rules, one day you will be able to retire. Actually, no
expression of the common good of our Nation has been more broadly
accepted nor admired for the results: That the reduction in poverty of
America's seniors went from about 50 percent to 8 percent during the
existence of Social Security is a testimony to its great success.
It is not a handout; it is not welfare. It is an earned benefit that
rewards work. It promotes and rewards what I think all of us would like
to see in our society. Senator Durbin and I could not be more
privileged to stand in support of this national commitment to America's
seniors, disabled, and children who lose a parent.
This universal insurance program provides guaranteed security for all
seniors. Let me emphasize the word ``guaranteed.'' Regardless of the
state of the economy, rate of inflation, fluctuations in the financial
markets, or the length of one's life, security is guaranteed, dignity
is guaranteed.
It is hard to underestimate the importance of Social Security for our
Nation's elderly. Of the two-thirds of our seniors and the disabled, 50
percent or more of their income comes from Social Security. For 20
percent of seniors in this society, it is their only income. For women
and minorities, it is a much higher percentage of their protection as
they go forward. Nearly 2 million children receive survivor benefits.
For the disabled, it is more than 50 percent of their income. It is the
ultimate safety net and one that is earned.
I think it is important for us as Democrats--and we certainly argue
this--that Social Security's guarantee of financial security should be
at the top of our Nation's priorities, along with educating our kids
and protecting national security. ``Social Security first'' is more
than a rhetorical phrase; it is a policy that works. That is why we so
strongly oppose privatization views on Social Security through so-
called personal accounts.
Privatization, in our view, is not about choice. Privatization is
about mandatory cuts in guaranteed benefits. That is by the analysis
from the President's own commission. All of the Social Security
actuarial analyses admit that we will raid the trust funds for up to $2
trillion and will force deep cuts in guaranteed benefits--up to 25
percent for many current workers and, as the years unfold, as much as
45 percent for future enrollees. Those benefit cuts would not be
voluntary. They would apply to all retirees--even those who choose not
to invest in private accounts. We think that is a major problem, a
major flaw in the direction you take.

Seniors simply cannot afford to have benefits cut, particularly those
on the low-income side of our society. After all, today's Social
Security guaranteed benefits are simply an average of $900 a month, or
less than $11,000 a year. In fact, for women, it is $780 a month, or
about $9,300 a year. I think that is pretty tough to live on in New
Jersey; I don't know in Illinois, or Pennsylvania, or New Hampshire;
but $9,300 doesn't cut it. It is very hard to presume that somebody is
going to live successfully in their retirement. Many of us look at this
and argue about priorities. Some argue that we need deep cuts to make
sure Social Security is solvent. But the numbers prove that wrong, in
my view.
In the next 75 years, the entire Social Security shortfall, in
present value terms, is $3.8 trillion. That is a lot of money.
Meanwhile, the Bush tax cuts would cost more than $12 trillion, present
value, in the same amount of time. We need to make priority choices. We
believe we can fund this, since it ought to be one of the highest
priorities in society that would necessarily be on our agenda. We have
the resources. It is a matter of will and of whether we want to make
sure we have the fiscal discipline to set the priorities to make it
happen.
I also want to talk about this rate of return. I am an old grizzled
30-year veteran of the financial markets, and I can tell you they go
up, down, and move sideways for years on end. It is an uncertainty and
a risk that you build into markets if you put it into these personal
accounts.
We believe in that three-legged stool. We are not against private
investing. We are not against personal savings. We encourage 401(k)s
and IRAs, but I think it is a mistake to put at risk the guaranteed
benefits for those 20 or 50 percent who are so dependent on Social
Security.

[[Page S11741]]

