[Congressional Record (Bound Edition), Volume 147 (2001), Part 2]
[House]
[Pages 2405-2411]
[From the U.S. Government Publishing Office, www.gpo.gov]



                      PAYING DOWN THE PUBLIC DEBT

  The SPEAKER pro tempore (Mr. Linder). Under the Speaker's announced 
policy of January 3, 2001, the gentleman from Michigan (Mr. Smith) is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. SMITH of Michigan. Mr. Speaker, last night we heard a new 
President talk about some of the priorities of this country and some of 
the potential problems with the economy which

[[Page 2406]]

could eventually affect jobs, not only the number of jobs, but the kind 
of incomes that are offered for those jobs.
  To me the important thing is not whether or not we have a tax cut. To 
me I think the most important thing we can do to strengthen the economy 
is to hold down the increase in Federal Government spending. We have 
seen a Federal Government over the years that has ballooned in size, 
and the political situation is that when Members of Congress, both the 
House and the Senate, come up with new programs, new spending, take 
home pork-barrel projects, they end up on television, the front page of 
papers and it is announced on the radio; and it probably increases 
their chances of being reelected.
  Mr. Speaker, the problem is having a government growing bigger and 
bigger, which is bad for the economy when we take more and more money 
out of worker's pockets and send it to Washington; but the problem is 
also taking away the empowerment from individuals and sending it to 
Washington, so Washington ends up with more rules and more governing of 
your lives and how you live it and take care of your family. I see that 
moving the question of how big should government be to the top of my 
personal list.
  Now the question is: In a situation now where we have more money 
coming into government than is currently used or is currently 
anticipated of being used over the next 10 years, what do we do with 
those extra dollars.
  What happened last year is we increased discretionary spending by 
approximately 8 percent. The three bills that we finished in December 
had an increase of almost 14 percent. So government and the tendency 
for government to get bigger and bigger and control more and more of 
our lives is very real.
  Mr. Speaker, I want to talk about this chart that I have beside me 
that relates to a lot of talk these days about debt, about paying down 
the debt. There are three parts to the $5.7 trillion of total public 
debt in this country. And the three elements that make up the total of 
$5.7 trillion are:
  The debt held by the public, $3.4 trillion. This is the Treasury 
paper that is loaned out, that is borrowing money for government needs; 
and so I call it the Wall Street debt.
  The other debt is the debt to approximately 119 trust funds, that is 
about $1.2 trillion; and the debt to the Social Security trust fund, 
and that is now $1.1 trillion.
  So when people talk, when Washington talks about paying down the 
public debt, they are talking about borrowing money from Social 
Security trust funds and the other trust funds and using those dollars 
to pay down the debt held by the public.
  Let me briefly go through that again. There is extra money coming 
into Social Security right now, approximately $150 billion that Social 
Security taxes will bring in more than is required to send out 
immediately for Social Security benefits. So what do you do with that 
$150 billion. Mr. Speaker, we have said look, we are going to take 
those dollars and write out an IOU and we are going to use that to pay 
down the so-called Wall Street debt, the debt held by the public.
  But over the years, what is anticipated is the total debt, the total 
debt, the total public debt subject to the debt limit under law is not 
going to go down. All we do is increase the size of the debt to Social 
Security, increase the size of the debt to the other 118 trust funds 
that we have, the largest being civil service, veterans, et cetera, and 
we decrease the amount of debt held by the public. There are some 20- 
and 30-year bills out here that would be very difficult to bid up and 
pay down so we are saying now you can only go so far in paying down the 
public debt.
  Mr. Speaker, the question is what do we do with the extra surplus 
dollars coming out of the Federal Government. The danger is if we leave 
