[Public Papers of the Presidents of the United States: William J. Clinton (1998, Book I)]
[April 7, 1998]
[Pages 517-523]
[From the U.S. Government Publishing Office www.gpo.gov]

Remarks in a Panel Discussion at a National Forum on Social Security in 
Kansas City
April 7, 1998

[Moderator Gwen Ifill, NBC News, introduced the 
panelists and asked the President if proposals to privatize Social 
Security were a slippery slope or a cure.]

    The President. Well, I don't think it's necessarily a slippery 
slope. I think the issue is, if you start with certain basic principles 
and you start with certain basic facts, then I think there are any 
number of options that can be chosen that both fit the facts--because if 
you start--you get in trouble in life if you start denying the facts. 
The facts are what we talked about this morning, the population trends, 
the financial problems of the system. I think it's important to keep a 
system that's universal, that's fair, that has a benefit certain as a 
baseline, and that deals with the problems of the disabled and the low-
income people that are presently helped.
    If you do all that, could you construct some system which also made 
allowance for private accounts? I think you could, yes. But could you--
would I favor totally privatizing the system? No, because then you 
couldn't have a universal system that was fair that had a benefit 
    Let me just back up and say, people are always saying, ``Well, so 
what's your plan?'' And what I'm attempting to do here is to avoid 
announcing a plan while we go through this period first of educating the 
whole electorate, all of our citizens, on what the facts are, and then 
eliciting ideas from people to get the broadest range of ideas. Because 
if I come out and say, ``Well, here's exactly what I think ought to be 
done,'' then that forecloses debate when I'm trying to broaden debate. I 
want all of you to have your say, and I want us to wind up getting the 
best possible ideas.
    But I think the important thing that you need to know about me and 
my position is, what are the principles I intend to follow, and are we 
prepared to do this? And I think I've answered those questions today.
    But I think it would be a real mistake to rule out--what I think we 
all would like to see--let me go back to what Senator Santorum said in 
his opening remarks about the problems with the rate of return and what 
Senator Kerrey said in his opening remarks about the need to give all 
people some wealth-generating capacity. I think we'd all like to see a 
higher rate of return on the system, on the investments. The

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question is, how do you get that and still keep the system that has 
lifted so many seniors out of poverty and dealt with disability and 
dealt with premature death and dealt with all the other problems the 
Social Security system deals with? But I think there are lots of options 
to do that.

[Panelist Senator J. Robert Kerrey 
described features of the reform proposal he and Senator Daniel Patrick 
Moynihan introduced. An audience 
member suggested removing the welfare aspects from Social Security and 
keeping any increase in contributions under the private control of the 
individual. Panelists responded that simply raising taxes to keep the 
current system operating would not be politically feasible and that 
comprehensive reforms to stabilize the system are necessary.]

    The President. Let me just say, I don't know anybody who has 
proposed--and I think your Missouri Congressman today made this point, 
or one of the Members who spoke before me or after me made this point--I 
don't know anybody who thinks that we should try to preserve the status 
quo program with an increase in the payroll tax. Most Americans are 
paying more in payroll tax than they are in income tax today; most 
working families are. And I don't know anybody who favors that.
    And with the projected surpluses we have now, all of the proposed 
solutions that I have seen so far I believe are achievable with no 
increase in the payroll tax. So that goes back to what you said.
    There are some people who believe that there maybe ought to be an 
increase of, let's say, one percent, but only for private savings 
accounts, totally within the control of the payer. So it would be, in 
effect, an enforced savings plan to give you some investment in private 
income later on in life, that there are some proposals.
    The only thing I've said about taxes is, I think that we ought to 
admit that we can solve this problem without an increase in the payroll 
tax, but we ought not to put ourselves in the position of saying that we 
won't even listen to somebody who's got a different idea. For example, I 
think the Kerrey-Moynihan plan--Senator Kerrey just left--has a fairly steep cut in the payroll tax 
in the first 20 or 30 years or something like that, and then, because of 
projected demographics, actually has it creeping up again--because we 
try to have 75-year plans with Social Security, actually has it creeping 
up again in 30, 35 years, something like that.
    But I don't think you have to worry; most of us, I believe, are 
committed to trying to find a way to solve this problem that doesn't 
involve an increase in the payroll tax. And if there were any, all of 
the plans I've seen are those that say that this should be a savings 
account that's yours to invest as you see fit.

