[Congressional Record (Bound Edition), Volume 145 (1999), Part 20]
[Senate]
[Pages 28366-28368]
[From the U.S. Government Publishing Office, www.gpo.gov]



                   SAVING THE SOCIAL SECURITY SURPLUS

  Mr. GRAHAM. Mr. President, the beginning of this congressional 
session was filled with hope and promise. A strong economy and 
improvements in the Federal budget gave us a wonderful opportunity to 
make important investments in our Nation's future. A portion of these 
surpluses could be used to extend the solvency of the Social Security 
program. A portion of the surplus could be used to restore solvency to 
Medicare and to modernize its benefit structure to reflect current 
medical practices. A portion of the surplus could be used, as was urged 
in the full-page ad in the Washington Post of October 28, ``to use this 
opportunity to preserve our parks and open spaces forever.'' This could 
be accomplished by such things as fully funding the Land and Water 
Conservation Fund, and a portion of the surplus could be used to fund 
tax relief and economic stimulation.
  Instead of devoting the surplus to these important matters, Congress 
is dribbling away the surplus with a combination of get-out-of-town 
spending and budgetary trickery. Our actions--emergency spending, 
scorekeeping adjustments, administrative directives--have one simple 
result: They are spending our surplus. Once current revenues are spent, 
the non-Social Security surplus will be spent and the Social Security 
surplus will be spent. If Congress continues on this gimmick-potholed 
path, we will be harshly judged by the American people for our 
shortsightedness.
  On October 4 of this year, the Washington Post ran an article on the 
10-year anniversary of the reunification of Germany. In that article, 
Wolfgang Schaeuble, the Christian Democratic leader and Chancellor 
Kohl's most trusted adviser, lamented the fact that Germans had avoided 
making the tough political choices 10 years ago that would have made 
their country stronger today. The spirit of reunification created an 
atmosphere for reform. The Germans could have used that spirit to make 
fundamental changes to their overly generous social contract that all 
acknowledged was unsustainable. They deferred, and the result was a 
tripling of the national debt in less than a decade.
  We face the same choice today. Our positive economic outlook creates 
a similar potential for the United States. The budget surplus gives us 
the resources to convert a substantial part of that potential to 
reality.
  At the beginning of the year, the Congressional Budget Office 
estimated we would have a non-Social Security surplus of $21 billion. 
What have we done in the last 10 months? The combination of excessive 
spending and the budget trickery designed to disguise even greater 
spending have placed the on-budget surplus in serious jeopardy and 
threatened to undermine the Social Security surplus. These actions--
spend and then hide--have occurred in waves throughout 1999. As with 
our coastline, no single wave erodes our beaches. Rather, it is a 
succession of waves that erodes the sand. These spending waves have 
eroded our surplus, eroded our opportunities, eroded our vision of what 
could be accomplished.
  In May of 1999, the Congress passed a supplemental appropriations 
bill which provided for $15 billion for everything from reconstruction 
aid for Central America and the Caribbean to farm loan assistance. Much 
of the May supplemental bill was designated as an emergency. No 
spending cuts or revenue increases were enacted to offset the emergency 
spending contained in that May 1999 supplemental appropriation. The 
consequence? A $15 billion reduction in the non-Social Security 
surplus.
  The May supplemental appropriations lowered for 1999 the surplus by 
$4 billion. That was a significant number because without that 
additional $4 billion of unpaid-for spending, we would have actually 
ended 1999 with an on-budget surplus. But because of it, we have ended 
1999 with an on-budget deficit of $1 billion.
  The May supplemental will lower the current fiscal year 2000 on-
budget surplus by $7 billion. It will lower the next fiscal year 2001 
by $2 billion; 2002 by $1 billion; and 2003 by $1 billion.
  By this action, we not only adversely affected the fiscal status of 
the year in which the action was taken but for 4 years into the future.
  This chart shows we started with a $21 billion on-budget surplus; as 
a result of that portion of the supplemental appropriations which was 
applied to fiscal year 2000, we reduced it by $7 billion. So now we 
only have a $14 billion on-budget surplus.
  The next wave hit in August of 1999, the Agriculture Appropriations 
Act: $8 billion of emergency spending, again, none of which was offset 
by reductions in spending elsewhere or increased revenues. So we have 
reduced the on-budget surplus by another $8 billion from $14 billion to 
$6 billion.
  In October of 1999, the Defense appropriations bill included more 
than $7 billion in emergency spending, of which $5 billion reduces this 
year's on-budget surplus. So our $6 billion on-budget surplus is now 
down to $1 billion.
  Also, in October of 1999, the Commerce-State-Justice appropriations 
bill designated $4.5 billion of spending for the emergency of the 
decadal census. More than $4 billion of that amount will come directly 
out of the 2000 on-budget surplus and, thus, as a result of that, we 
have exhausted our on-budget surplus, and we have reduced the Social 
Security surplus from $147 billion to $144 billion.
  What have we done thus far? We have initiated a series of waves of 
unfunded spending which have gone through all of our regular revenue 
for the year 2000 and now have gone through all of the on-budget 
surplus and have eaten into the Social Security surplus by $3 billion.
  That was not all. In addition to this spending, we have also had a 
series of accounting tricks. In the summer of 1999, to give the 
appearance of meeting the discretionary spending caps established as 
part of the Balanced Budget

