[Congressional Record (Bound Edition), Volume 151 (2005), Part 11]
[House]
[Pages 15803-15810]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       REFORMING SOCIAL SECURITY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 4, 2005, the gentleman from Arizona (Mr. Shadegg) is recognized 
for 60 minutes as the designee of the majority leader.
  Mr. SHADEGG. Madam Speaker, I rise today to engage, I hope, in a 
discussion with my colleagues about an important issue confronting our 
country, and it is an issue on which we have already begun a national 
dialogue. It is an issue that, at least before the last few months, was 
an issue of bipartisan concern, and that is reforming Social Security.
  As you know, Madam Speaker, the former President of this Nation, Bill 
Clinton, raised this issue during his tenure in office and noted that 
the Social Security program in its current structure is in trouble and 
in need of reform. It is facing several serious problems.
  One of them is the solvency of the program over time. And another is 
its fairness to the younger generations. There is a new idea here in 
Washington and a simple idea that has surfaced just within the last few 
weeks on Social Security reform that does not solve the entire problem 
in one fell swoop, but would start us on a path and would address the 
most egregious problem of all, and that is the structure of Social 
Security which simply is unsustainable in its current form. So I want 
to focus this discussion this afternoon largely on that new idea.
  It is an idea that responds as the House should respond to the 
concerns and the interests of the American people about what is 
happening with their Social Security taxes, their payroll taxes. Let me 
begin with some of the basics.
  As I think all Americans understand on both sides of the aisle, the 
Social Security system as it is structured today is a pay-as-you-go 
system. It is a system where those of us working today in the workforce 
pay in our payroll taxes and those payroll taxes by and large 
immediately go out the door to pay the retirement benefits of the 
Americans who are retired today. That is the structure of the current 
system, and that is the structure that many countries around the world 
created some 35 to 40 to 50 years ago.
  Germany, I think, was first to substitute a Social Security program 
for its elderly based on this premise, that is, that we would tax 
workers to pay retirement benefits for those retired. There was nothing 
wrong with that proposal when initiated because at that time the 
workforce was dramatically larger than those who were on retirement. 
Indeed, I think most Americans now know that in 1935 when Social 
Security was created, there were some 42 Americans working for every 
American collecting retirement benefits. Clearly, 42 workers can, 
through their payroll taxes, support one retiree. But as most Americans 
know by today, those numbers have changed dramatically.
  In the 1950s, it went to where we had roughly 15 or 16 workers per 
retiree. Again, that was sustainable. But now we face a new problem. 
The reality is that the workforce relative to the number of people 
retired has shrunk and today in America there are only 3.3 working 
Americans paying payroll taxes to support each individual currently 
retired and collecting Social Security taxes. If the trends continues, 
and it will, that is unsustainable. Very soon we will be down to where 
there are two workers and even less than two workers paying Social 
Security taxes, payroll taxes to support each retiree. That simply 
cannot be sustained over time. And so we have a problem with the 
structure of Social Security. We also have a problem with its long-term 
solvency. And, most importantly, I think we have a problem with what is 
referred to as generational fairness.
  We all know that solvency is the issue of whether or not we have the 
money set aside to pay the benefits we have promised, and in point of 
fact we do not. While the system runs a short-term surplus today, we 
collect more in Social Security taxes than we pay out today in Social 
Security benefits. That short-term Social Security surplus of revenues 
in over benefits paid out will end as soon as 2017. Indeed, the surplus 
itself will begin to shrink, that is go down, year to year as early as 
2008.
  So this is a problem that confronts us very soon, and as the 
actuaries have told us and as I think Americans understand, the trust 
fund which we would have to begin drawing upon in 2017 to pay the 
promised benefit will itself be depleted by 2042. Thus, we have a long-
term solvency problem with the current structure where we have a 
shrinking number of workers per retiree.
  But the other issue that is not discussed very often is the issue of 
generational fairness. Generational fairness is a term I use, and I 
think most Americans and my colleagues understand it, but then when I 
talk to an audience they say they do not understand it so let me try to 
make that point clear. Solvency is one issue, but generational fairness 
is a separate issue. As it turns out under the Social Security system 
that we have today in America, my grandparents, most Americans' 
grandparents, collected an effective rate of return on the Social 
Security taxes they paid, that is, on the payroll taxes they have paid 
into Social Security, when they collected their benefits, on average 
they got a rate of return on the money they had put in of about 5 
percent.
  Now, 5 percent is not a great rate of return. You and I would like to 
be able to invest our money and get 8 or 10 or a better rate of return 
on the money we invest; but for a program which is designed as this 
program is designed to provide a floor of protection for those 
Americans who have either not been able to or have not, in fact, set 
aside money for their retirement, if you got a rate of return on the 
money you put into Social Security of 5 percent, you were doing fairly 
well.

                              {time}  1615

  That is a decent rate of return. But because of the current structure 
of Social Security, that is not continuing. Indeed, our children, my 
children and my grandchildren, will get a rate of return of less than 
1.6 percent; and, indeed, for many of them, their rate of return will 
be negative, that is, they will pay in more in social security taxes 
than they collect in their lifetimes, on average, in Social Security 
benefits. That is generational fairness, and it is simply not fair.
  I think most Americans would agree that creating Social Security, the 
Social Security program we have, creating a floor of protection so that 
all Americans can enjoy their retirement years, safe in knowing that 
they have money to pay for their groceries and to pay their rent is a 
laudable goal, and with a rate of return of 5 percent on your money, 
you can do that. But with a rate of return of 1.6 percent or less, or a 
negative rate of return, our children and our grandchildren, if we do 
not make changes, will in fact not have a secure retirement. Indeed, 
they will not have the funds when they go to retire to even minimally 
get by.
  Now, those are the basics that have been involved in this debate from 
the