this money, if you will, on the counter, available for politicians to 
spend, the tendency is to spend that extra money.
  Mr. Speaker, let me give one example of our trying, our effort. In 
1997, with the caps on spending that we set in 1997 and we passed into 
law, passed by this House, passed by the Senate, signed by the 
President, that we were going to limit how much discretionary funding 
we spent over the next 5 years; if we had stuck to those spending caps 
through those years, that level of spending that is going to exist for 
the next 10 years that were talked about last night, that we talk about 
in the 10-year budget, that we talk about in the 10-year savings, if we 
had stuck to those caps that we set for ourselves instead of violating 
those caps, we would have spending over the next 10 years that is $1.7 
trillion less than what we anticipate for spending because of the new 
spending levels and the giant increases in spending every year. That 
could double the tax cut.
  One way to help make sure that Washington does not spend that money 
is to say look, let us set some of this money aside to do nothing 
except pay down part of that debt held by the public. So even though we 
borrow some money from Social Security and the other trust funds, at 
least we do not expand government spending, we use it to pay down the 
debt held by the public.
  Mr. Speaker, the other way is to get some of that money out of town. 
You would do that by a tax reduction. So can we have the kind of tax 
reduction that is going to increase fairness, a kind of tax reduction 
that is going to stimulate the economy during this downswing or at 
least leveling off of the economy? The answer is absolutely, yes.
  There are two ways that we can be significant in helping for this 
economic recovery in the short term. One is lowering interest rates. 
Alan Greenspan and the Feds can do that by issuing a rule on what the 
discount rate is for interest. That lowers interest for everybody.
  The other way is government can start reducing the bidding up of 
available dollars. In other words, paying down the Federal debt to 
leave more money available for everybody else. So as you decrease the 
demand for that money, then interest rates are also going to tend to go 
down.
  Let me show my colleagues this next chart. This is what has happened 
to the total public debt. The public debt is defined in law as the 
total debt, public debt, subject to the debt limit that includes what 
we are borrowing from the trust funds in addition to the Treasury 
paper, the Treasury notes that we are issuing.
  As my colleagues see, we did very well from 1940 to about 1982. In 
1982, the debt of this country just expanded by leaps and bounds. And 
how bad is going into public debt? The reason the debt was increased is 
because, politically, it is easier to increase borrowing than it is to 
go out and raise taxes.
  So to expand government, a decision was made to increase borrowing. 
So we substantially increase the borrowing, making it tough for our 
kids and our grandkids because someday, somehow, somewhere, future 
generations are going to have to pay back this debt, whether it is an 
obligation to Social Security, whether it is an obligation to Medicare, 
or whether it is an obligation to the Treasury bills where government 
has borrowed money.
  The next chart sort of starts relating to a particular interest of 
mine, and that is Social Security. What do we do about the problem of 
Social Security when the baby boomers retire. They start retiring 8 
years from now, and they go out of the, if you will, the mode of paying 
in their FICA taxes to support Social Security; and they become 
recipients as they retire. Social Security is going to start, if you 
will, going broke, start having to have less dollars coming in in taxes 
than is needed to pay benefits.
  It is estimated by Greenspan and others that the unfunded liability 
of Social Security right now is $9 trillion; that we would have to come 
up with $9 trillion today to put it in a savings account earning an 
interest rate of at least 2.2 percent to accommodate keeping our 
promise to future retirees.
  So if we simply continue to borrow Social Security dollars and other 
trust fund dollars to pay down the debt held by the public, this 
represents the debt held by the public when the baby boomers retire, 
and we start needing that money to pay benefits again, then we 
substantially increase our borrowing to start paying back some of

