[Congressional Record (Bound Edition), Volume 146 (2000), Part 16]
[House]
[Pages 23336-23341]
[From the U.S. Government Publishing Office, www.gpo.gov]



                        SOCIAL SECURITY SOLVENCY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 1999, the gentleman from Michigan (Mr. Smith) is recognized 
for 60 minutes as the designee of the majority leader.
  Mr. SMITH of Michigan. Mr. Speaker, I rise tonight to discuss Social 
Security. It is going to be almost like a professor lecturing a class. 
So everybody that is interested in Social Security should listen up. 
Those that are not interested in Social Security should be because it 
is America's biggest program, probably the United States Government's 
most important program.
  When I came to Congress in 1993, I left the Michigan Senate as 
chairman of the Taxation Committee. At that time, we were looking at 
the consequences of low investment and savings. I discovered that, in 
the United States, we have the lowest savings of any industrialized 
country in the world. And then I started looking at Social Security and 
the problems that Social Security was having in terms of the 
demographics in terms of financing the current promises in future 
years.
  When I came to Congress, what I did in 1993, I introduced my first 
Social Security bill. And then 2 years later, in 1995, 1997, and 1999, 
I introduced subsequent Social Security bills, all scored by the Social 
Security Administration to keep Social Security solvent for the next 75 
years.
  I have been serving as chairman of the Bipartisan Task Force on 
Social Security in the Committee on the Budget. With testimony we 
received, we came up with 18 unanimous recommendations of what should 
be in a Social Security bill. I incorporated those and introduced a 
bipartisan bill that is now before the House.
  I would suggest to everybody, current retirees, near retirees and 
young workers and young people in general to start looking at Social 
Security because it has the potential of developing a generational 
warfare if we continue to make promises of increased Social Security 
benefits and then we simply satisfy that challenge by increasing taxes 
on future generations.
  Let me just say that if we do nothing, if we add no more benefits to 
Social Security or Medicare or Medicaid but continue under the existing 
programs to keep those programs solvent, we will have to have a payroll 
tax to keep Social Security and Medicaid and Medicare solvent that will 
take 47 percent of our wages.

                              {time}  2015

  Right now the FICA tax is 15 percent of wages.

[[Page 23337]]

