[Public Papers of the Presidents of the United States: William J. Clinton (1999, Book I)]
[January 27, 1999]
[Pages 107-114]
[From the U.S. Government Publishing Office www.gpo.gov]
Remarks in a Roundtable Discussion on Social Security and Medicare
January 27, 1999
The President. Thank you, and good morning. The Vice President and I are delighted to welcome you here. We have
an unusually large delegation from the United States Congress here
today, and I believe I have all their names, and I would like to
acknowledge Senator Thomas and
Representatives Becerra, Bliley, Borski, Cardin, Hill, Nadler, Pickering,
Portman, Pomeroy,
Markey, Smith, and
Tauscher. I think I have got them all. And
give them a hand. [Applause] I think that's amazing that they're here.
I would like to thank Secretary Shalala, Social Security Commissioner Apfel, and Gene
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Sperling for their work on this meeting today.
I'd like to thank our panelists, Laura Tyson, Uwe Reinhardt, Martha
McSteen, Hans Riemer,
and Stuart Altman, for their presence. And
they will be introduced in a few moments.
In my State of the Union Address last week, I challenged Congress
and the American people to meet the long-term challenges our country
faces for the 21st century. Today you all know we are here to talk about
perhaps the largest of those, the aging of America.
The number of elderly Americans will double by 2030. Thanks to
medical advances, by the middle of the next century, the average
American will live to be 82, 6 years longer than today. These extra
years of life are a great gift, but they do present a problem for Social
Security, for Medicare, for how we will manage the whole nature of our
society.
As I have said repeatedly, this is a high-class problem, and the
older I get the better it looks. [Laughter] But it is one, nonetheless,
that we have to face. Fortunately, we are in a strong position to act
because of our prosperity and our budget surplus.
It is well to remember that the current prosperity of this country
was created not by rash actions in Washington but by facing boldly the
challenge forced by the budget deficits, by getting the deficit down,
getting into balance, bringing the interest rates down, and bringing the
economy back. We also should face the challenge of the aging of America
in the same way.
In the State of the Union, I laid out a three-part plan and asked
Congress to consider it, to invest our surplus in ways that will both
strengthen our economy today and in the future and meet the needs of the
aging of America. First, I proposed that we devote 62 percent of the
surplus for the next 15 years to saving Social Security, investing a
small portion in the private sector, as private, State, and local
government pensions do. The average position of the retirement fund in
the stock market, of Social Security, would be under 2 percent of the
market for the next 15 years, under 3 percent for the next 20 years, and
always under 4 for the next 50 years.
Over the course of the last week, I have been gratified to see
discussions of this proposal and, obviously, differences about the whole
market investment issue, but substantial agreement in the idea of
dedicating a large portion of the surplus to saving Social Security
across partisan lines. And for that I am very grateful.
I think we should build on this to extend the life of the Social
Security Trust Fund further. If we do what I suggested, it will add 55--
take us to 2055. I think we should have a 75-year life for the Social
Security Trust Fund. We should also make some changes to reduce the
poverty rate among elderly women, who have a poverty rate at twice,
almost twice the general poverty rate among seniors in our country. And
I believe we should eliminate the limits on what seniors on Social
Security can earn.
To make the changes necessary to go to 75 years on the Trust Fund
and deal with these other challenges, we will simply have to have a
bipartisan process. There is no way to avoid it. But I'm confident that
the changes, while somewhat difficult, are fully achievable. And if we
work together, we can make them.
To prepare America for the senior boom will require more than saving
Social Security. We also have to deal with the challenge to Medicare and
our obligation to make sure that our seniors have access to quality
health care. I want to say very clearly that we need to set aside enough
of the surplus for Medicare and Social Security before we address new
initiatives like tax cuts. That's why the second part of our proposal
calls for devoting 15 percent of the surplus for 15 years to the
Medicare Trust Fund. If we do this and nothing else, we can secure the
Trust Fund until after the year 2020.