[[Page 2407]]

the money. So it is just a temporary downswing and then a giant 
increase in the debt that will be required if we continue to borrow 
money in the future.
  Back to this chart. So if my colleagues can visualize, if my 
colleagues can visualize a projection of the increase in debt up till 
this year, what we are looking at if we borrow money from Social 
Security and write out an IOU and then pay back the debt, we would have 
a downswing. But then it would go dramatically upward to increase the 
debt of the country.
  I am a farmer from Michigan. It has always been the tradition for 
farmers to try to pay off some of the mortgage, to pay it down so that 
their kids could have a little better chance. In this body, we are not 
doing our job. We are increasing the debt. We are increasing the 
obligation to our kids and our grandkids.
  Then let me go over this last chart. The President last night 
suggested maybe some private investment. A lot of people have said, 
well, gosh, how can one talk about equity investments when the stock 
market is so volatile right now? What about the downswings?
  This chart that I made up represents what has happened to stock 
investments in the last 100 years. Some downswings, definitely 
downswings, up, down, up, down, up, down. But with a long-term 
investment, there has never been a 12-year period where stocks did not 
have a positive return.
  So if one is going to put some of that money into some kind of an 
equity investment, then the only way it is reasonable, is if one starts 
talking to younger workers of America, number one; number two, you say 
one can have the option. One can have some of this money if one puts it 
into an IRA type investment for one's retirement.
  There is going to be limits on where one can invest that money. It is 
not going to be a situation where some snake-oil salesman can say, 
look, put your money with me, and then we will double with it. It is 
going to be limited investments, such as 401(k)s, such as the Thrift 
Savings accounts that Federal Government employees have. Probably there 
is also going to be an obligation that half of it or 40 percent or a 
certain amount goes into bonds or interest-bearing accounts. So only 
part of that investment can go into growth funds or equity investments.
  I think the important thing to realize is the comparison of the 
average of 6.7 percent a year return on equities as compared to what 
you are going to get from Social Security. Right now, if one is an 
average Social Security recipient retiree, one is getting back 1.7 
percent return on the money that one and one's employer paid into 
Social Security.
  So then the logical question is, can we do better than a 1.7 percent 
return? The answer of course is, if one has checked one's CDs or 
checked most any savings account or checked the school loans that are 
tax free, there are a lot of ways that we can do much better than a 1.7 
percent return that one is going to get from Social Security.
  I have got a chart that I will show my colleagues a little bit later; 
that the average retiree starting next year is going to have to live 22 
years after they retire simply to break even on the money that they 
have sent into Social Security. Social Security is not a good 
investment.
  Ben Snyder is a page helping me put up these charts. Ben is from 
Northwestern Pennsylvania. We have a page program. Everybody should 
know and maybe start applying for a page job. It is very interesting. I 
think we have got about 80 total pages. They come during their junior 
year in high school, and they work like heck. They get up, I think, at 
5:30 in the morning to accommodate both going to school and working as 
a page in the United States Congress.

                              {time}  1330

  This pie chart represents how we are now spending money. The largest 
piece of pie, if that is visible, roughly 20 percent, is what is being 
paid out in Social Security. Social Security is the largest Federal 
Government expenditure and it is growing. Medicare is growing faster. 
If we go ahead with prescription drug coverage to add to the cost of 
Medicare, then we are looking at a Medicare expense that could very 
easily equal the cost of Social Security within the next 50 years.
  We argue in this Chamber a good part of the year over discretionary 
spending. There are 13 appropriation bills. Twelve of those 
appropriation bills represent 19 percent. The 13th appropriation bill 
is defense. Defense, by itself, represents 17 percent. In both cases 
that is still smaller than what is being paid out in Social Security.
  So how do we fix the problem when we know eventually that we are 
going to run out of tax money coming in for Social Security? One 
possible recourse is to increase taxes on workers. One possibility is 
to reduce benefits. I do not think either one of those options is 
acceptable and should not even be considered.
  When Franklin Delano Roosevelt created the Social Security program 
over 6 decades ago, he wanted it to be sort of a part of a three-legged 
stool, where there would be private pensions, personal savings, plus 
Social Security. So instead of people going over the hill after the 
Great Depression to the poor house, the Congress passed a law saying, 
look, we are going to have forced savings and we are going to take some 
money out of taxpayers' paychecks while they are working to ensure that 
they have a little Social Security when they retire. That is the 
program that we have been operating under since 1934.
  Right now, Social Security is a system stretched to its limits. There 
are 78 million baby boomers who begin retiring 7 years from now. They 
go out of the paying-in mode and into the recipient or taking-money-
out-of-Social Security mode. Social Security spending exceeds tax 
revenues starting in 2015. Social Security trust funds go broke 
technically in 2037. We are going to have a new trustee's report soon, 
and that might even go up to 2040.
  The question is, with all of this money, the $1.1 trillion so far, 
and by that year it will be another $4 trillion, how does government 
pay back this money? Maybe there are three options, maybe four: we can 
increase taxes again on workers or on the general public; we can cut 
other benefit programs or cut Social Security benefits; we can 
dramatically increase borrowing to put this country further in debt and 
put our kids and our grandkids at greater jeopardy and also risk 
economic development in this country with that kind of negative 
savings; we can start looking at a fix for the program now. And that is 
what we should be doing.
  I was encouraged that President Clinton said, ``Let us put Social 
Security first,'' but he did not come up with a bill. I was encouraged 
last night that this President said, ``Let us give a priority to Social 
Security.'' But what I wonder and am concerned with regarding this 
commission is does that just put off the question into the future. I 
would hope we could move aggressively ahead.
  We have Democrat Senators, like Senator Moynihan, Senator Kerry, 
Democrats in the House, like the gentleman from Texas (Mr. Stenholm), 
and a lot of Republicans that have come up with proposals on how we can 
keep Social Security solvent. But, Mr. Speaker, here is what everybody 
should remember: that the longer we put off the decision on fixing 
Social Security, the more dramatic and drastic those changes are going 
to have to be. So the quicker we do it, the better. So let us move 
ahead. If it is a commission, hopefully we can move quickly.
  Insolvency is certain. We know how many people there are, and we know 
when they are going to retire: 62, 65 and, in some cases, 67. We know 
that people will live longer in retirement.
  I chaired the Social Security task force, a bipartisan task force, 
made up of Republicans and Democrats. We ended up, after hearing all of 
the testimony, agreeing on 18 different parts of the solution that both 
Republicans and Democrats could agree to. But on the part of living 
longer, I wanted to mention what some of the medical profession were 
suggesting in terms of our longevity, our long life-span. They suggest 
that within 20 to 25 years, anybody

