[Congressional Record (Bound Edition), Volume 151 (2005), Part 5]
[Senate]
[Pages 5912-5913]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            SOCIAL SECURITY

  Mr. REED. Mr. President, I rise to express my deep concern about the 
negative impact the President's proposals that carve out private 
accounts will have on our Social Security system and also on our 
mounting Federal debt and the solvency of our Social Security Program 
in general and, ultimately, the economic prosperity of the Nation over 
many years.
  President Bush's plan to create private accounts within Social 
Security would lead to the following, I believe, very unfortunate 
effects:
  It would require a massive increase in Federal debt.
  It would weaken the Social Security solvency.
  It would not increase national savings and could lower it. National 
savings is a key function of our economy. Without national savings, we 
do not have the pool of capital we need for investment, innovation, and 
economic progress.
  Finally, it would sharply cut the guaranteed Social Security benefits 
under the President's preferred full plan.
  Let me go into some detail on these issues, drawing upon the 
excellent work of the Democratic staff of the Joint Economic Committee. 
I am very privileged to be the ranking member of the Joint Economic 
Committee. We have assembled a staff of professionals who have looked 
at all of these issues in great detail. They have concluded, as I 
suggested, that there are serious problems, not only in terms of 
solvency of the fund, not only in terms of the increase in Federal 
debt, but also large cuts in the guaranteed benefits of all of the 
beneficiaries. That will be a very unfortunate and, indeed, unnecessary 
consequence of any proposed reform of Social Security.
  Let's take a look at this first chart. It lays out the debt issue 
with respect to Social Security. First, the President has proposed that 
his plan for private accounts and Social Security reform would begin in 
the year 2009. He has put no money into his budget or his long-term 
budget. Typically, when we budget, we at least look ahead 10 years.
  In that first 10-year increment, which would be precisely from 2006 
to 2015, there would be an increase of $754 billion as a result of 
these private accounts. Again, beginning in 2009 and essentially 
stretching to 2015, you would accumulate almost $1 trillion, $754 
billion of debt.
  But the real staggering number is the first 20 years of these 
programs if the private accounts are made law. That increased debt 
would be $4.9 trillion, an extraordinary amount of money. Again, I 
believe it is appropriate to look at least 20 years. We are talking 
about solvency for the fund for 75 years. Just in the 20 years, we 
would have almost $5 trillion in additional Federal debt.
  The other issue that is important to point out is that this debt is 
on top of existing debt. This chart just describes the rapid increase 
of Federal debt as a result of private accounts from the year 2010 to 
the year 2060. By 2060, 35 percent of GDP will be equal to the debt we 
have accumulated for private accounts. I think we will stop for a 
moment: 35 percent of GDP; the debt will equal 35 percent of gross 
domestic product in the year 2060, but add that to current debt, the 
debt we are funding to operate our Government, and by 2060, the 
staggering total of debt relative to GDP is 70 percent.
  We have not run those debt levels since the end of World War II in 
which we all know we dedicated every resource we had to defeat the 
Axis. This is a much different world than 1945 and 1946. In 1945 and 
1946, we were at the sanctuary, if you will, of economic productivity 
for the world. Our infrastructure had not been destroyed. We had tooled 
up to create the most technologically advanced military force in the 
world. We quickly transitioned our tanks to Oldsmobiles and Chrysler 
automobiles and washing machines. Now we are in a world of intense 
competition, global competition, and if we believe we can live with 
debt equal to 70 percent of our gross domestic product, I think that is 
a fanciful notion, but that is the consequence of the President's 
proposal for private accounts.
  The other point we should note, too, is that this proposal for 
private accounts actually accelerates the insolvency of the Social 
Security fund. Again, the President's proposal is premised on saving 
Social Security, of making it more solvent. His private accounts would 
accelerate the insolvency date. This chart shows current law. Again, it 
is a function of GDP, but it shows where the fund's assets cross the 
zero line, and that is about 2042. The President's proposal of private 
accounts would drive the funds into insolvency much earlier--about 
2030. It makes no sense to me, if your goal is to increase the solvency 
of the fund, to have a proposal that actually weakens solvency. In a 
sense, searching for an analogy, if the boat is leaking, don't break a 
big hole in the bottom and have more water come in. That is not the way 
you save a leaking ship.
  Turning away from the charts, let's go to the mathematics of how this 
all works.
  The current Social Security shortfall, an estimate by the trustees, 
the actuaries of the Social Security Administration, is minus $4 
trillion. That is how much money we would have to have today to cover 
the shortfall for the next 75 years.
  Here is what the President's plan for private accounts does: First, 
it costs $4.7 trillion, so that is an additional $4.7 trillion. But 
what the President

