[Congressional Record (Bound Edition), Volume 147 (2001), Part 2]
[House]
[Pages 2032-2037]
[From the U.S. Government Publishing Office, www.gpo.gov]



                            SOCIAL SECURITY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 3, 2001, the gentleman from Michigan (Mr. Smith) is recognized 
for 60 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, I am a farmer from Michigan, and 
I know that you are as well in your State of Florida.
  Agriculture today and the plight of farmers is one of the serious 
issues before Congress. Another serious issue that is sort of the 
overriding consideration of where we go in the next several months is 
how high should taxes be in this country and how should government 
spend that tax money that comes down here to Washington as we decide on 
the priorities for spending.
  This first chart is a pie chart that shows the different pieces of 
pie, or the percentage of spending this year that goes into several 
categories. Social Security takes 20 percent of all Federal spending. 
Social Security is the largest expenditure that we have in the Federal 
Government. Of course, the people at risk are the young people today 
that are going to be threatened with huge increases in taxes or reduced 
benefits in Social Security benefits.
  Out of the approximately $2 trillion that we will be spending this 
year, 2001, 20 percent goes to Social Security. The next highest is 12 
appropriation bills. Twelve of the appropriation bills all together, 
what we spend a half a year arguing on, spending for so-called 
discretionary spending, discretionary meaning what Congress has some 
discretion

[[Page 2033]]

over, is 19 percent of the budget. The other 13th appropriation bill is 
defense, and that takes 17 percent.
  But here is Social Security now taking much more than even defense 
spending, with Medicare at 11 percent. Medicare is even growing because 
we are talking now of how do we add some prescription drug coverage to 
Medicare. So we are looking at the challenge of the Federal 
Government's expenditure and the Federal Government getting bigger. 
That means more imposition on individual rights. It is giving more 
empowerment to Congress and the White House, and it is taking away 
authority and authorization and power from individuals.