[[Page 15804]]

outset, and there are lots of ideas on the table. President Bush has 
put ideas on the table to deal with both the issue of solvency and the 
issue of generational fairness so that we can make the program 
financially sound for the future. Indeed, he would like to make it 
financially sound forever, not just for the 75-year horizon that the 
Social Security trustees base their analysis on. But also he would like 
to make sure that we guarantee the next generation as secure a 
retirement as this generation has had and as the last generation had.
  Now, I know a lot of Americans glaze over and say, wow, I have heard 
so many different ideas on Social Security and on Social Security 
reform that I get confused. People talk to me about personal accounts. 
People talk to me about benefit cuts. People talk to me about increases 
in taxes. I want to talk about a new idea, a new idea which can solve a 
part of the Social Security problem and stop a practice which is 
offensive and a bad idea.
  When I went home and did my town halls with my constituents in 
Phoenix, AZ, discussing the issue of Social Security, I had to explain 
to my constituents this short-term surplus that we have. That is the 
fact that today, and every year since 1983, we have been collecting 
more in Social Security revenues than we are paying out in benefits. So 
we have a surplus. And I had to explain to my constituents, as my 
colleagues here in the Congress have had to do, that that excess money 
is not being set aside for Social Security.
  Indeed, the Social Security surplus that Americans are paying in 
collectively through their payroll taxes, that is the money in excess 
of the amount spent today for those retired today, is being, I would 
say quite frankly, misappropriated by the Congress of the United States 
and the Federal Government. Because when Americans pay payroll taxes to 
fund the Social Security program, they believe, and they have an 
absolute right to believe, that their money, paid as payroll taxes to 
fund Social Security, should be and is being used for Social Security. 
But that is not true today, and it has not been true since 1983.
  That money, this short-term surplus of Social Security revenues or 
Social Security benefits paid out, is in fact taken each year by the 
United States Congress and spent for general government purposes. It is 
spent to fund the Department of Agriculture. It is spent to fund the 
Department of Defense. It is spent to fund the Department of Health, 
Education and Welfare. It is spent all over this government for general 
purposes having nothing to do with Social Security. And I will tell 
you, my constituents, when they learn that, are angry.
  Now, I mentioned a moment ago that there are many ideas for reforming 
Social Security. And some back home say, Congressman, it is all too 
confusing to me. I do not understand. That is the central key element 
of this new idea. When I went home and when my colleagues went home to 
address the issue of Social Security reform, and when the American 
people understood that we are misappropriating the Social Security 
surplus to things other than Social Security, they got angry; and they 
said, well, I do not care how and I do not understand how you reform 
the entire Social Security program, but the one thing you better do, 
Congressman, the one thing you owe to us, the American people, the one 
thing you owe to every single person collecting Social Security and 
every single person paying social security taxes is to stop stealing, 
stop raiding the Social Security surplus, those payroll taxes paid in 
for our future retirement, and using them for general government 
purposes. And that is precisely what this new idea does.
  A colleague of mine in the Senate, Jim DeMint, first elected to the 
House and served with me here in the House, has dropped a piece of 
legislation, and I and a group of members on the Ways and Means 
Committee in the House have dropped a piece of legislation that will do 
precisely that. It will take, from the moment it is enacted through a 
10-year period, from roughly today through 2017, the Social Security 
surplus that comes in and it will stop spending that money on anything 
other than Social Security. Now, how do we do that?
  What we will do is allocate that surplus to every single American who 
is paying payroll taxes under the age of 55, and we will set up an 
account in their name and we will put that money in that account. Now, 
for the first 3 years, the accounts will be invested in U.S. Treasury 
bonds, the safest investment in the world and the same kind of 
investment where your social security taxes are being invested today.
  But the key difference, the critical difference is that we will stop 
using that money for general government purposes, we will stop using it 
to hide the real deficit and the real debt, and we will allocate it to 
Social Security.
  Talk about a simple notion. I, an American taxpayer, Joe Smith in my 
district, an American taxpayer who works at a job and pays payroll 
taxes, he may be one of those American taxpayers who pays more in 
payroll taxes than in income taxes. We are going to say to him, 
Beginning with the passage of this bill, which is called the GROW Act, 
we will make sure that every single dime you pay in payroll taxes to 
fund the Social Security System goes to Social Security.
  Now, a portion of it will go to current retirees, but the rest will 
no longer be spent for Forest Service pickup trucks or for national 
defense or for welfare benefits, or for any other purpose than Social 
Security. And the way we will do that is to put it into an account in 
your name.
  I think that is a simple, straightforward basic idea that the 
American people can address and they can understand, because it is not 
complicated, and they can embrace and say, well, if we cannot fix all 
the problems with Social Security, we ought to at least get started. 
And I am extremely excited and encouraged that this simple notion of 
taking the Social Security surplus that we will have for the next 
decade and locking it away in individual, and use the overused term 
lockboxes, in the name of each American taxpayer so that we do not 
spend it on any other purpose, I think, is a great idea whose time has 
come.
  By the way, these will be individual accounts. They will be in the 
name of each payroll taxpayer. They will be inheritable. It will be 
their money. Indeed, just to show you how different it is than the 
current system: under the current system, if you pay payroll taxes this 
year, and you pass away 2 years from now, and you are under the age of 
65, that money that you paid in goes away. It is lost forever.
  If we enact this simple bill, locking away just the Social Security 
surplus, and you work for 2 more years after the program goes into 
effect and then you pass away, still under the age of 65, instead of 
getting nothing, your spouse or your children or your grandchildren 
will inherit every dime of that money. It is your money; and when you 
pass away, it becomes their money.
  This is not a gimmick. This is not a paper scheme. This is not a 
ledger entry here in Washington that never matters. This is hard, cold 
cash in the pockets of your children or your grandchildren beginning to 
accumulate the day this legislation takes effect.
  There are lots of other good things to say about it, but I have been 
joined by my colleague from Texas (Mr. Hensarling), and I have talked 
fairly long about this topic for a moment so maybe I will let him chime 
in and vary the discussion a little bit.
  Mr. HENSARLING. Madam Speaker, I thank the gentleman for yielding to 
me, and I especially appreciate his leadership on this issue. Tens of 
millions of Americans, future generations, are going to have their 
retirement security threatened unless we do something and do something 
today. Every day that we postpone trying to help save and reform Social 
Security it is costing us an extra $200 million. The time to act is 
now.
  Madam Speaker, for me this is much more than one's average 
congressional debate. This is something I take very, very seriously and 
very personally. I take it personally because my parents are in their 
70s. Now, Social Security is an important part of their retirement

