[Congressional Record Volume 150, Number 96 (Tuesday, July 13, 2004)]
[House]
[Pages H5642-H5646]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page H5642]]
                          THE STATE OF AMERICA

  The SPEAKER pro tempore (Mr. Burns). Under the Speaker's announced 
policy of January 7, 2003, the gentleman from Michigan (Mr. Smith) is 
recognized for 60 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, after listening to the previous 
speakers, Mr. Speaker, I think of Ronald Reagan's words, There you go 
again.
  Every 4 years we sort of experience the spinning and the demagoguery 
that takes place in this chamber using these podiums and C-SPAN to 
criticize the sitting President. Of course, Republicans did it 4 years 
ago and 8 years ago.
  When I first came into office and was elected in 1992, the Democrats 
in this Chamber were using this forum to criticize the first President 
Bush, all the things that went wrong. But I think of what the 
criticisms were of President Reagan when he came into office. When 
President Reagan came to office America was demoralized. President 
Carter had spoken about our malaise in Watergate, and our defeat in 
Vietnam had all shaken our self-confidence.

                              {time}  2245

  We had given up the Panama canal. The Shah of Iran and supporters of 
the Ayatollah Khomeini held 52 of our Americans hostage for more than a 
year at our embassy in Tehran. The military rescue mission, of course, 
failed in the desert, and we lost eight of our servicemen in that 
venture.
  Communism was on the march, and after South Vietnam fell, Cambodia 
followed. The Sandinistas took control of Nicaragua and Communist 
insurgencies were underway in Ethiopia, Angola, and certainly the 
Soviets invaded Afghanistan in 1979 and were suppressing the solidarity 
movement in Poland.
  Our economic situation was very dire in 1980, and President Reagan 
came in and actually renewed our faith. America, in most American's 
minds, no longer seemed to be special, and we needed that kind of 
determined leadership.
  The point I want to make, in reacting to some of the Democrats' 
criticism of this administration, was the criticism that President 
Reagan received when he believed we should stand up to the Soviet Union 
and we ended up doing that.
  It was President Reagan's resolve that repulsed communism in the 
Caribbean and Central America and repulsed it also in Afghanistan. It 
was Reagan's resolve that nurtured solidarity in Poland and gave heart 
to the dissidents of the Soviet bloc, and it was Reagan's faith in 
American ideals that toppled the Berlin Wall. All of this time he was 
being criticized as being a trigger happy President that might push the 
red button for a World War III with the Soviet Union.
  When he went to Berlin, and he was writing a speech for Berlin, he 
started out writing in that he wanted to include ``Mr. Gorbachev, tear 
down this wall,'' and all of his advisers and his speech writers said, 
no, do not do that; it will anger the American people and the world. 
They will think you are too bold; they will think you are too 
challenging. That might end up in war. You should just try to get along 
and make peace. But he insisted it go in despite that criticism, and 
that leads me to what historians are going to say 30 years from now in 
analyzing the decision and the determination of this President to go 
into Iraq.
  Most everybody in this chamber and the Senate had the same kind of 
intelligence information that the President and the administration had. 
Some of that intelligence information, we have now discovered, was very 
inaccurate in some regards.


