[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).