[[Page 15805]]

security. They worked very hard their whole lives to earn that Social 
Security, and nobody has a plan that will take their Social Security 
away. As their son, as a Congressman, I am dedicated to making sure 
that my parents and every one of that generation gets every penny of 
Social Security that they have earned. I have a sacred obligation to my 
parents.
  I have another sacred obligation. I have a 3\1/2\-year-old daughter 
and a 22-month-old son. And if we do not do something and do something 
today, Social Security as we know it will not be there for my children. 
We are rapidly approaching the point where we are going to lose the 
security from Social Security.
  My colleague from Arizona, who is a great leader on this issue, and 
everyone should appreciate his helping coauthor the GROW account 
legislation, he very ably laid out for the American people, Madam 
Speaker, the challenges we are facing in Social Security. As much as 
Congress would like to, we cannot repeal the laws of demographics. So 
Social Security, as it was envisioned, took money from current workers 
to pay for current retirees. Now, that worked very well 50 years ago 
when we might have had 40 workers paying into a system for every one 
retiree. But that is not true today. Instead, we are down to 3\1/3\ 
workers now supporting every retiree, and we are rapidly on the road to 
having only two workers support every retiree. So we have this 
phenomena of having more and more retirees and fewer and fewer workers 
paying into the system.
  Another challenge we have in Social Security, as far as demographics 
is concerned, is great news for seniors; it is just not particularly 
good news for the Social Security System. When Social Security was 
first created, the average life-span of an American worker was 60 years 
of age. You could not even draw your retirement until 65. Many folks 
had their name called on the roll up yonder before they could ever get 
a penny of retirement. Well, now, thanks to the marvels of modern 
medicine and technology, the average life-span of an American worker 
has increased to 77.
  So, again, Madam Speaker, we have more and more retirees that are 
living longer and longer and fewer and fewer workers supporting them. 
And that is putting an incredible financial pressure on the system.
  Something else it is doing is it is eroding the security in Social 
Security. Look at the amount of money people paid into a system versus 
what they took out. My grandparents, who are decreased, were born 
roughly in 1900. They received about a 12 percent rate of return on 
their Social Security. That is great. My parents, who were born in the 
late 1920s and early 1930s respectively, they receive about a 4 percent 
rate of return on their Social Security. Not bad.
  People in my generation, represented by those who were born in 
roughly 1960, we are getting about 2\1/2\ percent rate on our Social 
Security. That will barely cover the rate of inflation. And my 
children, who I spoke about earlier, they are due to receive a negative 
rate of return.
  Madam Speaker, that is absolutely unfair. We need to do something, 
and we need to do something today. But something as big as reforming 
Social Security needs to be done on a bipartisan basis.

                              {time}  1630

  I wish we could be joined by Members on the other side of the aisle 
who would come in and work with us on a bipartisan basis to try to do 
something about Social Security. Members cannot deny the underlying 
demographic challenges in this program.
  Right now the Government Accountability Office, the Social Security 
trustees, and any agency that has looked at the problem says that the 
unfunded liability of Social Security is now $10.4 trillion. Nobody in 
America knows how much money that is, but to try to bring it down to a 
level we understand, that means every man, woman and child in America, 
to try to solve the long-term fiscal instability of this program, would 
have to write a $30,000 check out today to try to solve that problem. 
Surely that is not going to happen.
  For those who continue to deny the problem, as so many of our 
colleagues on the other side of the aisle do, right now it is written 
in the current law that if we do not act, if we do nothing, if we 
ignore this problem, in 2042, there will be an automatic benefit cut of 
almost one-third.
  Madam Speaker, I may not be here in 2042, but I hope and I pray that 
my children will be, and for generational fairness we need to do 
something.
  What the gentleman from Arizona (Mr. Shadegg) has laid out is a 
simple plan and a very simple first step. I am surprised it is even 
debatable in this body. But for years and years and years the Social 
Security surplus has been taken by Congresses, and I will admit both 
Republicans and Democrats. They have taken the surplus and spent it on 
other areas of government. They have spent it on Medicare wheelchairs 
that cost five times as much as what they did at the VA. They spent it 
on $2 million studies of the sexual habits of older men, and that is a 
study I do not even care to know what the results said. The list goes 
on and on and on.
  That money needs to be dedicated to Social Security and nothing else. 
Those on the other side of the aisle said wait a second, this is very 
risky to create personal accounts for the Social Security surplus.
  Madam Speaker, what is really risky is for Americans to leave their 
retirement security in the hands of Washington politicians and 
bureaucrats. The Social Security trust fund has been raided over 49 
different times. Congress has just stepped in and spent that money on 
something else.
  There have been over 20 tax increases in the Social Security system. 
Every time you are getting the same benefits but your taxes go up, your 
rate of return goes down. We are losing that security out of Social 
Security. There have been multiple benefit cuts. For example, the 
taxation of Social Security benefits that took place in the early 
1980s. Also, very importantly, that the gentleman from Arizona (Mr. 
Shadegg) pointed out, right now we have no ownership rights in our 
Social Security. None whatsoever. There have been several Supreme Court 
cases to tell us that we do not own our Social Security.
  So this is a very simple plan. We know we do have some remaining 
years of surplus: 10, 11, 12 years of surplus remaining. Let us take 
that. Let us dedicate that to Social Security and let us get it out of 
Washington and put it into an account with your name on it that you own 
and that can be inherited and passed on, something that Washington 
cannot waste. What a simple proposition, and I am just saddened this is 
even debatable at this time.
  I hope anyone who is listening to this debate will let their voice be 
heard. We need to enact our grow accounts. We need to keep the security 
in Social Security for future generations.
  Mr. SHADEGG. Madam Speaker, I would like to engage in a brief 
discussion to make this a little more followable or reasonable for our 
listeners to understand.
  Like me, I assume the gentleman has done town halls at home on this 
topic.
  Mr. HENSARLING. Madam Speaker, I have done at least 30.
  Mr. SHADEGG. And what reaction did you get back home when people 
began to learn from at least 1993 forward to today, we have had an 
ongoing surplus of Social Security revenues over the benefits we pay 
out to those currently retired?
  Mr. HENSARLING. Madam Speaker, I think it is one of the most violent 
reactions I have ever seen at a town hall meeting, particularly when 
seniors realize they have worked and paid into this system, and for 
decades, Congress has taken that money and spent it on big government. 
They wanted it stopped today.
  Mr. SHADEGG. Madam Speaker, I am guessing the gentleman's experience 
is like mine, Americans have a simple image in their mind that if these 
are payroll taxes taken to fund Social Security, we ought to be using 
them to fund Social Security.
  Mr. HENSARLING. Madam Speaker, it is a very simple idea and they have 
been told for years that money is in

