[House Report 105-738]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     105-738
_______________________________________________________________________


 
                    PROTECT SOCIAL SECURITY ACCOUNT

                                _______
                                

 September 23, 1998.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

_______________________________________________________________________


    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 4578]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 4578) to amend the Social Security Act to establish 
the Protect Social Security Account into which the Secretary of 
the Treasury shall deposit budget surpluses until a reform 
measure is enacted to ensure the long-term solvency of the 
OASDI trust funds, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
  I. Introduction.....................................................2
        A. Purpose and Summary...................................     2
        B. Background and Need for Legislation...................     2
        C. Legislative History...................................     3
 II. Explanation of Provision.........................................4
III. Votes of the Committee...........................................5
 IV. Budget Effects of the Bill.......................................6
        A. Committee Estimate of Budgetary Effects...............     6
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures.........................................     6
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................     6
  V. Other Matters Required To Be Discussed Under the Rules of the 
     House............................................................7
        A. Committee Oversight Findings and Recommendations......     7
        B. Summary of Findings and Recommendations of the 
            Government and Oversight Committee...................     7
        C. Constitutional Authority Statement....................     7
 VI. Changes in Existing Law Made by the Bill, as Reported............7
VII. Dissenting Views.................................................9

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. ESTABLISHMENT OF SPECIAL RESERVE ACCOUNT.

    Section 201 of the Social Security Act is amended by adding at the 
end the following new subsection:
    ``(n)(1) There is established within the Treasury a special reserve 
account to be known as the `Protect Social Security Account' 
(hereinafter in this subsection referred to as the `account'). The 
account shall be used to save budget surpluses until a reform measure 
is enacted to ensure the long-term solvency of the OASDI trust funds.
    ``(2) The Secretary of the Treasury shall pay into the account 
annually at the end of each fiscal year during the fiscal-year period 
beginning on October 1, 1997, and ending on September 30, 2008, amounts 
totalling, in the aggregate, 90 percent of the projected surplus, if 
any, in the total budget of the United States Government for that 
fiscal-year period.
    ``(3) For purposes of determining budget surpluses under paragraph 
(2), within 10 days after the date of enactment of this subsection, the 
Secretary of the Treasury, in consultation with the Director of the 
Office of Management and Budget, shall project the budget surplus, if 
any, for the total budget of the United States Government for the 
fiscal-year period beginning on October 1, 1997, and ending on 
September 30, 2008.
    ``(4) The Secretary of the Treasury shall invest the funds held in 
the account pending enactment of the reform measure referred to in 
paragraph (1). The purposes for which obligations of the United States 
may be issued under chapter 31 of title 31, United States Code, are 
hereby extended to authorize, in the manner provided in subsection (d), 
the issuance at par of public-debt obligations for purchase for the 
account. The interest on, and the proceeds from redemption of, any 
obligations held in the account shall be credited to and form a part of 
the account.
    ``(5) As used in this subsection, the term `total budget of the 
United States Government' means all spending and receipt accounts of 
the United States Government that are designated as on-budget or off-
budget accounts.''.

SEC. 2. EFFECTIVE DATE.

    The amendment made by section 1 shall apply to fiscal years 
beginning on or after October 1, 1997.

                            I. INTRODUCTION

                         A. Purpose and Summary

    The bill to establish the ``Protect Social Security 
Account'' would reserve ninety percent of the anticipated $1.6 
trillion budget surplus into a special account. The $1.4 
trillion would be held until a measure is enacted to ensure the 
long term solvency of the Social Security system.