  The Social Security Benefit Guarantee Act. When Franklin Delano 
Roosevelt created the Social Security program over 6 decades ago, he 
wanted it to feature a private sector component to build retirement 
income. Social Security was supposed to be one leg of a three-legged 
stool to support retirees. It was supposed to go hand in hand with 
personal savings and private pension plans, and it is interesting, 
searching in the archives for some of the testimony back in 1935 when 
we started Social Security, to see that the Senate on two different 
occasions voted that it should allow private investment savings as an 
alternative to the government doing it; but when the House and the 
Senate went to conference, the decision was made that year to simply 
have it a totally government program, and that is what it is, a pay-as-
you-go program where existing workers pay in their taxes to support 
existing retirees.
  The demographics, the problem of demographics, fewer workers and more 
retirees, which we will get into in a moment. The system is really 
stretched to its limits. Seventy-eight million baby boomers begin 
retiring in 2008. These are the high-income people in general. That 
means they go out of the paying-in mode, paying in their taxes, 
directly related to their higher incomes, and start taking out benefits 
again directly related to what their incomes have been. That is when 
the problem starts. Social Security spending exceeds tax revenues 
starting in 2015. We increased the Social Security taxes substantially 
in 1983 so currently, temporarily, there are huge surpluses coming in, 
and we have been spending that surplus for other government programs.
  Social Security trust funds go broke in 2037, although the crisis 
could arrive much sooner. The crisis is going to arrive when we need to 
start coming up with the money that we borrowed and spent for other 
programs in the past, and that is the real problem. That is the real 
challenge.
  Insolvency is not some guess or estimate. Insolvency is certain. We 
know how many people there are, and we know when they are going to 
retire. We know that people will live longer in retirement, and our 
estimates on how long they live have been fairly accurate over the 
past. We know how much they will pay into Social Security and taxes, 
and we know how much they are going to take out under the benefit 
structure we have. Payroll taxes will not cover benefits starting in 
2015, and the shortfalls will add up to $120 trillion of extra money 
needed over and above what is coming in in taxes, $120 trillion between 
2015 and 2075.
  To put that in perspective, I am not sure any of us really know how 
much a trillion dollars is, but our spending that we are going to end 
up for this current fiscal year that we have just started is going to 
be approximately $1.9 trillion. Just for Social Security over the next 
75 years, we are going to need to come up with an additional $120 
trillion. It is a huge problem, and it is so frustrating that we have 
not paid attention to it.
  We have let the last 8 years go because politicians have been afraid 
that they would be demagogued in the election. We have missed an 
opportunity over the last 8 years by not having the leadership in the 
White House to move ahead with saving Social Security. Instead, we have 
had words saying Social Security should come first but no legislation 
proposed that could be scored to keep Social Security solvent over the 
next 75 years.
  Here is part of the demographic problems. The coming Social Security 
crisis, pay-as-you-go retirement system, will not meet the challenge of 
demographic change.
  Workers per Social Security beneficiary. Back in 1940, here are 38 
workers paying in their taxes for every one retiree. Today there are 
three workers paying in their taxes for every one retiree, and the 
estimate is by 2025 there are only going to be two workers paying in 
their benefits that is going to cover the Social Security check for 
every one retiree. So if that person's Social Security benefits end up 
being whatever, $15,000, or $1,200, $1,500 a month, those two workers 
are going to have to pay in that $600 or $750 a month each to cover 
those benefits of that one retiree. So we would let taxes go that high.
  This depicts sort of graphically the short-term surplus and the long-
term future deficits. Remember, I mentioned this red represents $120 
trillion, $120 trillion that we are going to be short; that that much 
more is needed over and above the Social Security taxes to accommodate 
the promises that we have made in Social Security. Because we have been 
raising taxes a great deal on the fewer and fewer workers, we have 
ended up with a short-term surplus, and Republicans came in as a 
majority in 1995 and for the first time we started not using all of the 
Social Security surplus for other government program spending. For the 
first time in 40 years we started saying, look, we have to stop 
spending the Social Security surplus, and last year we called it a 
lockbox. Whatever it is called, what we did was made a decision, and we 
enforced it by saying we are not going to spend any of the Social 
Security surplus on any other programs.
  We talk about all of these huge surpluses. Most of the surplus coming 
in is from the Social Security tax.
  Let me just give three numbers in terms of what is going to happen 
this current fiscal year that started the first of this month. This 
year we are estimating that we are going to take in $533 billion of 
Social Security taxes, $533 billion coming in. What is needed to pay 
benefits this year is $367 billion. That means we have a surplus in 
Social Security of $166 billion. So the $166 billion that is coming in 
from the Social Security tax, where we are really at this time at least 
overtaxing American workers to come up with the extra money and we are 
using that extra money to pay down the debt held by the public. So what 
we will do is we will write an IOU to the Social Security trust fund. 
There is a box down in Maryland full of IOUs where we have spent the 
money in the past, where we have borrowed it and spent it for other 
things; and this current year we expect to take $166 billion for the 
Social Security surplus, write an IOU for it, and use that money to pay 
down the public debt.
  This is Barry Pump. I do not know if the cameras see him; but Barry 
Pump is from Iowa, one of our star pages. So I thank Barry very much.
  Economic growth will not fix Social Security. So some have said the 
economy is great, it is going to mean that we are not going to have the 
Social Security problems; let us keep this economy rolling and we can 
quit worrying about Social Security. Untrue.
  Social Security benefits are indexed to wage growth. So the higher 
one's wages, when they retire the higher their benefits.
  So an increased economy means that more taxes are paid in earlier; 
but later on when one eventually retires, they are going to take more 
benefits out. So the growing expanding economy, the way we have Social 
Security structured right now, is not going to solve the problem. I 
mean, that is why 4 years ago when I introduced my bill Social Security 
was estimated to go insolvent, to not have enough money coming in in 
2012.
  The expanding economy over the last 3 years has grown enough, a lot 
of it coming in from capital gains taxes, by the way, has grown enough 
that short-term, as far as the extra money coming in, means that we 
will have enough money to cover benefits another extra 3 years until 
2015. Growth makes the numbers look better now but leaves a larger hole 
to fill later.
  The administration has used these short-term advantages as an excuse 
to do nothing; and I just want to emphasize that this growing economy, 
though they can say, look, the Social Security trust fund is going to 
be there to pay benefits until 2035, it used to be 2032, or we are not 
going to have enough money coming in from the Social Security tax by 
2012, now we are extended to 2015, does not solve the long-term 
financial fiscal problems for Social Security because the paychecks 
going out later on are going to be that much greater.
  I think this is important that most Americans do not realize. Somehow 
they feel that somehow they earn