[An audience member asked why the President had not actively supported 
legislation prohibiting any further borrowing from Social Security 

    The President. Because I'm against it. I haven't taken a position to 
get it achieved, because I think it would be a big mistake. The Social 
Security Fund has been investing in Government securities, which have 
the full faith and credit of the Government behind it. The Government 
then takes that money and spends it on other things; that's true. But 
it's an investment by the Social Security Trust Fund. If they take in 
more money in any given year than they give out as benefits, they have 
to do something with that money. They have to invest it somehow. If they 
invest it in Government securities, they get the money back plus 
interest, and it's the safest possible investment.
    Now, there was a lot of talk for years about how this amounted to a 
raid on the Social Security Trust Fund. And I could understand that talk 
because we were running huge deficits every year, so people had a right 
to ask, what's going to happen when the Government has to pay back the 
Social Security Trust Fund and the Trust Fund needs the money to pay out 
benefits--which is one reason it was so imperative that we balance the 
budget and then start running a surplus. But now the projected surpluses 
we have over the next 10 to 20 years are surpluses over and above what 
it will take to pay back to the Social Security Trust Fund the money of 
their investment plus interest.
    And I believe it was a good investment by the Social Security Trust 
Fund. I also think it was good for the taxpayers at large. It kept the 
Government from going out into the private markets, borrowing money, 
running interest rates up, and driving your interest rates up by making 
it harder for you to get money. So I don't agree that it was a bad 
policy. But it would have become a horrible policy if we

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hadn't balanced the budget and started running a surplus, because then 
when it came time for the Government to pay back the Social Security 
Trust Fund, we either wouldn't have been able to pay the money back or 
we would have had to sock you with a huge tax increase. But you don't 
have to worry about that now because we've got this deficit down, we're 
going to run a surplus, and it's going to look like a good investment of 
the Trust Fund, I think.

[Panelist Representative Kenny C. Hulshof 
noted the existence of proposals in Congress to make Social Security 
surpluses untouchable, counteracting the tendency to create new programs 
with available money.]

    The President. If I could just follow up, because he made a point 
there that I think deserves some greater attention. I didn't mean to 
dismiss your question as lightly as it may have sounded like. There are 
people who believe that it would be better--let's assume that what I 
said is right. It is right now, as long as we keep the balanced budget, 
we run the surplus. Let's assume that's right. Still there are people 
who say, ``Okay, Mr. President, so the Social Security Trust Fund had a 
surplus, and they invested their surplus in Government securities, and 
they'll get it back plus interest. But wouldn't it be better, if we had 
any surplus, that in effect the surplus was invested in a way that went 
to the individual in accumulating benefits of the people who were paying 
the taxes?'' That's basically what a lot of people say.
    See, one reason the return is not any higher than it is, is that 90 
percent of your taxes, when you pay Social Security every year, are 
going to pay for the current Social Security benefits of your parents 
and grandparents. And that's what Senator Kerrey was talking about. 
That's what a lot of the people--the individual account argument is. If 
you get money this year, even if it's just $2, if all you get is a 5 
percent return on it, if you keep it there for 50 years, pretty soon 
you're going to have a pretty good chunk of change. That's the argument 
for having something for children at birth.
    But I just want to point out, it will not be all that easy to shift 
from a system where you take all the surplus of any given year and apply 
it to each individual's future retirement when 90 percent of the money 
you're paying out now is being used to pay your parents' and 
grandparents' retirement. So it sounds like a good idea, but it's going 
to be hard to make the transition.