[[Page 28367]]

Act of 1997, the Budget Committee directed the Congressional Budget 
Office to alter its estimates of spending included in several of the 
appropriations bills. These so-called scorekeeping adjustments which 
total $17 billion make it look as if we are spending less in the 
current year than is actually the case.
  The Budget Committee justifies these directions by claiming they are 
more in line with those used by the Office of Management and Budget.
  What is happening is we are cherry picking. For example, the Office 
of Management and Budget spending estimate for the year 2000 for the 
Department of Defense is lower than the Congressional Budget Office. 
Therefore, the Budget Committee says: Use the Office of Management and 
Budget. But guess what. When we turn to the energy and water 
appropriations bill where the reverse is true--that is where CBO's 
spending is lower than the Office of Management and Budget--they said: 
Use the Congressional Budget Office estimate.
  It is a case of trickery: Pick the lowest estimate of spending and 
force that lower estimate to be the one used to assess whether or not 
we have eaten into the Social Security surplus. The analogy would be a 
business which used two sets of books. The difference is that the 
business man or woman who did that would go to jail.
  No Halloween mask can hide our identities as we engage in these 
trick-or-treat charades. When these scorekeeping adjustments are added 
to the emergency spending listed previously, Congress will have spent 
the entire amount of its current revenue, the entire amount of its on-
budget surplus, and will have spent at least $20 billion of Social 
Security surplus for fiscal year 2000.
  The trickery does not end there. Another bit of trickery is directed 
at administrative action. In an effort to avoid paying for additional 
spending, congressional leaders have asked the administration to make 
changes in the Medicare rules allowing for higher reimbursement levels 
to Medicare health care providers. These payments, anticipated to be 
approximately $4.5 billion over the next 5 years, will not show up in 
any action taken by Congress, but they will certainly result in higher 
spending and smaller surpluses.
  The analogy is to a family which sends a son or daughter to college 
and gives him or her a credit card to pay for college expenses. The 
credit card receipts may not be signed by the parents, but they are 
ultimately going to be responsible. At the day of reckoning, they will 
have to pay for them and reduce their bank account in so doing.
  The threat to the on-budget and Social Security surpluses are not 
confined to the current fiscal year. There are other waves that have 
yet to hit the beach but are forming on the ocean's horizon.
  As an example, we are proposing paybacks, additional reimbursement to 
Medicare providers for the current fiscal year of $1 billion; for the 
fiscal year 2001, $5 billion; and over the next 10 years, $15 billion. 
None of those are currently proposed to be offset by either spending 
reductions or revenue increases. In the House of Representatives, they 
are proposing to marry a minimum wage increase with tax cuts. Those tax 
cuts over 10 years will total $95 billion. They are not proposed to be 
offset by either spending cuts elsewhere or revenue increases.
  Mr. President, $5 billion of the discretionary spending authorized in 
the last few months will not occur in the current fiscal year but, 
rather, have been pushed into 2001, and another $2 billion has even 
been pushed into the year 2002. The spending limits of fiscal years 
2001 and 2002 are even more restrictive than this year's limit. The 
spending cap for 2000 was set in 1997 at $579 billion. We are probably 
going to spend in excess of $610 billion before this session concludes. 
We have blown through the spending cap for this year by some $31 
billion.
  The problem gets worse because in fiscal year 2001, we have set 
ourselves a spending limit of $575 billion, $35 billion below what we 
are spending this year. In the fiscal year 2002, the spending cap is 
$569 billion, another $6 billion below current year spending.
  Given the fact that Congress cannot pass spending bills within this 
year's limit of $579 billion, it is wholly unrealistic to believe 
Congress will have even greater success with the significantly lower--
$35 billion next year and $41 billion 2 years out--limits than we have 
today. Spending above those limits will further threaten the Social 
Security surplus.
  In fiscal year 2000, we will spend all of the tax revenue we collect, 
we will spend all of the on-budget surplus, and we will dip into Social 
Security by about $20 billion. In the year 2001, we will spend all the 
revenue we collect, and at this rate, we have already spent all but $3 
billion of the on-budget surplus.
  Why is this recounting of the reality of our spendthrift year of 1999 
important? Some say it does not matter if we spend the Social Security 
surplus; we have done it for 30 years, so why not 1 more year? Why stop 
the spend-and-borrow party today? Spending the Social Security surplus 
is stated to be good for the economy.
  I argue just the opposite, that preserving the Social Security 
surplus is intricately linked to a strong American economy. Most 
economists agree that increasing national savings is important to 
maintaining a strong economy. Greater savings results in greater 
investment in plant and equipment, which creates jobs and raises 
productivity. Greater productivity translates into a higher standard of 
living. The surest way to increase national savings is to reduce the 
Federal debt.
  The Finance Committee even has a subcommittee dedicated to this 
proposition. It has a subcommittee with the title, Long-Term Growth and 
Debt Reduction. We have denominated one of our very institutions to the 
proposition of the relationship between economic growth and debt 
reduction.
  Alan Greenspan, the Chairman of the Federal Reserve Board, told the 
Senate Finance Committee earlier this year:

       Increasing our national saving is critical. The President's 
     approach to Social Security reform supports a large unified 
     budget surplus. This is a major step in the right direction 
     in that it would ensure that the current rise in government's 
     positive contribution to national saving is sustained.

  I would say that quotation is even more relevant today, as we have 
just gotten the latest monthly report on the national personal savings 
rate and it is virtually at an all-time low. It is, in fact, the 
savings that are occurring at the national governmental level that are 
providing most of the savings which are available in our economy.
  Reducing the Federal debt frees capital for use in the private 
sector. Lowering the public debt reduces the Federal Government's 
interest costs, freeing scarce resources for other important public 
investments.
  The Office of Economic Policy reported in August that over the last 7 
years, because of the greater fiscal discipline that has been practiced 
at the national level, we have saved for the American taxpayer $189 
billion in interest costs--$189 billion which is now available for 
other constructive public uses, including financing tax relief for 
American taxpayers.
  Reducing the Federal debt also has a positive effect on individual 
American families. When the Federal Government decreases its borrowing, 
it results in greater availability of capital for all other borrowers. 
The same Office of Economic Policy estimates that a typical American 
family with a $100,000 mortgage on their home will save about $2,000 a 
year in mortgage payments if interest rates are reduced 2 percent as a 
result of the Federal Government's more austere fiscal policy.
  So saving the Social Security surplus is important in the economic 
life of our Nation and for individual American families today. It also 
will be a critical factor in the challenge we are going to be faced 
with in the next two decades as Social Security begins to meet the 
demands of the baby boom generation.
  Demographic changes taking place in our country will dramatically 
alter the Social Security program. An aging