[[Page 23338]]

something with a Social Security account, a Social Security fund. Not 
true. There is no Social Security account with their name on it. These 
trust fund balances, and I am quoting from the Office of Management and 
Budget of this administration, these trust fund balances are available 
to finance future benefit payments and other trust fund expenditures 
but only in a bookkeeping sense. 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 somehow reducing other government 
expenditures.
  Again, the source is the Office of Management and Budget. I think it 
is interesting to note that the Supreme Court now in two decisions has 
ruled that there is no entitlement for Social Security. Regardless of 
how many years one paid into Social Security, Social Security is a tax. 
The benefits are whatever Congress and the President decide those 
benefits are going to be. So what we have seen in the past, when there 
was a financial problem in 1977, 1983, when they were coming short of 
money, they reduced benefits and increased taxes. I just stress as 
vigorously as I can that it is going to be unconscionable to yet again 
raise taxes on the American worker.
  We will see a chart later I have, but right now 75 percent of 
American workers pay more in the Social Security tax than they do in 
the income tax.
  This represents the public debt versus the Social Security shortfall. 
Our total debt in this country, what we owe the trust funds and what we 
owe in Treasury bills, is $3.4 trillion. The shortfall of Social 
Security between now and 2057 is $46.6 trillion.
  Vice President Gore is suggesting that if we pay off this debt by 
using extra Social Security money coming in and any other surplus that 
can be found, that if we pay off this debt it is going to solve this 
problem and keep Social Security solvent until 2057. It is like adding 
another giant IOU to the trust fund. So technically if this Chamber 
passed a bill saying we are going to write an IOU for $9 trillion to 
the Social Security trust fund, the actuaries would say well, this will 
keep Social Security solvent for the next 75 years. The fact is that 
the challenge, the problem, is coming up with those dollars once we 
have fewer dollars coming in on the taxes than are required for the 
benefits.
  I am going to portray this in another way. The blue at the bottom, 
the light blue, represents the $260 billion that we are now using to 
pay on financing the debt, the interest on that particular debt 
approaching $300 billion. Vice President Gore is suggesting that if we 
dedicate somehow this savings every year for the next 75 years to 
Social Security, it will keep Social Security solvent.
  So what the difference between the $46.6 trillion that is needed and 
what this interest savings will be is $35 trillion. So the red part of 
this graph represents the shortfall that still is going to be there 
even if this Chamber and the Senate and the President has the guts, has 
the intestinal fortitude, to dedicate this kind of interest rate 
savings to Social Security. It is a problem that cannot be solved by 
adding IOUs.

