    [Public Papers of the Presidents of the United States: William J. Clinton (1999, Book I)]
    [February 3, 1999]
    [Pages 152-157]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks to the American Association of Retired Persons National
    Legislative Council
    February 3, 1999

        Thank you, and good morning. Thank you, Mr. Perkins--or, good
    afternoon. Don't tell anybody. [Laughter] Don't tell anybody I didn't
    know what time it was. [Laughter]
        Thank you, Mr. Perkins, for your memory
    of that; I did say that, about counting. Mr. McManus, Tess Canja, Margaret
    Dixon, John Rother,
    and Horace Deets, thank you especially for
    representing the AARP so well in dealing with the White House over the
    last 6 years.
        I was glad to be invited to come over here today. You know, it's
    rare that a President gets to speak to an organization of which he's a
    member. [Laughter] And as I said repeatedly a couple years ago, I had
    mixed feelings about that, when you called my attention to the fact that
    I was aging. [Laughter] But I don't have

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    mixed feelings about the record the AARP has established for 40 years,
    calling attention to the challenges of aging to all Americans.
        Those challenges, today, are more profound than ever as we look
    forward to the baby boom becoming a senior boom, the number of seniors
    doubling by 2030. We owe it to 21st century America, to the children and
    the grandchildren of the baby boom, as well as to all the seniors, to
    meet those challenges and to meet them together.
        I remember, in 1992 when I was a candidate for President, I came to
    your convention in San Antonio and talked about the kind of America I
    wanted to work with you to build, an America in which we honor our
    obligations to older Americans without burdening younger Americans, an
    America with its fiscal house in order and its future shining brightly.
    When I took office, we charted a new course to achieve that kind of
    America with fiscal discipline, more investments in our people, more
    trade for our goods and services around the world.
        In the past 6 years, the American people have worked hard and come
    far. We know now that we have the longest peacetime expansion in
    history: nearly 18 million new jobs; wages rising at twice the rate of
    inflation; the highest homeownership in history; the lowest welfare
    rolls in history; and now, the lowest peacetime unemployment rate since
    1957. Last year, for the first time in three decades, the red ink turned
    to black with a $70 billion surplus. We project one slightly larger than
    that this year and projecting them on out for about a generation, as we
    have ended the structural deficits that caused our national debt to
    quadruple between 1981 and 1992.
        I want to thank you for your hard work over these past 6 years, for
    standing strong for bipartisan progress on the issues of great concern
    to you. Now, I ask you to stand with me and to say, we must meet the
    great challenges of the next century. We must use this prosperity; we
    must use this confidence; we must use this projected surplus to save
    Social Security, to strengthen Medicare, to meet the challenges of the
    aging of America.
        In my State of the Union Address, I laid out a four-point plan to do
    that: saving Social Security; strengthening Medicare; providing tax
    relief to help Americans save for their own retirement; and a tax credit
    to help families with long-term care for aging, ailing, and disabled
    relatives. These will help our country to honor our duties to people
    today and to uphold our responsibility to future generations.
        On Monday I sent my new balanced budget to Congress--the first
    budget of the 21st century--to implement this plan. First, in the budget
    we dedicate the lion's share of the surplus to saving Social Security
    and to strengthening Medicare. Both are important, and I'd like to
    explain why.
        I proposed that we invest 62 percent of the surplus to save Social
    Security, and the surplus--excuse me, for the next 15 years. I am very
    pleased that Members of Congress in both Houses and both parties have
    agreed that this is the right thing to do. As you know, I have proposed
    investing a small portion of the Trust Fund in the private sector, to do
    it in a way that any private or State government pension would do. I
    agree with AARP that we absolutely have to insulate any investment of
    the surplus from political influence. And I believe we can, just as
    other public pension funds do.
        I was in New York last night, talking to several people there in the
    investment community who came up to me and said they thought I was
    right, and they hoped that we wouldn't let initial criticism stop us
    from offering a plan which would demonstrate to the American people that
    you could run this investment just like any other public pension
    investment is run. And I am confident that we can do that.
        If we do this, we can earn a higher return and keep Social Security
    sound for 55 years. Now, all of you know that from the beginning we have
    measured the financial health of Social Security by asking if it will be
    sound for 75 years into the future. I do believe we have to take steps
    to strengthen Social Security for 75 years. I have looked at the
    options. Believe me, it's a lot easier to go from 55 to 75 than it is to
    go from where we are now, 2032 to 75.
        I also believe we have to improve the program by reducing poverty
    among elderly women who are twice as likely to be poor as married
    couples on Social Security. I believe we should eliminate the limits on
    what seniors on Social Security can earn. This costs the Trust Fund some
    money in the short run, but over the long term it will actually
    strengthen the retirement systems of the country. And more importantly,
    it will strengthen the quality of life of people in their later years.