[[Page 28368]]

post-World War II generation, declining birthrates among young- and 
middle-aged adult Americans, and increasing life expectancies will 
quickly deplete the assets which are currently accumulating in the 
Social Security trust fund.
  By law, surpluses generated by Social Security may only be invested 
in U.S. Government or U.S. Government-backed securities. The Social 
Security surpluses being generated today were planned as part of the 
changes made to the program in 1977 and then in 1983. The surpluses 
were created for the express purpose of prefunding the retirement 
benefits of the baby boom generation. It is much like the biblical 
principle of saving during 7 good years to prepare for 7 lean years.
  Mr. President, I ask unanimous consent for an additional 5 minutes to 
complete my remarks.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. GRAHAM. I thank the Chair and my colleagues.
  Under current projections, these surpluses will reverse in the year 
2014 when the baby boom generation begins to retire. Their demand for 
retirement benefits will outpace the revenue collected from payroll 
taxes after the year 2014. These shortfalls will require that the 
assets, the Federal Government's securities which have been accumulated 
by the Social Security trust fund, be redeemed.
  In essence, the Social Security trust fund, with a large pile of 
several trillion dollars' worth of Federal securities, will now be 
going to the Federal Treasury and saying: We are going to turn these 
pieces of paper back to you, and we need the cash they represent in 
order to meet the current obligations to Social Security beneficiaries.
  The most effective way to plan for the demands that will be created 
by the baby boomers' retirement is to utilize the current Social 
Security surpluses in a very thoughtful and prudent manner, in a manner 
to reduce that portion of the national debt which is held by the 
public.
  Lowering our outstanding debt today will put the United States in a 
much stronger financial position should we need to borrow funds to 
redeem the U.S. Treasury securities currently held by the Social 
Security trust fund. The cash obtained from redeeming those assets will 
be used to pay benefits when the baby boom generation retires.
  The Social Security surplus can lower the debt held by the public by 
$2 trillion if we do not waste it. That $2 trillion reduction in debt 
held by the public will serve as a critical cushion to meet our Social 
Security obligations.
  In summary, we are about to lose a great opportunity to address the 
long-term fiscal challenges facing our country. Instead of preserving 
both the on-budget and the Social Security surpluses for uses in saving 
Social Security, Medicare, investing in America, or returning it to the 
taxpayers in the form of tax relief, Congress is frittering the money 
away.
  We have spent the fiscal year 2000 on-budget surplus, and we have 
spent at least $20 billion of this year's Social Security surplus. The 
outlook for 2001 and 2002 is not any better. We should stop these 
actions now, pay for the spending we enact, and avoid the use of 
accounting gimmicks.
  We stand at a unique point in history. Two months from now, we will 
move into a new century and, indeed, a new millennium. Instead of 
taking a ``get the appropriations bills done and get out of here 
approach,'' we should direct our sights to larger goals. We should be 
prepared to act boldly. We can seize upon this opportunity provided for 
us by a strong economy and an improved financial state of affairs and 
embark on a fiscal agenda that will pay rich dividends for decades to 
come.
  Our predecessors, at the beginning of the 19th and 20th centuries, 
faced similar opportunities and challenges. Each chose the bold 
approach. The Louisiana Purchase in 1803 and the building of the Panama 
Canal in 1904 were emblematic of a proud, vigorous, bold new nation at 
the beginning of a new century. Although controversial in their day, 
the Louisiana Purchase and the building of the Panama Canal are 
examples of courageous endeavors that have stood the test of time.
  The question facing this Congress is whether we will live up to the 
example of the 19th century and the 20th century as we commence the 
21st century or whether we will squat in the narrow, visionless box 
built for parliamentary pygmies. Will we validate Proverbs 19:18, 
wherein it says: ``Where there is no vision, the people perish''?
  Thank you, Mr. President.
  Mr. WYDEN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, I ask unanimous consent to speak for up to 
15 minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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