There are a number of other problems I could find with private
accounts. As to management fees, I assure my colleagues, the smaller
the account, the higher the fees. They accumulate. We have had a number
of problems with them in Great Britain and other countries. There are
serious issues that need to be addressed before one even thinks about
it.
I hope we do not lose track of that compact, of that commitment we
have, that promise to make sure that if one plays by the rules, they
pay their taxes and work hard, they will have a dignified retirement
benefit. That is how the world has changed post the creation of Social
Security, and we believe strongly that we ought to implement a plan
that guarantees benefits.
The PRESIDING OFFICER. The Senator's time has expired.
Under the previous order, the Senator from Illinois is recognized.
Mr. DURBIN. Mr. President, I thank my colleagues for staying this
evening. The world's greatest deliberative body does not spend a lot of
time debating. That was one of the biggest surprises that I learned
when I first came over to the Senate. I hope tonight, if we have a good
debate, it will set a standard that will lead to even more debates on
the Senate floor.
For 66 years, Social Security has been America's insurance policy.
Social Security has been America's promise that when all else fails,
the monthly check from Social Security is going to be there to help you
pay for your food, your utilities, and your prescription drugs.
Social Security has never been Uncle Charlie's red hot investment
tip, that stock that just could not lose. Social Security has always
been that rainy day fund that your dad and your grandfather told you to
take care of first before you even listened to Uncle Charlie.
Some politicians do not like Social Security. It is an old idea. It
has been around for several years. It is conservative. It is a
Government program. It was created by Franklin Roosevelt during the New
Deal. It is also the horse, though it never sets a track record, that
always finishes the race.
The critics want to dismantle Social Security for a flashy, dazzling
money maker that just cannot lose. They want to cut the current Social
Security monthly benefit and add higher administrative costs at the
expense of your parents' retirement and your own.
Now, they tell us that Social Security privatization adds up, but
like that hot stock tip, their privatization argument is all about
faith and not facts. As every good magician, they want to divert your
attention from the most important part of their presentation.
The supporters of privatizing Social Security cannot explain how they
will fill the $2 trillion hole in the Social Security trust fund that
will be created when people lift out money to put in privatization
personal accounts. If they were honest about their $2 trillion
shortfall, they would tell you that the options are very limited and
very painful.
For one thing, they might suggest we raise payroll taxes to make up
the difference, but who needs an increased payroll tax with this lame
economy? They could tell you honestly that we can raise the retirement
age under Social Security and make up for the $2 trillion shortfall in
privatization. But is that something you want the Government to mandate
at this point in your life? Or they could cut Social Security monthly
benefits, but that might come just at the time when your mother's
prescription drug bill goes up $100 a month.
If it turns out that Uncle Charlie's hot stock tip, or the Republican
privatization of Social Security, fails, guess who ends up holding the
bag. Well, first, your parents, then you as their children, and
ultimately, when the bottom falls out, future taxpayers.
The bad news about Social Security is not the bedrock principle on
which it was founded. The bad news about Social Security is that this
President and this Republican Congress, with their tax cuts for the
wealthy and recordbreaking deficits, are endangering Social Security
and Medicare at exactly the wrong time.
This is a news flash from those who are supporting privatization,
which I think they should crawl across every TV screen in America
whenever this debate starts, and it ought to say, just so you did not
miss it: The baby boomers are on the way.
We have only known that for 50 years. We have seen them coming. We
know they expect Social Security to be there because they paid into it.
So instead of historic deficits and Social Security privatization
schemes, how about some conservatism for a change? How about protecting
the Social Security trust fund?
In closing, this is a historic moment. Since the Republicans chose
the issue of privatizing Social Security as our topic tonight, it now
can be said officially to Republicans across America that it is now
safe to say privatize Social Security again. For 3 years, they would
not do it while the Dow Jones was diving, the Standard & Poor's was
sliding, mutual funds were muddling, and corporate robbers were led
away in shackles. Welcome back Social Security privatization. But there
is one problem: the Republicans may now think it is safe to dive again
into the Social Security privatization pool, but when it comes to
common sense that pool is still empty.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SANTORUM. Mr. President, I want to make sure the record is
straight. I do not believe the Senator from New Hampshire used the word
``privatization.'' My colleagues will not hear me use the term
``privatization.''
Privatization intimates to the American public that we are going to
abandon the current Social Security system and turn it over to
completely private accounts, which is not what any proposal on this
side of the aisle or what the President's commission suggested.
What the President's commission suggested, what every bill over on
this side of the aisle proposes--and, by the way, joined in a
bipartisan fashion and has historically been a bipartisan issue--is to
take a portion of the contribution that comes into the Social Security
Administration and give people the option voluntarily to establish a
personal retirement account to be part of their Social Security benefit
which continues to be guaranteed as it is, as much as it is, under
current law.
So let's understand that we are still talking about the foundation of
this system being the same. What we are talking about is trying to
solve the problem, a problem that my two colleagues on the other side
of the aisle did not address. They talked about the criticisms of the
personal retirement account option for people to help finance the
shortfall in Social Security, that $25 trillion shortfall. They did not
propose one solution as to how to do that.
We have proposed a solution that uses the power of the market, which
uses individual choice. If my colleagues want to talk about guarantees,
ask the people back in 1978 and 1984, after the 1977 and 1983 changes
in Social Security, whether that benefit is guaranteed. In both 1977
and 1983 benefits were reduced. So this idea that there is some
guarantee out there is only as good as the next Congress's vote. The
real guarantee is ownership. One owns that money in their account. That
is a private property right that is now not subject to the whim of the
next Congress to take away from an individual. So what we are doing is
giving real guarantees, real security to Social Security, No. 1.

No. 2, this idea that if we don't do anything, things will be fine? I
hold up a comment by David Walker before the Aging Committee in the
Senate. He said:

Taking action now on Social Security would not only promote
increased budget flexibility in the future and stronger
economic growth but would also make less dramatic action
necessary than if we wait.

Waiting is not an option. There are three things we can do to fix the
Social Security shortfall. No. 1, raise taxes; No. 2, cut benefits; No.
3, grow through investment and thereby make up the shortfall. Those are
the three options.
Senator Sununu and I think most Republicans, and some Democrats,
thankfully, have said we prefer option 3.
By the way, this debate has been around a while, as the Senators have
suggested. One of the issues is, Do we include people who are not now
in Social Security in Social Security, like teachers, local government
employees, State employees who are now exempt? They are vehemently
against losing their investment-based Social Security

[[Page S11742]]

system if they have to trade it for a pay-as-you-go, promise-from-
politicians system that we have. If it is such a bad system, then why
do all the people who have an investment-based system, at least in
part, not want to be in this other system? The reason is because it
works. Every other pension system in this country is based on that. And
virtually every other pension system, Social Security system in the
world, has some component of private investment.
We will be--I underscore ``will'' because I think it will eventually
happen--the last to do this. But we should not wait because waiting
costs. The longer we wait, the deeper the cuts in benefits that will
have to be made if we do not go the personal retirement route, or the
higher the taxes must go, again, if we do not come up with another
method to solve this problem.
I want to put up a chart from Senator Moynihan. I heard talk that
somehow or another, if this money is put aside, we are robbing money
from the Social Security system. I have a couple of comments on that.
No. 1, the Social Security actuaries say:

If the personal accounts are considered as part of Social
Security, it is reasonable to combine the amounts of the
trust fund assets and the personal accounts for
representation of the total system.