[An audience member requested the President's encouragement for more 
local discussion forums explaining the details of the Social Security 
crisis. Panelist Senator Rick Santorum agreed 
on the need to lay a foundation of public understanding before Congress 
could act.]

    The President.  Let me just say, if I could follow up on that, one 
of the most important things about a democracy, a representative 
democracy like ours, is that the political system--when you quoted 
President Ford today, it was a great comment--the political system act 
when it's required to act, in a bold way, but that you have the trust of 
the people and the support of the people. And this is an interesting 
issue. This is a fairly complex issue.
    Now, I think the people have been ahead of the politicians as a 
whole in the sense that I think it's widely understood that there's a 
problem here, and therefore all of you want us to do something about it.
    On the other hand, there is a fairly small number of the political 
leaders in Congress, let's say, and there's a fairly significant number 
of people in the press, the people that are covering this, who've been 
thinking about this problem for a long time, and they know we need to do 
something about it. So all of us who are activists, you know, the 
tendency is that we want to go in a room now and just--you know there's 
a problem, so we'll fix out what to do about it.
    The nearest thing I can think of that we're trying to avoid happened 
a few years ago, before I became President, on catastrophic health 
insurance. I don't know if you remember this--and the AARP even got 
burned on this--where everybody in the country knew there was a problem, 
right? So the politicians figured, ``Well, the people all know there's a 
problem. The AARP says there's a problem. So we'll all sit down and do 
what seems like a reasonable thing and come up with a solution.'' And 
the public outcry was so great that a then-Democratic Congress and a 
Republican President had to undo what was done.
    Now, it was too bad, really, in that, but it wasn't catastrophic for 
the country. This is big-time business. We can't--once we do this, we 
have to do it, do it right, and we can't undo it. We've got to do this 
right, and so that's

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why we're doing it in this way. And I thank you for what you said, and 
I'll do what I can to try to--I've got an office in Washington, part of 
the White House, that deals with State and local officials. We'll work 
with the Congress and try to see how we can multiply these things.

[An audience member asked how privatization would affect disability and 
survivors insurance and how supporters could be certain that people 
would indeed save when given the opportunity.]

    The President. I think we should all have a chance at that. Go 
ahead. We'll start here; we'll just go around. You've asked, in some 
ways, the question on which everything else depends, so I'll give 
everybody a shot at that. Why don't you start?

[Panelists commented on the need for Social Security to continue to 
protect the most vulnerable citizens by incorporating elements of 
privatization while still providing an income guarantee.]

    The President. I can't add much to what's been said, except I would 
like--this is the one and only time I'll try to do this because the 
Social Security issue itself is sufficiently complex and important--but 
just for a moment, since you talked about families that are at risk of 
having something bad happen, I'd like to fold the Social Security issue 
into the larger issue of family savings, just for a moment, and ask you 
to think about it and think about it from the point of view of a family 
living on, let's say, $20,000 a year and one living on $40,000 a year 
and then one living on $100,000 a year.
    We want a system, first, in Social Security that has some sort of a 
disability benefit and a survivor benefit to give a baseline threshold 
of existence to people that could have horrible misfortune. Then we want 
a baseline predictable retirement benefit that is universal, again, 
that--today it's lifting 15 million seniors out of poverty.
    But there are other things that we want to happen in the course of a 
family's life. We want more and more people to be able to save for their 
own retirement. And keep in mind, more and more companies are offering 
their employees defined contribution plans, not defined benefit plans. 
There are very few--increasingly, a smaller percentage of our workforce 
works for a company that can afford to guarantee your retirement, that 
says, here's what your benefits are going to be forever.
    So what have we done? We've tried to stabilize any retirement 
systems that are under water or at risk, with various actions in 
Washington. And the Congress, in a complete bipartisan fashion, has 
tried to dramatically increase the ease with which and the incentives 
through which people have to take out 401(k) plans and then can carry 
them from job to job.
    In addition to that, in the IRA proposals that we passed in the last 
year as a part of the Balanced Budget Act--and then again last year we 
liberalized them, I think, some--you can now save for an IRA. And you 
can say, well, you can't afford to save. But if you can, you don't have 
to pay taxes on that money. And then later, if you withdraw now from an 
IRA, for example, to pay for your child's education expenses, you don't 
have to pay taxes on that either.
    So what we're trying to do slowly but surely is to create a system 
in which middle class people who are strapped for cash can afford to 
save in a comprehensive way. Now, what are the problems? Relatively low 
rate of return on Social Security. And if you move away from low rate of 
return to higher rate of return, can you continue to maintain the 
baseline benefit and the universality, number one? Number two, do you 
create so much risk that, if people happen to retire and need the money 
when there's a big drop in the stock market, they're in bad shape? 
Senator Santorum has really thought a lot 
about how to minimize the downside risk.
    But I hear your message; I agree with it. And I think those are the 
real dilemmas we're going to have to figure out: What are people going 
to have to do for themselves outside the Social Security system, and 
what can we do to help them do that? How are we going to increase the 
return; how are we going to minimize the risk; how can we do that and 
keep the benefit level at an acceptable level?
    But to me, what I'd like to do when I leave office when the 21st 
century starts, I'd like to know that any family that's out there with 
one person or two people that are working their hearts out, doing the 
best they can, no matter how meager their income, they're going to have 
a chance to create a little something for their children and themselves 
later on and have a chance to do even better, and that no 20-year-old 
person will ever have to worry about whether his or her Social Security 
taxes are going