                              {time}  1645

  So the first question it seems to me should be, how high should taxes 
be?
  Mr. Speaker, I would ask our listening audience to give us a guess in 
their own mind of how many cents out of every dollar they earn goes for 
taxes at the local, State, and national level, what percentage of what 
you earn goes in taxes.
  Well, if you are an average American taxpayer, a little over 41 
percent goes in taxes, 41 cents out of every dollar you earn. When the 
seniors graduate next year or when they finish college or high school 
and go into the job market, on average they are going to be shelling 
out 41 cents of every dollar they earn in taxes, taking the first 4 
months out of every year proportionately to pay taxes.
  And, of course, everybody is now considering their Federal tax bill. 
They are looking at the taxes. If they have some investment in some 
mutual funds, they are getting notices on their 1099s that they have a 
capital gains tax to pay, even though the value of that mutual fund 
might have gone down in this past year.
  So the question then becomes, how do we have tax fairness? It would 
be my suggestion that we make every possible effort to reduce taxes 
from that 41 percent down to at least 35 percent. That is what made 
this country great is the fact that you are going to get some reward 
for your efforts to save and invest to try to maybe get a second job or 
a second part-time job so you can take care of your family.
  Well, we now have a tax system that says, look, not only are we going 
to tax you at the same rate if you get a second job, we are going to 
tax you at a higher rate if you start earning more money. I think there 
is a lot to do on tax fairness. I think there is a lot to do on tax 
simplification.
  But I want to spend a little time talking about where we go on 
finances, and part of that question is how large should the Government 
debt be in this country.
  Right now the debt today is $5.69 trillion, almost $5.7 trillion of 
debt. I am a farmer, as I mentioned, and our tradition on the farm has 
been to try to pay off some of that mortgage to leave your kids with a 
little better chance. But what we are doing in this country right now, 
in this body, and the Senate and the White House is borrowing all of 
this money and we are going to leave it up to our kids and our 
grandkids to pay back.
  Without reform, Social Security leaves our kids a legacy of debt 
larger than we have today. Right now, of the $5.7 trillion, $3.4 
trillion is so-called Treasury debt, Treasury bonds, Treasury paper. It 
is so-called the debt to the public, the public borrowing. The rest of 
the debt is debt that we borrow from the trust fund. Roughly $1.1 
trillion comes from the Social Security trust fund that the Government 
has borrowed that extra money coming in from Social Security taxes and 
spent it on other programs.
  Yesterday we passed a bill to make sure that we do not do that this 
year. And then there is $1.2 trillion that is from all of the other 119 
trust funds. And so, most of what we are doing with the extra money 
coming in from the trust funds, we are writing out an IOU and we are 
using those dollars to pay down the public debt.
  But when the baby-boomers start retiring around 2008, then we are 
looking at a situation where there is not going to be enough money 
coming in from Social Security taxes to pay benefits. So what do we do?
  Well, what Washington has done in the past is increase taxes. I think 
it is important that we deal with Social Security now so that we do not 
rely on tax increases in the future.
  And that is why we have this curve. As we pay down the debt held by 
the public, eventually we are going to have to start borrowing again to 
pay Social Security benefits and Medicare benefits, and that is going 
to leave our kids with that huge debt load.
  The temporary debt reduction plan does little more than borrow the 
Social Security surplus to repay the debt held by the public; and when 
the baby-boomers retire. Social Security surpluses disappear and 
Federal debt again soars.
  Again on the debt, for the whole load of hay, we see now that this is 
roughly the division of that $5.7 trillion of debt. But over time, if 
we keep borrowing money from the Social Security trust fund and 
Medicare trust fund and other trust funds and use that money to pay 
down the debt held by the public, then the debt held by the public 
continues to diminish, but the Social Security trust fund debt and the 
Medicare trust fund debt are still there. There is not enough money 
there to pay the benefits that are going to be required after the baby-
boomers retire.
  That is demonstrated in this chart. In the top left, we see a 
momentary surplus in Social Security taxes coming in. Right now your 
Social Security taxes are 12.4 percent of essentially everything you 
make. But when the baby-boomers retire and go out of the pay-in mode to 
recipients of Social Security, then the problem really hits us from 
twofold, a tremendous increase in the number of retirees that are going 
to be taking Social Security benefits and a reduced number of workers 
that are paying in their taxes to cover the cost of that program and 
starting.



  Starting around 2012, there is going to be an insufficient amount of 
Social Security taxes coming in, so we are going to have to come up 
with money from someplace else.
  What we have done on several occasions that I think should make every 
American very concerned is that we have either increased taxes and/or 
reduced benefits. We did that in 1977. We did it again in 1983 when we 
revised the Social Security system.
  This red, by the way, represents $9 trillion of unfunded liability. 
That is why I think it is so important and I have urged this 
administration and, of course, I encouraged for the last 8 years the 
previous administration to move ahead with some changes in Social 
Security that will keep Social Security solvent.
  I mean, if we take a trillion dollars out of this total $5.6 trillion 
that we are now guessing is going to be there over the next 10 years 
and we use that trillion to start some real returns on some of that 
money, we can save Social Security and keep it solvent for the next 75 
years.
  If we put it off, that means that we are going to have to be even 
more drastic in the future to make these changes. In other words, the 
longer we put off the solution to Social Security, the more drastic 
those changes are going to have to be.
  I mentioned $9 trillion in today's dollars. The unfunded liability 
means that we would have to put $9 trillion into a savings account 
today to earn enough money in interest to pay benefits to add to what 
is going to come in in Social Security taxes to keep Social Security 
solvent for the next 75 years.
  When Franklin D. Roosevelt created the Social Security program over 6 
decades ago, he wanted it to feature a private sector component to 
build retirement incomes. Social Security was supposed to be one leg of 
a three-legged stool.
  I have some of those old brochures that I have looked up in the 
archives where it says, look, Social Security is one-third of what 
should be everybody's effort to have a secure retirement, one-third 
from Social Security, one-third from your individual savings and 
investment, and one-third from some kind of a pension plan that he 
encouraged everybody to partake in. But right now we have almost 22 
percent of our Social Security recipients