                              {time}  2030

  The biggest risk is doing nothing at all. Social Security has a total 
unfunded liability of over $9 trillion. I mentioned that over the next 
75 years you need $120 trillion of future dollars, that inflated future 
dollar. To raise that $120 trillion over the next 75 years, you need $9 
trillion today. So Alan Greenspan, the Chairman of the Federal Reserve, 
suggests that we need $9 trillion today, so put it in a real interest 
bearing account that will bring in 6 to 7 percent real return in order 
to accommodate the $120 trillion shortfall over the next 75 years.
  Nine trillion dollars we have got to come up with today if we are 
going to solve the problem and not make any changes in this program, 
and not get any better return on the investment than we are getting on 
Social Security now, which is less than 2 percent for the average 
taxpayer.
  The Social Security trust fund contains nothing but IOUs. 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.
  Everyone should start out with a prerequisite that we are not going 
to increase taxes once again, and we are not going to cut benefits for 
existing retirees or near term retirees. Somehow we have got to do a 
better job on getting a better return on that investment.
  The Social Security lockbox. A little bit of a gimmick, but it has 
served us well in trying to make sure that we do not spend the Social 
Security surplus. It saves the Social Security trust fund dollars for 
Social Security. It keeps Washington's big spenders from using trust 
fund dollars for other government spending.
  I have heard the Vice President say, look, we need that lockbox for 
Social Security. The House, this Chamber, has passed the lockbox 
language. We have sent it to the Senate. Now the Democrats in the 
Senate are filibustering that so it is not passed into a bill and sent 
to the President.
  If Vice President Gore really wants to implement that lockbox 
provision to make sure that we do not spend the Social Security 
surplus, then I think probably all he has to do is tell that particular 
Chamber that they should go ahead and pass the legislation.


                ANNOUNCEMENT BY THE SPEAKER PRO TEMPORE

  The SPEAKER pro tempore (Mr. Shimkus). The Chair would remind the 
gentleman not to cast reflections on the other Chamber, such as 
characterizing Senate action or their activities.
  Mr. SMITH of Michigan. Thank you, Mr. Speaker, and I would apologize 
if I did that.
  Mr. Speaker, this Chamber passed the bill. It has languished over in 
the Senate. With the Vice President's help, I am sure we could get it 
through the Senate Chamber.
  The diminishing return of your Social Security investment. The 
average Social Security taxpayer will receive a 1.9 percent interest 
rate, real interest rate return, on what that worker and their 
employer, or, if they are self-employed, what they pay into Social 
Security. So the average worker is not going to live long enough, even 
though our life spans are substantially increasing, to get back what 
they have paid in in Social Security tax. So that is part of the 
problem, is getting a better return on that investment.
  The real return on Social Security is 1.9 percent for most workers, 
and it shows a negative return, as you see over here, for some, 
compared to over 7 percent for the marketplace. So the marketplace for 
the last 120 years has averaged a return of 7 percent, a real return. 
This is what this graph depicts.
  You have a negative return if you happen to be a minority. The reason 
is that a young black worker today, their life expectancy is about 62.5 
years. That means they can work all their life, paying into Social 
Security, but, on average, they die before they start taking any 
benefits out, and they are substantially shortchanged. But even the 
average, even the best, even the person that lives to be 105, on 
average they are only going to get a return that is 1.9 percent real 
return on the money, tax money, that has been sent in. And this is over 
and above that amount of the Social Security tax that is used for 
insurance, for disability insurance. This only counts that amount that 
is put into the OSDI fund. Again, on the average, the market return is 
7 percent.
  Another way of depicting the problem, because it is sort of like 
maybe the mechanic that knows the operation of the internal combustion 
engine, so they are very careful about taking care of their automobile, 
and they change the oil and they do the lubrication on a regular basis.
  Well, I have been studying Social Security now for 7 years. I know 
the internal workings of Social Security, and it is running out of 
lubrication. The friction currently on Social Security means that there 
are going to be tremendous problems in the future, and that huge 
liability is going to fall on our kids and our grandkids.
  I am a farmer from Michigan, and traditionally we have always tried 
to pay down the farm mortgage in an effort to leave our kids a little 
better off.

[[Page 23339]]