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to be wasted, because there will be a retirement system when they 

[An audience member suggested removing the cap on the amount of wages 
subject to Social Security tax, as a means of generating more revenue 
for the system. A panelist responded that it would not generate enough 
additional revenue and would increase the tax burden unfairly.]

    The President. Maybe I should answer this since this is really a 
question, if we're going to defend this, that a Democrat should answer, 
if we're going to try to keep this nonpolitical.
    If you think about it, there may be an argument for raising the 
income some, because of inflation and because a lot more people have 
moved into higher income brackets in the last 5 years. But if you think 
about it--let's suppose you took it off altogether. You say, ``What do I 
care about some baseball player making $10 million a year,'' right? But 
if you think about it, what would happen is you would be putting people 
in a position of paying over the course of their lifetimes 50, 60, 100 
times more than they would ever draw out of the Social Security system. 
And you can say, ``Well, they owe it to society.'' But these people also 
pay higher income taxes, and the rates are still pretty progressive for 
people in very high rates.
    So I think you can make--in fact, if you took it off altogether--the 
gap that will exist in 2029 is the equivalent of about 2\1/4\ percent of 
payroll, and that would close, I think, if you took it off altogether, I 
think about a percent and a half of payroll. But you would really have 
tremendously changed the whole Social Security system. You would have 
basically said, ``If you get to where you make $70,000 or more a year, 
we're going to soak you, and you're never going to get anything out of 
this compared to what you're putting in.''
    Like I said, I wouldn't rule out raising it some, but I think we 
should be very careful before we get out of the idea that this is 
something that we do together as a nation and there at least is some 
correlation between what we put in and what we get out, except we want 
people on the bottom to get out a whole lot more than they put in so we 
can give them a decent retirement. It goes back to what our nurse said 

[An audience member asked if Congress would consider such unpopular 
options as raising the retirement age or changing the cost-of-living 
adjustment formula. Panelists responded that, in the context of overall 
reform, those options were important considerations but were not a quick 
fix to a difficult problem.]