                 B. Background and Need for Legislation

    For the first time since 1969, the federal government will 
end the current fiscal year with a budget surplus of $63 
billion. Repeated and growing surpluses are now estimated for 
the coming decade by both the Congressional Budget Office and 
the Administration. These cumulative surpluses are forecast to 
total $1.6 trillion through fiscal year 2008 and are due to 
higher income tax payments and low inflation. According to the 
Congressional Budget Office's latest estimates, income tax 
revenues are up by $500 billion, corporate income tax revenues 
are up by $100 billion and government spending is down by $700 
billion.
    While the overall fiscal situation is optimistic, the long-
term financial position of the Social Security program is not. 
The latest report from the Board of Trustees of the Social 
Security Trust Funds indicates insufficient cash receipts for 
expected outlays to occur in 2013, creating a fiscal imbalance 
in the total budget. Money generated through converting the 
government bonds held by the Trust Funds will cover expenses, 
but these funds will have to be raised by borrowing in the debt 
markets or altering tax and spending policies to create surplus 
receipts elsewhere in the budget. In 2032, the fund will be 
drained of government bonds and no longer have either the 
authority or resources to pay promised current law benefits.
    Problems and possible solutions to the insolvency of Social 
Security were investigated in a series of eleven hearings 
entitled ``The Future of Social Security for this Generation 
and the Next'' by the Subcommittee on Social Security during 
1997 and 1998. Some solvency proposals used all or part of the 
estimated budget surpluses to finance Social Security reform. 
President Clinton, in his State of the Union address expressed 
his commitment to save Social Security--reserving one hundred 
percent of future budget surpluses until necessary measures 
have been taken to strengthen the Social Security system.
    Since the start of fiscal year 1998, the surplus forecast 
for fiscal years 1998-2008 has grown from a cumulative $680 
billion to $1.6 trillion by the Congressional Budget Office 
revised estimates. In response to this, several members of 
Congress have proposed mechanisms to save all or a portion of 
these growing amounts for Social Security.
    H.R. 4578, a bill to establish the ``Protect Social 
Security Account'' addresses the significant economic and 
fiscal challenges that lie just over the budget horizon by 
reserving nearly all (ninety percent) of the budget surplus in 
the coming decade until a solution to Social Security is 
enacted. The bill creates a new account into which the 
Secretary of the Treasury must deposit the unified budget 
surplus annually beginning in fiscal year 1998 and continuing 
until fiscal year 2008. In this manner, the growing surpluses 
will be clearly identified as resources available for 
preservation and solvency of the Social Security system.

                         C. Legislative History

    Since March of 1997, the Subcommittee on Social Security 
has held a series of eleven hearings, including testimony from 
eighty-eight witnesses, addressing the long-range insolvency of 
the Social Security system under present law and options for 
reform. Witnesses included: Members of Congress, the 
Commissioner of Social Security, representatives from the 1994-
1996 Advisory Council on Social Security, members of the Social 
Security Board of Trustees, representatives from the General 
Accounting Office, representatives from the Congressional 
Research Service, economists, social insurance policy experts, 
academics, representatives from business and labor groups, 
investment and financial experts, representatives from State 
and local government groups, advocates for people affected by 
proposed changes to the system, experts on social insurance 
programs in other countries and public opinion experts.
    On March 5, 1998, Mr. Bunning introduced H.R. 3351, a bill 
to establish a ``Protect Social Security Account'' in the 
Treasury into which would be deposited one hundred percent of 
the unified budget surplus until such time as a solution to 
Social Security's long-term problem is enacted. On September 
17, 1998, Mr. Rangel introduced H.R. 3207, a bill to establish 
a ``Save Social Security First Reserve Fund'' in the Treasury 
into which would be deposited one hundred percent of the Social 
Security surplus until such time as a solution to Social 
Security's long-term problem is enacted. On September 16, 1998, 
Mr. Archer introduced H.R. 4578, which would establish the 
``Protect Social Security Account'' in the Treasury into which 
would be deposited ninety percent of the unified budget surplus 
until such time as a solution to Social Security's long-term 
insolvency is enacted.
    On September 17, 1998, the Full Committee ordered favorably 
reported, H.R. 4578, as amended, a bill to establish the 
``Protect Social Security Account,'' by a voice vote with a 
quorum present.