But I want to make something else clear. I believe that--some have
suggested that by dedicating the surplus to Medicare, we won't need to
make any decisions to reform the program. I disagree with that. Medicare
needs revenues to increase its solvency, but it also needs reform to
make sure that it is modern and competitive and to gain additional
savings to help finance a long overdue prescription drug benefit. So,
for me, reforming Medicare and committing the surplus go hand in hand.
I'd also like to say that, for me, there can be no better use of our
surplus than assuring a secure retirement and health care to older
Americans. And I believe that it is good not only for older Americans
but for their children and grandchildren as well, and for the larger
economy.
Why is that? Well, first of all, if we dedicate this portion of the
surplus to Social Security and Medicare over the next 15 years,
obviously,
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in most of those years that money will not be needed. In all those years
we will, in effect, be buying back the national debt. As we do that, we
will bring the percent of our debt--I mean, our publicly held debt as a
percentage of our economy--down to its lowest point since 1917, since
before World War I. What will that do? That will drive interest rates
down, and it will free private capital up to invest in the United
States, to create jobs, to raise incomes. So I think that it's very
important.
If you look around the world today at the troubles these countries
are facing, when their budget deficits get out of hand, when their
interest rates go through the roof and they can't get any money from
anywhere, when we worry constantly about our trading partners, trying to
keep them in good shape and help them to not only preserve our economic
markets, to preserve partners for peace and democracy and freedom--if we
in the United States could actually be doing something to pay down our
debt while saving Social Security and Medicare, we would keep these
interest rates down. And it would be an enormous hedge against whatever
unforeseen future volatility occurs in the global economy.
So this is a strategy that will actually grow the American economy
while preparing for the future. Of course, in an even more direct way
it's good for the rest of America because when the baby boomers retire,
as I said in the State of the Union, none of us want our children to be
burdened with the costs of our retirement, nor do we want our
grandchildren's childhoods to be lessened because our kids are having to
pay so much for our retirement or our medical care. So, from my point of
view, this is a very good thing for Americans of all ages, without
regard to their political party, their income, their section of the
country. I think this will benefit the country and help to bring us
together and strengthen us over the next several decades.
Let me just say very briefly that the third part of our proposal is
to dedicate $500 billion of the surplus to give tax relief to working
families through USA accounts, Universal Savings Accounts. Under my
plan, working Americans would receive a tax credit to contribute to
their own savings account and an additional tax credit to match a
portion of their savings, with the choice theirs about how to invest the
funds, and more help for those who are working harder on lower incomes
and therefore would have a harder time saving. This new tax credit would
make it easier for Americans to save for their own retirement and long-
term care needs. And obviously, this would be further helped by
something that is already in our balanced budget, which is the $1,000
long-term care tax credit.
So these are the things that I think together would not only help us
to manage and deal with in a very good way the aging of America, I think
it would help us to secure the long-term economic prosperity of the
country and help to keep families together across the generations
without seeing unbearable strains put on those families as so many of
the baby boomers live longer and inevitably have more medical costs.
So I hope that we will have a good debate in Congress. There will be
others with their own ideas. I welcome them. I look forward to it. Today
we're going to focus on the programs that I mentioned at the beginning
of my talk. And I'd like the Vice President, who has worked very hard on this with me, now to make a
few remarks and to introduce our panelists so we can get on with the
morning.
Thank you very much.
[At this point, Vice President Al Gore made
brief remarks and introduced the panelists.]
The President. Well, I would like to begin by asking a question of
Laura Tyson, who is, as has been said,
on this bipartisan Medicare Commission. One of the things that I have
seen--and I alluded to this in my remarks--one of the things that I've
seen said in the press in the aftermath of the State of the Union is
that by proposing to allocate 15 percent of the surplus for 15 years to
the Medicare Trust Fund, I basically was killing any chance to reform
the program because we can keep it just like it is until 2020.