[[Page 2034]]

that depend on Social Security for 90 percent or more of their total 
retirement income.
  So if there is one message in all of this talk about Social Security, 
if there is one message we can drive home: it is the importance of 
saving now for your retirement.
  Let me tell you another reason. I chaired the Social Security Task 
Force here in Congress for the last couple of years in the Committee on 
the Budget, and the Social Security Task Force brought in futurist 
experts on health and on medicine, and their guess was that within 20 
years, anybody that wanted to live to be 100 years old would have that 
option, and their estimate was that within 40 years anybody that wanted 
to live to be 120 years old would have that option.
  I mean, what does that mean in all of our individual lives? What does 
that mean for our kids? What does that mean in terms of the importance 
of making the changes now to keep Social Security solvent in the 
future?
  The personal retirement accounts that a lot of people have talked 
about and some people have said to me, well, now is not the time to 
talk about individually owned accounts because look what the stock 
market has done over the last 12 years.
  The fact is that an average person retiring from Social Security 5 
years from now is going to get a 1.1 percent return on the money that 
was paid in that they paid in and their employer paid in. Right now the 
average is 1.7 percent. But as taxes go up, the percentage and the 
likelihood that you are going to get that money back is going to 
diminish.
  And so, the question is, can we do better than getting a 1.1 percent 
or even a 1.7 percent return on some of that money?
  The other danger is, so, if we can put it into individual accounts 
where workers of America own that account and own that money so that 
when the problems in Washington make Members of Congress and the Senate 
and the President feel that other spending is more important, that we 
do not again cut Social Security benefits.
  So there is some security in having this in individual accounts. And 
we can put it in safe investments. We brought in experts into our 
Social Security Task Force that said, look, we can guarantee a 4.2 
percent return and guarantee that you will have at least a 4.2 percent 
return on the way we are going, we can invest your money.
  Some other insurance companies have higher rates. Some others have 
lower rates. But the fact is that a CD at your bank, other investments 
that are secure, can do a lot better than that 1.1 to 1.7 percent 
return.
  The fact is that the Supreme Court, on two decisions now, has said 
that there is no entitlement to Social Security. On two decisions the 
Supreme Court says Social Security taxes are simply another tax. Social 
Security benefits are simply another law that Congress has passed, and 
the President has signed to have a certain benefit structure and, 
therefore, there is no entitlement or no necessary connection between 
the two.
  I think that should make us nervous, also.
  Social Security is a system stretched to its limits. Seventy-eight 
million baby-boomers will begin to retire in 2008. Of course, the baby-
boomers after World War II, the soldiers came home and there was a 
tremendous increase in birth rate and at that time, of course, we had 
that huge increase in population. We had problems in building our 
schools and building up our education system and the kind of services 
necessary to deal with that expanding population, and Social Security 
worked very well as an expanded workforce, paid in those taxes, and 
those taxes immediately go out to pay the benefits of existing 
retirees.