                      II. EXPLANATION OF PROVISION

         A. Section 1. Establishment of Special Reserve Account

Current law

    The unified budget surplus represents the receipts and 
outlays of both on and off-budget activities. Budgetary 
surpluses, if not otherwise utilized for increased spending or 
tax reductions, automatically retire the publicly-held debt as 
it matures and surplus receipts become the means of financing 
government activities. The Congressional Budget Office 
estimates that the fiscal year 1998-2008 unified budget surplus 
will reach $1.6 trillion.

Explanation of provision

    This provision would create a new Treasury account, the 
``Protect Social Security Account'' into which would be 
deposited a portion of the unified budget surplus beginning in 
fiscal year 1998. At the end of each fiscal year, amounts would 
be paid into the account by the Secretary of the Treasury so 
that over the FY 1998-2008 period, ninety percent of the 
surplus ($1.6 trillion according to current Congressional 
Budget Office estimates), would be deposited in such account. 
Prior to the first deposit, the Secretary of the Treasury in 
conjunction with the Office of Management and Budget would 
estimate the budget surplus for the period.
    Payments to the account are made in anticipation of 
legislation correcting the long-term insolvency of the Social 
Security system. Deposits to the ``Protect Social Security 
Account'' would be made in the same form of federal securities 
as deposits into the Social Security Trust Funds (non-
marketable securities).

Reason for change

    Congress has adopted long-term, progressive fiscal policies 
that have brought the Federal budget into balance for the first 
time in almost thirty years and a $1.6 trillion surplus is 
estimated for the next 10 years. The Social Security program, 
however, faces looming insolvency and instability in the 21st 
century. The approaching retirement of the Baby Boom generation 
will result in the Social Security program spending more than 
its annual Federal Insurance Contributions Act (FICA) tax 
income beginning in 2013. By 2032 the Social Security Trust 
Funds will be fully depleted and the system will be able to 
honor only seventy-five percent of current law benefit 
commitments.
    Social Security programs provide benefits to forty-four 
million Americans, including more than twenty-seven million 
retirees, more than 4.5 million people with disabilities, and 
close to 2 million surviving children, and is essential to the 
dignity and security of the Nation's elderly, disabled, and 
their families. Prompt action is necessary to restore 
Americans' confidence that their retirement benefits will be 
protected.
    The Federal budget surplus should be reserved until a 
solution is reached to preserve, strengthen, and protect the 
retirement income security of all Americans through the 
creation of a fair and modern Social Security program for the 
twenty-first century that ensures equal treatment across and 
within generations to all Americans; provides a continuous 
benefit safety net for workers, their survivors, and 
individuals with disabilities; and protects benefits for 
current retirees and those nearing retirement.

Effective date

    This provision applies to fiscal years beginning on or 
after October 1, 1997.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statements 
are made concerning the votes of the Committee on Ways and 
Means in its consideration of the bill H.R. 4578.

                       Motion to Report the Bill

    The bill, H.R. 4578, as amended, was ordered favorably 
reported on September 17, 1998, by voice vote with a quorum 
being present.