This government, this Congress, this White House, is now taking a 
course where we are jeopardizing the potential happiness and success of 
our kids and our grandkids by leaving them this great huge obligation. 
We have got to deal with it, we have got to change it. It has to be 
more than rhetoric. It has got to be real action for written bills that 
can keep Social Security solvent.
  This chart, very briefly, is the number of years it takes to get back 
your Social Security tax. If you were lucky enough to retire in 1940, 
because of the low taxes, you could get back everything you and your 
employer paid in in 2 months. By 1980, you have to live 4 years after 
retirement.
  If you retire in 2005, you have got to live 23 years after retirement 
to break even, to get back just what you and your employer put in into 
the tax. In 1983, they increased the age limit that starts this next 
year, and that is why this sort of levels off up here. But by 2015 and 
2025, you are going to have to live 26 years after you retire in order 
to get back what you and your employer paid in. I am not sure our 
medical technology is going to be that good by that time. It may be, 
but a better way to do it is to make some changes now that will mean 
that our kids and our grandkids are not put under this huge burden and 
that they can appreciate the benefits of Social Security, as their 
grandparents and their parents hopefully have.
  This is a picture of my grandkids getting ready for Halloween. 
Whether it is Selena or James or Henry or George, he is a real tiger, 
or Emily or Clair or Francis or Nicholas. Nicholas is now 13. When he 
retires, he is going to have this challenge, not to mention his younger 
brothers and sisters and cousins, that they are going to have if we do 
not do something on Social Security.
  I put the picture of my grandkids on my office wall. As I walk out to 
vote, I try to make my voting decisions on how it will affect this 
country and the future generations of this country 15, 20, 30, 40 years 
from now.
  We have got to start looking longer range. We have got to start 
dealing with the two important programs that we have for seniors, 
Medicare and Social Security; and Medicaid with nursing home care is 
another issue that we have got to start dealing with.
  We cannot keep putting it off simply because it is hard, because it 
is a difficult problem, simply because somebody might criticize us for 
things or portions that we do in it. Somehow Republicans and Democrats 
have got to get together and seriously move ahead.
  This chart represents what we have done in the past. I do not know if 
the cameras still show my grandkids, but imagine them up there, because 
what we are going to do with their taxes down here can be very 
significant. Here is what we have done in 1940, 1960, 1980 and 2000. In 
1940 the rate was 2 percent and the base was $3,000. So the total 
amount of tax for the employee and the employer was $60, combined; 
combined.
  In 1960, it got to 6 percent, and the base was $4,800. So you, the 
employee, paid 3 percent on the first $4,800, and the employer paid the 
same; a maximum tax combined for the employee and the employer of $288.
  It got up to 1980, and they raised the tax again; got into a little 
problem, so this Chamber decided, well, an easy way to do it is load 
more taxes on the American worker. So, again we increased the tax up to 
10.16 on the first $25,900, total possible tax for employee and 
employer combined, $2,631.
  In 2000, we got up to 12.4 percent on the first $76,200, a total tax 
now of $9,448.
  Mr. DREIER. Mr. Speaker, if the gentleman would yield, I would like 
to congratulate my friend. I just walked in, and I see the picture and 
I see the headline saying ``increasing payroll taxes again is not the 
answer.''
  I would like to say that I could not agree with the gentleman more. 
Obviously increasing the payroll taxes would be a horrible thing on 
those struggling workers, certainly the middle-income wage earners.
  Mr. Speaker, I would simply like to compliment my colleague on this 
very interesting special order.
  Mr. SMITH of Michigan. Mr. Speaker, reclaiming my time, I would 
certainly thank the gentleman from California (Mr. Dreier), the 
chairman of our Committee on Rules.
  Mr. Speaker, just finishing the taxes, and maybe really what we have 
not finished is the bottom line. If we do not get a better return on 
the investment, we are in for real problems. Governor Bush has 
suggested that we have some real investment that stays within Social 
Security; that is not going outside of the Social Security system, but 
simply allows a better return on some of the money.
  We can do better. As we know, you can get a CD and do better than a 
1.9 percent return. Any return that we can expand over and above 1.9 
percent on average is going to mean that retirees live a better life.
  My oldest grandson's name is Nick Smith. Maybe that is my immorality. 
But Nick painted the fence for us this past year. He made $180, and I 
said, Nick, you really need to put some of that into a Roth IRA. Then I 
went through the tables year by year on the magic of compound interest. 
So we went year by year and found out that by age 66, he would have 
almost $70,000; and if he waited until he was 72 to take that money out 
at the rate investments have been earning money over the last 100 years 
on average, it would end up $140,000.
  He said, well, grandpa, can I still put some money, maybe, in your 
Roth IRA, but I want to save most of it to buy a car.
  That is part of the problem we are facing today. Our savings and 
investment in this country is still low, and that means two things. It 
means we do not have the money to do the research, to put into the 
companies, to expand to the best possible state-of-the-art machinery to 
compete in this world, but it also means that the retirement for these 
individuals is not going to be as good as it really could be.
  With good investments, let me say, and I am going to show you some 
examples from Texas and California, with good investments, a modest-
income worker today can retire as a rich retiree. This is one of the 
problems why it is so important, I think, that we do not again raise 
taxes on the working poor in this country, on the average working 
family.
  This pie chart represents that 78 percent of families now pay more in 
the payroll tax than they do the income tax.