[[Page 15806]]

the trust fund. In a technical legalistic sense maybe it is in the 
trust fund, but in any practical sense it is not. That money has been 
taken away and an IOU left in its place. That is like a person writing 
an IOU to themself. The only way that IOU can be redeemed is by raising 
taxes on the American people.
  People who are entering the job force today, if we do not do 
something to try to make up that IOU, their payroll taxes are going to 
have to be increased 43 percent and what is that going to do to younger 
families and job creation in America.
  Mr. SHADEGG. Madam Speaker, the gentleman mentioned that we are 
quickly approaching the point where Social Security no longer has the 
word ``security'' in it. I have a female constituent in Arizona, born 
in Hungary, moved to the United States, lived here all her life, paid 
into Social Security. She comes to my town halls, and she used to come 
to my coffee cup meetings on Saturday mornings. Years ago she stood up 
and made it very clear that, based on a point the gentleman made a few 
moments ago, it is not accurately described as Social Security, it is 
more accurately described as social insecurity. Because as the 
gentleman pointed out, the United States Supreme Court has ruled in a 
series of decisions that if the Congress were to decide tomorrow to not 
fund Social Security, to not pay the benefits but to use that money for 
some other purpose, it could do so. If a taxpayer were to sue and say 
no, wait a minute, that is my money that I paid into the Social 
Security system so it would be used for my retirement, that taxpayer 
would simply lose that lawsuit.
  So her description of it is because it is in the hands of the 
politicians and they can take it away at any time, she describes it as 
social insecurity.
  It is important for our listeners to understand these GROW accounts 
would change that and change that forever. We would be taking the 
surplus and putting it aside in the name of the taxpayer, and from that 
instant forward it would be their money and they could keep it. That is 
a dramatic change in the system.
  Mr. HENSARLING. Madam Speaker, it could not be more simple and I 
cannot believe that at least in my district in Texas that 99 percent of 
my constituents would not want to embrace that idea. Such a simple idea 
that number one, Social Security ought to be used for Social Security, 
pure and simple.
  Second of all, you know own it. Washington cannot take it away. 
Social Security is used for Social Security, and you own it and 
Washington cannot take it away. That is what the GROW account is all 
about. There is nothing more to it. It is that simple, yet it is that 
important.
  Again, I think we need to emphasize for those soon-to-be retired, we 
will be running surpluses. These people will be okay, but it is future 
generations. That is the challenge that we face now. Too many people in 
this town care about the next election and not the next generation. We 
could ignore this problem if we wanted to for 5, 10, 12 years, but how 
do you look yourself in the mirror and know that you have set the 
Nation on a course to cut your children and grandchildren's Social 
Security by a full third or to raise their taxes by 43 percent.
  That is why it is so important that we start the GROW accounts, 
dedicate Social Security to Social Security, and let taxpayers own it, 
not Washington.
  Mr. SHADEGG. Madam Speaker, we have been joined by the gentlewoman 
from North Carolina (Ms. Foxx) and I am thrilled to have her join in 
the discussion about what we do about Social Security, reforming Social 
Security, and about the new idea of the GROW accounts, of taking just 
the surplus that Congress has been stealing and spending on general 
government, take that Social Security surplus and dedicate it to 
accounts in the names of individuals so it is their money and so every 
dime of Social Security taxes goes to Social Security.
  Ms. FOXX. Madam Speaker, I thank the gentleman for yielding me this 
time, and all those who have developed the legislation to save Social 
Security which we call GROW.
  I am going to repeat some of the things that both Members have said 
because I think it is important to repeat them. There are many times 
when we have to say the same things over and over in order to get the 
message across.
  We have heard a lot about Social Security reform. I just came here 
this year. This is my first term. I was told it was going to be an 
exciting term, and a lot of things would be done, and I cannot think 
about something more exciting than save Social Security.
  There are a lot of strong opinions about doing this, but we get some 
of our best ideas not from Washington but from places like the Fifth 
District of North Carolina that I represent. That is why I commute to 
Washington to vote but return home every chance I get.
  Recently, as I often do, I stopped by a restaurant in my district to 
have breakfast. While I was there, I engaged the people there in a 
discussion about Social Security reform. I shared with them some of the 
same things you have been talking about, and many people do not 
understand the fundamental facts about Social Security.
  We have got to make sure that our current retirees and those near 
retirement have the peace of mind of knowing they are going to get 
their full Social Security benefits for their entire retirement. The 
government has promised them that, and that is an obligation we have. 
But we also have to make sure that the benefits are there for our 
children and grandchildren. The folks in Bojangles that I talked with 
understand this and certainly agree with us, but we know right now that 
Social Security is financially broken.
  I think that the President has done a good job of explaining that to 
the people, but again over and over we have to say it. As the gentleman 
from Texas (Mr. Hensarling) said, back in 1950, we had 16 workers 
working for every person drawing from Social Security, for every 
beneficiary. Today there are just over 3 workers paying for each person 
receiving benefits. Within two decades only 2 people will be supporting 
each retiree.
  I love his phrase about the law of demographics. He is absolutely 
right. We can repeal a lot of laws here and pass a lot of laws, but we 
simply cannot repeal the law of demographics, and we are facing that in 
this country. We have to deal with it. We have to understand that is a 
reality that has to be dealt with.
  The life expectancy is much longer today than it was when Social 
Security was created. As he said back in 1929, people were only 
expected to live 57 years. In 1937 when Social Security was adopted, 
people were expected to live to only 60. Well, Social Security was set 
up to be drawn out at age 65. The people who set up Social Security 
never expected many people to draw from Social Security. But today, 
most people live to be 80, and it is not too much in the distant future 
that most of us are going to be living to 100.
  The fact of the matter is that Social Security will begin running out 
of money in just 13 years and be completely broke in a matter of 
decades. For the millions of Americans who depend on Social Security, 
it is simply unacceptable. If we do not reform Social Security, taxes 
will have to be doubled or tripled in order for the system to keep its 
promises to future retirees.
  In less than 40 years if we do not make changes, the government will 
have to take at least 30 to 40 percent of every worker's wages to pay 
for Social Security benefits. Compare that to 1940 when workers paid 
only 1 percent of their salary into the system, and that was basically 
the promise that was made when Social Security was adopted.
  President Bush has called on Congress to help fix the Social Security 
system, and I agree with him that we have to take action. I think that 
the GROW accounts are a great step in the right direction. We have to 
protect Social Security benefits for our current retirees and near 
retirees while giving younger workers more ownership and control over 
their Social Security taxes.