                              {time}  1700

  Social Security spending exceeds tax revenues starting technically in 
2015, and that is when the problems really hit us. If there was a 
Social Security trust fund, then the Social Security trust fund would 
keep Social Security solvent until 2034 or 2035.
  But let me spend just a couple of minutes on what the Social Security 
trust fund is. You pay in currently 12.4 percent of the first roughly 
$80,000 you earn in Social Security taxes. For the last almost 6 years 
now, there has been quite a huge surplus on the taxes coming in as 
opposed to what was needed to pay benefits.
  Again it is a pay-as-you-go program. Taxes come in and by the end of 
the week, they are sent out in benefits almost. We are dealing with a 
situation where the government then writes an IOU, but you cannot cash 
in that IOU. It is nonnegotiable. They write the IOU, and say we are 
borrowing this money; and for the last 42 years, government has been 
spending any surplus that came in from Social Security on other 
government spending.
  Starting last year, for the first time, and I introduced a bill in 
the spring of 1999 that said we would have a rescission or we would cut 
all spending if we started digging into the Social Security surplus, 
that ended up with the lockbox bill of the gentleman from California 
(Mr. Herger).
  We passed that again just yesterday, a lockbox bill that says we are 
not going to use the Social Security surplus for any spending. But now 
there are a bunch of IOUs in a steel file box down there that 
technically says the government has borrowed this money.
  The question then becomes, when Social Security needs the money, how 
is it going to pay it back? It is going to do one of three things. To 
come up with that money to pay it back for benefits, it is either going 
to reduce the cost of Social Security, in other words, lower benefits 
so there is not so much to pay back or they are going to reduce other 
spending or they simply borrow more money.
  You remember that earlier chart, how we are going to leave our kids 
this huge debt. That is because to pay Social Security benefits, we are 
going to have to borrow those huge amounts of dollars. By huge, I mean 
over the next 75 years, borrowing or somehow coming up with $120 
trillion. Remember, our total budget this year is $2 trillion. Over the 
next 75 years, coming up with $120 trillion in excess of what is coming 
in in Social Security taxes to pay the benefits that are currently 
promised.
  You can see now it is a huge problem. Nobody knows quite how to solve 
this problem. So we keep putting it off. The danger of this legislative 
body, of course, is until a crisis is almost on us, we do not react in 
solving some of the tough problems. That is why it is so important, Mr. 
Speaker, that the American people understand how dramatic, how 
challenging the problem is of keeping Social Security solvent.
  Insolvency is certain. We know how many people there are and when 
they are going to retire. It is not some kind of economic projection. 
The actuaries over in the Social Security Administration know 
absolutely how many people there are. Their estimate of how long people 
are going to live is very, very accurate; and we know how much they are 
going to pay in and how much they are going to take out in Social 
Security. Payroll taxes will not cover benefits starting in 2015, and 
the shortfalls will add up to $120 trillion between 2015 and 2075.
  This other chart shows the paying-in problem. This is the 
demographics, the changing makeup of our population. Back in 1940, 
there were approximately 30 people working paying in their Social 
Security tax for every retiree. Today, there are just three people 
working paying in their Social Security tax for every one retiree. And 
over on your right, you see by 2025, the estimate is that at that time 
there are only going to be two people working for each retiree. Two 
people working for each retiree. A huge challenge, a huge potential to 
increase those taxes on those two workers. As you increase taxes, of 
course, you discourage economic development.
  There is no Social Security with your name on it. As I give speeches 
around the country, a lot of people think that there is somehow an 
account that is in their name that entitles them to Social Security 
benefits. This is a quote from the Office of Management and Budget of 
the United States Government. They say: ``These trust fund balances are

[[Page 2035]]

