[Congressional Record Volume 151, Number 118 (Tuesday, September 20, 2005)]
[Senate]
[Pages S10235-S10237]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. VOINOVICH (for himself and Mr. Conrad):
  S. 1730. A bill to establish the Trust Fund Administration to invest 
in non-Federal Government debt instrument index funds all Federal trust 
fund revenues transferred to the Federal Government upon the issuance 
of special rate Treasury obligations to such trust funds, and for other 
purposes; to the Committee on Finance.
  Mr. CONRAD. Mr. President, I rise today to join Senator Voinovich of 
Ohio in introducing a new Social Security lockbox proposal, the Truth 
in Budgeting Act of 2005. For years, I have urged my colleagues to stop 
what I believe is the reckless practice of raiding Social Security 
trust fund surpluses to pay for other things. By failing to save these 
surpluses, we are putting future generations in the position of having 
to borrow trillions of dollars to make good on our Social Security, 
Medicaid, Medicare, and other commitments.
  The legislation Senator Voinovich and I are introducing today would 
not only take Washington's hand out of the Social Security cookie jar, 
it would literally take the cookie jar away. If our bill is adopted, 
Social Security surpluses and other trust fund surpluses would no 
longer be used to fund other functions of Government and to mask the 
size of the Federal deficit. Instead, Social Security payroll taxes 
would be used to provide future Social Security benefits, as they were 
always intended.
  Our bill would end the practice of spending trust fund surpluses. 
Instead, it would require those surpluses to be set aside and invested 
in a broadbased bond index fund that will be drawn on to finance our 
future obligations. In many ways, this legislation is a truth-in-
budgeting bill because it will force us to recognize the true size of 
our fiscal deficit. It is our hope this will force Congress and the 
President to work together to address not only our current budget 
imbalances but our long-term entitlement challenges.
  Let me take a few minutes, if I could, to explain why I think this 
legislation is so important.
  Our budget situation has taken a dramatic turn for the worse. Over 
the last 5 years, we have gone from record surpluses to record 
deficits. The 2005 deficit is now projected to be $331 billion, the 
third worst in U.S. history. That is before Katrina. The increase in 
debt this year will be far higher.
  This is something that I find confuses the American people, confuses 
my constituents, confuses the media, and perhaps even confuses our 
colleagues: The advertised deficit--$331 billion before Katrina--is not 
the amount the debt will increase by this year. The amount the debt 
will increase by is much larger, approaching $589 billion,

[[Page S10236]]

and that is before Katrina. Why the difference? Because in the deficit 
calculation, borrowing from trust funds is ignored. It is not ignored 
when you consider how much the debt is increasing. It is ignored in the 
deficit calculation.
  But, for example, the $173 billion this year that will be borrowed 
from the Social Security trust fund and used to pay for other things, 
is not included in the deficit calculation. It is added to our debt. It 
has to be paid back. It is not included in the deficit calculation.
  There are $85 billion of other transactions, such as that one, that 
will add up to a total of a $589 billion increase in the debt. Again, 
that is before Katrina.
  Looking forward, our current budget takes every penny of Social 
Security surplus over the next 10 years to pay for tax cuts and other 
spending priorities. Over the next 10 years, under the budget that has 
been passed here, every penny of Social Security surplus is being taken 
to pay for other things--$2 .5 trillion.
  The reported shortfall in Social Security over the next 75 years is 
$4 trillion on a net present value basis. I, frankly, do not believe 
that. I think that shortfall is significantly overstated. But if it 
were real, if it were $4 trillion, look at the comparison here on this 
chart: We are taking $2.5 trillion in Social Security money over the 
next 10 years, using it to pay for other things, when we say Social 
Security has a $4 trillion shortfall on a net present value basis. What 
sense does this make? We are digging the hole deeper before starting to 
fill it in.