                                  Iran

  Mr. SMITH of Michigan. Mr. Speaker, I want to tell my colleagues and 
the audience, Mr. Speaker, about the new threat and the fact that some 
Democrats are saying, look, you have got to do something about Iran. 
Iran was one of the several countries after 9/11 that we knew were 
developing weaponry, that we knew that was a country being led by a 
tyrant dictator that was not trustworthy in terms of the threats and 
the blackmail. Iran today is becoming increasingly active in its drive 
not only to derail Iraq democracy but to lead the Islamic radical 
movement into the future.
  In recent months, we have seen a series of provocations in Iraq that 
could be considered acts of war, that may make a coalition response 
necessary.
  Iran appears to have financed and encouraged the Shiite cleric 
Muqtada al Sadr's Mehdi Army in their resistance and which was behind 
the April uprising in Sadr City and Najaf. Al Sadr continues to 
denounce the new Iraqi government. How much of this is coming from 
Iran? We now know that some is.
  We held a recent hearing in our Committee on International Relations, 
and we found out that border patrols have captured at least 83 Iranians 
trying to cross illegally into Iraq, and there are several reports of 
brief incursions of the Iranian troops into Iraq along the borders.
  Also in June, Iranian military forces hijacked a small British navy 
vessel in the Shatt al-Arab waterway with eight crew members aboard. 
The relief crew members say they were hijacked in Iraqi territorial 
waters before being escorted into Iran.
  On July 5 American-Iraqi joint patrols, along with U.S. special 
operations teams, captured two men with explosives in Baghdad who 
identified them as Iranian intelligence officers, and I am relating now 
to the problems in Iran because it was one of several countries that 
intelligence says was developing mass weaponry and that was using that 
weaponry to blackmail its neighbors and threaten the world.
  In addition, Iran has been working actively to produce chemical, 
biological and nuclear weapons, along with ballistic missiles for 
delivery. The Under Secretary of State John Bolton testified before our 
Committee on International Relations: The recently apprehended 
Pakistani proliferator Dr. A.Q. Khan has confessed to having shared 
nuclear technology with Iran. North Korea has provided missile 
technology, including the SCUD B, the 300 kilometer range missiles; and 
the SCUD C, the 500 kilometer range missiles. Iran's Shahab-3 missile 
is thought to be based on North Korea's so-called No Dong missile 
design.
  The International Atomic Energy Agency inspectors say that Iran is in 
violation of its commitments as a signatory of the non-proliferation 
treaty. Iran is engaged in prohibited uranium enrichment activities, is 
in the process of constructing a heavy water reactor designed 
specifically to produce large quantities of plutonium usable for 
weapons and is seeking to produce polonium-210 which is used as a 
weapon initiator.
  Iran failed to announce any of these activities as required by the 
non-proliferation treaty, and they go well beyond any conceivable, 
peaceful nuclear program. Iran has responded to these charges by 
threatening to end inspections and withdraw from the non-proliferation 
treaty.
  My point is, Mr. Speaker, that we are facing a new challenge, 
somewhat unlike the challenge of the Cold War with the Soviet bloc, but 
every bit as challenging, every bit as dangerous.
  The State Department continues to recognize Iran as the world's 
foremost State sponsor of terrorism. Iran's links to Hezbollah, Hamas, 
Palestinian Islamic Jihad, the Popular Front For the Liberation of 
Palestine, the al Aqsa Martyr's Brigade and the al Qaeda, has been 
directly implicated in the 1983 bombing of the U.S. marine barracks in 
Beirut, a series of bombings in 1986 in Paris, the 1992 bombing of the 
Israeli embassy in Buenos Aires and the 1996 Khobar Towers in Saudi 
Arabia.
  In recent weeks, two Iranian diplomats assigned to the U.N. in New 
York were ejected for spying. The diplomats were said to be 
photographing sensitive sites.
  Iran is clearly one of the most dangerous countries in the world and 
appears to be stepping up its efforts against a free Iraq. The West and 
the United States, we are working with allies to try to contain these 
threats. It cannot be just the United States.