I didn't see it that way, for the reasons I said. First of all, I
think there are some substantive changes that ought to be made that
would enrich the program, like the prescription drug program, and
secondly, because I think the demographics and the costs are going to
require reform anyway. I mean, if my numbers are right, I think that the
Medicare spending would have to grow at like half the rate of economic
growth for the next decade just to extend it for another 5 or 6 years.
So what I'd like for you to talk about is--what do you think--it's a
good thing to dedicate
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some of the surplus to Medicare, and whether you think it can be used as
an excuse not to make any further changes in the program, or whether it
would actually facilitate changes?
I think we need to get this out. And I really don't know what she's
going to say, but I've been very concerned about that because when I
made this suggestion, I did not intend to say that, whoop-de-do, now we
don't have to make any changes in the program. What I was trying to do
was to make it possible for us to change the program without pricing it
out of the reach of Americans, millions of Americans.
So, Laura, you want to talk about that?
[Laura D'Andrea Tyson, member,
Commission on Medicare, noted Medicare's complexity and said that
despite efforts to improve it, additional funding would be required. She
indicated the President's plan to dedicate a portion of the budget
surplus to Medicare would secure the program. Vice President Gore asked
Dr. Uwe Reinhardt, commissioner, Kaiser
Commission on Medicaid and the Uninsured, for his analysis, and Dr.
Reinhardt strongly supported the President's proposal. Vice President
Gore then commented that Dr. Reinhardt had characterized those who
disagreed as uncivilized sinners, and Dr. Reinhardt concurred.]
The President. Let me just say for the record, as someone who knows
a little about such characterizations, I wouldn't do that, myself.
[Laughter]
I'd like to ask Stuart Altman a question.
Stuart has worked for Republican and for Democratic administrations.
He's been through all the various generations of reforms we've had,
trying to manage these health programs that we fund. And he's now also
on the Medicare Commission. I'd like to just ask him to give us some
idea from his point of view about--maybe be a little more specific, and
I'm sure the Members of Congress here would like this--what are the type
of structural reforms you think we should adopt to improve and modernize
Medicare, even as we extend the life of the Trust Fund?
[Stuart Altman praised the Health Care Finance
Administration's work in an increasingly complex situation and said
Congress had hindered the agency's ability to contract with providers
and bill more efficiently. He advocated restructuring the system to
allow competition with the private sector and altering the benefit
package to include prescription drugs.]
The President. I don't want to interrupt the flow of the program; I
think they're doing so well. But I just want to comment on one thing
that Stuart said, because I think we ought to drive it home. Many of us
have actually met people who choose between food and medicine. Nobody
made a deeper impression on me when--in 1992 than this elderly couple I
met in the Arel Senior Center in Nashua, New Hampshire, when they
described this choice they made on a weekly basis.
But the point I want to make is, you know when we have partisan
fights in Washington, they always get a lot of publicity. And when we do
something together, almost nobody notices. But one of the things that
I'd like to compliment all the Members of Congress here for is that
there has been an enormous amount of bipartisan consensus to
dramatically increase investment in medical research. And the NIH
budget, for example, has grown exponentially as a result of that.
Now, what are we trying to do? Among other things, we're trying to
find cures for everything from cancer to arthritis to Parkinson's to you
name it. And we're also trying to develop preventions. A lot of those
cures and preventions will be in the form of medicine, and a lot of what
lengthens people's lives is in the form of medicine. We will be spending
more and more and more money every year that we don't have to spend on
hospital care and doctor care if we don't provide a prescription drug
benefit.
And from the point of view of the Congress, I would ask you to
think, if we were all serious about all this money we have put into the
NIH, then we have to be equally serious about getting the benefits of
that investment to all the American people, to the health care system in
general, and to the economy in general. And I think it's very important
because the problem Stuart mentioned is going to accelerate because of
the breakthroughs that will occur as a result of the medical research
that all of you have funded.
Go ahead.
