[Weekly Compilation of Presidential Documents Volume 34, Number 31 (Monday, August 3, 1998)]
[Pages 1507-1510]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Teleconference Remarks to Regional Social Security Forums from 
Albuquerque

July 27, 1998

    The President. Thank you, Ken. First of all, let me say I'd like to 
thank the Older Women's League who are watching in Chicago; Congressman 
Mike Castle of Delaware and his group; Congressman Earl Pomeroy of North 
Dakota, who's had such a leading role in this effort, and his group; and 
Congressman David Price of North Carolina. I thank you all for hosting 
this forum.
    Our economy is the strongest it's been in a generation. We have the 
lowest unemployment rate in 28 years, the lowest crime rate in 25 years, 
the lowest percentage of our people on welfare in 29 years, the first 
balanced budget and surplus in 29 years, the lowest inflation rate in 32 
years, the highest homeownership in history, and the smallest National 
Government in 35 years. But this sunlit moment is not a time to rest. 
Instead, it offers us a rare opportunity to prepare our Nation for the 
challenges ahead. And one of our greatest challenges is to strengthen 
Social Security for the 21st century.
    As you know, I believe strongly that we must set aside every penny 
of any budget surplus until we have saved Social Security first. Fiscal 
responsibility gave us our strong economy. Fiscal irresponsibility would 
put it at risk. On whether we save Social Security first, I will not be 
moved, but on how we save Social Security, that will require us to have 
open minds and generous spirits. It will require listening and learning 
and looking for the best ideas wherever they may be. We simply must put 
progress ahead of partisanship.
    The stakes couldn't be higher. For 60 years, Social Security has 
reflected our deepest values, the duties we owe to our parents, to each 
other, and to our children. Today, 44 million Americans depend upon 
Social Security. For two-thirds of our seniors, it is the main source of 
income. And nearly one in three beneficiaries are not retirees, for 
Social Security is also a life insurance policy and a disability policy, 
along with being a rock-solid guarantee of support in old age.
    Today, Social Security is sound, but a demographic crisis is 
looming. By 2030, there will be twice as many elderly as there are 
today, with only two people working for every person drawing Social 
Security. After 2032, contributions from payroll taxes will only cover 
75 cents on the dollar of current benefits. So we must act and act now 
to save Social Security.
    How should we judge any comprehensive proposals to do this? I will 
judge them by five principles.
    First, I believe we must reform Social Security in a way that 
strengthens and protects a guarantee for the 21st century. We shouldn't 
abandon a basic program that has been one of America's greatest 
successes.
    Second, we should maintain universality and fairness. For a half-
century, this has been a progressive guarantee for our citizens. We have 
to keep it that way.
    Third, Social Security must provide a benefit people can count on. 
Regardless of the ups and downs of the economy or the gyrations of the 
financial markets, we have to provide a solid and dependable foundation 
for retirement security.
    Fourth, Social Security must continue to provide financial security 
for disabled and low-income beneficiaries. We can never forget that one 
in three Social Security beneficiaries are not retirees.
    And fifth, anything we do to strengthen Social Security now must 
maintain our hard-won fiscal discipline. It is the source of much of the 
prosperity we enjoy today.
    Now, all this will require us to plan for the future, to consider 
new ideas, to engage in what President Roosevelt called ``bold, 
persistent experimentation.'' I thank you for doing your part and for 
participating in this important national effort to save Social Security.
    Now I'd like to hear from all of you. I guess we should start with 
Betty Lee Ongley of the Older Women's League in Chicago. Then we'll go 
on to Representative Mike Castle in Wilmington, Delaware; then to 
Representative Earl Pomeroy in Bismarck, North Dakota; and then to 
Representative David Price in Raleigh, North Carolina. So let's begin.

[At this point, the regional discussion began.]

[[Page 1508]]

    The President. Thank you. I'll be glad to comment on that. Let's go 
now to Congressman Pomeroy in North Dakota. And again let me thank you 
all for the leading role you've played in this right from the beginning 
and for your efforts to increase retirement benefits generally for 
seniors.

[At this point, the regional discussion continued.]