[[Page 15807]]

  I like the idea of giving workers control and putting their money 
into their personal accounts. This gives them control over their money 
and the government less opportunity to misuse it. I am confident that 
once people focus on the facts and study this issue, they will realize 
that Social Security reform is essential.
  Many people have been misled about the need for reform. However, once 
they have the facts, and I am convinced of this, they agree that 
something has to be done to protect the retirements of our future 
generations. We have a responsibility to save Social Security so our 
children and grandchildren can receive the benefits that we have 
enjoyed.

                              {time}  1645

  Several different programs have been recommended to deal with the 
Social Security problem, but I am convinced that the plan that has come 
together to be called the GROW accounts is the best plan that we have 
right now to move us in the right direction. As other people have said, 
we have an obligation not only to the people who are currently drawing 
Social Security but those who are coming after us to make sure that 
their money is where they can draw it out and look to their retirement.
  One of the things I ask people about all the time, too, is can 
anybody live on the average benefit that Social Security gives them. It 
is my understanding it is $921. That is the average benefit. So far in 
all the town hall meetings that I have had and all the discussions I 
have had, nobody that I know of says they can live off $921 a month.
  I think that this discussion we have had on Social Security is 
performing a couple of good services for us. One, it is focusing on the 
problems with Social Security; but it is also raising the awareness of 
the American public that you cannot just depend on Social Security for 
your retirement. You have got to be looking to other ways to have the 
kinds of funds that you need to live comfortably in your retirement, 
and I think that that is the other benefit that this discussion on 
Social Security has brought about.
  I again want to commend the gentleman and his colleagues for what 
they have done in bringing to us the GROW accounts, and I want to tell 
you that you have my support on this. This may not be where we end up 
on salvaging Social Security, but it is certainly a step in the right 
direction. As they say, a journey of a thousand miles begins with one 
step. We are taking the first steps. I want to thank you for doing that 
and pledge my support to you in educating the American public about 
this and hope that even more good ideas will come as a result of the 
discussions.
  Mr. SHADEGG. If the gentlewoman will remain for a moment, I would 
like to just ask her, I presume you have done Social Security town 
halls back home.
  Ms. FOXX. We have.
  Mr. SHADEGG. If they went like mine, you got a lot of feedback and a 
lot of confusion about how the Social Security system works.
  Ms. FOXX. We did.
  Mr. SHADEGG. I suppose, like a lot of us, people are confused about, 
well, what is the right overall solution and they are not quite sure 
exactly which reform measure is the right one to do. Is that right?
  Ms. FOXX. That is right. But they do know, as you have pointed out 
before, that they and others have paid money into the government and 
they were expecting to get that money back with some reasonable rate of 
return, some interest paid back on it. That is the deal we made with 
them.
  Mr. SHADEGG. And when they discover, as our colleague from Texas (Mr. 
Hensarling) explained, that we are actually taking that short-term 
surplus that we have, the excess of revenues we are getting in this 
year over the benefits we are paying out this year and we are spending 
it on other things, as he pointed out, we are spending it on 
phenomenally expensive wheelchairs or we are spending it on Forest 
Service pickup trucks or we are spending it on welfare benefits or we 
are spending it on whatever other program is out there and not spending 
their Social Security taxes to set aside for Social Security, not on 
Social Security benefits and not on paying future benefits, what kind 
of reaction did you get from your constituents?
  Ms. FOXX. They are very upset by that. And the question is, why have 
you been spending the money? I am in the fortunate position, I have not 
been in Congress before, so I can say, I did not do that, although the 
gentleman from Texas is absolutely correct, it has been done by both 
Democrats and Republicans, so we have to fix this situation.
  Mr. SHADEGG. I think it is a fair question for us to ask as Members 
of Congress today, and I think the gentleman from Texas was very fair 
on that point, both Republican Congresses and Democrat Congresses have 
used the Social Security surplus for non-Social Security purposes. I 
guess the question, though, that I want to ask you and a question that 
I have thought about is, could I go home to my constituents and justify 
to them that it is appropriate for me to take their Social Security 
taxes and spend them on some other purpose? I think the answer for me 
is no. Have you given that question some thought?
  Ms. FOXX. I have. I agree with them. And when my constituents say 
that to me, again through this education process, they have learned the 
problems that have been created by Social Security and, again, they 
have understood these laws of demographics that we have explained. They 
want us to stop this. It is a pretty simple thing. Most of the people 
in my district are just down-to-earth folks with a lot of common sense. 
There is some sort of rule, what is that law, when you are in a hole, 
the first law is to stop digging. They just say to me, just quit doing 
it.
  Mr. SHADEGG. Just quit digging. Quit stealing that Social Security 
surplus and spending it on other things.
  Ms. FOXX. That is right. So the proposal you have made I think is 
again a step in the right direction. Down the road we may find that we 
have to do other things, but the most important thing is to get people 
to get control of their retirement. As I said, I think that this issue 
has brought up the point that they cannot just depend on the Federal 
Government to look after them. I think we have performed a cruel hoax 
actually on the people of this country by letting them think that their 
Social Security was going to take care of them in the manner to which 
they have become accustomed. It is only one part of it, but it should 
be a secure part of their retirement. As the gentleman from Texas has 
said, the security part has gone away.
  Mr. SHADEGG. I want to thank the gentlewoman for her contribution to 
this discussion and invite her to stay and discuss it further.
  I do want to build on a couple of points she made. First of all, I 
want to make it clear that this is not my idea. I am one of the people 
advancing it. Here in the House, it will be introduced by the gentleman 
from Florida (Mr. Shaw). I think his name will be the second on the 
bill. The first name on the bill will be that of the gentleman from 
Louisiana (Mr. McCrery), who is the chairman of the subcommittee on 
Ways and Means that deals with Social Security, so it will be the 
gentleman from Louisiana (Mr. McCrery) and then the gentleman from 
Florida (Mr. Shaw) and then the gentleman from Wisconsin (Mr. Ryan) 
along with the gentleman from Texas (Mr. Sam Johnson). Those will be 
the original cosponsors along with myself here on the House side.
  But I think there are literally dozens, maybe even hundreds, I would 
hope, of Members here on the House side who will be cosponsors of the 
bill when it is introduced. I have to give credit where credit is due. 
The original idea, as I mentioned earlier, was brought to the Congress 
by my former colleague here in the House, now a member of the United 
States Senate, Jim DeMint, and there are at least 11 Senators who have 
already signed on as a coalition to try to build support for this idea 
on the Senate side as well. I think it is important that we build 
momentum for that.

[[Page 15808]]