                                  Iraq

  Mr. Speaker, again realize that the U.N. is made up of some of these 
tyrant dictators. The U.N. is made up of individuals representing some 
of these countries with very selfish motivations.
  When we look at the 13th and 14th resolution of trying to convince 
other nations to join with us in countering what was happening in Iraq 
with their

[[Page H5643]]

total disregard for the 13 resolutions, saying that there has to be 
inspectors, with Iraq kicking these inspectors out, it was countries 
like France and Germany and Russia that had deals with Saddam that were 
going to lose money if there was an invasion of Iraq. They were trying 
to actually lift the embargo on Iraq at that time because they could 
profit by it.
  The chairman of sort of the counterpart for the Committee on 
International Relations from the Duma, the Soviet Union in Moscow, came 
before our Committee on International Relations, and he was talking 
about and mentioned that Iraq and Saddam Hussein owed Russia between $9 
and $12 billion. One of us said, well, if the United States guaranteed 
that you would get that paid back, would that make a difference in how 
you would vote in the United Nations on the Iraq resolutions? He said, 
well, of course.
  Here again, my point is that these countries are looking out for 
their self-interests, and if the United States is willing to spend its 
money, it is easy for some of these countries to stand back that might 
lose by going into Iraq, other countries that might lose by having to 
contribute finances at a time when their budgets are under the same 
kind of pressures ours are, and so I come back to how historians will 
look on our action after 9/11, going into Afghanistan and going into 
Iraq to try to counter the terrorist threat that is now facing the new 
free world.
  I cannot help but criticize those individuals that try to play 
partisan politics to the extent of showing their exuberance in 
criticizing this administration for actions that most of that side of 
the aisle, certainly most of this side of the aisle, voted on when we 
voted to give the President the authority to militarily go into Iraq.


                       Delaying November Election

  Mr. Speaker, there has been discussion, that I just want to comment 
on, about criticizing this administration for suggesting that we might 
delay the election. Every Republican I know in this Chamber and in the 
Senate have said no way are we going to postpone the election.
  If there is any agreement that needs to be made in terms of potential 
terrorist disruption of the election, it is an agreement by the 
Republicans and the Democrats that we are going to have the election; 
that we are going to count the votes; and whatever the votes are is 
going to determine who is going to be the next President of the United 
States.


                            Social Security

  Mr. Speaker, I am going talk a little bit about Social Security this 
evening, but also it is partisan politics and demagoguery that I would 
suggest has been the reason why we have not proceeded with a solution 
on Social Security. We have known Social Security is going bankrupt, 
and we have known that for the last 14 years.
  In fact, I wrote my first Social Security bill when I was chairman of 
the senate finance committee in the State of Michigan, and I brought it 
to Congress and I introduced it. I have introduced five Social Security 
bills, all of which have been scored by the Social Security 
Administration to keep Social Security solvent, and I have considered 
this one of my priorities in Congress because not solving this problem 
of keeping Social Security solvent and putting it off means that there 
is going to be much more drastic solutions that will have to be made in 
the future to keep Social Security solvent.
  In terms of the demagoguery, it is easy to criticize anybody's 
suggestion on solving Social Security or Medicare or Medicaid, some of 
the overpromising we have done in those areas, because, for example, in 
Social Security, we have 80 percent of all of the retirees that are 
very heavily dependent on Social Security for their retirement income. 
So you can understand that it is very easy to frighten these people by 
saying, well, look, that Republican or this Republican wants to 
jeopardize your Social Security benefits.