[Vice President Gore asked Martha McSteen,
president, National Committee To Preserve Social Security and Medicare,
about the need to deal with Social Security and Medicare together and
the projected doubling of eligible seniors
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in the year 2030. Ms. McSteen noted the two programs were viewed as
entwined, particularly with regard to the baby boomers for whom health
care advances meant increased longevity and the opportunity for greater
post-retirement productivity.]
The President. I'd like to close this section of the panel with Hans
Riemer and ask him sort of what this looks like
from his perspective. Let me remind you that the people that are now on
Social Security don't have to worry about what we're talking about. The
people that are now on Medicare, by and large, don't have to worry about
what we're talking about, although, there's a more immediate time
problem there. What we're trying to do for Social Security is to take it
out to the time when it would even cover Hans' retirement, which it
ought to as a retirement system that big, and also to try to at least
have a framework which will enable us to not only secure Medicare for
2020 but make some changes that will enable us to manage the program far
beyond that.
So I'd like for Hans to talk a little about his work and how he sees
this and what advice he has.
[Mr. Riemer, 26-year-old founder and director,
2030 Center, advocated maintaining fiscal discipline by using the budget
surplus for the Medicare and Social Security Trust Funds. He stated that
because his generation would be living longer, it would need budget
flexibility derived from paying down the debt, but should also address
potential pension and health care problems.]
The President. You know, I doubt, given the global economy, at least
in the foreseeable--and I mean probably the next 10 to 20 years--it will
ever be possible for a country that wants to have a great economy to run
permanent deficits again. Now, we all know, if there's a recession
happens and you've got fewer taxpayers paying in and more money going
out for unemployed people--and we know there will be good times and bad
times; that's part of human nature. But the elimination of the
structural deficit, I think, is pretty much going to be a requirement
for every country that wants to run an advanced economy and have long-
term stable conditions, because the control of the--the people that can
decide where the money goes, and why, are going to pretty much demand
it. And I think that that's something that we have to be quite careful
about, and we need to be very prudent in projecting this.
And everybody understands when we say we're going to have surpluses
over 25 years, that they will vary in size depending on the condition of
the economy. What we mean by that is that we have a structural surplus
and that the projections are pretty good. And I think that we have to--
my sense is that that's where Congress is, in both parties. There will
be people who think that we ought to have a tax cut now instead of the
retirement tax cut, so that it ought to be fungible now. There will be
arguments about that. But my sense is, there's almost no one willing to
do anything that would in any way run the risk of returning to a
structural deficit. And I think that's a big step forward for our
country.
Well, I thank all of you. We have here, in addition to Members of
Congress, we've got a lot of health care providers and people who
represent other folks. We've got a little time. I wonder if any Member
of Congress who is here would like to ask a question of any member of
our panel. This is not prepared. This is all--[laughter].
Mr. Nadler? Mr. Pomeroy?
[Representative Jerrold Nadler noted that the
assumptions used by Social Security actuaries were extremely
conservative and asked why projections were being made on such
conservative estimates of economic growth.]
The President. Ken, you want to answer that? [Laughter] He's just
greedy and wants all the money he can get; that's all.
[Kenneth S. Apfel, Commissioner, Social
Security Administration, stated that Office of Management and Budget had
made prudent assumptions based on a smaller work force in the future
and, therefore, slower economic growth. He said more optimistic
assumptions would create a bigger problem if the economy did not grow as
much as anticipated.]
The President. Let me say--I'm with you. I think they're wrong, but
I don't think we can take the risk. But let me tell you why it looks
like they're right. The reason it looks like they're right is that the
number of people taking early retirement, for example, taking the early
Social Security option, is going up still--people checking out at 62.
And then they--if they're living
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to 82, then that's--and by the way, even today people who live to be 62
have a life expectancy of nearly 80; a 76 average life expectancy is
from birth. So somebody who lives to be 62 years old, unless they have
some critical condition, their chances of living to be 80 or more are
pretty good. So the assumptions are based on two things. Number one is
the slowing of the growth of the work force, and number two is people
drawing for a lot longer time.