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        Now, doing these things will require some difficult choices, but
    they are clearly achievable. You know basically what the range of
    options is, and I know what it is, as well. To make them, it is clear
    what we have to do. We have got to work together across party lines to
    make these decisions. We have to work together across generational lines
    to make these decisions. But think of how we'll feel if we have Social
    Security secure for 75 years, if we lift the earnings limit, and if we
    do something to reduce the deeply troubling rate of poverty among single
    elderly women, who are growing in numbers at a very rapid rate.
        I have told the American people and Members of Congress in both
    Houses of both parties--I've met with dozens of them, literally--that I
    am ready to make these choices and to make them with them, and it is
    time to get on with the job. Now, I feel pretty good about where we are
    with that, because of the initial positive support for setting aside the
    surplus portion for Social Security. I wanted to come here today to tell
    you what I said in the Union I was very serious about--I do not think it
    is enough. We all know that Medicare is going to have financial trouble
    well before Social Security does, unless we do something about it.
        Now, if you look at--where is my chart? There it is. [Laughter] What
    I propose is to take 62 percent of the surplus, which you see there for
    Social Security--maybe I'll bring it up a little closer. [Laughter] You
    may be able to see it just fine, but I can see better from here.
    [Laughter] And then to take 15 percent, about a little less than $1 in
    every $6 of the surplus, and commit it to Medicare.
        Now, some of those who agree with us on Social Security do not agree
    that we should do this. They would use the entire rest of the surplus
    for tax cuts. I believe we can only meet our responsibility to the
    future by saving Social Security and Medicare. Now, President Kennedy,
    who first proposed Medicare, once said, ``To govern is to choose.'' And
    so we should have a great national debate about the choices involved in
    managing this surplus. After all, we haven't had one in 30 years, and
    it's a little unusual for us.
        Yesterday we learned of a proposal that would make a very different
    choice about what to do with the surplus. The plan would spend well over
    $1 trillion over the next 15 years on a tax proposal that would benefit
    clearly the wealthiest Americans--who have, I might add, done quite well
    as the stock market has virtually tripled in the last 6 years. I'm happy
    about that; we should all be. But we ought to look at this proposal
    against that background. It would do this before Medicare has been
    secured and in a way that would prevent us from spending 15 percent of
    this or investing 15 percent of this surplus in Medicare.
        Now, to govern is to choose. I believe that's the wrong choice. I
    believe this is the right choice. You, the American people, and the
    United States Congress will have to decide.
        This is the latest in a rather long series of large and risky tax
    proposals that we have heard over the years. If we had adopted even one
    of the large ones, we wouldn't have the surplus we enjoy today. We
    cannot return to the old policies of deficit and debt. Quite apart from
    our obligations to deal with the aging of America, the strength of our
    economy is premised on our demonstrated discipline and driving down
    profligate deficit spending, driving down interest rates, getting
    private investment up, generating opportunities for the American people.
        I believe the American people should have tax relief. In a few
    moments I'll talk a little bit about what I think the best way to do
    that is. I believe there are things we can and we must do to help
    families. And I believe our targeted tax cut for the USA account is
    especially important. I'll say more about it in a moment.
        But first of all, anyone who hopes to invest the surplus or to spend
    it on other programs or to spend it with a tax cut, must first tell
    America's families: What is your plan to preserve and strengthen
    Medicare in the 21st century? I was always taught from childhood, as
    most of you were, that you may want to do a lot of things, but you have
    to do first things first. To me, Social Security and Medicare, with
    their looming financial challenges, are the first things, and we have to
    take care of them first.
        I want to work with you to strengthen Medicare. I want to work with
    the results of the Medicare Commission that Senator Breaux is chairing. In the bipartisan balanced budget we reached
    in 1997, we extended the life of the Medicare Trust Fund by 10 years.
    But no one seriously believes this is adequate, particularly with more
    and more people qualifying for Medicare.