                              {time}  2300

  And, boy, they want to privatize it; and the snake oil salesmen are 
going to lose it; and you will end up not having Social Security. Of 
course, I am paraphrasing, but you can understand that it is easy to 
scare seniors rather than coming together. And it has to be a coming 
together, Republicans and Democrats, to solve Social Security.
  On this chart, Mr. Speaker, it is a pie chart of how we are spending 
money this year. As you see, the biggest piece of pie, the biggest, 
largest expenditure of the Federal Government, is Social Security, at 
21 percent. The domestic discretionary programs represent 16 percent. 
We spend most of the year in our 12 appropriation bills, outside of 
defense, arguing about how we are going to spend that 16 percent of the 
total Federal spending.
  Most of it is entitlement programs on automatic pilot. Even interest 
over here is essentially on automatic pilot. But I think it is 
important also to mention the dangers that are facing our kids and our 
grandkids in terms of increasing the debt of this country. Fourteen 
percent of the total Federal budget is used servicing the debt, or 
paying interest on the debt that we owe. That represents over $300 
billion a year, and this is at a time when interest rates are 
relatively low.
  We saw Greenspan and the Fed raised interest rates a little bit a few 
weeks ago. Probably another two times, maybe three times the rest of 
this year there might be another quarter. Maybe one of these times, 
depending on inflation, they might go up as much as a half. But the 
fact is, interest rates are going up. That means this piece of the pie 
is going up simply to pay interest on the outstanding debt, which is 
now $7 trillion.
  And we are adding to that debt by our annual deficit spending. Now, 
deficits mean how much we overspend in 1 year. Debt is the adding up or 
the sum of all those annual overspendings. And as I mention, that is 
now $7 trillion. But we are increasing the debt by over $500 billion a 
year.
  How do you put that in perspective? I think about the fact that we 
are a 228-year-old country, and it took the first 200 years of this 
country to get up to the first $500 billion of debt. Now we are going 
deeper into debt $500 billion a year. For lack of a better word, it is 
unconscionable for Washington to be so egotistical that they think our 
problems today justify taking the money from our kids and our grandkids 
that they have not even earned yet. What I am saying is this huge 
burden of the debt is going to be placed on future generations.
  And the debt is only part of it. Overpromising. There is no question 
a politician that goes home and promises new services, new benefits 
coming from government probably gets on television or on the front page 
of the paper. And politicians that take home the pork barrel projects, 
that are seen cutting the ribbon probably are more likely to get 
elected. So we have been overspending and overpromising.
  The green eyeshade people, our economists, call the overpromising 
unfunded liabilities. Unfunded liabilities mean that we do not have 
enough money coming in to accommodate those promises. This chart shows 
how much we are going to have to take out of the general fund to 
accommodate Social Security and Medicare and Medicaid. And by 2020, it 
is going to take 28 percent of the general fund budget, added to our 
payroll tax, our 15.2 percent payroll tax, to accommodate the 
shortfall, or the shortage between what we have promised in these 
programs and the extra money needed to keep those promises. If you go 
up to 2030, it is going to take over 50 percent of the general fund 
budget.
  Are we going to take 50 percent of the general fund budget? No. That 
means tax increases. Or, if we do not have the guts, if we do not have 
the intestinal fortitude in Congress and in the White House, it means 
maybe adding to borrowing, which is going to add to the burden of 
interest.
  After I voted against the prescription drug bill, Tom Savings, one of 
the actuaries, came to my office and said, these are my calculations of 
the unfunded liability, of what it is going to take in these programs 
over and above the money coming in from the payroll tax. Medicare part 
A, which is mostly hospitals, is going to be almost $22 trillion 
unfunded. Medicare Part B is going to be $23 trillion unfunded. 
Medicare part D, the new drug program, adds $16.6 trillion of unfunded 
liability. Social Security is $12 trillion unfunded liability.
  Again, that means that that $73.5 trillion would have to be put into 
some kind of a savings account or investment account that is going to 
have a

[[Page H5644]]

return of at least inflation to accommodate the money that is needed 
over the next 75 years to pay for the benefits that have now been 
promised in those programs. I mean huge amounts of money, an almost 
inconceivable $73.5 trillion, that we would have to come up with today. 
But our total Federal budget, back to that pie chart, our total Federal 
spending only comes to approximately $2.4 trillion in 1 year. So total 
Federal spending is $2.4 trillion in 1 year.
  This is a quick snapshot of the problems with Social Security. A very 
short-term surplus. What happened with the Greenspan Commission in 
1983, they reduced benefits and increased taxes. A huge jump in taxes. 
So the huge jump in taxes, they figured if that was invested in a 
proper way, it could accommodate a longer-term solvency. But their 
expectations did not culminate the way they thought it would. And the 
fact is that starting in 2017, we simply go into the red from there on 
out, and that is sort of representing the unfunded liability in that 
program.
  I think it is important to briefly describe how Social Security 
works. Benefits are highly progressive based on earnings. That means 
that if you are a lower income, you get 90 percent back. Ninety percent 
of what your wages were you will get back in Social Security benefits 
for that every month. So if you had $1,000 coming in for Social 
Security over a month's period, you would get $900 back in Social 
Security benefits for that month.
  At retirement, all of a worker's wages up to the tax ceiling are 
indexed to present value using wage inflation. Indexed to present value 
means that if a job as a farmer, a boot maker, or anything else paid X 
amount 20 years ago, then that is going to be what you would pay that 
profession now. As far as wage inflation, that would be what you are 
given and assumed. So that just because you worked for a low wage 20 
years ago, it would be put on the books and added up and calculated to 
determine benefits based on what that job would be paying today.