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proposes is that there is essentially a privatization tax, that those 
private account holders will have to pay back some money at the time 
they exercise their retirement benefits. That is $3.1 trillion. Still 
we have a gap of $1.6 trillion, the net cost of the private accounts.
  Add that to $4 trillion and now we have a shortfall of $5.6 trillion. 
We have created a bigger problem; we have not solved the problem.
  The next table also suggests the possible consequences on national 
savings. Again, national savings is a key macroeconomic construct when 
it comes to progress in terms of our economy because it is from those 
national savings which we draw the investment capital and resources to 
train people, to innovate new equipment, to invest in new plant and 
equipment.
  This is what happens, and national savings is a simple function of 
private savings, what you and I, our households are saving, together 
with public savings, what the Government is saving. We have stopped 
saving. We were saving, which means we had a surplus, until 2000, 2001, 
and now we are in a huge deficit, about $450 billion a year.
  Let us see what would happen with these private accounts. First, the 
public borrows more money. Public savings go down. Private savings go 
up because we give that money back to people and say now put it into 
the stock market. The net effect is zero at best, but it could even be 
worse than that because something could happen in terms of public 
behavior.
  First, they could reduce their current savings saying, well, I do not 
have to save anymore for contingencies because now I have this private 
savings plan. It is a possibility. To what extent it happens in 
reality, it is a projection, but that is a possibility.
  The second is early retirements for these funds. My sense is, every 
time we have constructed some type of retirement benefit we have found 
ways to allow people to borrow from it for emergencies. We will 
probably do the same here. But even if those factors do not take place, 
zero national savings at best. We need to develop policies that 
encourage national savings. We should not be devoting huge tax cuts for 
wealthy Americans. We should be devoting tax cuts to encourage average 
Americans to save more, and we cannot do both if we have a deficit. My 
preference obviously would be to encourage average Americans to save 
more.
  Now, chart No. 5 walks through the effect on individuals. The 
President has not offered a plan yet. He has been talking about it 
around the country, but the suggestions, the intimations are that in 
order to help address the solvency problem he is going at benefit 
payments. Essentially, the Commission to Strengthen Social Security put 
out the blueprint, and this blueprint would suggest cuts in benefits. 
One proposal was moving away from wage replacement to simple cost-of-
living increases in benefits. That would effectively be a cut over 
time.
  If we look at the combination of guaranteed benefits and the best 
estimates of the yield on private accounts, here is what happens over 
time. This is from the Congressional Budget Office. The average earner 
retiring in the year 2005 is protected. I think we recognize that 
because we have not made a change yet. By 2015, however, if one is 
participating in private accounts, they are doing worse than this 2005 
beneficiary, and it goes down all the way. We can see as the guaranteed 
benefits decrease, the private accounts do not make up the difference, 
and this is some of the work of CBO.
  So we have a situation that, frankly, is not a good deal for the 
retirees and not a good deal for the country when the debt is increased 
so precipitously. More national savings are not encouraged. A situation 
is created in which the problem is not getting fixed but is being made 
worse in so many different dimensions.
  When we look at this issue of benefit payments, many people fail to 
recognize that this is not just about retirees. I have a retiree here. 
There are a significant number of Americans who collect Social Security 
because they are disabled. They will not have the benefit of private 
accounts because by definition they cannot work. They are disabled. So 
they are not going to be taking their paycheck each month and putting 
it into their private account. All the most vulnerable Americans are 
going to see is a benefit reduction, and that is not fair. It is not 
smart either.
  Moreover, there is a suggestion that this is just an issue for 
seniors and that is all. The Social Security Administration has an 
interesting statistic, at least I found it very interesting. Their 
estimate is, of the cohort of 20-year-olds who are out there today just 
joining the workforce, who are healthy and running around, who have no 
immediate cares for retirement like middle-aged people, that 3 out of 
10 will become disabled before they reach 65 years old. So I ask, where 
are they going to get the disability insurance to cover the benefits 
that today Social Security pays to people who become disabled? They 
cannot afford it. They will not buy it. There will be some disability 
program, but it will not be the kind of program that today provides at 
least some modicum of support for individuals who have been disabled 
through no fault of their own.
  This is a topic that will be discussed again and again, but it is 
important to look at these issues and to make a practical and pragmatic 
assessment. That is what the American people are doing today. They are 
looking at the proposal of private accounts. They are seeing it 
jeopardize our economic future and seeing it eventually cut their 
prospects for retirement or for protection if they become disabled, and 
they are rejecting it out of hand. I think they should.
  We have to continue to keep the focus on this particular proposal.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. THOMAS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Sununu). Without objection, it is so 
ordered.
  Mr. THOMAS. Mr. President, I ask unanimous consent to speak as in 
morning business.
  The PRESIDING OFFICER. We are in morning business. The Senator is 
recognized.

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