[Congressional Record (Bound Edition), Volume 145 (1999), Part 19]
[Senate]
[Pages 26740-26741]
[From the U.S. Government Publishing Office, www.gpo.gov]



                            SOCIAL SECURITY

  Mr. GREGG. Mr. President, I rise today to express my concern about 
the President's latest Social Security proposal as outlined in his 
recent radio address. I hope Congress will resolve to oppose this 
proposal unless it can be significantly modified, and it does not 
appear the President wants to modify it.
  I am greatly disappointed with the decision by the President to bring 
forward this proposal. I had hoped to work with the President in a 
bipartisan manner to resolve the Social Security issue. There are a 
number of us in the Senate who are willing to go forward in a 
bipartisan manner on this issue. For example, Senator Kerrey, Senator 
Breaux, Senator Grassley, and I have introduced a comprehensive Social 
Security reform bill. I have been pleased with this bipartisan effort, 
at least in the Senate, but I have been extremely disappointed by the 
White House's continued partisan approach toward the Social Security 
problem and especially their most recent proposal, which is, to say the 
least, a sham proposal. My goal today is to make absolutely clear for 
my colleagues just why this proposal does not work.
  This is not an easy task because it is a complicated and confusing 
issue, but it is something that must be done. Regrettably, I think the 
complicated and confusing nature of the proposal was intentionally 
created in that concept so the people would not understand it, so it 
would be confusing, and so that, therefore, by glossing over it with 
terms such as ``saving Social Security,'' they could attempt to hide 
the underlying documents and energy of it, which is to basically 
undermine Social Security.
  Thus, it is vitally important that we all understand exactly what is 
at stake. So I am going to go back to basics and try to simplify this 
as much as I can.
  In its simplest terms, the Social Security system has enough money to 
pay benefits today but does not have enough money to pay the projected 
benefits in the future, beginning in the year 2014. That is the entire 
problem.
  What will we do in the year 2014 under the current law? We will have 
to raise additional money through the income tax, through the general 
revenues of the Federal Government. The gap between benefits promised 
and the Social Security taxes will get bigger and bigger every year. It 
will be $200 billion annually by the year 2020 and $666 billion 
annually by the year 2030. Under the current law, we will simply keep 
raising revenues every year until the Federal Government has paid 
everything it owes to the Social Security system in the year 2034.
  When we reach that point, we declare insolvency, the Government of 
the United States, and the benefits would have to be cut, and Social 
Security would basically go into a tailspin. These funding gaps are so 
large, it would be unfair to a future generation to wait until that 
time and do the drastic cuts in benefits or radical increases in taxes 
which would occur in order to pay for the system. That is why so many 
of us have been calling for a comprehensive reform, a reform that will 
begin now, when we have time to work on the system and to make it work.
  What has the President proposed? The President has proposed that as 
part of any lockbox legislation we accompany the lockbox with a 
provision that will transfer interest payments to the Social Security 
system. It is vital that my colleagues understand two things: This 
proposal would do nothing, absolutely nothing, to fund the future 
Social Security benefit; in fact, it would undermine the Social 
Security system by giving the false assurance of improvement. Secondly, 
this proposal would formally commit tens of trillions of dollars in new 
income taxes, simply through some accounting sleight of hand. That 
means that future generations, our children, our grandchildren, would 
get a tax increase as a result of this President's proposal which would 
run into the trillions of dollars.
  To understand why, let me first show my colleagues this quote from 
the President's budget of last year. It was tucked away on page 337 in 
the analytical perspective section. Some budget analyst must have 
experienced an attack of truth in budgeting and included the language. 
It is definitive.

       Trust Fund balances are available to finance future benefit 
     payments and other trust fund expenditures--but only in a 
     bookkeeping sense . . . They do not consist of real economic 
     assets that can be drawn down in the future to fund benefits. 
     Instead, they are claims on the Treasury that, when redeemed, 
     will have to be financed by raising taxes, borrowing from the 
     public, or reducing benefits or other expenditures. The 
     existence of large trust fund balances, therefore, does not, 
     by itself, have any impact on the Government's ability to pay 
     benefits.

  That last sentence is the clearest explanation of what the problem 
is. No matter how large the trust fund stated number is, it does 
nothing to pay down the benefits, if there are not assets to back it up 
which can be drawn on without raising taxes.
  I hope every Member of Congress understands this. I hope the American 
people understand it. If we use our power to artificially inflate the 
balance of the trust, it does not do the

[[Page 26741]]

beneficiaries one bit of good. If we decree that it is a $1 trillion or 
a $10 trillion or even a nothing number in the trust fund, it has 
exactly the same financial impact. It has no impact on the outyear 
benefit structure. So the President's proposal to credit the trust fund 
with the interest savings will have no impact at all on the structure 
of the system and the liability which the American taxpayer will have 
to pay to support the system in the outyears.
  What it would do, however, is give a false impression that we have 
taken some substantive action. And that, of course, is the goal of this 
President--politics over substance. We already have a problem of 
understanding. Already the Social Security system's problems are 
papered over by the declaration of actuarial solvency through the year 
2034. This disguises the fact that the real problem for us and for the 
next generation begins in the year 2014. What the President is 
effectively saying is that we should now paper over the problem even 
further, that we should wait until the year 2050.
  Earlier this year, the Comptroller of the United States, David 
Walker, testified before the Senate Finance Committee. He was speaking 
about the President's proposal of earlier this year, but his comments 
are equally valid regarding the most recent proposal he has put 
forward. He said:

       . . . it is important to note that the President's proposal 
     does not alter the projected cash-flow imbalances in the 
     Social Security program. Benefit costs and revenues currently 
     associated with the program will not be affected by even one 
     cent.