So when the Senator from New Jersey said you are taking this money
out of the system, you are not actually taking the money out. Actuaries
say you actually should include it as part of it since it is going to
pay benefits.
The Senator from New York said:

Critics charge that establishing personal savings accounts
would turn Social Security over to Wall Street. Dock workers
would become day traders. A market downturn could wipe out
benefits. The latter charge is obscene. The present
progressive retirement benefit would remain.

That is the point I was making before.

We are not eliminating the base Social Security Program. We
are enhancing it, we are stabilizing it, and we are better
securing it through investment. There is no occasion to touch
it.

Not one proposal the President has put forward or one proposal put
forward on this side of the aisle, in a bipartisan fashion I might add,
does anything to undermine the basic Social Security system. It is, in
fact, a response to shore it up, to make it stronger, and to make it
secure and guaranteed for future generations. That is why we so
strongly believe in it.

I yield.
The PRESIDING OFFICER. Under the previous order, there will now be a
period for questions and answers: 1 minute has been allocated for
questions, 2 minutes for response. The Democrats are to propose the
first question. The Senator from Illinois.
Mr. DURBIN. Paul Krugman of the New York Times summarized this pretty
well.

Social Security as we know it is a system in which each
generation's payroll taxes are mainly used to support the
previous generation's retirement. If contributions from
younger workers go into personal accounts instead, the
problem is obvious. Who will pay benefits to today's retirees
and older workers? Privatization creates a financial hole
that must be filled by slashing benefits, providing large
financial transfers.

The obvious question to the supporters of privatization is, Where
will you find the $2 trillion that makes your proposal honest? Without
filling that financial hole with $2 trillion, you have a theory that is
too good to be true.
Mr. SANTORUM. That is a very good question.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SANTORUM. This question always hearkens me back to a commercial
which dates me a little bit. It was Fram Oil Filters. The question was:
Pay me now or pay me later?
The issue is, and the issue that, again, my colleagues on the other
side of the aisle fail to address, and that is there is an unfunded
liability here. How are we going to make it up? The question is, What
is the best way to guarantee that for future generations?
What I believe is, by allowing individuals to put money into accounts
which they own, which increase in value, we will secure that system to
the future. Does that mean coming up with more money now to secure the
system later? Yes. But if you don't do that, you are going to pay much
more later. So the question is, Pay me now--do it in a way that is
progressive in the sense that individuals own money and have control of
that investment, have real guarantees because it is their money--or pay
me later, on a promise that my benefits will not be cut, which they
will have to be, or taxes will not increase, which they will be.
The PRESIDING OFFICER. The Senator from New Hampshire.
Mr. SUNUNU. Mr. President, in their opening statements we heard the
other side use the word ``guarantee'' numerous times. To be sure, my
colleagues and I believe strongly in the moral obligation that we have
to ensure a sound retirement system. But to simply say ``guarantee,''
``guarantee,'' as if that will solve the fundamental problems in our
retirement security system is a huge mistake and it ignores both
demographics and the baby boom generation and history because, we all
know, in 1977 and 1983, significant changes were made.
We are willing to stand up and talk about ways that have been
actuarially shown to strengthen the solvency of the system, but we
still have not heard a single idea or proposal of substance from the
other side. If you are not going to cut benefits, and you are not going
to raise taxes, what ever are you going to do?
The PRESIDING OFFICER. The Senator from New Jersey.
Mr. CORZINE. I appreciate the comments of the Senator from New
Hampshire about guarantees. The idea of making certain that those
payments, that $900 average that we are talking about, is available is
going to take some of those kinds of choices that the Senator outlined,
as did the Senator from Pennsylvania. We have to make some tough
choices.
We made a very tough choice when we said we are going to cut taxes,
the present value of taxes, $12.1 billion, which put us into deficit
financing of $550 to $600 billion in the upcoming fiscal year, when the
Social Security shortfall in this country, on a present value basis as
opposed to accumulating all those totals over 75 years, is $3.8
trillion--three times the coverage of the estate tax. Even if you
reformed it up to a $4 million or $5 million exemption, it would fill
about one-quarter of that hole. The dividend exclusion, the cut in
capital gains, would take it up a little over half.
There are other options than just sitting here and suggesting that
there are no ways to fund this Social Security gap. That was why it was
so important to emphasize ``Save Social Security First'' when we were
running surpluses. We wanted to build up that Social Security trust
fund so there would be income from it, but also have the ability to
meet those needs as we go forward.
I think it is absolutely essential that we focus on guaranteed
benefits because we are looking at the core, the fundamental
cornerstone of what retirement savings is for a vast number of
Americans. Fifty percent plus depend mostly on Social Security.
So having that at the risk of the whims of the market is a whole
different kettle of fish than having what a guaranteed benefit is
about. That is why we emphasize it.
The PRESIDING OFFICER. Next question, Democrat Senator.
Mr. DURBIN. I ask my colleagues on the Republican side, they say it
is voluntary and all about giving people a choice. What kind of choice
do you give people who do not want to open a personal account, who
don't want to privatize? The choice you give them is to see their
monthly Social Security benefit reduced. The average benefit of $900
will go down, if you decide that you don't want to play the stock
market, you don't want to invest.
I have to ask you, How voluntary is that, if you are going to reduce
the monthly benefit payment to those who do not sign up? And, the
ultimate cost of this, since you cannot come up with a way to pay for
the $2 trillion, could be as much as 40 percent of that current $900
monthly value. How voluntary is that? What kind of choice does that
person have, when they lose the benefit they counted on all their
working years?
Mr. SANTORUM. I assume what the Senator is referring to is the
proposal by the administration to use price indexing versus wage
indexing. Is that correct?
Mr. DURBIN. I was talking about the overall $2 trillion.