                              {time}  2310

  The best 35 years of earnings are averaged. The annual benefit of 
those retiring in 2004 equals 90 percent of the earnings up to $7,344, 
thirty-two percent of the earnings between the $7,344 and the $44,000 
and then 15 percent of the earnings above $44,000.
  What I do in my Social Security bill, I add another so-called bend 
point of 5 percent which has the effect of saving money by reducing the 
increase in benefits for high-income retirees. And then early retirees 
receive an adjusted benefit so if you decide to retire at 62 or 63, it 
is going to be less than if you decide to retire at 65 or 66 or 67.
  I put this on because so many people in the maybe 250 speeches I have 
given on Social Security complain about somebody abusing Social 
Security with supplemental security income. And so I wanted to put this 
on my chart that SSI does not come out of the Social Security, it comes 
out of the general fund even though it is administered by the Social 
Security Administration.
  We do a lot of talk about this word privatizing. Privatizing is a 
negative word. I, nor any other Member of this body or the Senate, has 
done anything except have a percentage of your wages go into a fund 
that is dedicated to your name. So government still controls it. What 
you invest in is limited to safe funds, so you do not have the option 
of saying, well, gee, this sounds like a really good deal so I'm going 
to invest in this new energy substitute. In my legislation, we limit 
investments to index bonds, index stocks, index cap funds.
  It is interesting that when Franklin Roosevelt created the Social 
Security program over six decades ago, he wanted it to feature a 
private sector component to build retirement income. Actually when the 
Senate passed their Social Security bill in 1933, the Senate said these 
savings accounts are actually going to be owned by the worker but they 
can't take any money out till they retire. The House, and again this 
was after the Great Depression, said, well, we better have government 
handle all of these Social Security funds coming in and not really have 
any of the Social Security benefits in an individual's name. When they 
went to conference, the House won out and we have the program that we 
have today with the government taking all the money and if there is any 
surplus coming in from the FICA tax, from the payroll tax, then what 
Congress and the White House does is spend that surplus on other 
government programs. So for a start, let us get some real return on 
that extra investment from the surpluses coming in and let us not 
simply use it up by spending it on other programs. That is part, I 
think, of every bill that I have seen introduced.
  The system is stretched to its limits. Seventy-eight million baby 
boomers begin retiring in 2008. Social Security spending exceeds tax 
revenues in 2017. Social Security trust funds go broke in 2037. But it 
is worse than that, because all the money is spent and there is only 
IOUs, that government owes this money back. If government follows the 
pattern that has been traditional for the last 50 years, then every 
time they have come short of money, they do a combination of reducing 
benefits and increasing taxes. When you consider that about 78 percent 
of American workers today pay more in the payroll tax than they do the 
income tax, I think it should be out of the question because it is 
significantly reducing the chances that workers can become wealthy if 
we continue to increase the tax on them like that.
  Insolvency is certain. We know how many people there are and when 
they will retire. We know that people will live longer in retirement. I 
chaired the Social Security bipartisan task force. The medical 
futurists came in and predicted that within 25 years, anybody that 
wanted to live to be 100 years old would have that option and within 30 
years with our new medical technology, with nanotechnology and what is 
happening in our research, anybody that had the money and wanted to 
live to be 120 years old would have that option. Already companies are 
coming in and saying we are paying retirees now, we are paying 
retirement benefits longer than they actually worked for us. You can 
see the predicament of the life span. That is the demography of the 
situation that now faces us in a sort of pay-as-you-go program where we 
depend on existing workers to pay their taxes in that immediately goes 
out to pay the benefits of existing retirees. As the birthrate goes 
down and as our medical technology allows people to live longer, it 
makes that kind of pay-as-you-go program unworkable. And so some 
changes have to be made. Almost every State now has made a transition 
from a fixed benefit to a fixed contribution type program. For the long 
run, we have got to move in that direction. Part of that movement is 
getting a real return on some of this money that American workers are 
sending in so that it can be their own individual account. A good 
persuasion is the fact that the Supreme Court now on two decisions has 
said that there is no connection between the taxes you pay in for 
Social Security and your entitlement to benefits. Taxes are just 
another tax bill, a tax on your payroll, and benefits are simply 
another benefit program and they are separate and there is no 
entitlement simply because you pay into Social Security all your life. 
It seems like that is a good argument, Madam Speaker, that says, look, 
let's have some of this in our open accounts so that if we die before 
we are eligible for Social Security it goes into our estate and it 
passes on to our heirs.