                              {time}  2045

  Mr. Speaker, 78 percent of our families pay more in the FICA tax than 
the payroll deduction. Actually, it drops down to 74; 74 percent pay 
more in the Social Security tax than they do in the income tax.
  Let us not raise taxes again. The longer we put off this decision, 
the longer we put off this decision, the more drastic the changes are 
going to have to be. So the bills that I introduced in 1995 and 1997 
were less drastic, it did not have to make the kind of changes, but the 
bill I introduced this year actually had to borrow some money from the 
onbudget surplus to accommodate the transition to make the system work, 
to make the system solvent, without reducing any benefits for existing 
or near-term retirees and without increasing taxes. The longer we wait, 
the more drastic the solution. So let us do it.
  Mr. Speaker, the six principles of saving Social Security that 
Governor Bush has proposed, that are consistent with the bills many of 
us have introduced: protect current and future beneficiaries; allow 
freedom of choice; preserve the safety net; make Americans better off, 
not worse off; create a fully funded system; no tax increases.
  Mr. Speaker, let us talk just for a second about personal retirement 
accounts. They do not come out of Social Security. They stay in Social 
Security, and they are part of your retirement. They can only be used 
for retirement purposes, and the way Governor Bush has proposed, the 
way I have proposed, the way the gentleman from Texas (Mr. Stenholm) 
and the gentleman from Arizona (Mr. Kolbe) have all proposed is that we 
have limited safe investments, that we can only invest in certain safe 
investments, such as an IRA or a 401(k)

[[Page 23340]]

