Mr. President, when I began my first campaign for the U.S. Senate in 1995, I published a booklet entitled ``Where I Stand.'' I wrote it because the first obligation of a candidate is to tell voters…
Mr. President, when I began my first campaign for the U.S. Senate in 1995, I published a booklet entitled ``Where I Stand.'' I wrote it because the first obligation of a candidate is to tell voters what you believe. In that booklet, I wrote:
The Social Security system must be preserved, protected,
and improved. We have made this covenant with our senior
citizens. However, the long-term future of the Social
Security system is in peril. If we do not get this issue
resolved soon, this Nation faces an entitlement disaster,
eroding the trust between grandchildren and grandparents. We
must explore every option in order to fix and strengthen our
Social Security system. This will require bold leadership.
A decade later, those words still define my position on Social Security. Social Security has been one of the most important and successful Government programs in the history of America. Almost every American family over the last 70 years has been touched by Social Security. In signing the Social Security Act of 1935, Franklin Roosevelt said:
None of the sums of money paid out to individuals in
assistance or insurance will spell anything approaching
abundance. But they will furnish that minimum necessity to
keep a foothold, and that is the kind of protection Americans
want.
A fundamental point that President Roosevelt made was that Social Security was not intended to replace the personal responsibility of individuals saving for and preparing for their own retirements. Social Security was never intended to be a substitute for a retirement or savings plan. It is a safety net for people. Social Security is an insurance contract that protects the most vulnerable in our society from falling into poverty. But Social Security is actuarially unsustainable with its present commitments to future generations.
Today, I am introducing comprehensive Social Security reform legislation. I began my day in Nebraska this morning with some of the people who would be most affected by my bill--America's next generation. It is their generation that will be asked to sustain the future of Social Security.
My generation, the baby boom generation, has been the largest and most productive workforce in the history of man. The impending retirement of the 77 million-strong baby boom generation will impact every aspect of our economy, Government, and society--Medicare and Medicaid, health care, our workforce, and our competitive position in a world filled with countries much younger than ours. The next generation of Americans will respond to these challenges as every generation of Americans has responded to challenges--with innovation and hard work.
However, my generation has a moral obligation to ensure that future generations do not have to bear an increasingly heavy burden of providing retirement resources for future generations. That is why we must reform Social Security. It is a 1935 model trying to operate in a 21st century world. It will soon be incapable of delivering the promises and resources that it was built to provide 70 years ago.
Last week, in testimony before the House Budget Committee, Federal Reserve Chairman Alan Greenspan urged Congress to act on modernizing entitlement programs sooner rather than later. He warned that, unless we act now to meet the huge unfunded liabilities facing our entitlement programs, there will be severe economic consequences for our Nation. Chairman Greenspan is right.
America's largest entitlement programs--Social Security, Medicare, and Medicaid--are on a trajectory that cannot be sustained. For fiscal year 2006, the Congressional Budget Office tells us that 64 percent of the $2.5 trillion Federal budget will be obligated to mandatory spending, of which 42 percent is for Medicare, Medicaid, and Social Security. Those are tax dollars that are committed--money that cannot be used for anything else.
Each year, the percentage of the Federal budget obligated to funding entitlement programs grows larger and larger. The current unfunded liability for Social Security over the next 75 years--this is the horizon that the Social Security Administration uses to calculate benefits and expenditures--is $3.7 trillion. That means over the next 75 years, we are obligated to make the commitments of the retiree benefits a reality. Yet we have $3.7 trillion of debt. We don't know where and how we are going to get that $3.7 trillion. We are now $3.7 trillion in debt in the current obligations over the next 75 years for Social Security. Medicare's unfunded liability is nearly $28 trillion. These liabilities are in addition to America's current national debt of $7.5 trillion.
Medicare costs are growing faster than any other Government or entitlement program. As we see health care costs continue to rise, coupled with the growing number of retirees, it will only continue to put more and more pressure on our Federal budget and squeeze out money for important discretionary Government programs such as education, roads, parks, and housing.
Last Congress, we passed an enormous expansion of Medicare. I voted against it. I thought it was bad policy and would add hundreds of billions of dollars to an already unsustainable program. I am supportive of efforts to reopen the Medicare reform bill and fix it. But for political reasons, I doubt that will happen soon, although we will be forced to deal with it in the future.
The Social Security system is not in crisis today, but there is clearly a crisis on the horizon. In 2018, more money will be paid out of Social Security than comes in. In 2042, the Social Security trust fund will be insolvent. Beyond the next 75 years, there is only a black hole of unfunded liability for future generations. The longer we do nothing, the more difficult it will be to protect Social Security and the promise our Government made to future generations of Americans.