[[Page S11743]]

Mr. SANTORUM. Maybe I am confused. When the Senator says what change
would then occur, my guess is--I am confused by the question.
Mr. SUNUNU. If the Senator from Pennsylvania will yield on this point
because it was a confusing question, to say the least, but I think it
gets the facts completely wrong. There are pieces of legislation that
protect the guaranteed minimum benefit and that make no changes to
those in the current system. To suggest that simply the act of
proposing to allow some worker to control 2 or 3 percent of what they
earn every week in a private account means that somebody else's
benefits will be cut is simply demagoguery.
The Senator from Pennsylvania addressed the question of pay me now or
pay me later. To be sure, if you allow personal accounts to be set up,
you won't have as much money flowing into the trust fund today, but you
will earn a rate of return and increase the value of those accounts in
such a way that the total value of all the assets in your retirement
system will be greater in the long run.
I think the Senator who worked on Wall Street understands that fact.
I think anyone who has an IRA or a 401(k) understands that fact.
The legislation that has been introduced in a bipartisan way in this
Chamber and in the House has been scored by the Social Security actuary
to increase the solvency of the Social Security trust fund over that
75-year window.
That may be a frustration to those who vehemently oppose personal
accounts in any way, shape, or form, but it is a fact. The Social
Security actuaries are not partisan in this debate.
The PRESIDING OFFICER. The next question is from the Senator from
Pennsylvania.
Mr. SANTORUM. Thank you, Mr. President.
I reiterate the first question which the Senator from New Hampshire
offered, which is, What specific plans are out there? But I am not sure
we are going to get an answer to that tonight. I will go to a second
question.
We hear a lot, as I mentioned in my remarks, about their guarantee,
and I know both Senators know about the Fleming v. Nestor case in
1960--a U.S. Supreme Court case that said that Social Security benefits
are not guaranteed. You do not have a private property right to Social
Security benefits. It is a political promise.
We saw evidence of that in 1977 and 1983 with those amendments to the
Social Security Act which reduced benefits. So we are talking about
this great guarantee, this incredible, infallible promise. Yet we have
seen cuts in Social Security by previous Congresses.
My question is, Can the Senator tell me that the 1977 and the 1983
amendments are not examples of what you would call a guaranteed benefit
and how those reductions in benefits square with you telling the
American public that there is a guaranteed benefit?
Mr. DURBIN. Mr. President, let me just say that we can argue for some
time as to whether this is a guaranteed entitlement. This much I can
guarantee you. In a nation where 40 million people rely on Social
Security for their checks, and where their families rely on receiving
them, trust me; the people who are elected to this Chamber and the
House of Representatives will be responsive to guaranteeing the future
of Social Security. There is much less political risk when it comes to
the future of Social Security than there is market risk when you decide
that you are going to take a chunk of your savings and hope that you
happen to retire at the right moment when the stock market is on the up
tick rather than the down tick. The market risk is far greater than the
political risk.