[[Page 2408]]

that wants to live to be 100 years old will have that option. Within 30 
to 35 years, anybody that wants to live to be 120 years old could very 
well have that option.
  What does that do to an individual's personal savings now? Is there 
going to be enough money in their savings accounts to accommodate any 
kind of a decent retirement if they are to live that extra 20 years or 
30 years over the average today? And what is it going to do to programs 
that industry has that have guaranteed a fixed income on retirement? It 
is going to be tremendously expensive. What is it going to do to Social 
Security and Medicare? A tremendous imposition, a tremendous danger of 
asking American taxpayers to dig deeper into their pockets in the 
future to accommodate that growing senior population.
  The last point. Taxes will not cover benefits starting in 2015, and 
the shortfalls will add up to $120 trillion between 2015 and 2075; $120 
trillion more is going to be required over and above what is coming in 
from the payroll tax. One hundred twenty trillion dollars in the future 
dollars is the same way as expressing the current $9 trillion unfunded 
liability that we need today to put into an investment account to 
return at least a 2.2 percent interest rate to accommodate future 
retirees.
  Here is part of the problem: there are fewer workers. It is a program 
that was designed in 1934 to be a pay-as-you-go program. Like a chain 
letter, it depended on expansion. It depended on more and more workers 
paying in part of their payroll tax to accommodate retirees. In 1940, 
for example, we had 38 workers paying in their Social Security tax for 
every retiree. In 1940, 38 workers paying in their Social Security tax 
for every retiree.
  Today, it is down to three workers, working with that increased tax 
and paying in their Social Security tax to accommodate every one 
retiree. The estimate is that by 2025 there will be just two workers. 
Because people are living longer, because the birthrate went down 
substantially after the baby boomers, and the life-span is dramatically 
increasing, there are fewer workers. So we have fewer workers and more 
retirees, which makes it tough on those two guys left that are going to 
end up having to pay that kind of tax, especially if we do not start 
planning now for the long-term solvency of Social Security.
  This represents the long-term solvency up until 1975. Because we 
increased taxes on Social Security substantially in 1983, the so-called 
Greenspan Commission in 1983 got together as a commission, what we are 
talking about now, and they decided to do two things: reduce benefits 
and increase taxes. They increased taxes so dramatically that there has 
been a huge surplus since that time coming in from Social Security 
taxes over and above what was needed for paying out benefits. And let 
us remind ourselves that it is a pay-as-you-go program. Most of that 
money comes in at the end of the month; and within the next week, most 
of the money is sent out in terms of paying benefits for existing 
retirees. So a huge imposition.
  The red part of this chart represents the $120 trillion that Social 
Security is going to be short of paying benefits over and above what is 
coming in in Social Security taxes. So I should make my point, Mr. 
Speaker, and the point is let us not waste this short-term opportunity 
that we have to make some use of this money to start getting a better 
return on that money coming in.
  There is no Social Security account with our name on it. I have made 
maybe between 200, 250 speeches around the United States and a lot of 
people think somehow that there is an entitlement there, that there is 
an account with their name on it which they are entitled to. This is a 
quote from the President's Office of Management and Budget and it says: 
``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 other expenditures.''
  That is the problem. A lot of people, say, ``Well, we have a trust 
fund that is going to take care of us until 2035, maybe 2040 when the 
trustee's report comes out. The question is where does the money come 
from? The money is gone. Over the last 40 years we have taken the extra 
Social Security surplus and spent it on other programs, which have 
almost become entitlements.
  So it increases the size of government and perpetuates itself because 
on almost every new spending that is developed there now becomes an 
interest group, a special interest group, that starts doing everything 
they can to lobby Congress to continue that spending. And if we 
continue it the second year, then there is a feeling, well, we are 
entitled to it. So a strong public political pressure to continue that 
spending. That is one of the problems that we have seen in this 
country, is that government has continued to grow.
  The public debt now, as I mentioned earlier, is $3.4 trillion. So 
what we hear is the suggestion that if we pay down this $3.4 trillion 
it will accommodate the $120 trillion over the next 75 years, or the 
$46.6 trillion over the next 55, 56 years. The fact is that that little 
block of money, or the interest savings, worse yet, the interest 
savings that we save from paying off this $3.4 trillion is going to 
somehow accommodate the shortfall that we are facing in Social 
Security.
  Some have suggested economic growth will help take care of the Social 
Security problem. Not so. Because there is a direct relation between 
the wages we make and the taxes we pay in, in relation to the benefits 
we will ultimately receive, short-term economic growth and increased 
wages means that in the short run there is extra money coming into the 
Social Security Trust Fund; but in the long run, when eventually that 
person retires, their entitlement for benefits is going to be 
significantly larger. We increase benefits not based on inflation 
increases but based on wage inflation. So at some point it ends up 
catching up with us and simply costing more.
  Let me just read through this chart. 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 currently now, but leaves a larger hole 
to fill later. And the administration has used these short-term 
advantages, I think, over the last 8 years, to do nothing. Very 
disappointing.
  What I have decided, Mr. Speaker, I have decided that it is going to 
take the bully pulpit of the President; it is going to take that 
information going out to America so more and more people know the 
seriousness of the Social Security problem.
  Medicare is also going broke, but right now we are talking about 
adding a prescription drug coverage to Medicare. There is no question a 
lot of people need that prescription drug benefit. But, again, it is 
like a cargo ship that is already overloaded that we know if we are not 
careful it is going to sink, and yet we are adding more cargo to that 
ship.