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        To stabilize Medicare, we should extend its life until 2020. To
    truly strengthen Medicare for the long term, we will have to take
    further steps. That means committing a percentage of the surplus to the
    Trust Fund. It also means committing ourselves to meaningful reforms
    that will meet the demands of the 21st century.
        I am frank to tell you that some people have said, ``Well, the
    President, by committing this amount of money from the surplus to
    Medicare, to the Trust Fund, is trying to convince people that we can
    just go on forever without making any changes in Medicare.'' That is
    simply not true, and I don't want to pretend that that's true. But
    neither do I believe we should be in the position of making reforms or
    changes that we might later regret, simply because we haven't stabilized
    the Trust Fund when we have the funds to do it. These funds should
    support meaningful reform and prevent permanent damage to Medicare and
    to the people who depend upon it and are entitled to rely on it.
        So here's what I think we should do, with regard to at least basic
    principles, as we look forward to the 21st century Medicare program. Did
    they change the chart? Good. [Laughter]
        First, Americans should be able to count on Medicare and know it
    will be there when they need it. I have proposed to use, as I said,
    about one of every $6 in the surplus for the next 15 years to just
    simply guarantee the soundness of the Medicare fund until the year 2020.
    Without these new resources, Medicare spending would have to plummet
    significantly below the private sector average. No one believes we can
    have that happen without seriously weakening a program that millions of
    older Americans need.
        Second, Americans on Medicare should be able to count on a modern,
    competitive system that maintains high-quality care and top-notch
    service by drawing on the best private sector practices.
        Third, Americans on Medicare, especially Americans with lower
    incomes, should be able to count on a defined set of benefits and
    protections without having to worry about excessive new costs they can't
    begin to afford.
        Fourth, Americans on Medicare should be able to count on a benefit
    that many have long waited for and that will actually cut our cost over
    the long run and lengthen life and lengthen the quality of life:
    prescription drugs.
        Now, I believe we ought to use the savings that reforms in Medicare
    can create to provide this prescription drug benefit. Yes, it will be
    more costly on the front end, but over the long run it is bound to save
    money. It will keep people out of the hospital. It will keep people away
    from more expensive medical procedures. It will lengthen life, and it
    will lengthen the quality of life.
        I want to thank especially Senators Kennedy and Rockefeller for
    their leadership on this issue. I look forward to working with members
    of both parties. But keep in mind, within these principles, my view of
    Medicare is: Take 15 percent of the surplus; make sensible reforms; add
    the prescription drug benefit. All three will be required to truly
    strengthen Medicare for the 21st century.
        Now, as I said before, we know the American people have worked very
    hard to replace the era of budget deficits with an age of budget
    surpluses. They deserve to benefit from that, and they deserve some tax
    relief. The real question is: What kind of tax relief and how much
    should it be? What are the other competing demands for the country?
    Again, to govern will be to choose.
        I think we should use a percentage of the surplus to give Americans
    tax relief that strengthens working families, that encourages savings
    and the sharing of our Nation's wealth among a broader range of
    Americans. And that is why I have proposed that we set aside--we're back
    to the chart now--12 percent of the surplus or, over 15 years, $536
    billion, to establish USA accounts, Universal Savings Accounts, that
    give working Americans a chance to save for the future. These accounts
    would basically involve the Government giving a tax credit that would be
    a cash match for a certain amount of savings by Americans who save, with
    extra help for Americans who are lower income working families who have
    less ability to save on their own.
        Now, all of you know that when Social Security was set up, it was
    never viewed as the sole source of income, ideally, for retirees.
    Although, unfortunately, it still is the sole source of income for a
    large number of people. We need a country in which we have a sound
    Social Security system, a sound set of pension options--and all of you
    know how the pension marketplace has been changing, from defined
    benefits to defined contributions--and we need,