or the Thrift Savings Plan that we have for Federal employees, where 
you get your choice of four or five safe investments to invest in, and 
then you can only use it for retirement purposes.
  They become part of your Social Security retirement benefits. A 
worker will own his or her retirement account; and if you die before 
you reach retirement age, it is not a case where you get zero, zip, 
nothing; but it will go into your estate for your heirs and, again, 
limited to safe investments that will earn more than the 1.9 percent 
paid by Social Security. That is dramatic maybe, but no new taxes, no 
cut in benefits for existing or near-term retirees.
  Mr. Speaker, I borrowed a lot of these charts from Senator Rod Grams. 
He has also introduced a Social Security bill that keeps Social 
Security solvent that allows choice within safe savings accounts. 
Personal retirement accounts offer more retirement security. If John 
Doe makes an average of $36,000 a year, he can expect monthly pays of 
$6,514 from his personal retirement account compared to Social 
Security, which is $1,280. And that is because of the magic of compound 
interest.
  Mr. Speaker, choosing personal accounts, in our law in 1935, we gave 
State and local governments the option of whether or not to go into 
Social Security or set up their own retirement pension system, where 
they could do their own investments for their own pension. The 
Galveston County, Texas, employees reap the benefits. Employees of 
Galveston County, Texas, opted out of Social Security.
  This is how they faired: death benefits under Social Security $253. 
You get a burial benefit. Under the Galveston plan, you get $75,000 
death benefit. Disability benefits per month, Social Security $1,280, 
and Galveston plan, they are ending up with $2,749.
  This is disability. This is retirement. The retirement benefits per 
month, retirement is the same as disability under Social Security 
$1,280; but under the Galveston plan for retirement benefits, it is 
$4,790 a month compared to Social Security of $1,280 a month for that 
same person if they had paid into Social Security and let government 
use the money the way the government administers and uses this program. 
Spouses and survivors benefit under the Galveston County plan.
  I use these plans to try to argue to my grandson Nick Smith why the 
magic of compound interest is so important and why savings and 
investment now can make a huge difference.
  This is a quote from a young lady whose husband died, and she said, 
``Thank God that some wise men privatized Social Security here. If I 
had regular Social Security, I'd be broke.'' After her husband died, 
Wendy Colehill used her death-benefit check of $126,000 to pay for his 
funeral expenses and she entered college. Under Social Security, she 
would have received a mere $255. Fairly young, so he died at an early 
age, she was not eligible for all of those benefits.
  How do we save Social Security? That is the question. Right now, as 
chairman of the Joint Task Force on Social Security, some of the 
witnesses came in making predictions with the new RD&A technology, the 
new gene sequencing, where the new gene catalog and the nanotechnology 
that is developing very rapidly, they were estimating that within 25 
years a person would have the option of whether or not they wanted to 
live to be 100 years old; and within 35 years, our technology would be 
such that they could have the option of whether or not to live to be 
120 years old. Tremendous policy implications, let alone the increased 
argument that young people more than ever before should be as diligent 
as possible to save and invest today.
  You should take that money out, get it out, have it directly taken 
out of your paycheck, maybe, something to add to those retirement 
benefits, because you need that personal savings on top of Social 
Security even at its best, even if we can solve it.
  Again, San Diego enjoys the personal retirement accounts because they 
opted out of Social Security. A 30-year-old employee who earns a salary 
of $30,000 for 35 years and contributes 6 percent to his personal 
retirement account would receive $3,000 per month in retirement. Under 
the current system, he would contribute twice as much, but receive only 
$1,077 in Social Security.
  The difference between the San Diego system and the PRAs and the 
Social Security is more than the difference in a check. It is also the 
difference between ownership and depending on politicians in Washington 
on what they do with your Social Security. Even those who oppose PRAs 
agree they offer more retirement security.
  This is interesting. It is a letter from Senator Barbara Boxer, 
Senator Diane Feinstein, and Senator Ted Kennedy to President Clinton 
allow the PRAs in San Diego to continue and not go into Social 
Security. They said in the letter to the President, quote, ``Millions 
of our constituents will receive higher retirement benefits from their 
current public pensions than they would under Social Security. So let 
them keep Social Security. At least that has to be an option.''
  Nobody is proposing, Governor Bush is not proposing that it be a 
mandate. Everybody is saying it is still an option whether you want the 
potential to earn more money where it belongs to you, where it is in 
your account; but if you want to stay in the existing system, you can.
  The United States certainly trails other countries in saving its 
retirement system. In the 18 years since Chile offered PRAs, 95 percent 
of Chilean workers have created accounts. Their average rate of return 
has been 11.3 percent per year. Among others, Australia, Britain, 
Switzerland offer workers PRAs.
  I represented this country in an international conclave, if you will, 
discussing public pension retirement benefits and listening to those 
other countries what they are doing to very quickly move ahead with 
getting a better return on some of that investment. It made me feel 
somewhat embarrassed as we lag behind, as we have been unwillingly to 
step up to the plate, if you will, and make some solid decisions that 
are going to save Social Security, one of our most important programs.
  British workers chose PRAs with 10 percent returns. And who could 
blame them compared to our 1.9 percent return we are getting? Two out 
of three British workers enrolled in the second tier Social Security, 
they have half of it they allow to go into the second tier. They chose 
to enroll in PRAs. The British workers have enjoyed a 10 percent on 
their pension investment.
  Over the past few years, the pool of PRAs in Britain exceeds nearly 
$1.4 trillion larger than their entire economy and larger than the 
private pensions of all other European countries combined. So what we 
have now is other European countries that are following the lead of 
Australia, Chile, Great Britain in terms of looking at ways to get a 
better return on the investment that is coming in.
  Based on a family income of $58,475, the return on a PRA is even 
better. If you invest 2 percent of what you earn versus 6 percent for 
pink or if you are investing 10 percent, which is the dark purple, and 
if you were to invest that kind of money over 20 years and 30 years and 
40 years, even at the 2 percent, you see you have $55,000 at the end of 
20 years. That is the magic of compound interest. In 30 years, it keeps 
going up, and by 40 years, it is worth $278,000.
  Look at what happens if you were to invest 10 percent and the Social 
Security tax is now 12.4 percent. It takes about 2 percent for the 
disability insurance program. Nobody is touching that. That insurance 
has to stay in place for the disability portion; but eventually, if you 
were allowed to invest 10 percent or you dig into your pocket and come 
up with other investments to account for 10 percent, in 40 years that 
would be worth $1,389,000; and if you have a 10 percent return on that, 
you would not have to go into the base, but just the interest would be 
$138,000 a year. A 5 percent return would be half of that, or about 
70,000 a year.
  The magic of compound interest is important. Somehow we have to allow