                              {time}  1345

  I hope we are very, very careful in the way we design any kind of a 
prescription drug program or any kind of benefit expansion, whether it 
is Social Security or Medicare or any of the other benefits. We should 
not be allowed to do that in any way that simply says that we will 
borrow more money later or we will tax the younger generation later 
when we need it or we will pretend that we are going to cut other 
benefits. My guess is that we do not have the intestinal fortitude to 
cut Social Security benefits or Medicare benefits significantly or any 
other government expenditures to accommodate the need in the future.
  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 and 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 30 percent. That is just in the 
next 30 or 40 years.

[[Page 2409]]

  Here is the average return on what you get on Social Security. Over 
the last 25 years, the average return on equities, for example, 
combined with some kind of investment in interest income, such as bonds 
or other securities, has been 6.7 percent over the last 100 years. It 
has been approximately 7 percent over the last 25 years. The real 
return of Social Security is less than 2 percent, or 1.7 percent for 
most workers, it shows a negative return for some, compared to over 7 
percent for the market. Some minority groups and some people that are 
put in unhealthy environments in their working lives end up dying 
earlier, so they end up paying into Social Security but never getting 
anything back really. For example, a young black male, because their 
life expectancy is earlier than even when they start drawing benefits, 
is going to have a negative return on average for what they and their 
employer are putting into Social Security. The average again is 1.7 
percent and the market for the last 25 years has given a return of 7 
percent.
  Even those who oppose PRAs, personal retirement accounts, agree that 
they offer more retirement security. This is a letter written by 
Senator Barbara Boxer and Dianne Feinstein and Senator Ted Kennedy to 
then President Clinton. They said, ``Millions of our constituents will 
receive higher retirement benefits from their current public pensions 
than they would under Social Security.''
  What we did in 1934 is we left it an option to local government and 
to State government whether they wanted to participate in the Social 
Security program or whether they wanted to have their own payroll 
deduction with their own investments.
  The U.S. trails other countries in terms of coming up with some 
programs that are owned by the worker, that they have control over.
  Let me just point out, Mr. Speaker, that the Supreme Court on two 
decisions now has said that there is no entitlement to Social Security. 
Social Security is a tax on one hand that Congress has passed and the 
President has signed and the benefit package is simply another benefit 
package that is not related and otherwise no obligation on the part of 
government. So government can change any time they want to. When we ran 
into problems in 1977, when we ran into problems in 1983, in both of 
those situations government made the decision to lower benefits and 
increase taxes. I see that as a danger but I see it as a plus if we can 
have a personal retirement savings account that is in the control of 
the individual where politicians cannot, if you will, mess around with 
them in future years.
  I see an absolute in our Social Security Task Force that I chaired. 
We had different vendors come in suggesting that they could guarantee a 
return much higher than the 1.7 percent that Social Security has, a 
guaranteed return with part of the investment in equities. With that 
guarantee you have a little less risk but like in our thrift savings 
account for the Federal Government, our thrift savings account gives 
individual Federal employees the option of putting some of the money in 
index stocks or index bonds or Treasury paper. And so you have some 
choice but it is limited to more safe investments. If we have a Social 
Security account, I visualize that as having similar characteristics 
where you would have a limit on where you could invest that money and a 
requirement that a certain percentage go into securities that would be 
interest-bearing and absolute. Look at what can be paid at your local 
bank on a CD or a government savings bond or any kind of investments 
that are available out there and very secure in terms of interest, none 
of which are as low as the 1.7 percent.
  This just says that in the 18 years since Chile offered the PRAs, 95 