  When we have these discussions, it is useful for the listening 
audience to know that they can go other places to learn more. The 
policy committee which I chair has a Web site with substantial 
information about this idea of taking the Social Security surplus and 
dedicating it to individual accounts for individual taxpayers and 
making it their money forever; but I am certain that at your personal 
Web site and at my personal Web site, they can gather other information 
and learn about it.
  The thing that occurred to me in that question about how do you 
oppose this, and our colleague from Texas (Mr. Hensarling) said, Gosh, 
I don't even understand why this is even debatable, I would hope that 
Members listening to this debate, but, hopefully, Americans listening 
to our discussion tonight, might say to themselves, I would like to 
learn a little bit more about GROW accounts, I would like to at least 
ask my Member of Congress whether she or he thinks it is appropriate to 
take my payroll taxes that I pay in for Social Security and spend those 
on something other than Social Security, whether it is wheelchairs or 
jet airplanes; and if they say, no, it is not really appropriate to 
take the payroll taxes that I pay in for Social Security, FICA, that I 
get on my little pay stub and use those for something else, to ask 
their Member of Congress whether she or he will vote to dedicate the 
Social Security surplus, we have 10 more years of surplus that we know 
of without any reform at all, we have 10 more years of surplus, do you 
favor allowing the Congress to continue to steal that money and spend 
it on other things, agricultural programs, you name it, or will your 
Member of Congress agree to vote to dedicate the payroll taxes that we 
raise for Social Security solely to Social Security?
  I certainly hope that Americans across the country when they see 
their Member of Congress this coming weekend or sometime over the 
August break, I hope they will confront them and ask them that question 
because I think it is the question we have to answer. Maybe we cannot 
solve the whole Social Security problem in a single blow. Maybe we 
cannot do it all at once; but the one thing we can do, and I like the 
way you say it, we can stop digging the hole deeper by taking the 
Social Security surplus and spending it on something other than Social 
Security.
  Ms. FOXX. I think that is a very, very fair question. I think you are 
absolutely right. The challenge is to get a majority of the Members of 
Congress, in the House and the Senate, to commit to doing this. It is 
the only fair thing to do. Again, it is such a commonsense issue. The 
people of this country understand that is their money, they have worked 
hard for it, they and their employer are putting that money aside and 
they expect to be able to get that money back, again with some 
reasonable amount of interest when it comes time for them to retire.
  People can find more information on the Internet these days than I 
ever even wanted to know, but they can get in touch with their Member 
of Congress, they can find out where he or she stands on the GROW 
accounts and where he or she stands on the issue of saving Social 
Security. I would encourage them to do so.
  Mr. SHADEGG. I actually am going to spend a little time now trying, 
hopefully, to bring anybody who maybe joined this discussion late up to 
speed on this particular idea, and I want to do it first graphically.
  In this discussion tonight, we have talked about what is happening 
with Social Security and the whole notion of Social Security reform; 
but we have tried to focus on a simple idea that has come forward 
recently to deal with the several problems that are confronting the 
Social Security program.
  The biggest problem, of course, is that demographics make it 
unsustain-
able over time. We have too few people working and paying in benefits 
for the number of retirees. We have already heard about that tonight. 
In the long run, we are going to run out of money; but in the short 
run, we have a surplus and there is an idea that I think will protect 
America's taxpayers and strengthen our Social Security system that has 
just surfaced here in Washington within the last 3 or 4 weeks that I 
think is a brilliantly simple idea, and I want to try to explain it.
  It is embodied in a bill called the GROW Act; Growing Real Ownership 
for Workers Account is the name of the act. It is being introduced here 
on the House side by several Members of the Ways and Means Committee, 
led by the gentleman from Louisiana (Mr. McCrery) and on the Senate 
side by Senator Jim DeMint and 11 of his colleagues.
  I just want to explain very simply the concept of the bill. First of 
all, I have got a blank piece of paper here. I want to just graphically 
show what is going on with Social Security. The first thing I want to 
do is put a line on the chart which shows the benefits that we are 
currently paying out. Those benefits are fairly level. That line just 
runs across the chart from left to right. You can see benefits just 
move across that line. That is the amount of money we have to pay out 
each year to retired Americans.
  I want to start with today, and I want to show revenues. To show 
revenues, I want to show kind of the graphic notion of this temporary 
surplus. Right now, we are bringing in more money than we are spending 
in benefits. So the surplus stands out here. But that surplus begins to 
go down just like that. All of this is money that we are collecting in 
excess of what we are spending in benefits. So this is the benefit 
line, I will label it ``benefit,'' and this is the revenue line. You 
can see because the revenue line is above the benefit, we have more 
money coming in in Social Security taxes today than we are paying out 
in benefits.
  What that says is that today's retirees and near retirees are secure. 
We are not going to do anything to touch their benefits. If you are 55 
years of age or older in America, you are safe. But let us put a date 
on this. This is 2005. This year is 2017. What happens is that in 2017 
that surplus disappears, and we begin to have a deficit. That will be a 
line that goes down like this. We have to deal with our ability to pay 
our benefits during these years by using the trust fund.
  But the question is, what do we do with this surplus? I am going to 
label it ``S'' for the surplus. That is the money we have that comes in 
in payroll taxes that my constituents have deducted from their 
paychecks and it says FICA on it and that is the amount of money that 
is not needed to pay benefits. That is extra money.
  What we have been talking about here tonight is that extra money 
every year since 1983 with only two exceptions has been spent by 
Congress on something other than Social Security. They may be good 
things. They may be welfare benefits for those in need. They may be 
forest fire fighting. It may be spent for missiles or tanks for our war 
in Iraq, but it is being spent on something other than Social Security. 
Fundamentally, the American people deserve to have their payroll taxes 
that are collected to fund Social Security spent on Social Security.

                              {time}  1700

  What the GROW Act does, this bill that is being proposed here on the 
House side and there on the Senate side to deal with at least a part of 
the Social Security problem, is to say we need to stop spending this 
surplus, and I am going to label the surplus as showing this block of 
money right here, that block of money, that we need to stop the 
practice of spending that Social Security surplus on things other than 
Social Security.
  It is pretty simple when we look at it graphically. Social Security 
money should be spent to pay for Social Security benefits, and if there 
is a surplus, we should set it aside to pay the Social Security 
benefits of those who will retire in years to come.
  Let me go through just a simple kind of a Q&A session about what this 
bill does because it might help people, and then I would urge people to 
get on the Web site of the Policy Committee or to get on the Web site 
of the Republican conference here in Washington and look at what this 
bill does and how it

[[Page 15809]]