available to finance future benefit payments and other trust fund 
expenditures, but only in a bookkeeping sense. They are the 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.''
  I thought I would throw that quote in, Mr. Speaker, to reaffirm the 
point that I was just trying to make earlier, that having the Social 
Security trust fund and pretending that somehow that is the solution 
out there is fooling ourselves. It is fooling the American people.
  The public debt versus Social Security shortfall. Some have suggested 
that if we paid back the debt held by the public, now $3.4 trillion, 
somehow that savings on interest is going to accommodate the $46.6 
trillion shortfall between now and 2057, over the next 56 years. This 
chart is simply to represent that that $3.4 trillion debt and roughly 
the 5 percent interest on that debt is not going to accommodate the 
huge shortfall in Social Security.
  Some people have suggested, look, if we can keep the economy going 
strong, that will help solve our Social Security problems. It helps 
solve the Social Security problems in the short run, but because there 
is a direct relationship in the Social Security benefits you receive to 
the wages that you pay in, in the long term it does not help the 
problem, because the more you earn and the more you pay in, eventually 
the higher the benefits you are going to be entitled to. And spelling 
this out, Social Security benefits are indexed to wage growth. 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. Any administration has got to 
realize that saying that we are going to pay down the public debt to 
save Social Security is not going to do the job.
  Helping me is a page by the name of Martha Stebbins. Martha is from 
New Hampshire. I was up in New Hampshire, Martha, and bought some maple 
syrup last summer. It is very good, but we make maple syrup in 
Michigan, too, that is pretty good. In fact, we make some maple syrup 
on my farm.
  Back to business. The biggest risk is doing nothing at all. Social 
Security has a total unfunded liability of over $9 trillion. 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. 
Neither one should be an option of this Congress or the Senate or the 
President.
  How about investing the money? How big a risk is it? The diminishing 
returns of your Social Security investment. Right now, this chart 
represents what you might get back in terms of Social Security benefits 
based on what you and your employer paid in, or if you are self-
employed, what you paid in.
  The real return of Social Security is less than 2 percent for most 
workers and shows a negative return for some compared to over 7 percent 
for the market on the average over the last 100 years. If you look at 
just the last 10 years, then we are looking at returns that exceed 14 
percent. It is a negative return, by the way, for minorities.
  So if a young black male today because they have a shorter life span, 
they spend their life paying into Social Security, but then die and 
might get a $200 death benefit, but they essentially lose all their 
money. If some of this money was in their own account, then it would go 
to their heirs and it would not be simply kept by the Federal 
Government saying, well, this helps balance out everything else. On 
average, as I mentioned, it is 1.7 percent with a market return of over 
7 percent.
  This is a chart, I thought to demonstrate this point, the fact that 
it is not a good investment, it is not a good idea, and again let me 
make sure that everybody understands, Mr. Speaker, that in all of the 
proposals to solve Social Security, none of those proposals touch the 
disability and survivor benefits. So that portion of the Social 
Security that goes for disability, if you get hurt on the job, then you 
get some benefits the rest of your life, or if you die and your spouse 
or your kids need help, none of the proposals nor the three bills that 
I have introduced over the last 8 years, none of the proposals dig into 
that survivor disability portion of the package.
  But to get back all of the money that you and your employer have paid 
in is going to take anybody that retires in the next several years, it 
is going to take 23 to 26 years that you are going to have to live 
after retirement to break even, to get back the money you and your 
employer put in. Because taxes have gone up so dramatically, that is 
why this graph has gone up and you are going to have to spend more time 
and live longer after you retire to break even. Of course, if you 
happened to retire in 1940, it took 2 months to get back everything you 
put in. In 1960, 2 years. Today it takes 23 years. You have got to live 
23 years after you retire to break even and get the money back that you 
and your employer paid in in Social Security taxes.
  This chart represents how we have increased taxes over the years. So 
people that say, well, you know, politicians that have to run for 
reelection would not dare to increase taxes again because already 75 
percent of working Americans pay more in the Social Security tax than 
they do in the income tax. Seventy-five percent to 78 percent of 
Americans today pay more in Social Security tax, 78 percent if it is 
the total FICA tax, than they do in income tax.
  And it is a very regressive way to tax. Yet this country has 
substantially increased that tax. In 1940, we had a 2 percent rate. 
That meant the employer paid 1 percent and the worker paid 1 percent on 
the first $3,000. The maximum for the year for both employee and 
employer were at $60 a year.
  By 1960, we raised the rate to 6 percent, raised the base to $4,800; 
and the maximum was $288 a year. In 1980, we raised the rate to 10.16 
percent on a base that was increased to $25,900. So the maximum went up 
to $2,630 a year.
  Today we have a 12.4 percent tax, 6.2 for the employee and 6.2 for 
the employer on, since it is indexed is now up to $79,000, on the first 
$79,000, so the maximum total is about $10,000 a year.
  This is our history of every time government has got into trouble 
where they needed more money than was provided by the revenues and the 
benefits that have been expanded, of course, over the years, then we 
ended up increasing taxes. And twice, in 1977 and in 1984, we also 
reduced benefits.
  This is what I was mentioning in the FICA tax. So the FICA tax, 12.4 
is Social Security; and the rest of the 15-odd is Medicare. So a total 
of a little over 15 percent goes in your payroll tax.
  Right now 78 percent of American working families pay more in the 
payroll deduction in the FICA tax than they do in income tax. What I am 
trying to do with that chart is shout that it would be very unfair to 
again raise those taxes. But if we do not deal with Social Security now 
and we say, look, we are just going to use the Social Security surplus 
to pay down the debt held by the public, that $3.4 trillion to 
accommodate the $50 or $60 trillion shortfall in Social Security and 
pretend that somehow that is going to fix Social Security, I think it 
is not fair to ourselves to say that and I think it is not fair to the 
American people to think that that is going to be a possibility.
  These are the six principles of my Social Security bill that I have 
been introducing. I was chairman of the Senate finance committee in the 
State of Michigan before I came here, and there were a couple of 
considerations and concerns I had before I came to Congress, and that 
was the low savings rate in the United States. We have a lower savings 
rate than any of the other G-7 countries.
  Our savings rate is about 5 percent of what we earn. In Japan, for 
example, it is about 19 percent. In Korea, it has been as high as 35 
percent of what they earn. We used to in this country save about 15 
percent. Back in the 1940s and 1950s we were saving almost 15 percent 
of what we earned.