percent of the Chilean workers have created accounts. They have their 
own passbook. Their average rate of return has been 11.3 percent a 
year. British workers chose PRAs with 10 percent returns. I was over in 
Europe representing what our country's public pension program was, and 
I was surprised to learn that so many countries around the world are so 
much further ahead in the private investments that give a much greater 
retirement benefit package than our current Social Security plan does 
in this country.
  For this chart we came up with a dollar amount of $58,475. If the 
total family income were this $58,000, the return on a PRA is even 
better. We broke it down into 20 years, 30 years and 40 years, with a 
decision of whether or not to invest 2 percent of the money, 6 percent 
of the money or 10 percent of the money. You can see if you go all the 
way on purple, invest it in a working career for 40 years, you end up 
putting 10 percent of your money in for 40 years, it ends up being 
$1,389,000. This is the magic of compound interest. It is another 
demonstration that you cannot just go in and out of the market. It has 
got to be more of a long term.
  There has never been any period in American history, even around the 
greatest recession and depression, any 15-year period anyplace you want 
to put it on the map that has not shown a positive return in equities. 
For example, if you have 40 percent of your money in investment 
accounts and not more than 60 percent in equities and you left that 
money in for 35 years, guess how bad the market would have to drop for 
you to be worse off than Social Security. The stock market would have 
to drop 100 percent. That is, of course, never going to happen. It is 
never going to go to zero. That is because even the 40 percent that are 
in investment funds are going to end up giving you more than you are 
going to end up with Social Security.
  This is my legislation for Social Security, and I am just going to 
briefly go through the highlights of the bill. When I first came to 
Congress in 1993, I wrote my first Social Security bill. I have written 
three Social Security bills now in each of the last three sessions. 
They have all been scored to keep Social Security solvent. I have spent 
a lot of time because I think it is a very, very important program, and 
I think the consequences of doing nothing, of continuing to put this 
off, are going to tremendously jeopardize future retirees and going to 
put a huge burden on future workers. The bill that I introduced, the 
Solvency Act for 2000, allows workers to invest a portion of their 
Social Security taxes in their own personal retirement savings account, 
the PRSAs that start at 2.5 percent of wages and gradually over the 
next 50 years increase that amount. We do not touch, nor does any 
proposal that has been introduced in Congress, touch any part of Social 
Security that is designed as an insurance program for disability and 
survivors. Nobody is talking about doing anything with that program. 
That would continue totally to be a Federal Government program to 
ensure against disability on the job and the need of survivors if 
something happened to that particular worker.
  My bill does not increase taxes. It repeals the Social Security 
earnings test for someone 62 years old. It gives workers the choice to 
retire as early as 59\1/2\ years old, and as late as 70. In my 
proposal, which interestingly I use the word actuarially sound, it does 
not cost any more to tell a person, Look, if you want to put off your 
benefits after age 65, we will increase future benefits 8 percent a 
year in what you otherwise would have gotten from Social Security for 
every year that you put off retiring. If you wanted to put off the 
whole 5 years, you could have a 40 percent increase in benefits. It is 
actuarially balanced simply because your life expectancy, some people 
might die at 69 or 70, on the average it is not going to cost any more 
if we allow people to put off their retirement. More and more seniors 
are in good health and are willing to continue working and that should 
be a flexible program of choice that is available.
  My bill that I introduced this last session takes a portion of the 
on-budget surplus over the next 10 years. It takes $800 billion over 
and above the Social Security surplus. So we go into the, if you will, 
on-budget surplus, some of the surplus that we are talking about. 
Remember now, this is a pay-as-you-go program. The money comes in, most 
of it goes out by the end of the week that it comes in, so how do you 
change that to allow some real investments, some personal investments?