This reality is daunting, but there is good news in all of this. The system can be fixed. It is within our power to preserve the Social Security net for this Nation. It has been done before. In 1983, President Reagan worked with congressional Democrats and Republicans to make tough choices and extend the life of Social Security. Dealing with this problem now means less dramatic and difficult choices later. The earlier we confront the reality of the coming crisis, the more options we will have to come up with a wise and sustainable course of action.
Allow me to now lay out the main points of the Social Security reform bill that I will introduce today.
My bill would ensure the vitality of Social Security for future generations. There are no easy choices to fix the demographic challenges and realities facing Social Security. Understanding this, we must make choices that address the problem responsibly and fairly.
My bill would make changes to Social Security only--only--for those Americans under the age of 45. No American age 45 or older will see a change in Social Security or their benefits. For Americans under 45, my bill would provide the option of voluntary personal accounts. Providing personal accounts is good policy for both the long-term viability of Social Security and for individuals. Government should be about empowering individuals and enhancing personal freedoms and their futures. Personal accounts help do this for those under 45.
My bill would continue to provide a guaranteed Social Security benefit from the Social Security trust fund. Under my plan--under any plan--Americans still need the security of knowing that the portion of their Social Security benefits that comes from the traditional Social Security system will be guaranteed. My bill will continue to guarantee survivor and disability benefits as they currently are.
Social Security provides benefits for more than 6 million spouses and children of breadwinners who have died
prematurely or have become disabled. For these families, their benefits should not be touched.
I know something about this. When I was 16 years old, my father died. The Social Security benefits my mother received were critical in helping her raise four young boys in Nebraska. I well remember my mother's relief when that Social Security check arrived each month.
We must remember that the first obligation of Social Security is to the most needy Americans. My bill does not raise taxes. I believe we can fix Social Security without raising taxes. We need to begin reforming Government programs so they do not become so large and so expensive that future taxpayers will be unable to pay for them. Young wage earners and small businesses are the most vulnerable to tax increases, and they would be the ones most adversely affected by higher taxes to save Social Security.
Additionally, whenever we increase the cost of labor, we hurt our competitive position in the world and make job creation more difficult. This is not abstract economic theory; it is reality that has an impact on every future American.
Those are the principles that form the foundation of the bill I will introduce today. Here is how it would work.
Upon passage of the bill, Americans 44 and younger would be given two voluntary options. One, they can invest 4 percent of their payroll tax into a personal investment account modeled on the same accounts now offered to all Federal Government employees. I participate and my staff participates in this program. The remainder of their payroll tax contribution would continue to go into the traditional Social Security system. Option 2, individuals can continue to invest their entire payroll tax in the traditional Social Security system.
If they choose the personal account option, then individuals will be able to invest in the same five funds that collectively make up the current Federal Thrift Savings Plan--again, the program that I am in, Members of Congress are in, and Federal Government employees are in.
The first is the common stock index fund. Over the last 10 years, this fund has earned an average annual rate of return of 11.99 percent.
The second fund is the fixed income index investment fund. Over the last 10 years, this fund has earned an average annual rate of return of 7.72 percent.
The third is the Government securities investment fund, and over the last 10 years, it has earned an average annual rate of return of 5.75 percent.
The fourth is the small capitalization index. Over the last 10 years, it has earned an average annual rate of return of 11.84 percent.
Fifth is the international stock index fund. Over the last 10 years, it has earned an average annual rate of return of 5.45 percent.
These five funds provide a range of excellent investment options.
My bill would also provide a default account for those Americans who, for whatever reason, do not want to deal with choosing a fund or funds for their accounts. This fund would invest differently in an individual's early working years than in their later working years.
The Thrift Savings Plan has been a success for Government employees. Last year, returns on the different accounts ranged from just over 4 percent to 20 percent, and in the last 10 years, the returns have been between 5.5 and 12 percent. Compare this with the 3-percent return provided by Treasury bonds that Social Security now invests in today.
These private accounts are in addition to the guaranteed Social Security benefits and personal savings pensions and retirement account programs individuals build up during their working years.
Under my bill, personal accounts would be administered by a board within the Social Security Administration called the Social Security investment board. The board would be composed of the Secretary of the Treasury, the Chairman of the Federal Reserve Board, the Chairman of the Securities and Exchange Commission, and two Senate-confirmed appointments nominated by the President. One of the President's appointments would serve as chairman of the board.