We might be able to suspend the rules of political science in this
debate. We certainly cannot suspend logic, common sense, and
mathematics.
If you wonder why this Nation is in deficit, listen to the argument
on the other side. They will allow workers to opt out of Social
Security and go into personal accounts and argue here calling this
demagoguery when we raise the question that even if these workers opt
out, that did not endanger Social Security. That doesn't add up. Once
the workers opt out, there is not enough money to make current payments
to retirees. They cannot explain to you how they will make up the
difference. That is the problem--if we are going to maintain benefits,
make it voluntary and not penalize current Social Security retirees.
You have to explain to us how we make up the difference.
The PRESIDING OFFICER. The next question is from the Democratic side.
Mr. CORZINE. Thank you, Mr. President. Let me say on the
constitutional question, the Court rules. But if there is a law that
has to be changed, it has to come before this body. The political risk
is no higher, in my view, than the market risk, being one who has lived
with market risk for a fairly substantial period of my life and
understanding that those risks are real and tangible. We have very real
and tangible examples of that in the world today.
Look at the underfunded pension liabilities that are managed for some
of those teachers and other people who have been talked about.
I think we are talking about two relationships. And I think when you
are talking about--which gets to my question: Is $900 a month too much
to promise our seniors? Is a guaranteed benefit of $900--and then
adjusted for wage indexes so it is a standard of living and replacement
wage--is that really too much? I ask the Senators.
Mr. SANTORUM. Only two-thirds of that $900--$600--is funded under the
system we have right now. Three hundred dollars of that benefit--in
other words, two-thirds of that benefit--over the course of the next 75
years is going to be funded. So the question is, How are you going to
make up this difference? We have put forth a plan that reduces that
unfunded liability, that makes up that gap substantially. If we were to
do one of the plans, it makes it up completely.
So I suggest that we have plans on the table on how you get there.
What we have not heard from the other side is how they get there. We
have heard about the Bush tax cut. Are you suggesting we should
increase taxes? What taxes do you want to increase to pay for these
benefits? Are you suggesting that you don't want to increase taxes but
somehow you want to reduce benefits? What benefits are we going to
reduce to pay for this? But the fact is, you can't say to folks, It
would cost this much--and it is not costing anything because all of the
money stays in the system--to do their personal retirement account.
The question is, How do you make up the difference? Again, no answer
and no ideas. We can do this or we can make up the difference or we
will make sure the guarantee is good--but no plan and no ideas and no
honesty to the American public as to what the particular solution is to
solve this problem.
We have been courageous enough and bold enough to put forward a plan
which, by the way, looks remarkably, in part, like the Thrift Savings
Plan. Over these last few years, as bad as the market was, I didn't
hear any Member of Congress or anybody else say we will abolish the
Thrift Savings Plan. A diversified and balanced fund leads to good,
long-term, stable investments over time.
That is what we are talking about. If it is good enough for Federal
employees, it should be good enough for Social Security recipients.
Mr. SUNUNU. Mr. President, we always hear the opponents of personal
accounts talk about risk. They love to talk about the fact that the
market was down yesterday or the day before, or a particular stock
didn't perform well. But, of course, nobody is talking about investing
their retirement savings in the market the day before they retire. We
are not even talking about investment for 1 or 2 years. We are talking
about investing for 20, 30, or 35 years. Everybody knows the market
goes up and down. But in a portfolio that is balanced and that is mixed
with stocks and bonds, or with a blend of the two, the return over the
long term will be strong but will be much higher than you could
otherwise get from Social Security.
As a proof of that, I ask my colleagues if they can find any 20-year
period in the last 100 years when this stock market didn't outperform
U.S. Treasuries?
Mr. DURBIN. Mr. President, if you will look at the funds to invest in
for

[[Page S11744]]

individuals, virtually all of them suggest there is going to be an
administrative cost in that instance. Most of them require a minimum
investment of $2,000 because, frankly, the administrative costs can be
so overwhelming. You tend to ignore that when you talk about the
creation of personal accounts.
The British, in their experience in the United Kingdom, found that
the administrative costs got out of hand to the point where they had to
step in after several years. They also will step in because fraud was
taking place. People were deluding future retirees into believing they
were going to win in the market if they invested. That is a case in
point where they tried to take the retirement savings in the United
Kingdom using your model, and it didn't work. The administrative costs
were far greater than they anticipated. Also, there was a fraud
involved.

Taking money and putting it in the stock market is an option every
American should have. But to use the Social Security funds of an
individual for that purpose raises a risk that is too great for some
people.
If the Senator from Pennsylvania suggests in the Thrift Savings Plan,
the Federal retirees--he did not say that is part of our retirement;
that is our savings account, over and above our retirement. I support
what Al Gore supported, as do most Democrats, Social Security Plus.
That allows people to invest in the Social Security over and above
their Social Security. That would give them a chance to take advantage
of a good market and not be eaten alive by administrative costs or
defrauded out of the basic needs to survive.
The PRESIDING OFFICER (Mr. Brownback). The next question is from the
Democrats.
Mr. CORZINE. If the Senator from Pennsylvania will wait, I will ask
that question.
The question we have to get to when we are talking about an
intellectually honest debate about Social Security and whether people
have a plan--you can ask whether one wants to talk about capital gains,
tax dividend exclusion, inheritance tax, as I suggested, as a means to
fill some of this gap. Others may have other choices. It happens to be
this Senator's choice with regard to these particular issues, but there
are other ways to do it.
There is no answer that I am hearing from my Republican colleagues
about where you get the $2 trillion that is going to finance these
transitions to private accounts--there is none; I have yet to hear it--
without entering into the general funds at a time when we already have
denigrated our fiscal posture in this country to an extraordinary
degree, switching from $250 billion surpluses.
The PRESIDING OFFICER. The time of the Senator has expired.
The Republican response.
Mr. SANTORUM. First, I say again what we are talking about here with
this thrift savings model--and I know many have been critical of that.
It was stated that administrative costs would eat up the benefit. The
administrative costs on Thrift Savings was .05 percent, .07--only 50
cents on every $1,000 investment. So it will not eat up the benefits of
investment. That is No. 1. It can be done in a way that makes sense
from the market return point of view.
The question the Senator from New Jersey poses is, How are we going
to finance this? Again, the cost of not doing something is much larger
than the cost of doing something.
The Senator has said he would increase taxes. I suggest that is
certainly not an option I support. But I certainly respect the Senator
from New Jersey for coming forward and saying we can solve this problem
by increasing taxes.
The Senator suggests we increase taxes on things having nothing to do
with Social Security, which would separate the covenant we have had,
that Franklin Roosevelt put forward, that the contribution would
somehow tie directly to the benefit you receive. So we will finance
Social Security with things outside of Social Security.
I am not suggesting that. I am suggesting we will finance the
shortfall through allowing people to take a portion of what is already
being paid. If we did it immediately, we could put a little over 2
percent into personal retirement accounts and it would not affect
anything. We have a surplus right now big enough to finance 2 or 3
percent of benefits going to that account. And over time, yes, we would
have to come up with a mechanism in the short term to finance that 2 or
3 percent, whatever we put aside. Again, that would grow, so we would
not have to do so over the long time.