works. But before I do that, let me go through a Q&A, just kind of a 
basic so people can understand what we are talking about.
  First question: What will the GROW Act do? Simply put, it stops the 
government from spending the Social Security surplus, a person's 
payroll taxes paid to fund Social Security when they retire, on 
anything other than Social Security. Again, in almost every year since 
1983, Congress has spent this surplus of payroll taxes over payroll 
benefits on something other than Social Security.
  How would we stop doing that, how will Congress stop spending that? 
The answer is we are going to put it into individual accounts. We will 
take this surplus. We will divide it by the number of Americans who are 
paying payroll taxes, and we will put it aside in an account with their 
name on it. From that instant forward, it is their money. It will be in 
an individual lock box, and that will change the way the program works 
rather dramatically. For one thing, as the gentleman from Texas (Mr. 
Hensarling) pointed out a few moments ago, people's current Social 
Security benefits are not guaranteed. If the government changes its 
mind, if Congress were to change its mind and stop paying those 
benefits or even reduce, people lose to that degree. Once we start 
taking this money and put it into a GROW account with their name on it, 
in my case, my daughter is young enough to enroll in this program. It 
would only apply to Americans under age 55. She can enroll and her name 
would be on an account. It would say ``Courtney Shadegg,'' and a 
portion of the payroll taxes that she is paying in would go into that 
account in her name. If she were to pass away today, God forbid, she 
would get nothing and she would have nothing as an asset in her estate 
to pass on. But the moment we establish these GROW accounts, she would 
have the money in that account to give to her children if she wanted 
to.
  People say to their themselves how much money in this surplus would 
that amount? If I am just an average worker in America and you take, 
Congressman, that surplus and you allocate it in my name, over the 10 
years that we have left during which there is clearly a surplus, 
without any other reform, how much money would it amount to? Well, in 
typical Washington terms, they give us the gross number, and it is $790 
billion. But what does that mean for me, individual? On average it 
means that every single working American paying Social Security taxes 
right now would have roughly $5,000 in this account in 2017, just 10 
years from now. If we were to start the accounts this year, in roughly 
10 years, they would have $5,000 in an account in their name that they 
could pass on.
  Now, what happens to that money if one passes away? The answer is it 
is their asset. It is just like the car they own today or the savings 
account they own today or the bank account or the money in their 
checking account. If they pass away, that money goes, all of it, 100 
percent of it, to their spouse or, if they are unmarried or divorced, 
it goes to their other heirs. It can go to their children or their 
grandchildren or to their brother or sister or whoever they want to 
leave it to just like any other asset that they own.
  How does it affect current retirees? It does not affect current 
retirees. Current retirees are secure because we do not need this money 
to pay their benefits. This is, after all, the surplus after the 
benefits have been paid.
  What is the budget impact of establishing these GROW accounts? I 
would call it truth in budgeting. What it says is that once we 
establish a GROW account and stop taking the Security Social surplus 
and spending that money to fund other operations of the government, we 
will be able to see the real deficit each year, and that way we will be 
able to know honestly and straightforwardly how much money we have.
  What is the upside of these accounts? Well, there are so many 
upsides, it is hard to explain. Number one, it is a person's asset. 
They can keep it. Number two, initially they get to invest it in a 
treasury fund. For the first 3 years they may buy a treasury bill, and 
that is all they will be able to do is buy a treasury bill with it. But 
that treasury bill will be absolutely as secure as the Social Security 
funds are today, and indeed I will argue it will be more secure because 
it is theirs forever and the government cannot take it away. But 3 
years from now the legislation provides that a board, an independent 