    The President. Well, first of all, let me say that we're having this 
forum today in Albuquerque, New Mexico, with a number of experts whose 
opinions range across the spectrum from believing that we should have a 
large portion--some believe almost half of the present payroll tax--
converted over a period of 20 or 25 years into individual investment 
accounts, to those who believe maybe you should have a small percentage 
of payroll tax or a small annual payment to people for individual 
investment accounts, to those who believe that Social Security Trust 
Fund itself should invest, beginning with a modest amount, a limited 
amount of its funds to increase the rate of return. So let me try to 
answer all these questions.
    Let me begin by going back to Betty Lee Ongley's question about the 
impact on women. First of all, I think it's quite important that we 
maintain in the Social Security system the life insurance benefits. 
Because so many women are the primary home raisers of their children--
even if they're in the work force--I think maintaining this life 
insurance benefit for the children when the wage earner is killed or 
disabled is terribly important. And that is, I think, a very important 
thing.
    Now, the second thing I would say is, I personally believe we're 
going to have to do some things beyond the Social Security system to 
help women to deal with the fact that they live longer and that today 
their earnings base is not as great because they're out of the work 
force for an average of 11 years.
    On the question of getting pay up, I think that there is legislation 
in Congress that would deal with the equal pay issue, which would solve 
some of the other problems. And I would like to see more aggressive work 
done on that, to do even more work to enforce the equal pay requirements 
of our law for women. So, if I could just leave that there.
    Now, let me move into the questions raised by the other people who 
called. And I want to give Ken Apfel a chance to talk, especially if I 
make a technical mistake.
    In various ways, you all asked the same questions about the private 
accounts. First of all, let's back up and realize why we're dealing with 
this. By 2030, there will be only two people working for every one 
person drawing Social Security. The average rate of return on the 
investment any worker makes on Social Security will go down as more 
people live longer and more people are in the retirement fund, because 
Government securities, while they're 100 percent certain, don't have a 
particularly high rate of return, like any kind of 100 percent certain 
investment.
    So the question is then raised, well, if--over any 30- or 40-year 
period, an investment portfolio that, let's say, was 60 percent in 
stocks and 40 percent in government bonds, or 40 and 60 the other way, 
would have an average rate of return far higher. And even after you take 
account of the stock market going down and maybe staying down for a few 
years, shouldn't we consider investing some of this money, because, 
otherwise, we'll have to either cut benefits or raise taxes to cover 
them if we can't raise the rate of return. So--and I think those are the 
three main options.
    And younger people especially, many of whom are used to doing things 
on their own, accessing information over the Internet, and also have 
only experienced a growing stock market, which has been growing since 
1980, and which, since 1993, has virtually tripled, have been especially 
interested in these individual accounts. So let me just try to deal with 
these issues.
    First of all, what about individual accounts and how could we set 
them up? There are, I think, basically two basic options that have been 
advanced. One is, should we take a one percent or two percent, or some 
percentage of the payroll tax and, instead of putting that into Social 
Security, put it into a mandatory savings account for workers, and then 
they can invest it in stocks if they like? What's the downside of that? 
The downside of that is twofold. Basically, your investments might lose 
money, and you might not be so well-off with them when you retire, so 
that the

[[Page 1509]]