[[Page 2036]]



                              {time}  1715

  But now our savings rate has tremendously gone down. Part of it maybe 
is the advertisements of ``Fly now, pay later.'' ``Come in and get a 
new car and get $200 immediate cash to buy Christmas presents,'' or 
something.
  So we have encouraged debt. So there is a danger not only of the 
Federal Government mounting this kind of debt, but there is a problem 
with individual Americans relying more and more on those credit cards 
or other credit systems to borrow and borrow more money. That does a 
couple things. Number one, it disrupts economic expansion, because 
savings and investment mean that that investment is what companies use 
to do the research, to buy the kind of state-of-art equipment and 
machinery that can accommodate international competition.
  It was important to me when I came to Congress that I try to do the 
kind of things to encourage savings, and one of those things was 
allowing some of this large Social Security tax to be invested and to 
be in the name of individuals. So that is when I started writing the 
bills.
  So, number one, my Social Security proposals protect current and 
future beneficiaries, allow freedom of choice. In other words, if you 
do not want to go with any kind of a private investment plan that will 
be limited to safe investments by law and you want to stay in the 
current system, you can. It preserves the safety net, because we are 
not going to allow anybody to go without food or shelter in this 
country. It makes Americans better off, not worse off; and it creates a 
fully-funded system, and no tax increase.
  Personal retirement accounts offer more retirement security.
  If I have to take a drink of water, that probably means that I have 
talked almost long enough, and maybe the listening audience has 
listened long enough, so I am going to finish the last few slides.
  Personal retirement accounts offer more retirement security. If John 
Doe makes an average of $36,000 a year, he can expect monthly payments 
in Social Security of $1,280, or from a personal retirement account he 
can expect $6,514.
  When we passed the Social Security law back in 1934, we said that 
States and local governments could opt out of Social Security and 
develop their own pension retirement plan. Galveston, Texas, did just 
that. They decided not to go into Social Security, but to have their 
own retirement plan. Right now this chart compares what those 
individuals in Galveston County have as death and disability and 
retirement benefits as opposed to what they would have in Social 
Security.
  On the death benefits, Social Security, $253; the Galveston plan, 
$75,000 in death benefits. Social Security, $1,280; the Galveston plan, 
with their own investments, $2,749. Monthly retirement payments, 
$1,280, compared to Galveston retirees getting $4,790.
  San Diego did the same option. San Diego enjoys personal retirement 
accounts, PRAs, as well. A 30-year-old employee who earns a salary of 
$30,000 for 35 years and contributes 6 percent to his PRA would receive 
$3,000 per month in retirement. Under the current system he would 
contribute twice as much in Social Security, but only receive $1,077.
  The difference between San Diego's system of PRAs and Social Security 
is more than the difference in a check. It is also the difference in 
ownership, in knowing that politicians are not going to take that away 
from you.
  Even those who oppose PRAs agree they offer more retirement security. 
This is a letter from Senators Barbara Boxer and Dianne Feinstein and 
Ted Kennedy to President Clinton. In their letter they said, ``Millions 
of our constituents will receive higher retirement benefits from their 
current public pensions than they would under Social Security.''
  So the question is, how can we make this more available to everybody, 
to, in effect, guarantee they are going to be better off and they are 
going to have an ownership of some of that retirement account?
  I represented the United States in describing our pension retirement 