                          Votes on Amendments

    A rollcall vote was conducted on the following amendment to 
the Chairman's amendment in the nature of a substitute.
    An amendment by Mr. Rangel to reserve the entire amount of 
the Social Security surplus by transferring the annual Social 
Security surplus to the Federal Reserve Bank of New York, was 
defeated by a rollcall vote of 15 yeas to 22 nays. The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
         Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer......................  ........        X   ........  Mr. Rangel........        X   ........  ........
Mr. Crane.......................  ........        X   ........  Mr. Stark.........        X   ........  ........
Mr. Thomas......................  ........        X   ........  Mr. Matsui........        X   ........  ........
Mr. Shaw........................  ........        X   ........  Mrs. Kennelly.....  ........  ........  ........
Mrs. Johnson....................  ........        X   ........  Mr. Coyne.........        X   ........  ........
Mr. Bunning.....................  ........        X   ........  Mr. Levin.........        X   ........  ........
Mr. Houghton....................  ........        X   ........  Mr. Cardin........        X   ........  ........
Mr. Herger......................  ........        X   ........  Mr. McDermott.....        X   ........  ........
Mr. McCrery.....................  ........        X   ........  Mr. Kleczka.......        X   ........  ........
Mr. Camp........................  ........        X   ........  Mr. Lewis.........        X   ........  ........
Mr. Ramstad.....................  ........        X   ........  Mr. Neal..........        X   ........  ........
Mr. Nussle......................  ........        X   ........  Mr. McNulty.......        X   ........  ........
Mr. Johnson.....................  ........        X   ........  Mr. Jefferson.....        X   ........  ........
Ms. Dunn........................  ........        X   ........  Mr. Tanner........        X   ........  ........
Mr. Collins.....................  ........        X   ........  Mr. Becerra.......        X   ........  ........
Mr. Portman.....................  ........        X   ........  Mrs. Thurman......        X   ........  ........
Mr. English.....................  ........        X   ........
Mr. Ensign......................  ........  ........  ........
Mr. Christensen.................  ........        X   ........
 Mr. Watkins....................  ........        X   ........
Mr. Hayworth....................  ........        X   ........
Mr. Weller......................  ........        X   ........
Mr. Hulshof.....................  ........        X   ........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the estimated budget effects of H.R. 4578, as 
reported by the Committee:
    The Committee agrees with the estimate prepared by the 
Congressional Budget Office (CBO) which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee states the 
Committee bill results in no change in budget authority for 
direct spending programs relative to current law, and no new or 
increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 2(l)(3)(C) of rule XI of the 
Rules of the House of Representatives requiring a cost estimate 
prepared by the Congressional Budget Office (CBO), the 
Committee advises that the CBO has submitted the following 
statement on H.R. 4578, as reported.
                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 22, 1998.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4578, an Act to 
Establish the Protect Social Security Account.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is James Horney.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 4578--An Act to Establish the Protect Social Security Account

    H.R. 4578 would establish an account within the Treasury 
called the ``Protect Social Security Account.'' The bill would 
require the Secretary of the Treasury to make annual payments 
into the account during the fiscal year 1998-2008 period that 
in aggregate equal 90 percent of the projected total budget 
surplus for that period. Those amounts would be invested in 
federal securities, and interest on those securities would be 
credited to the account. These securities presumably would be 
included in federal debt subject to the statutory limit.
    The transactions authorized H.R. 4578 would be purely 
intragovernmental and would not affect aggregate federal 
outlays or revenues. They also would not affect outlays or 
income of the Social Security trust funds. Therefore, pay-as-
you-go procedures would not apply to the legislation. The bill 
contains no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and would not 
affect the budgets of state, local, or tribal governments.
    The CBO staff contact is James Horney. This estimate was 
approved by Paul N. Van de Water, Assistant Director for Budget 
Analysis.

 V. OTHER MATTERS REQUIRED TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the need for legislation was confirmed through its ongoing 
oversight of the Social Security Administration and the Social 
Security programs.

B. Summary of Findings and Recommendations of the Government Reform and 
                          Oversight Committee

    In compliance with clause 2(l)(3)(D) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that no oversight findings and recommendations have been 
submitted to this Committee by the Committee on Government 
Reform and Oversight with respect to the provisions contained 
in this bill.

                 C. Constitutional Authority Statement

    With respect to clause 2(l)(4) of rule XI of the Rules of 
the House of Representatives, relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States * * * '').