Now, I'll make you a prediction--that's one of the reasons that I
think it's imperative that we make this bipartisan agreement this year.
The reason I--we can make it wrong--because I think you have to consider
one thing. Number one, there's a record number of kids in school today.
Now, they say they've factored that in, but that means you're going to
have more workers in a few years. Number two, we've still got a fairly
generous immigration policy, which I think, on balance, has served us
well. But the third and the most important thing is, after you get a
certain percentage of people who retire at 62 and they're going to live
until 82 or 85 or whatever, if we take the earnings limit off you will
have more and more people working.
The computer and the Internet are changing the nature of work. When
I became President, there were only 3 million people making a living out
of their homes. When I ran for reelection, the number was 12 million. I
think, today, the number is almost 20 million. So I think what you are
going to have is a dramatic change in the nature of work in the next 20
years and more people doing work in different places and different ways,
especially older people.
So my guess is, they are low. But if you look at people drawing
Social Security for a longer period of time and the sheer demographics
and you were in charge of keeping the thing stable, you'd probably make
the same call they did.
[Ms. Tyson concurred that caution in long-term projections was good
because it was important to assure the public that predicted surpluses
were realistic. Vice President Gore pointed out that in 1992, the
transition team used the most conservative economic assumptions. He
noted that the world economy was growing at a slower rate than the
actuarial projection.]
The President. Mr. Pomeroy, Mr. Smith, and Mr. Cardin. Go ahead.
[Representative Earl Pomeroy said the
President's plan would significantly advance the prospect of achieving
Social Security reform. He also supported the President's debt reduction
plan to ensure flexibility when facing future problems. Ms. Tyson noted
the 30-year decline in the domestic savings rate and said the
President's plan would reduce debt and increase savings.]
The President. Janet Yellen, our Chair
of the Council of Economic Advisers, nodded yes when she said it will
add 2 points to the savings rates. That's good.
[Representative Nick Smith asked Ms. Tyson what
was being done to ensure the country was on the cutting edge of
productivity and competitiveness. Ms. Tyson pointed to the President's
strategy of investment in education and technology, and trade
liberalization.]
The Vice President. Well, the new
Governor of California, Gray Davis, points out that if every retiree 30
years from now is going to have two workers financing his retirement, he
says, ``I don't want my two to have a C average and inadequate schools
today.'' [Laughter] A pretty good way to put it.
The President. You talk about our long-term productivity. Let me
just mention one thing that was a part of my State of the Union Address
that didn't get a lot of attention, but I hope that it will get more,
and I hope that there will be a real bipartisan effort here. And that is
that I think we still have a lot of capacity for growth and productivity
within the borders of the United States.
When you've got hundreds of thousands of high-tech computer jobs
going begging and when you've got neighborhoods in this country where
the unemployment rate is still in double digits, mostly in inner cities
and rural areas, our trick in the next 10 years--if you want to think
about how we can continue to grow this economy with no inflation--will
be to try to find the right mix of incentives for private sector
investment and then removing the barriers to employment investment in a
lot of places, whether it's education and training or whatever else.
We've had some success with the empowerment zones. I proposed some
new initiatives in my State of the Union. But for the last 2 years--
Reverend Jackson is here--I've gone to this
unusual meeting with Jesse Jackson, Jack
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Kemp, and Wall Street to talk about how we can get
Wall Street to try to invest more in our inner cities and our isolated
rural areas. And I think that's something we should not dismiss the
potential of.
If you think about it, if you go into a place where there is
complete underinvestment and, therefore, underpurchasing of American
goods and services, if it works when we invest in Central America or
whatever, it would certainly work here. And I'd like to see some more
careful attention given to that.
Mr. Cardin, and Mr. Markey.
[Representative Benjamin L. Cardin said
he was intrigued by the savings incentives USA accounts would offer to
young people and low wage workers. He asked Mr. Riemer how young people
might be encouraged to save for retirement. Mr. Riemer stated that young
people were receptive to the message and suggested a campaign to stir up
excitement about the accounts.]