system in an international forum in London a couple of years ago, and 
it is interesting the number of countries that are ahead of us in terms 
of allowing their workers to own personal retirement accounts.
  In the 18 years since Chile offered the 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, 
all offer worker-PRAs. The British workers chose PRAs with 10 percent 
returns, and two out of three British workers enrolled in the second-
tier social security system. They are allowed to have half of their 
social security taxes go into these personal retirement accounts, and 
they have been getting 10 percent-a-year return. Again, that compares 
to our Social Security return, currently at 1.7 percent.
  This is what has happened in equity investments over the last 100 
years. It is a graph of the ups and downs of the returns on equities. 
Some bad years, in the early 1920s, during the Depression, 1929, a 
little depression. But, on average, if you leave your money in for over 
12 years, in any time period, then you did not lose any money on equity 
investments. The average return over this time period was 6.7 percent.
  Again, we are looking at a system, such as all Federal employees know 
about the Thrift Savings Plan, so it is limited to safe investments. It 
is limited to your choice of how much you want to put in equities 
versus government Treasury bills versus bonds for corporations, fixed 
income bonds or variable interest rate income bonds. So you balance 
that in terms of minimizing risk, and in all cases the experts suggest 
that it is going to be very, very easy to do much, much better than the 
1.1 to 1.7 percent return you are going to get on Social Security.
  Based on a family income of $58,475, the return on a personal 
retirement account is even better. We divided this into three different 
areas, if you invest 2 percent of your wages or 6 percent of your wages 
or 10 percent of your wages. If the average working life span is, what, 
if you go to work at 20, 25, and you retire at 65, 70, so on average I 
suspect we are working 40 years, paying in our Social Security taxes, 
so let me jump way over to the 40 years.
  If you were to work 40 years and invest 2 percent of your money, then 
you would end up with just a little over a quarter of a million 
dollars. If you invested 10 percent of your money, you would have $1.4 
million over the 40 year-period.
  What we are looking at, if you just invested this money at 2 percent 
for the first 20 years, you would still have $55,000 after 20 years; or 
if you invested at 10 percent, you would have $274,000 over 10 years.
  Again, the fact is that long-term investments, even with the 
fluctuations for that 12-year or 15-year period, we have never had a 
12- or 15-year period in the history of the stock market, of equities, 
where there has been a loss. Again, the average return on such an 
investment has been 6.7 percent.
  Okay, let me finish up just briefly with the Social Security bill 
that I have introduced. I am rewriting that bill now to make a couple 
changes that I think are important.
  The question is, some people argue, well, you cannot let individuals 
invest the money themselves. So what I have done in this legislation is 
I have limited the investment to safe investments, index stocks, index 
bonds, an index of mutual funds, or an index of some of the foreign 
stock investments funds. That is what we are doing in the Thrift 
Savings Plan also.
  My legislation allows workers to invest a portion of their Social 
Security taxes in their own personal retirement savings accounts that 
start at 2.5 percent of wages and gradually increase. So 2.5 percent 
out of the 12.4 percent that is going in Social Security taxes you 
would be allowed to have in your own account and invest it in your 
selection of maybe four, maybe five, limited so-called safe 
investments, and then I would leave it up to the Secretary of Treasury 
to add to that any other investment potential that he thought was safe 
and reasonable to add to this selection.