        VI. CHANGES IN EXISTING LAW MADE BY THE BILL AS REPORTED

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                 SECTION 201 OF THE SOCIAL SECURITY ACT

    Sec. 201. (a) * * *

           *       *       *       *       *       *       *

    (n)(1) There is established within the Treasury a special 
reserve account to be known as the ``Protect Social Security 
Account'' (hereinafter in this subsection referred to as the 
``account''). The account shall be used to save budget 
surpluses until a reform measure is enacted to ensure the long-
term solvency of the OASDI trust funds.
    (2) The Secretary of the Treasury shall pay into the 
account annually at the end of each fiscal year during the 
fiscal year period beginning on October 1, 1997, and ending on 
September 30, 2008, amounts totalling, in the aggregate, 90 
percent of the projected surplus, if any, in the total budget 
of the United States Government for that fiscal year period.
    (3) For purposes of determining budget surpluses under 
paragraph (2), within 10 days after the date of enactment of 
this subsection, the Secretary of the Treasury, in consultation 
with the Director of the Office of Management and Budget, shall 
project the budget surplus, if any, for the total budget of the 
United States Government for the fiscal year period beginning 
on October 1, 1997, and ending on September 30, 2008.
    (4) The Secretary of the Treasury shall invest the funds 
held in the account pending enactment of the reform measure 
referred to in paragraph (1). The purposes for which 
obligations of the United States may be issued under chapter 31 
of title 31, United States Code, are hereby extended to 
authorize, in the manner provided in subsection (d), the 
issuance at par of public-debt obligations for purchase for the 
account. The interest on, and the proceeds from redemption of, 
any obligations held in the account shall be credited to and 
form a part of the account.
    (5) As used in this subsection, the term ``total budget of 
the United States Government'' means all spending and receipt 
accounts of the United States Government that are designated as 
on-budget or off-budget accounts.

                         VII. DISSENTING VIEWS

    Democrats believe that we should not spend any of the 
budget surplus until we have assured the long-range solvency of 
the Social Security system. The budget surplus that our 
Republican colleagues are spending belongs to Social Security.
    That is because the general budget would not have a surplus 
if the government weren't using Social Security's surplus. Over 
the next 5 years, there is no projected budget surplus without 
counting Social Security's surplus. While the consolidated 
budget surplus appears to be $520 billion. In reality, all of 
the $520 billion--and more--is Social Security's. The Social 
Security surplus is projected to be $657 billion over that 
period. Thus, without Social Security, there would be a deficit 
of $137 billion in the next 5 years.
    The Republicans merely would create a separate account in 
the government's budget and pretend they are saving Social 
Security. That is not enough. Their bill requires the Secretary 
of the Treasury to make bookkeeping entries, but it does not 
prevent the Congress from using the Social Security surplus for 
further tax cuts or further increases in spending. Congress 
could use the entire amount of the Social Security surplus next 
year for tax cuts or spending increases. There would be nothing 
in the Republican bill to prevent it from doing so.
    We can do more to take Social Security off-budget so the 
budget surplus will not be spent until Social Security is 
solvent. We can put that money where it will be safe. The 
Democratic amendment would have taken the entire amount of the 
Social Security surplus in each fiscal year and transferred it 
to the Federal Reserve Bank of New York to be held in trust for 
Social Security.
    This amendment would have removed the surplus from the 
control of Congress. Under the amendment, Congress would have 
to default on publicly traded debt instruments before it could 
default on its obligation to the Social Security system.
    Moreover, the Democratic amendment would have locked up 
100% of the Social Security surplus. The Republicans pretend to 
lock up only 90% of the budget surplus.
    The Republicans admit up front that they are spending 
Social Security's money. They call their plan the ``90-10 
Plan.'' What they mean is that they are taking 10% of the total 
budget surplus--which is Social Security's surplus--and using 
it to fund tax cuts.
    The Republicans are attempting to crack open America's nest 
egg. It is the Republican's unveiled effort to rob future 
Social Security beneficiaries of their retirement benefits.

                                   Charles B. Rangel.
                                   William J. Coyne.
                                   Ben Cardin.
                                   Jim McDermott.
                                   John Lewis.
                                   John Tanner.
                                   Robert T. Matsui.
                                   Pete Stark.
                                   Richard E. Neal.
                                   Sander Levin.
                                   Karen L. Thurman.
                                   Xavier Becerra.
                                   William J. Jefferson.
                                   Jerry Kleczka.

                                
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