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    thirdly, a vehicle which promotes more private savings.
        The USA account is designed to give tax relief--which, I might add,
    would be considerably greater tax relief for middle income families than
    most of the other proposals I've heard that cost a lot more money--but
    tax relief in the form that actually promotes personal savings, more
    secure retirement, and gives people who otherwise would not have it a
    chance to have a savings account which would give them the opportunity
    to hook into the creation of wealth in America and to own a part of
    America's wealth-creating enterprise. I think it's very, very important.
        I have also proposed $1,000 tax credit to help pay for the long-term
    care needs of families who are caring for aged, ailing, or disabled
    family members. We know that long-term care needs will increase.
    Frankly, I would like this tax credit to be even larger. But I believe
    if we start now, within our other obligations to fix Social Security and
    Medicare and the other competing claims and responsibilities of the
    Government, I believe that this will become an integral part of the way
    we manage long-term care and will be a strong part of a bipartisan
    American consensus for how we should support long-term care over the
    long run. So I very much hope that will pass.
        For middle income families I have also supported tax relief for
    child care, for work-related expenses for disabled Americans, for
    further tax relief from the interest payments on student loans, and tax
    relief to businesses which help their employees start retirement
    programs. We've worked very hard for 6 years to stabilize the existing
    retirement systems and to facilitate the establishment of retirement
    programs by more small- and medium-sized businesses for whom the old
    laws were quite a hassle and a lot of trouble and actually a lot of
    startup costs, so we're working very hard on that.
        Now, this is the kind of tax relief that I think is good for the
    country. I have proposed tax relief to individuals and corporations who
    will invest money in areas of high unemployment in America, in inner
    cities and rural areas, to bring private enterprise to create jobs and
    to generate more national growth and more national wealth.
        This is the first time, at least in 30 years, when we've had a level
    of prosperity and the resources necessary to actually get free
    enterprise into the inner-city and rural areas that still have been left
    behind by the economic expansion. And I hope you will all support that,
    because, keep in mind, that helps the whole economy. We have to keep
    finding new ways to grow this economy, even with a low unemployment
    rate, that doesn't spark inflation. And this is clearly the best way we
    can.
        Now, I think this tax relief is good for America. We can afford it.
    It is all paid for, all this tax relief I mentioned. Except for the USA
    accounts, every other bit of this tax relief I mentioned is paid for in
    the balanced budget. It has nothing to do with this surplus. It will not
    have anything to do with undermining our fiscal strength.
        I simply think we have to use the surplus in a way that honors our
    most profound responsibilities to our parents, to our children, to our
    grandchildren. And I think that we cannot waste a penny of it until we
    have saved Social Security and Medicare for the 21st century.
        As I pointed out in the State of the Union Address, there is another
    enormous benefit that will come from saving the surplus in this way. It
    will enable us to buy back a lot of the national debt held by the
    public. And that is very important. Why? In 1981 our total national debt
    amounted to about 26 percent of our annual income. In 1992 it had
    quadrupled in dollars, and it was about half our national income. When I
    got the budget charts, it was projected to go as high as 75 or 80
    percent of our national income, a very dangerous situation.
        Now, the national debt has dropped from 50 percent down to 44
    percent of our income, but if--if--we save the money I recommend for
    Social Security and for Medicare for 15 years, our national debt will
    drop to 7 percent of our national income. That's the lowest level since
    1917, before the United States entered World War I.
        Now, what does that mean in practical terms to an average family? It
    means that we will have lower interest rates, lower home mortgage rates,
    lower car payment rates, more investment, a dramatic increase in
    national savings, and more economic growth.
        It also means that as we have all the financial instability you see
    around the world--and I want to make it clear that the financial
    instability, for example, we saw in Asia came primarily not

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    out of irresponsible Government spending policies--a lot of those people
    had balanced budgets--but there was just turmoil in the financial
    markets because of banking systems and investment patterns. That
    undermines our ability to grow, when our trading partners get in
    trouble. We need to know that we have some insurance against that sort
    of trouble here at home, so we can keep plugging ahead, even as we try
    to help our friends around the world get back on their feet and start
    growing again. So this is an enormous insurance policy.
        The last thing I want to tell you is this: You can be thinking about
    what your successors around this table will be debating 15 years from
    now. Today, when we draw up a budget, the first thing we have to do is
    take interest payments on the debt off the table. Right? Some of you may
    own that debt; you may have Government bonds. We've got to pay you
    before we can do anything.
        Today, that takes over 13 cents of every single tax dollar. Fifteen
    years from now, if we do this, it will take 2 cents of every tax dollar.
    Once we secure Social Security and Medicare, think what you could do
    with the difference in tax cuts, or investments in education, or
    whatever you think it ought to be spent on. This is a very important
    issue.
        So, 7 years ago, I said to you that if we worked together we could
    leave our children a nation that is stronger, freer, and wealthier than
    the one we inherited. Today, we actually have the chance to do this.
    Today, we have a chance to deal with the aging of America, a challenge
    facing every advanced society on Earth, in a way that is dignified, that
    has genuine integrity, that will strengthen not only the lives of
    seniors but will strengthen the lives of their children and
    grandchildren. It is an enormous opportunity and an enormous
    responsibility. I ask you to join with me to make sure that our country
    meets that responsibility.
        Thank you, and God bless you.

    Note: The President spoke at 2 p.m. at the Willard Hotel. In his
    remarks, he referred to Joseph Perkins, president, John McManus,
    national legislative council chair, Ester Canja, president-elect,
    Margaret Dixon, past president, John Rother, legislation and public
    policy director, and Horace B. Deets, executive director, American
    Association of Retired Persons (AARP).