The President. Mr. Markey.
[Representative Edward J. Markey praised
the President's recommendations but noted a concern about Government
investment in and interference with the stock market. Ms. Tyson cited
State and local retirement plans and the Federal Retirement Investment
Board as models, listed elements necessary for success, and stated that
investment decisions must be made on the basis of fiduciary
responsibility and not political influence or concerns. Vice President
Gore added that some investment opportunities could add an additional
layer of insulation from political influences and pointed out that
returns on equities were significantly higher than other alternatives.]
The President. I want to call on Mr. Portman, but Gene Sperling, did
you want to say anything about the question here?
[National Economic Council Director Gene Sperling emphasized the importance of competitive bidding to
ensure that the actual investments would take place by private managers
using broad-based passive indexes. He said that such a system would be
insulated from political interference and should get the highest return
due to lower administrative costs.]
The President. Mr. Portman.
[Representative Rob Portman commended the
President for raising this issue in the State of the Union Address and
encouraged him to keep the notion of private savings accounts on the
table during the discussions with the Congress rather than relying
solely on investment in the stock market. Ms. Tyson responded that
having private savings accounts as a replacement for Social Security
would undermine its social insurance value but that the USA accounts
would function as a complement to Social Security.]
The President. We are getting down to the real details of this
debate that will unfold. I wanted to make two points, if I might.
There are some proposals for savings accounts, private savings
accounts, that say that they could ensure a floor, which would be a
return no less than Social Security would otherwise give. That will all
be part of this debate, and I'm looking forward to it. And I appreciate
it.
Let me say one other thing to Mr. Portman,
if you were to set aside this much money for Social Security and
Medicare, then most of the Republican caucus would believe that there is
not enough money left for a tax cut of the size you believe should flow.
And then we would argue about the form of the tax cut. If you look at
that negative savings rate, I think that's partly because people have
great confidence--you know, the stock market went up again, and also
interest rates are down, home mortgage payments are lower, and a lot of
people may feel like they're more comfortable spending more money.
But one of the challenges that we have to face in this coming
Congress is not only what the size but what the nature of the tax cut
should be. And should it be in the nature of helping people develop a
greater private savings plan, or should it just be a tax cut that people
can dispose of?
The argument for the latter, frankly, which doesn't have all that
much appeal to the young or to the old but might have a lot of appeal to
the parents in the middle is, ``Hey, I'm maxed out on my credit cards,
and I need some help. You know, there's a negative savings rate, that
means I can't go charge anything else.''
But the argument for the long term of the country, it seems to me to
be the stronger argument because that is one way we can have an increase
in personal savings, as opposed to the aggregate savings rate. When we
buy in the debt--which we'll do if we save this money,
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we'll be buying back the debt--that will increase the national savings
rate, and it will free up private money, and it will be invested
privately. But if you want to increase the personal savings rate, it
seems to me we need to really think about not only what the size but
what the nature of the tax cut should be.
We've already gone 40 minutes over--that's a good sign--but I'll
give Mr. Hill the last word, because he had his hand up, and then we'll
go. Go ahead.
[Representative Rick Hill stated that public
institutions investing privately produced substantially lower rates of
return than private institutions investing in the market and asked if
reasons for that had been identified.]
The President. Gene? [Laughter]
They're more risk-averse, I imagine, is one reason.
[Mr. Sperling concurred that public investors tend to be more risk-
averse, but pointed out that investment in the market over a long period
of time would provide a higher return than the Government bonds in which
Social Security currently invested. He reiterated that using broad-based
indexes would help ensure the highest possible return.]
The President. Thank you very much. This was terrific. And thank the
participants, thank you.
Note: The President spoke at 10:40 a.m. in the East Room at the White
House. In his remarks, he referred to civil rights leader Jesse Jackson,
chairman, Wall Street Project; and former Representative Jack Kemp, who
spoke at the second annual Wall Street Project conference.