The PRESIDING OFFICER. The time has expired.
The next question is from the Republicans.
Mr. SANTORUM. The Senator from Illinois mentioned the British system.
The Senator from Illinois knows that the current Prime Minister of
Britain, who is not a Conservative-Republican but a Labor-Democrat, if
you will, has suggested expanding the personal retirement accounts in
Britain, saying they have learned from their mistakes, the system has
been improved and reformed, and he wants to expand the system to create
more opportunities.
Just recently--in the last couple of years--Sweden--that conservative
bastion in Scandinavia--has gone to personal retirement accounts. Most
European companies have done so. Almost all of the South American
countries have done so. Russia and China are going in that direction.
The rest of the developed world has recognized the power of the market
as a reliable tool to finance long-term commitments for retirement. Not
here in America. Now, that is not a surprise because when we adopted
Social Security in the late 1930s, we were one of the last to do so.
I ask the Senator who asked the question, if it is good enough for
the rest of the world, why isn't it good enough for us?
Mr. DURBIN. I thank the Senator from Pennsylvania. It is rare of him
to argue that the social programs in Russia and China should be
emulated here in the United States.
It is interesting he would start with the British because they
certainly have a much grander view when it comes to government
responsibility on health care. If we were to guarantee the same type of
health care protection to Americans as the British, not only for
retirees but for the people, perhaps we could follow their logic in
saying we may have failed over the last 10 or 15 years with their
private savings accounts but people were not hurt that badly.
In the United States, if the experiment which the Senator has
suggested with Social Security benefits tries and fails, we will have a
generation or two of retirees on the hook, people who will not have
what they anticipated they would have at the time of retirement. Then
where does the burden fall? It falls on their children, first, to try
to take care of their parents, and ultimately on the rest of the
taxpayers.
This noble experiment, unfortunately, still has this big gap in it--
$2 trillion--which the Republicans, suggesting privatization of Social
Security, cannot come up with. Until they do, we are going to have to
cut benefits. Cutting benefits is certainly not the answer to providing
any kind of security for our retirees.
The PRESIDING OFFICER. The next question is from the Democrats.
Mr. CORZINE. I know my colleagues on the other side of the aisle are
a little resistant to talking about avoiding making permanent some of
the Bush tax cuts, but I wonder if there is any proposal at all, among
the tax cuts that the President has laid down and we as a Congress have
supported, that one would feel were appropriate to help finance this
incredible deficit that I think we all agree is so important, whether
it is to fill that $2 trillion gap that you admit is there and will
have to default. Is it looking at people who make more than $1 million?
Is that worth trading off financing adequately the Social Security
system? Is there no tax cut that has come through that would not be
justified relative to the cost of having it?

The PRESIDING OFFICER. The time has expired.
Mr. SUNUNU. Mr. President, let me provide for my colleagues an
example of what it is to answer a question: No. Of course not.
Cutting taxes is about strengthening the economy. If you have not
noticed, we have been in a recession. When you are in a recession, you
want the economy to grow because economic growth is the single most
important thing to increasing revenues. If you want to balance the
budget, you need to do two things: Strengthen the economy and
strengthen revenue growth, and of

[[Page S11745]]

course control spending. I am not willing to forgo the tax cuts that
have strengthened the economy.
When we asked the Democrats in this Chamber tonight for a plan to
strengthen Social Security, we heard no answer. When we pointed out
that the long-term success of markets in generating economic growth and
a strong rate of return is historically without argument, they ignored
the question. When we asked about the success of personal retirement
accounts in country after country around the world, they changed the
subject and decided they wanted to talk about health care.
We cannot ignore the challenge before us. We have talked about
substantive solutions here. The suggestion that simply because we are
creating personal accounts means we have to cut benefits and the fact
that the Democrats want to ignore the rate of return that strengthens
the assets in the entire system is not reason not to take action. We
need to take action. We need to take up this challenge. And we need to
be clear in the answers to the questions that are being asked tonight.

