[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.

                          ____________________