  I said something I want to go back to because I indicated I do not 
believe the projected $4 trillion shortfall in Social Security is 
correct. That is the estimate of the actuaries. I think they are wrong. 
Why do I think they are wrong? Because their whole scenario is based on 
economic growth for the next 75 years averaging 1.9 percent a year. 
Over the previous 75 years, the economy has grown at 3.4 percent a 
year. If the economy were to grow in the future as it has in the past, 
80 percent of the Social Security shortfall would disappear.
  Does that mean we do not have a problem? No. I wish it did. We have a 
huge problem. The problem we have, I believe, is a budget problem. The 
problem we have is, first, we are running very large deficits now 
before the baby boomers retire. No.2, the shortfall in Medicare is 7 
times the shortfall in Social Security, approaching $30 trillion. There 
is the real 800-pound gorilla.
  In Social Security, the problem is not so much the shortfall, at 
least from my perspective. I think the problem is that the assets in 
the Social Security trust fund--and there are assets there. Anybody who 
tells you there are no assets there is wrong. There are assets there. 
They are special-interest Government bonds, backed by the full faith 
and credit of the United States, that are in the trust fund. The 
problem is, those bonds have to be redeemed out of current income. That 
is the problem. Those bonds sitting in the Social Security trust fund 
have to be redeemed out of current income.
  We already have a circumstance in which we are running massive 
deficits. We have this looming shortfall in Medicare. Oh, yes, we have 
a problem. We have a big problem, and the sooner we get at it, the 
better. The first thing to do is stop diverting Social Security money 
to use for other purposes. As I have indicated, this increase in debt 
is happening at the worst possible time, right on the brink of the 
retirement of the baby boom generation. The number of Social Security 
beneficiaries is projected to climb to 81 million people by 2050. This 
is not a projection. It is not a projection. The baby boomers have been 
born. They are alive today. They are going to retire, and they are 
eligible for Social Security and Medicare. That has enormous 
implications for the future.
  As stunning as it may seem, we are only 3 years away from the 
beginning of the retirement of the baby boom generation. Social 
Security trust funds are running surpluses now. But starting in 2017, 
payroll tax revenue will no longer be sufficient to pay for benefits. 
Those bonds we are issuing to the Social Security trust fund will have 
to be redeemed out of current revenues at the time. At this point, as 
shown on the chart, the Social Security surpluses will turn into Social 
Security deficits--out here in 2017. When that happens, a serious 
budget crunch will ensue, unless we find a way now to save those 
surpluses.
  Another way of looking at this is by looking at the total balances in 
the Social Security trust funds, which are expected to peak at over $6 
trillion in 2026. As shown on this chart, this is the pattern of the 
Social Security trust fund assets. You can see, right now we are at 
about 2005, about right here, and we are still in the buildup phase. 
There are massive surpluses being run in the Social Security accounts. 
But instead of the money being used to prepay the liability or to pay 
down debt, the money is being used to pay for other things.
  So here we have it. We have this massive buildup. In 2026, roughly, 
the trust fund assets peak at $6 trillion, and then they begin being 
drawn down precipitously. We have a problem. It is a serious problem. 
It is a problem that is inexorable. Unfortunately, our current budget 
policy is contributing to the problem because it is taking the amount 
that is in surplus every year and using it to pay other bills. That is 
comfortable. That is easy. But it does not help us deal with the 
problem.

  In 2001, I urged my colleagues to set aside $900 billion of what was 
then projected to be surplus to either prepay the liability or pay down 
debt. For those who are advocates of personal accounts, the money could 
have been used to establish personal accounts, not borrowing it but 
putting real assets behind it. For those who do not like personal 
accounts, the money could have been used to pay down debt to better 
prepare ourselves for the time when the baby boomers retire.
  The chart I was showing before perfectly illustrates why this is no 
time to permanently or continually divert Social Security and other 
trust fund surpluses to other purposes. Failing to return to a fiscal 
path of saving trust fund surpluses will severely limit Congress' 
ability to address the looming pension and health care needs of the 
baby boomers and will shift a larger debt and tax burden on to future 
generations.
  Any private-sector corporation that behaved like the Federal 
Government is behaving would find its chief officers on their way to a 
Federal institution, but it would not be the Congress of the United 
States, it would not be the White House. Anybody who was running a 
private-sector entity that took trust fund assets, retirement fund 
assets of its employees, would be guilty of a Federal crime. They would 
be on their way to a Federal institution. It would not be Congress; it 
would not be the White House; they would be on their way to a Federal 
penitentiary.
  What is happening here is a shell game, and it is a shell game with 
enormous consequences, not like a shell game where somebody bets on 
some corner deal and loses $10 or $20. This is a shell game being 
played by society. I believe it is time to put a stop to this practice 
of borrowing against future commitments.
  That is why I am proud to join Senator Voinovich to introduce a newly 
designed bipartisan lockbox bill to stop the raid on Social Security 
and other trust funds. This legislation says enough is enough. The raid 
on Social Security and other trust funds has to stop. It is time to 
start saving Social Security surpluses for Social Security and to stop 
raiding the Social Security piggy bank to pay for other priorities.
  With this bipartisan legislation, Senator Voinovich and I intend to 
finally put Social Security in a lockbox that works. Our bill takes a 
new tack on the lockbox concept by fundamentally changing the way in 
which Social Security and other trust fund surpluses are invested. The 
legislation would create a new Office of Trust Fund Administration at 
the Treasury Department that would be charged with investing Social 
Security and other trust fund surpluses in safe, non-Federal debt 
instruments, including State municipal bonds, corporate bonds, 
mortgage-backed securities, and bond index funds. These interest-
bearing investments could only be used to meet the obligations of 
Social Security and other Federal trust funds.
  Under our proposal, trust fund surpluses would no longer be used to 
fund the general operations of Government, and the true size of the 
Federal deficit would be revealed, forcing us to tackle

[[Page S10237]]

these deficits head on. This bill, if passed, would force Congress, the 
President, and the public to recognize the true cost of Federal 
borrowing, and it would force the Federal Government to invest in real 
assets that could be used to finance future financial obligations.
  I believe our Nation is in a precarious financial position. 
Unfortunately, our current budget policies have worsened our outlook by 
driving the Nation further into deficits and debt. We need to begin by 
returning to budget discipline and paying down debt.
  It is time for us to take a new direction. I believe this legislation 
is an important first step.
  I thank my colleague, Senator Voinovich, for his work on this matter. 
He has spent months pursuing the issue. I am honored to join him. I 
believe this is an important policy change for the country and for the 
Congress. I hope that my colleagues will support it.
                                 ______