  In other words, the proposal the President is putting forward has 
absolutely no impact on the ability to pay the benefits that are going 
to be required to be paid to maintain the Social Security system in the 
outyears.
  Moreover, he went on to say: One of the risks of the proposal is that 
the additional years of financing may very well diminish the urgency to 
achieve meaningful changes in the program. That would not be in the 
overall best interest of the Nation. It would be tragic, indeed, if 
this proposal masked the urgency of the Social Security solvency 
problem and served to delay the much-needed action.
  In other words, even though this proposal would not do anything for 
Social Security, it would make the representation to the public that we 
had. This would become a license for irresponsibility. It would break 
the faith of the Social Security beneficiaries by representing that the 
problem had been solved for another 50 years, even though we have taken 
absolutely no real action.
  Here is a chart that shows the workings of the Social Security system 
in a simplified form and represents the problems we confront. On the 
left of the chart, we can see the projections under the current law. On 
the right-hand side of the chart, we can see projections under the 
President's proposal. There is absolutely no difference. The 
President's proposal has no effect on the problems of the system. 
Current law problems which caused the system to go into insolvency are 
going to exist in the same form if we follow the President's proposal.
  The numbers are startling. We term it insolvent in the year 2040 
because the cost is so high. Under the President's proposal, it is a 
$1.1 trillion increase in the year 2040 on the taxpayers of America, 
which, in my opinion, represents an insolvency event, if we follow the 
President's proposal.
  What is the President's argument? He is arguing that his program 
provides for additional reduction in public debt and that we can 
justify these additional income tax liabilities by the fact that the 
public debt has been reduced and debt service has also been reduced. 
But, once again, the reality is different from the claim. If you study 
the Social Security actuary's memo in the President's plan written last 
Saturday, October 23, you would find the following information. I hope 
the press will pick up on this. Transfers are not contingent on actual 
amounts of reductions of debt held by the public. Transfers are assumed 
to be as indicated, regardless of the effect on the budget balances.
  Now, it may well be the President will yet propose a way to require 
that only a reduction in public debt will trigger the transfers he has 
suggested, but that is not what his current proposal says. His current 
proposal only issues this new debt and these new liabilities and does 
not make them in any way contingent upon public debt being reduced. 
This is not a plan to reduce public debt. It is a plan to issue new 
debt. It creates new income tax obligations, regardless of what happens 
with the overall budget balance. It has nothing to do with 
straightening out the Social Security system by reducing public debt. 
It is simply an increase in income tax obligations as a result of an 
increase in debt obligations of the Federal Government.
  One other point: The President believes it is appropriate to reward 
Social Security by giving it the interest savings from the reduced 
public debt. Current law already credits Social Security with interest, 
as if we had saved the surplus, whether we do or do not. This is 
current law. What the President is proposing is that we give a second 
round of transfers to the Social Security system. We are already 
crediting Social Security with interest saved. That is what produced 
the finding that the system is sound until the year 2034.
  The President is simply proposing that we arbitrarily issue a second 
round of credit, not justified or contingent upon anything happening in 
public debt reduction, and increase the income tax obligations to the 
program. Remember, again, all the taxes the President is talking about 
pouring into this program as a result of this accounting process 
gimmickry are income taxes; they are not payroll taxes.
  So we are shifting the burden, under the President's proposal, of the 
Social Security system from being a payroll tax system to being an 
income tax system, from going to a system where the people who receive 
the benefit under the retirement process and pay for it during their 
working lives are now receiving a benefit from the general revenue fund 
and the income tax fund versus the payroll tax fund. That is a huge 
change in the basic philosophy of the way we have supported the Social 
Security system. The President does this with his proposal, which is to 
create a new accounting mechanism.
  So the practical effect of the President's proposal is to do 
absolutely nothing in the way of resolving the fundamental problems 
that confront Social Security. The practical effect of the President's 
proposal is to create an accounting gimmick that makes you feel as if 
you have done something. The practical effect of the President's 
proposal is to undermine the momentum for fundamental, fair, effective 
Social Security reform in exchange for a political statement that may 
get you through the next election but which is going to create major 
crises for the system in the outyears.
  The President's proposal fails any form of accounting test. The 
President's proposal fails any form of a reasonable review. The 
President's proposal, most importantly, fails the next generation and 
the generation behind it because what it does is transfer onto their 
backs, for the sake of a political statement today, a tax burden that 
will amount to trillions of dollars. It is an action that is absolutely 
inappropriate and which I hope this Congress and the American people 
will reject.
  I yield the floor.

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