    The President. Let me just make one suggestion here, if I might, for 
all of you, and I'm embarrassed that I can't remember exactly the 
numbers for the question that the lady just asked. But you need to keep 
in mind, if the specifics are real important to you--I mean all the 
specifics--then I think you need to always know what the impact of any 
specific proposal is. So again I'll say, in the year 2029, we'll stop 
being in balance, and then we'll go into a deficit of roughly where we 
can only pay 75 percent of the cost of the existing system of Social 
Security with the revenues that we have.
    So if somebody says to you, ``Well, what if we raise the retirement 
age to 70,'' or ``What if we cut the cost of living by half a percent,'' 
or ``What if we took the ceiling off the incomes earnings,'' to go back 
to this gentleman, I think it's important, if you really want to 
seriously discuss that level of detail, that you know what the impact of 
each specific one would be. And we can get you that information. For 
example--or if you want one percent of payroll devoted to individual 
savings account, what will that add to the gap of 2.23 percent in the 
short run? And then you just have to decide what you're prepared to do 
to close the gap.
    But you have to understand, your Members of Congress here, they're 
going to have to actually make difficult decisions at something less 
than an abstract level. They're going to have to sit down and say, 
``Okay, if I raise the payroll ceiling this much, it will close four-
tenths of a percent of this 2\1/4\ percent payroll gap.''
    And one of the things that surprised me--the reason I brought this 
up--one of the things that surprised me when I started studying it in 
this way is what a small impact it would have to accelerate the rate at 
which we're going to 67 for the retirement age. I mean, it does you some 
good, but it doesn't have anything like the impact that I had imagined 
it would.
    Do you want to say anything?

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[A panelist concurred, emphasizing that a reform package should balance 
many elements. An audience member then described features of his 
retirement annuity.]

    The President. You like the fact that it's locked in?
    Audience member. Yes, and I can't touch it. I can't cash in. I can't 
go buy shoes or anything like that. It's locked in for me. [Laughter]
    The President. Thank you.

[Panelists and audience members commented on the options of individual 
savings accounts and 401(k) plans in terms of the level of access 
permitted and the need to preserve funds for use in retirement.]

    The President. But I do want to emphasize that your proposal would 
be not to increase the amount of payroll tax but to take a percent away 
    Senator Santorum. No. Take a percentage 
away so it wouldn't be an increased tax burden on you.
    The President. Let me say to the young lady that asked this 
question, we changed the law on IRA's, individual retirement accounts 
which would require you to be able to put away something over and above 
your Social Security tax. But now, if you put money into an IRA now, and 
you have to withdraw from that IRA to meet a medical emergency or for a 
first-time home or to pay for education, you can do that without a 
penalty now. And if you do it for education, you do it without even 
paying any tax at all on the gain.
    So there is a way under the present system, as a young person, that 
you can save. And if you face a medical emergency, you could withdraw 
from the savings without penalty, but it would have to be over and above 
what you pay in your payroll tax. And that wouldn't be changed by what 
Senator Santorum--he wouldn't make it any 
harder for you to do that. And we tried to make it easier, in the way we 
changed the law in the last 2 years.

[An audience member suggested changing the Social Security cap.]

    The President. You think that there should be a cap on the size of 
your tax or that we should have a higher floor on the benefits?

[The audience member said that those with incomes under $30,000 per year 
should pay minimal or no Social Security tax. Senator Santorum responded that the present earned-income tax credit was 
intended to assist lower income taxpayers.]

    The President. It's $31,000 a family.
    Senator Santorum. It's up to around 
$30,000, and you would get some credit to help you pay your Social 
Security tax. So in a sense--I do know that people earning under, I 
think it's $20,000, pay no Social Security tax, net, of the EIC. So 
there is no Social Security tax burden, net, when you take the tax 
credit in effect.
    The President. Let me say again, I believe that those of us who have 
higher incomes should pay more on the Social Security cap. I don't have 
a problem with that. The only point I was making is, if you took the cap 
off altogether on upper income people, they literally--they wouldn't be 
in a Social Security system anymore, they'd just be writing 6 percent of 
their income for something that they'd never see.
    And we do tax them more on the income tax side, considerably more. 
And we also have no cap on what they pay into the Medicare Trust Fund, 
which you pointed out. But the thing that has made Social Security work 
in the past is that everybody has had to pay in and everybody got to 
draw out, that there was a guarantee and a mutuality of responsibility.
    The earned-income tax credit has been somewhat controversial in 
Congress, but if it were up to me, I would have it even more generous. 
Because the way it works now is the average family of four with an 
income of $30,000 a year or less is paying approximately $1,000 less in 
income tax, including eligibility for refunds, than they would have paid 
if the law hadn't been changed in 1993. And we did it to try to take 
account of the fact that the payroll tax was so high for people and that 
incomes of people--the lower 20 percent of our work force had not gone 
up very much in the last 10 years.
    But it seems to me that it's better to have some giveback there and 
still have a universal participation in the system, since we want 
everybody to be a part of both the responsibility for paying in and then 
be able to get the minimum amount coming out.