[[Page 2410]]

That is the cost of transition. To accommodate that cost of transition, 
to put the money in accounts that are going to give a better return 
than Social Security does by far, then you need some extra money. Part 
of that is going to be the Social Security surplus money, but in 
addition, it is going to take money from the general fund surplus.
  So when you hear Washington talk about paying down the debt in the 
next 10 years, again the debt they are talking about is not the total 
debt. The debt they are talking about is the Treasury bills, the 
Treasury paper debt. Here again, the only way that is going to be paid 
down is if you take the Social Security surplus dollars, write an IOU 
and use that money to pay down the other debt. By definition, that 
means that if you are using that money to pay down the Treasury bill 
debt, you are not using that money to accommodate a transition so that 
we can have a Social Security program that is going to be solved 
forever.
  I resist and I urge my colleagues and the White House to not suggest 
that we are going to pay down the debt held by the public over the next 
10 years, because by definition that means that we are not going to 
solve Social Security.
  My bill uses the capital market investment to increase the Social 
Security rate of return, and it is interesting, when I wrote this it 
was 1.8 percent, today it is 1.7 percent, that workers are now 
receiving from Social Security. Over time, PRSAs grow and the Social 
Security fixed benefit is reduced. It indexes future benefit increases 
to the cost of living increases instead of wage growth. Future benefits 
would be indexed and increased to a COLA that represents inflation 
rather than the higher increase due to inflation. That goes a long way 
in solving the problem.
  This is another way of representing that Social Security is a bad 
investment. To get back what you and your employer put in, or what you 
put in if you are a private business, in 1940 you had to stay alive 2 
months after you retired to get everything back you had put in. By 
1960, you had to stay alive 2 years to get everything back. Today when 
you retire, you have to live 23 years after you retire to break even 
getting the money back that you and your employer put into Social 
Security. Not a good investment. We can do better.
  This represents what this government has done on tax increases when 
we have gotten into trouble, Mr. Speaker, in past years. In 1940, the 
Social Security rate was 2 percent. The employer paid 1 percent, the 
employee paid 1 percent on the first $3,000. The maximum payment for 
both employee and employer was $60. In 1960, we raised the rate to 6 
percent. We raised the base to $4,800 for a maximum payment, employer 
and employee, of $288. In 1980, we jumped it to 10.16 percent of the 
first $26,000. And, of course, after the 1983 changes, we are up to 
12.4 percent on the first $78,000. That is about a $10,000 a year 
payment going into Social Security. The danger is, is what is going to 
happen in this line and in this line if we do not do anything to fix 
Social Security and if we put it off, then the likelihood is, is that 
we are going to put the imposition of more taxes on the American worker 
to accommodate those existing retirees.
  With those tax increases, here is the situation that we have found 
ourselves in. Now 78 percent of families pay more in the payroll tax 
than they do in the income tax.