The PRESIDING OFFICER. This will be the final question that will be
asked by the Republican side, which will have 1 minute.
Mr. SUNUNU. Mr. President, to that point about this suggestion that
there is $2 trillion or $3 trillion--the number seems to get greater--
in this so-called hole that does not exist because in the long run the
system will be in better actuarial balance and because those assets
will always be part of this system--to this point precisely, the
nonpartisan actuaries of Social Security found that under a reformed
system as proposed by the President's commission almost all workers
could expect to receive higher benefits with a personal account plan,
and the biggest increase in benefits would go to low-income workers.
In 2050, a low-wage retiree could expect 26 percent higher benefits
from the commission's personal account proposal. Why, if this kind of a
proposal is not just actuarially sound but better for low-income
workers, are my opponents unwilling to even consider the idea of
personal accounts?
The PRESIDING OFFICER. Two minute response from the Democratic side.
Mr. CORZINE. The Senator from New Hampshire makes the assertion that
the Social Security actuaries have said that these plans--at least the
President's commission's plans--will resolve the problem related to
solvency. I, for the life of me, do not read those actuarial reports
with that conclusion. In fact, the reason we are talking about the $2
trillion that seems to be missing--the magic asterisk--is that that, in
fact, is talked about in these actuarial reports as a basis for cutting
guaranteed benefits--25 percent for near termers, 45 percent for people
out in that 50-year timeframe.
There is a missing hole. It is not enough just to assert that this is
actuarially sound when that is not, in fact, what the reports say, at
least as I read them. And I do not understand how we are going to get
through those transition costs, which are repeated by almost any
objective analyst I have heard talking about moving to privatized
accounts.
That is why we so strongly stand and speak to guaranteed benefits
because that is what the program is about. Yes, it has the political
risk, but, as I think the Senator from New Hampshire knows, markets
have a risk. They have real risk.
The Senator talked about a 20-year timeframe. I think if one looked
from 1929 to 1949, you would find a 20-year period where returns were
at best flat, if not diminished. So it is a very tough analysis to show
that any individual retiring at any given point in time is going to be
secure because the markets have produced a 7-percent return, which, if
you look at 100 years or 50 years, may very well be the actuarial
result. But you don't eat actuarial results; you eat benefits.
The PRESIDING OFFICER. There will now be a period for closing
arguments on either side. Each side has 5 minutes in which to close
their arguments.
Who yields time?
The Senator from Pennsylvania.
Mr. SANTORUM. Mr. President, I would like to be recognized for 2\1/2\
minutes.
The PRESIDING OFFICER. The Senator is recognized for up to 2\1/2\
minutes.
Mr. SANTORUM. Thank you, Mr. President.
I thank my colleagues for this debate and appreciate the opportunity
to talk about this very important issue in a way that talks about the
bigger issues of the day. I thank them for their engagement on this
issue.
I end my part of this debate by going back to someone who is not
necessarily a great favorite of mine but someone who knew a little bit
about the Social Security system, and that is Franklin Delano
Roosevelt. He was adamant--adamant--that we have a funded Social
Security system. He did not agree with the pay-as-you-go system that
was adopted in the late 1930s. In fact, his Secretary of Labor, Frances
Perkins, said that he--``he'' being FDR--described building such a
system, a pay-as-you-go system--which is the system today--as
``immoral,'' immoral because he understood that a pay-as-you-go system
would pile up obligations on future generations of taxpayers.
That is exactly what is going on. Back in 1940, there were 40 workers
for every 1 beneficiary. Today, there are 3.4 workers for every 1
beneficiary. In 20 years, there will be less than 2 workers for every 1
beneficiary.
This system is becoming more and more and more inequitable. Franklin
Roosevelt was right when he said such a system is immoral. A moral
system, which every other retirement system in America is funded upon,
is a funded system, a system that says you will contribute so much,
invest that money and have that money funded--real assets to pay
benefits, not taxing future generations for accrued benefits of someone
in the past.
We are in a system that has what I described. We will keep that
system forever. But we should at least have a partially funded system
that has some buildup of equities to be able to pay benefits for future
generations. That is what we are trying to do. It is a more moral
system. It is a better and more equitable system. Considering the
changes in demographics that we have going on in this country, it is
one that is necessary to avoid big cuts in benefits or big tax
increases. It is the fairest, most equitable, just way--most moral way,
according to Franklin Roosevelt--and we should adopt it.
The PRESIDING OFFICER. Who yields time?
Mr. DURBIN. Mr. President, to clarify the UC, do I understand we have
5 minutes to close, and we will be the final speakers?
The PRESIDING OFFICER. The Democratic side has 5 minutes. The
Republican side had 5 minutes, and they have used 2\1/2\ minutes. There
is nothing in the UC to determine which side goes last.
Mr. DURBIN. If I could read to the Chair--and perhaps I am mistaken
here--it said: Further, I ask consent that the next 10 minutes be
equally divided for closing comments, with the Republicans controlling
the first 5 minutes.
The PRESIDING OFFICER. That order was not obtained.
Mr. DURBIN. It was changed.
Could I have clarification what the order is, then, so we can end
this appropriately?
The PRESIDING OFFICER. It was simply 10 minutes for closing argument.
There was no delineation as to who would go first or second in the
final determination of the order that was obtained.
Mr. DURBIN. Thank you, Mr. President.
Mr. President, I would ask to be notified when I have used 2\1/2\
minutes.