  Here is sort of the picture of the demographic problem. In 1940, 
there were 28 workers paying in their Social Security taxes to 
accommodate every one retiree. By the year 2000, with people living 
longer and the birthrate going down, it got down to three people having 
to pay increased taxes when it is just the three people paying in to 
accommodate every retiree. Of course, all this time we are increasing 
our benefits for retirees. By 2025, the estimate is that there is only 
going to be two people working for every one retiree. Talking to the 
National Association of Manufacturers and some of the business groups, 
I have suggested that if they do not help in explaining the problems of 
Social Security, then we could be facing the kind of situation of being 
forced to pay higher and higher payroll taxes that would put our 
businesses at a competitive disadvantage.
  Take a guess what the payroll tax equivalent is in France. It is over 
50 percent. Over 50 percent of their payroll in France goes to 
accommodate

[[Page H5645]]

their senior programs. Germany just went over 40 percent. No wonder 
that they are complaining about their competitive disadvantage in terms 
of trying to compete with the rest of the world. It is so important 
that we move ahead trying to solve this problem now of insolvency 
rather than just simply looking the other way and putting it off 
because it does two things. It puts an extra burden on our kids and our 
grandkids and future generations. Secondly, it is going to be much more 
difficult to solve the longer we put off the solution. That is because 
of the little blip where we have surpluses coming in now and pretty 
soon we are going to have to reach into other funds to accommodate our 
promises on benefits.
  Economic growth will not fix Social Security. I have heard some 
people say, actually from the other side of the aisle, look, if we can 
get a President that creates a strong economy. First of all, a 
President or this Congress does not create a strong economy. It is our 
system that we have in this country. It is a wonderful system that we 
devised back in our Constitution when we structured it so as to 
encourage hard work and effort.