[[Page 2037]]

  My proposal does not increase taxes. It repeals the Social Security 
earnings test for everybody over 62 years old; it gives workers the 
choice to retire as early as 59.5 years old, and as late as 70. In my 
proposal, I made a suggestion that you could increase your benefits 8 
percent a year for every year after 65 that you delayed taking those 
benefits.
  Mr. Speaker, it gives workers the choice to retire at 59\1/2\. It 
gives each spouse equal share of the PRSAs. If you are a stay-at-home 
mom, you get half of what your husband makes; or if you are a stay-at-
home dad, half of what your wife makes would go in your individual PRSA 
account. So it is always divided equally between the two spouses. If 
one spouse makes more than the other spouse, they are added together 
and divided by two to represent how much would go into each account.
  It also increases widow and widower benefits up to 110 percent. That 
is partially to encourage retirees that might be a surviving widow or 
widower to live in the same home. You cannot do it now. One cannot live 
on half as much money as two. So this adds to the surviving spouse's 
benefit.
  It reinforces the safety net for low-income and disabled workers. It 
passes the Social Security Administration's 75-year solvency test. In 
other words, the actuaries over at Social Security have scored this and 
said this will keep Social Security solvent for at least 75 years. 
Actually, it would keep Social Security solvent forever, the way it is 
written.
  The bill takes a portion of on-budget surpluses over the next 10 
years. That is what I would like to stress. This bill borrows $800 
billion of surpluses other than the Social Security surpluses to make 
the transition. Since we are taking all the money essentially now that 
is coming in and paying out $400 billion a year in Social Security 
benefits, how do you come up with enough money to stop paying out? You 
are not going to stop paying out those benefits, so how do you make the 
transition?
  So the transition is made from borrowing some money from the general 
fund. Now that we have this surplus coming in, now is the time to take 
that step. So if we can take $1 trillion now from the other surpluses 
to fix Social Security, then we are going to have Social Security 
solvent; and it is not going to haunt our kids and grandkids later.
  It uses capital market investments to create Social Security's rate 
of return above the 1.7 percent workers are now receiving. Over time, 
PRSAs grow, and Social Security fixed benefits are reduced. It indexes 
future benefit increases to the cost-of-living increases instead of 
wage growth.

                              {time}  1730

  In other words, part of the problem now with Social Security is that 
benefits go up faster than the economy. Benefits increase based on wage 
inflation, which is higher than the CPI inflation. So one of the things 
my bill does is it changes the index of how much wages are increased to 
inflation. So it covers the increased cost of everything we buy, but it 
does not go up faster than everything we buy, as is currently 
structured under the current Social Security law.
  Let me finish, Mr. Speaker, by simply saying that I think we are in 
luck with this new President we have. He suggested that we leave some 
of the money that taxpayers are paying in, now at an all-time high. We 
are paying more taxes now, at the 41 cents out of every dollar, than we 
have ever paid in the history of America in peacetime. There was one 
year during World War II that it was higher than what it is today.
  So the fact is that another way to say that we have a surplus is 
saying that we are overtaxing somebody, someplace, somehow. So let us 
make taxes more fair, but at the same time, this President has said it 
is important to continue to pay down the debt so our kids and our 
grandkids are not left with that huge mortgage on the way we have 
operated government.
  Thirdly, he said that we have to fix Social Security. So I am 
encouraged. I think the challenge before this body is not sweeping this 
problem of Social Security and Medicare solvency under the rug, to 
leave it for future Congresses or as future problems for taxpayers that 
will be our kids and our grandkids.

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