The PRESIDING OFFICER. The Senator will be notified.
Mr. DURBIN. Mr. President, I have listened carefully to the debate
tonight and I have listened to the suggestions to privatize Social
Security with personal accounts, and I have waited to hear the
following: If you take current people paying into Social Security for
today's retirees out of the mix, who is going to make up the
difference? Who is going to make up the money that is lost currently
being paid to retirees?
That is an unanswered question. Until that question is answered, this
cannot be an honest proposal. That gap, that failure of any discussion
on privatization of Social Security, leaves

[[Page S11746]]

current retirees in the lurch--and those about to retire--because
people will be bailing out if they decide to take personal accounts
proposed by the Republican side--and nobody makes up the difference.
I will say that the Republican side has been resolute in saying they
will not even consider looking at the tax cuts that President Bush has
proposed twice now during his administration, resolute in their belief
that though they have failed to revive the economy--these tax cuts have
driven us into the deepest deficits in our history--and though the
total cost of these tax cuts will be three times the amount of money
that we need to save Social Security on a permanent basis, they are
resolute that we cannot ask one millionaire in America to give up a
penny in his Bush tax cuts--too much, too far to go.
It shows you how this cannot be resolved in honest terms because
unless and until we are all committed to the future of Social Security,
unless and until we realize that rich and poor in this country all
benefit from having this insurance policy--which Franklin Roosevelt
conceived so that our parents and grandparents could live in dignity--
we will continue to reach a stalemate in this conversation.
Stick with the basics. We should not cut current benefits. We should
make any program voluntary, and it should be an add-on to the Social
Security retirement. It should not be in place of it, unless you can
come up with an honest answer of how we are going to fill the hole.
I yield the floor.
The PRESIDING OFFICER. The Senator has used 2\1/2\ minutes.
The Republicans have 2 minutes 30 seconds remaining.
Mr. SUNUNU. Mr. President, earlier in the debate I made clear that it
was frustrating that we had asked the other side for a proposal, a
plan, specifics to strengthen the Social Security system, and they had
not given an answer.
Here, finally, in the last minutes of a debate that has gone over 1
hour, we get an answer: They will commit to raising taxes. Because to
suspend or eliminate tax cuts in order to cover this shortfall in
Social Security is to make a firm commitment that you will raise taxes,
that you will take new taxes into the general revenues and divert them
to Social Security. That is a tax increase. There is no ifs, ands, or
buts about it.
Every worker in the country already pays over 12 percent of their
payroll every week in taxes into the Social Security system. I say that
is enough. We can reform, strengthen, and vitalize this program by
empowering workers, giving them the option to control 2 or 3 or 4
percent of those payroll taxes every week and put it in a personal
retirement account, not to gamble it on penny stocks but to put it in a
fund similar to the Federal Thrift Savings Plan, a mixed basket of
stocks, a very secure investment in bonds, perhaps a mix of the two, to
invest not for 1 or 2 years but for 20 or 30 or 40 years; empower
workers today to control more of what they earn. Surely that is a good
thing for those workers because it gives them an asset they can leave
to their family.
When we take money out of the hands of bureaucrats and give more
control to individuals, we are making them more powerful and, to be
sure, we are making the bureaucracies less powerful. That is indeed a
step in the right direction.
When they set up these accounts, the assets don't disappear or go
away. They stay part of the retirement security system. If you look at
the proposal just introduced last week by Representative Nick Smith,
that has been scored by the actuaries as returning more to the system
in the long run to cover any shortfall that you claim. Whether it is
$500 million or $500 billion or $1 trillion or $2 trillion, whatever
number you choose to pick today, over the long run there are more
assets in the system to be used to pay benefits, and that is what makes
it actuarially sound. That is what makes it a good idea for workers and
a good idea for the American people.
I thank my colleagues.
The PRESIDING OFFICER. The Democratic side is recognized for 2\1/2\
minutes. The Senator from New Jersey.
Mr. CORZINE. Mr. President, we could get into a debate about whether
making tax cuts that have not occurred yet permanent is a tax hike. I
think that is not what we are talking about tonight.
Are there ways this can be financed? At least this Senator made some
specific suggestions about where one could look for funding that would
cover this gap, and I think there are a number of ways of looking at
it. They require tough choices. Is providing $900 monthly income to
seniors more important than eliminating the estate tax, providing a
dividend exclusion to a very narrow sector of our society, or is it
better to provide $900, $11,000 a year on average, to the American
people, providing also for 2 million kids who lost their parents,
dealing with the disabled in this country? It is hard for me to
understand these tradeoffs, but at least I believe that that is an
argument the American people would find winning.
I also believe Social Security has been a promise to the American
people--again, that if you live by the rules, you pay your taxes, if
you show up and work, if you are committed to a lifetime of work, you
will have a dignified retirement. And putting this into the risk of a
marketplace--a world that, both fortunately and unfortunately, from
time to time I have lived in--can lead to results for individuals that
are much different than what the expectations or whatever actuarial
numbers are projected by people who are bureaucrats thinking about what
returns will average out over some long period of time. Because people
live in the here and now, in a 20-year timeframe or 40-year. They work
and they retire at a certain point in time. And if the market is not
performing at that point in time, when that account they own comes up,
they don't have those guaranteed benefits.
By the way, this is a zero sum game. When you take out that $2
trillion, it requires that somebody else give, not only the people who
are choosing to leave the system but those people who choose to stay in
the system.
The PRESIDING OFFICER. The time of the Senator has expired.
Mr. CORZINE. We should protect Social Security and oppose
privatization.
The PRESIDING OFFICER. The debate is concluded.

____________________