                              {time}  2320

  So we have a Constitution and system in America that those that work 
hard, that save, that try and invest, that go to school and use that 
education, end up better off than those that do not.
  Now we are sort of floundering a little bit in an ambition of some to 
divide the wealth, taking from the people that have made it and giving 
to the people that have not made it. So if a young couple decides, 
look, we are going to work double shifts so I can have more money and 
do better for my family, we not only tax them more, but we tax them at 
a higher rate.
  So we have got to be very careful that we do not discourage the kind 
of policies that have made this country grow better and faster and 
stronger with a higher standard of living than any other country in the 
world by continuing to say if you are successful, we are just going to 
really hit you with larger taxes.
  When the economy grows, workers pay more in taxes, but also will earn 
more in benefits when they retire. Growth makes the numbers look better 
now, but leaves a larger hole to fill later.
  The administration uses some of these figures, and I have met with 
both President Clinton, who tried to move ahead with Social Security 
reform, and President Bush, who has tried to move ahead with Social 
Security reform.
  But here is my guess: Whether it is Mr. Kerry or Mr. Bush, I think 
that it is very important that we move ahead with Social Security 
reform next year. The first year in a 4-year cycle for the President is 
the only real opportunity for a President to push for the kind of 
agreement between Democrats and Republicans that is going to be able to 
solve the Social Security problem. If there is not bipartisan support 
for some way to solve the problem, then we are going to be faced with a 
future of reducing benefits.
  Some people have suggested if government would keep their hands off 
the surplus and not spend it for other government programs, keep their 
hands off the money in the trust fund, that Social Security would be 
okay. I have this bar chart to show you the difference between what is 
needed and how much is in the trust fund.
  The trust fund, or the IOUs, where there is no money there, is $1.4 
trillion. The unfunded liability, in other words, what is needed to go 
into a savings account that will earn interest at the rate of 
inflation, is $12 trillion. So what is in the trust fund is not nearly 
enough to accommodate a solution for the problem. We have got to pay it 
back, and we will; but will we borrow money, or increase taxes to come 
up with that $1.4 trillion to pay back?
  The biggest risk is doing nothing at all. Social Security has a total 
unfunded liability of over $12 trillion. The Social Security trust fund 
contains nothing but IOUs, and to keep paying promised Social Security 
benefits, the payroll tax will have to be increased by nearly 50 
percent or benefits will have to be cut by 30 percent. A dire 
prediction, a real problem for seniors 20 years from now and for our 
kids and our grandkids that are going to have to put up with our 
overspending and our overpromising.
  The real return to Social Security, this chart is supposed to show 
that Social Security is not a good investment. The real return on 
Social Security is less than 2 percent for most workers, and shows a 
negative return for some, compared to the 7 percent that the market has 
shown us over the last 100 years.
  The first chart is minorities. If you are a black male, your average 
age of death is 62 and you end up with negative return on the money 
that goes into Social Security. It is interesting that back in 1934, in 
fact from 1934 up until the start of World War II, the average age of 
death in America was 62 years old. But benefits, even when we started, 
you could not draw Social Security benefits until you were 65. So if 
you die on average at 62, the program worked very well, because most 
people never collected any benefits.

  The average return, again, is 1.7 percent. The tall blue graph on the 
right shows what the Wilshire 5000 index earned, and that was 11.86 
percent after inflation, and that was for the last 10 years, including 
the last three down years.
  This is how long you have got to live after you retire if you are 
going to break even on Social Security benefits. If you retire in 2005, 
you are going to have to live 23 years after you retire to break even 
on Social Security. As you see, in the earlier years, if you happen to 
retire in 1980, you only have to live 4 years after you retire. That is 
because you paid much less in in relation to what you are going to take 
out as we have reduced benefits and increased taxes.
  This is the increased taxes. So every time we have gotten into 
problems we have said, well, let us increase the taxes on workers. In 
1940, we raised it from 1 percent to 2 percent of the first $3,000. In 
1960 we raised it to 6 percent of the first $4,800. In 1980, we raised 
it to 10.16 percent of the first $26,000. In 2000, we raised it to 12.4 
percent of the first $76,200. In 2004, the rate did not go up, 12.4 
percent for Social Security, but the base was increased to $87,900. 
$89,000 is now the base that we tax the 12.4 percent on for Social 
Security.
  Madam Speaker, 78 percent of working families now pay more in payroll 
taxes than income taxes.
  These are the six principles that I sent to the House and Senate 
Members suggesting maybe at least we can agree on some of the 
principles.
  One, protect current and future beneficiaries.
  Two, allow freedom of choice on whether you want to stay in the 
existing program or whether you want to go into a program where you 
would have some of the money dedicated to your own account that you 
own.
  Preserve the safety net. In other words, I do not use all of the 
trust fund to make the transition into a program that starts putting 
money in these personal savings accounts.
  Make Americans better off, not worse off.
  Next I say investing, allowing some of the investment to go into 
mutual funds, index funds. That is the seed corn for our business and 
industry to do the research, to make the kind of improvements to 
increase their efficiency and competitive position within the world 
trade we are now facing.
  Create a fully funded system.
  And no tax increases.
  Just briefly, I am going to finish up by going through the Social 
Security bill that I just introduced, and that is a bill that is 
sponsored by both Republicans and some Democrats. It is scored by the 
Social Security Administration to keep the program solvent. There is no 
increases in the retirement age, no changes in the COLA, the cost of 
living index, depending on inflation, where we increase benefits every 
year, and that there is no change in the benefits for seniors or near-
term seniors. Solvency is achieved through higher returns from worker 
accounts and slowing the increase in benefits for the higher-income 
retirees.
  The Social Security trust fund continues. Voluntary accounts would 
start at 2.5 percent of income and would reach 8 percent of income by 
2075. So it is a gradual transition into a personal savings account, 
and it is important we do it gradually.
  The other option we are looking at is you could issue bonds and make 
the