[[Page 23341]]

and provide ways for more Americans to save and invest more.
  Mr. Speaker, I saved out the chart of my grandkids just to stress 
with every grandparent, with every parent that might be listening 
tonight, with every young student who is really the kids that are at 
risk for the kind of future that we might give them, if we do nothing, 
because the potential is that they are going to have to pay huge tax 
obligations, Vice President Gore by suggesting that we add another IOU 
and take the interest savings and apply it to other Social Security 
and, therefore, the trust fund gets big enough to pay it simply demands 
that sometime in the future, somebody is going to have to come up with 
that money to pay off the trust fund.
  To do that, what we have done in the past is increase taxes; that is 
the easiest thing for this Chamber to do. It is the worst thing for our 
economy. There are only three ways to come up with the money. Let me 
point that out; I will put my pointer down so I can use my hands as I 
conclude this last statement.
  Some people have said, do not worry, there is a trust fund out there. 
If we use the payback, the money from the trust fund, Social Security 
will last until 2035; and for the most of us, that is long enough.
  I would suggest to you that there is no difference between having a 
trust fund and not having a trust fund, if we are going to keep our 
commitment that we are going to provide the benefits that we promised, 
because if we do not have a trust fund, the way to come up with the 
money to continue paying benefits is threefold. You either borrow the 
money from the public, and all the leading economists say if we were to 
borrow $120 trillion over the next 75 years, it would so disrupt our 
economy that it would be disastrous for the United States of America.

                              {time}  2100

  So if we cannot borrow it, then how about the option of increasing 
taxes? That is the other option, increasing taxes.
  Of course, the third option is cutting benefits. What they did in 
1973 and again in 1983, before I got here, was they did both, increased 
taxes and cut benefits. Let us not do that again.
  Those are the same alternatives we would have if we have a trust 
fund. So to pay back the money that is in the trust fund, we still have 
to raise taxes or cut other spending, or increase public borrowing. So, 
in effect, it is the same having or not having a trust fund.
  It is important to pay down the public debt. It is a good start. It 
means we do not start spending the money for other government programs, 
and that is the danger.
  The argument between the Republicans and the Democrats is, the 
Republicans say, let us get the money out of town. Otherwise, we will 
spend it. The Democrats say, we will pay down the debt but we have a 
lot of increased spending we want to do.
  The challenge is not whether we cut spending or pay down the debt, 
the challenge is, are we going to hold down spending in this country? 
Can we get this money out of town in some way?
  The first choice would be to continue to pay down the debt held by 
the public with all of these surpluses that we bring in. We have 
decided 2 weeks ago, our Republican majority, that we were going to 
draw a line in the sand. Like last year, we drew a line in the sand 
saying, here is the social security lockbox. We are not going to spend 
any of the social security surplus for any government programs.
  We held to it, we did it. That was good. This year we went further. 
We said, of all of the social security surplus, of all of the surplus 
coming into all of the other 120 trust funds, where most of the money 
is coming from, of all of the surplus, on-budget and off-budget, we are 
going to take 90 percent of that and use that money to pay down the 
debt held by the public.
  Good. Good policy. That leaves 10 percent that we are arguing about, 
and that we hope to conclude this budget and this spending this year as 
we argue about that remaining 10 percent. But I think we have the edge 
now in the support of public opinion that we at least take 90 percent 
of all that surplus and use it to pay down the public debt.

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