combination of your investment fund, plus your guaranteed Social 
Security fund might be smaller than would have otherwise been the case.
    The second issue that's related to that is that if individuals are 
investing like this, the administrative costs of managing it can be 
quite high, much, much higher than Social Security, so that even though 
you might earn a higher rate of return, a lot of it would be taken right 
back from the people who are handling your account. So we have to work 
through that.
    What about having the Government do it? What about having everybody 
have an account, a number, in effect, attached to their name for this 
money but having some public source invest this money? Congressman 
Castle asked a question, as well as Congressman Price, and I think Mr. 
Weber in North Dakota asked this question.
    Now, the virtue of that is that if the Government were making these 
investments, you could do two things. Number one, you'd have much lower 
administrative costs. Number two, you could protect people who retire in 
the bad years, because you would average the benefits. And as I said, as 
we know, over any 30- or 40-year period--and the average person will 
work 40 years--the average rate of returns are higher. So you could 
always reap the average rate of return.
    Now, if you were a particularly brilliant investor, you'd get less 
than you would have if you'd done it on your own, but on the other hand, 
you wouldn't get burned. And if you happen to be among unfortunate 
people who retired in a long period where the market wasn't doing well, 
like it was in between 1966 and 1982, you'd still be held harmless for 
that because of the overall performance of the market.
    People worry about having the Government invest that much money. 
There may be a way to set up an independent board immunized from 
political pressure to do it, but still, that would be a whole lot of 
money coming from, in effect, one source, going into the stock market. 
So we're looking at the experience of Canada and some other countries to 
see what we can learn about that. And we're also looking at the 
experience of Chile, as a place where they've used individual accounts, 
to see what the pluses and minuses are.
    I think--what I would like to say is, if we go down this road, we 
need to make sure that behind this there's still a rock-solid guarantee 
of a threshold retirement that people will be able to survive on. And 
then we can debate the relative merits of these individual accounts 
versus individual guarantees within these bigger units. But I think I've 
given you the main arguments, pro and con, of both the individual 
accounts and the Government units--Government investment--I'm sorry.
    Let me just add one thing, if I might, because I think it was Mr. 
Weber who talked about a lot of--either that or Congressman Pomeroy 
talked about a lot of the people in North Dakota that depend upon Social 
Security have very modest incomes from the farm or from other sources. 
One kind of modified proposal that has been debated is the question of 
whether, instead of dedicating a percentage of payroll to an individual 
account we should use the surpluses over the next several years to 
guarantee workers, let's say, $500 a year.
    If you did that, obviously, as a percentage of income--and that 
would amount to quite a bit after a few years of getting that $500 check 
in an investment account--obviously, as a percentage of income, the 
impact on lower wage workers would be far greater than the impact on 
higher income workers, because the $500, and then the 1,000 and then the 
1,500 and 2,000 and so on, would be a much bigger percentage of a lower-
wage worker's income than just giving everybody one percent of payroll. 
So the dollars would be much bigger if your payroll was bigger.
    So that's another thing we've been asked to consider by various 
people, whether or not the fairest way to do it would be to just give a 
cash grant into the account of each Social Security-covered person who 
is paying in. And that's also being debated. And you all may have an 
opinion about that you want to forward to us.

[At this point, the regional discussion continued.]

    The President.  I would also emphasize--and again, I don't want to 
further complicate this discussion--but I believe we have to do

[[Page 1510]]

two things. I think we have to reform Social Security in a way that 
makes it viable and available for the baby boom generation when all of 
us get into retirement age, and it doesn't bankrupt our children or our 
children's ability to raise our grandchildren.
    But over and above that, we have to do some other things, which a 
number of the Members of Congress who are here in New Mexico and out 
there at these forums have been interested in, to increase the options 
for retirement savings beyond Social Security. Right now, Social 
Security is responsible for lifting about half the American senior 
population out of poverty who would be in poverty without it.
    But most seniors do not rely solely on Social Security. And more and 
more seniors, as we live longer, will need other sources of income, as 
well. So we're going to work hard on this, but we're also working on 
legislation to provide other avenues of retirement savings over and 
above this.
    Thank you very much, all of you, for joining us. Commissioner Apfel 
and I are going to go back to work here in Albuquerque, and we're going 
to try to listen to the arguments of these experts on the questions 
you've asked: Should the Government invest in private securities, in the 
stock market, or should Social Security funds be invested in the stock 
market? And if so, should it be done by a public entity, or should it be 
done by individuals with individual accounts? And we'll try to get the 
pros and cons out and make sure they're widely publicized, and we 
welcome your views, as well.
    Thank you.

Note: The President spoke at 11:35 a.m. by satellite from Room 124 of 
the Johnson Center Gymnasium, University of New Mexico, to four local 
forums located in Wilmington, DE; Chicago, IL; Bismarck, ND; and 
Raleigh, NC. In his remarks, he referred to Commissioner of Social 
Security Kenneth S. Apfel; Betty Lee Ongley, president, Older Women's 
League; and Richard Weber, vice president of administrative services, 
Basin Electric Power Cooperative.