[[Page H5646]]

transition to start at a higher rate, such as 5 percent of your income 
would go into your personal retirement account quicker, but that means 
in effect borrowing more money to accommodate the transition costs.
  Investments would be safe, widely diversified, and investment 
providers would be subject to government oversight. And the government 
would supplement the accounts of workers earning less than $35,000 to 
ensure that they build up significant savings.
  This was an idea that President Clinton had that said for the lower 
incomes, so that low income workers can retire more like millionaires, 
we need to add a little money, I think President Clinton called it a 
``golden savings account.'' But what I do in my legislation is say we 
are going to assume that everybody can at least have the 2.5 percent to 
start with, and then it goes up, of $35,000, that goes in their 
personal retirement savings account to accumulate and to have the magic 
of compound interest.

                              {time}  2330

  And that is what it is all about.
  Just as a footnote, Madam Speaker, I am still going to suggest to not 
depend on some kind of a magic solution. Every person under 50 years 
old; in fact, every person, should make a very strong, dedicated effort 
to start putting money aside for your retirement. Start figuring out 
what you are going to need. If you are going to end up living 40 years 
after you retire, how much money are you going to have to start putting 
aside. And the magic of compound interest and those figures, which 
maybe deserve a whole hour of briefing on encouraging savings, but let 
me just say that it is so important for everyone, for everybody from 
the age of 16 to the age of 60, to start setting aside as much as you 
can now and let the magic of compound interest help with the retirement 
benefits.
  In conclusion, accounts are voluntary, and participants would receive 
benefits directly from the government along with their accounts. 
Government benefits would be offset based on the money deposited into 
their accounts, not on the money earned, and workers could expect to 
earn more from their account than from traditional Social Security. In 
fact, what we do in our bill is we guarantee an individual worker that 
decides that they want to go into the personally-owned account system, 
and that is optional, that they will get at least as much as they would 
from the fixed Social Security system that exists today. So we can 
guarantee that, since they only earn 1.7 percent on Social Security.
  If anybody would like to review my charts, then they are on my 
website. If you go to one of the search engines and you type in 
``Congressman Nick Smith,'' you can get to my website. You can get to 
these charts that display my particular proposal for solving Social 
Security and, again, this proposal has been scored by the Social 
Security Administration to keep Social Security solvent. I have gone to 
the White House. The White House feels very strongly that it is 
important next year to start working aggressively to get some kind of a 
compromise between the Democrats and the Republicans in the House and 
in the Senate to move ahead with a solution for Social Security that is 
going to make sure that we keep this program solvent for the long run.

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