board, will be able to open up these GROW accounts so that they can 
invest them in other vehicles. They can invest them in an investment 
vehicle or an investment opportunity that would make a slightly better 
rate of return.
  They will not be able to invest them wherever they want. They will 
not be able to invest them in any risky scheme, and they will not be 
able to pick a private firm to invest them for them. But they will be 
able to direct how they are invested, whether they leave them in a 
treasury or whether they put them in one of two or three other 
investment options. And I want to talk about that in a moment.
  But there are two other basic things I want to touch upon. First, 
what about the issue of solvency? Well, GROW accounts alone will not 
solve the solvency problem. But they actually do make the solvency of 
the current system better. They make it better by roughly 2 years if we 
enact no other reform.
  Let me see if I understand this, Congressman. You are telling me that 
this is a portion of the solution to the Social Security problem, it 
will set up a GROW account, we will stop spending the surplus on things 
other than Social Security; so every dime of Social Security taxes 
collected will go into Social Security and it also helps make the 
program more solvent over time?
  I ask who would oppose that?
  Before I conclude, and I do not know quite how much time I have left, 
but I would like to talk about the whole notion of personal accounts 
versus private accounts. This is a topic that has been discussed a lot 
in the press, and I would dare say that many people in the public do 
not understand the difference between a personal account and a private 
account, and yet there are dramatic differences. Although they right 
now is that Republicans call them personal accounts or individual 
accounts and Democrats call them private accounts. But that is not 
true. There are dramatic, substantive differences.
  Under this proposal the individual accounts that would be established 
would remain in the hands of the government. They would go to a 
contract manager, who would manage them for everybody and who would put 
them only in very, very safe investments. The three most likely 
investments are: a municipal bond index fund; the second one is a 
corporate bond index fund; and the third would be a stock index fund.
  What do those terms mean? Number one, since this would be a decision 
made by an entity that was working for the government and it would be 
made for all of the money in the account, a person as an individual 
would not have to be particularly shrewd or in any way savvy about the 
markets to be able to participate because they are not going to pick 
the individual stock or the individual bond in which the money is 
invested. Rather, they will be given, like those of us in the Federal 
Thrift Savings Plan, a choice of probably three different investments 
or four different investments. They can leave it in a treasury, they 
can put it in a municipal bond index fund, a corporate bond index fund, 
or a stock index fund. And each of those will have slightly greater 
return.
  So people do not need investment knowledge and that is very important 
because some critics say that one has to be a savvy investor to be able 
to make this work. That is simply not true.
  The other point is that, because the investment decisions are made by 
an entity contracting with the government, the management fees are 
extremely low, and because they are managing a huge amount of money, 
the cost of investing remains extremely low.
  The last point I want to make is the restriction and the difference 
between a personal account and a private account is not just that the 
government

[[Page 15810]]

will control the funds that are picked and the manager of those funds, 
but also people will not be able to invest them in risky investments. 
Unfortunately, both Chile and England allowed true private accounts 
where they picked their individual stock market in which to place the 
money and they picked the broker and the fees were high and the 
investments were risky. That is not what is being talked about here.
  I urge Americans to study the issue of GROW accounts. There is, I 
think, in reality no downside to these accounts. They enable the 
Congress to stop spending Social Security on anything other than Social 
Security, and they let each American have an individual share of the 
Social Security surplus that is theirs forever and can never be taken 
from them.

                          ____________________