                              {time}  1400

  So part of the discussion on a tax cut, how do we accommodate a break 
for those individuals that pay more in the FICA tax, the payroll 
withholding tax, than they do in the income tax? My suggestion is that 
we tell these workers that if they want, it is their choice, but if 
they want, they can take a part of their Social Security tax and invest 
it in an IRA, to ultimately increase their retirement benefits.
  So I would like to see that part of this tax package that starts that 
opportunity with the limitation on safe investments, with a requirement 
that a certain amount go into interest-bearing accounts.
  There are six principles of saving Social Security: Protect current 
and future beneficiaries; allow freedom of choice; preserve the safety 
net; make Americans better off, not worse off; and create a fully 
funded system; and no tax increases.
  Again, if I come back to my concern of the danger of increasing 
spending and almost demanding that this body is faced with the kind of 
lobbyists and special interest pressure to continue that expanded 
spending, expanding the spending of the Federal Government is the 
greatest negative, the greatest potential to making our economy worse, 
than almost anything else we can do.
  When we talk about this tax increase, we talk about a situation where 
this tax increase does not even offset the projected 1993 tax increase. 
The tax reduction, the tax cut, that President Bush is talking about 
that our Committee on Ways and Means is taking up tomorrow does not 
offset those past tax increases.
  I think the question we should ask ourselves is, how high should 
taxes be in the United States? How high should taxes be? And then when 
we make that decision, we say, look, we do not want them too high. That 
is going to discourage entrepreneurs. It is going to discourage 
somebody from going out and getting a second job if they want to do 
better for their family because government takes more and more of it 
away. Then after we set that limit, let us discipline ourselves to set 
priorities on how to spend that amount of money.
  There is an unlimited need. We are going to hear Republicans and 
Democrats suggest that we should not have tax cuts because there are 
all those needs out there for more government spending. I think this is 
dangerous. I think we should not let ourselves fall into the trap of 
trying to fix every problem there is from Washington and simply asking 
all taxpayers to pay a greater tax on what they might earn.
  How would Members react, Mr. Speaker, if they were thinking of 
starting a new business that would employ workers and give them a good 
salary if government told them if they are a success we are going to 
take half of the money that they make and if they fail then tough luck, 
they do not have any money to send their kids to piano lessons and do 
not have the money to have a decent vacation? If we increase taxes too 
high, it is a negative on the economy. If we let the debt grow too 
much, then it becomes the kind of negative savings that we are seeing 
in this country.
  By the way, this country has a lower savings rate than any other 
industrial country in the world.
  Finishing up, personal retirement accounts, they do not come out of 
Social Security. They would simply come out of the additional funds 
that are now coming into government, the so-called surplus. They become 
part of Social Security retirement benefits. A worker will own his or 
her own retirement account and it is limited to safe investments that 
will earn more than the 1.7 percent that we now see as an average 
return coming back in.
  Social Security personal retirement accounts offer more retirement 
security. For example, if John Doe makes $36,000 a year, in Social 
Security he can expect $1,280 a month in a personal retirement account 
compared to what has happened in the last 100 years with no more than 
60 percent in equities. He would have $6,514 per month retirement from 
his PRAs. As I mentioned, States and local governments had the option 
of going into the Social Security program or doing their own 
investments. Galveston County, Texas, decided they wanted to do their 
own investment so they are not paying into Social Security.
  Just a comparison in Galveston, death benefits $253 in Social 
Security, $7,500 under the Galveston plan. Social Security benefits for 
disability, $1,280; Galveston plan, $2,749. Social Security payments 
$1,280 a month compared to the Galveston plan now paying $4,790 a 
month.
  I just simply demonstrate this to say that we can do better than the 
1.7 percent return we are now getting on Social Security. San Diego did 
the same thing.

[[Page 2411]]

  Mr. Speaker, I would conclude by urging this body to hold the limit 
on spending. Again, we have tried to set caps on spending. We did that 
last in 1997 with the 1997 caps on spending. If we would have had the 
discipline to hold down spending, to do what we said we were going to 
do when we passed those 1997 caps, the baseline, what is projected for 
increased spending over the years, that is roughly inflation plus 1 
percent, the projected spending if we would have stuck with those caps 
that we set for ourselves, would be $1.7 trillion less than is now 
projected under the new baseline. So we could have doubled the tax cut.
  So the danger and the question is, how do we keep government from 
continuing to grow at the rate that it has been growing? How do we make 
sure we pay down the total debt of this country, including the debt 
that is owed to the trust funds, Social Security, Medicare and the 
other trust funds, to make sure we keep Medicare and Social Security 
solvent? It is a huge challenge.
  Mr. Speaker, I appreciate the time; and I urge the President, I urge 
my colleagues, to move aggressively to solving Social Security and 
developing ways that we can discipline ourselves. A lot of this has to 
come from the White House. Discipline the Federal Government from 
continuing to increase spending like we have in the past.

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