[An audience member, citing the stalemate in campaign finance reform, 
asked for assurance that something would actually be done, and panelists 
responded that Congress was working to achieve a bipartisan solution and 
expected to

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act on Social Security reform in 1999. Ms. Ifill 
then asked for the President's closing comments.]

    The President. Well, that question melds rather nicely with the last 
question that was asked from the audience. I deeply regret that we 
haven't passed campaign finance reform legislation. But to answer this, 
why is this different, for one thing, the divisions in the campaign 
finance reform are both not only divisions--they're divisions of party 
and also divisions of incumbency and non-incumbency. And then they're 
honest differences of opinion about what would work and wouldn't--all 
kinds of problems--and complicated by Supreme Court decisions and a 
zillion other things.
    But the other thing is, frankly, every Member of Congress that 
really doesn't want to pass it knows that the Republic will go on and 
that the system we have is capable of producing significant positive 
change; witness the Balanced Budget Act and the fact that we've had the 
biggest increase in aid to higher education in 50 years and the biggest 
increase in coverage of children's health insurance in 35 years. So 
people know that this system can be made to function.
    The Members of Congress in both parties know that, at some point in 
the future, Social Security will stop functioning, with grievous 
consequences to the fabric of American life that affect people who are 
Republicans and Democrats and independents, in all walks of life, with 
all manner of circumstances. And basically, there's enough patriotism in 
the Congress to want to address it. That's the honest truth. It's an 
issue of our survival as a people, our unity as a people, and the innate 
patriotism of the people that are serving. That's why I believe it will 
    What I think will happen, what I want to see is that we will spend 
the time between now and December trying to answer the question this 
gentleman had: How can we get out this information to people? We also 
want you to become more familiar, so you can answer questions for 
yourselves. If you had to choose, for example, between a faster movement 
to a higher retirement age or an individual savings account or, you 
know, raising the cap on income or all these choices they're going to 
have to make, what choices would you make and why? And how would you 
answer the other charges? This ought to be a big national debate. There 
is no other program that affects so many of you in such an intimate, 
personal way.
    And then what I believe will happen is all these Members will have 
lots of forums in their own States. They'll listen to their own people. 
They'll listen to these experts. You're going to see 100 or more 
articles written by people like our panelists here, coming up with new 
refinements on ideas, analyzing the proposals that Senator 
Kerrey and others have made.
    And then in December, in January, we'll sit down and come up with 
the best possible solution. It won't please everybody 100 percent, but 
it will save Social Security for the 21st century, and it will make us a 
stronger, more united country. And then I think the Congress will come 
in and pass it because it is the right thing to do.
    That may seem naive, and I may be old-fashioned, but I'm more 
idealistic today than I was the day that I took the Oath of Office. 
That's what I think will happen. And I think you will make it possible, 
because you'll support people like these folks who will do the right 
thing by your children and your future.
    Thank you.

Note: The discussion began at 2:16 p.m. at the Penn Valley Community 
College. The panelists were: Senators J. Robert Kerrey and Rick 
Santorum; Representatives Kenny C. Hulshof and Earl Pomeroy; Marilyn 
Moon, senior fellow, Urban Institute; Gary Burtless, senior fellow, 
economic studies, Brookings Institution; David Walker, trustee, Social 
Security and Medicare Trust Fund; and Fred Goldberg, former executive 
director, Commission on Social Security and Entitlements.