Upon retirement, those who choose to enroll in a personal account will have two accounts: their personal account and their traditional Social Security benefits account. They will be required to convert a portion of their personal account to an annuity which, when added to their guaranteed Social Security, would be at least 135 percent of poverty. There is no such guarantee in our Social Security system today. The remainder of the personal account will be theirs to spend as they wish. It could be used to help with health care costs and retirement living costs, or it could even help an account holder's children or grandchildren put a downpayment on a home or pay college tuition.
There are those who say that allowing individuals to invest through personal accounts is too risky. Their concerns are serious, and they deserve a serious response. Under my plan, no person is required to have a personal account. An individual who does not want to invest can keep all of their money in the traditional Social Security system.
I believe the policies which enhance personal freedom and responsibility encourage the ethic of saving and limit the role of Government in their lives. These are the policies which will be more flexible and successful for America's future.
It is true that there is no guarantee with market-based investments; however, the historic success of markets is not a theory, it is a fact. Columnist George Will pointed out in a recent Washington Post column that in no 15-year period over the past eight decades has the growth of stocks ever been negative. In no 20-year period has the average growth been less than 3 percent, which exceeds the rate of return on Social Security assets today. This includes down times, significant down periods in the stock market.
We are blessed in America. We are blessed in America because the vast majority of Americans live healthier, longer lives than they did a few decades ago. Continued advances in medicine, education, and personal health will continue to increase not only the length of our lives, but also the quality of our lives, providing opportunities for older Americans to remain healthy, vital, and productive members of the workforce.
When Social Security was created in 1935, there were too many workers and not enough jobs. According to the Social Security Administration, in 1950, there were 16.5 workers per retiree. Incentives were created to move people out of the workforce. This dynamic is changing. Today there are 3.3 workers for every retiree. In 25 years, there will be about 2 workers for each retiree.
Why is this important? This is important because Social Security is a transfer program. The money comes in and the payroll taxes from the workers go out at the end of the month to the retirees.
So when there are less workers, there is less money coming into the system. My bill makes three adjustments to Social Security that will make it solvent for future generations. First, my bill would raise the current full benefit retirement age by 1 year from 67 to 68. Second, my bill would maintain the current earlier retirement age at 62 but would adjust benefits for those who choose to retire early.
Currently, workers who retire early today receive 70 percent of their full retirement benefits. My bill will provide these early retirees with 63 percent of the traditional benefits.
Third, currently an individual's base Social Security benefit is determined by two factors: their average income over 35 years and the wage index. My bill adds a third component, life expectancy. We are living longer. That means as we live longer, we will draw more from the Social Security fund.
Over the life of the program Social Security benefit calculations have never been adjusted to reflect increased life expectancy. By factoring increased life expectancy into the base benefit calculation, the rate of increase in benefit payments will be slow. No other changes will be made to the annual consumer price indexing of benefit increases.
In addition to making Social Security solvent, these adjustments can help confront the challenges of increasing Medicare costs and shortages in the workforce. It is important to protect
the option of early retirement, but our laws need to encourage individuals to stay in the workforce, not leave it.
Medicare costs, Medicaid costs, and labor shortages can be significantly reduced by keeping people healthy, vital, happy, and productive in the workforce. My bill pays for these changes in Social Security by using the existing $3.7 trillion unfunded liability to ensure the long-term health of the Social Security system. Doing nothing will mean at the end of 75 years, Social Security will have chewed up $3.7 trillion in taxpayer money to help keep Social Security solvent, but it will not, and we will still have an insolvent program with trillions of dollars more of unfunded liabilities staring us in the face.
In recent testimony before the Senate, Alan Greenspan said Social Security's total unfunded liability could be as high as $10 trillion over the life of the program. I have introduced this bill because I believe that leaders have a responsibility to deal with the great challenges of their time, not defer them, not make excuses for them, but to try to fix them and come up with solutions.
I do not hold my bill up as the only way to address the solvency of Social Security. It is one way. There may be better ways. No comprehensive bill will be immune from critical evaluation, nor should it be. However, I think my bill is a commonsense, responsible, and fiscally accountable place to start.
All Americans need to ask tough questions about the future of Social Security. We need to begin the process of refining ideas to forge the best, most responsible policy for the future of Social Security.
President Bush deserves great credit for making the modernization of Social Security a central part of his second-term agenda. There is no possibility for success in modernizing Social Security without strong Presidential leadership.
As I said at the beginning of my speech, Social Security is one of the most important and successful Government programs in American history. Since 1935, it has provided a safety net for our society's most vulnerable. We have a high moral obligation to ensure that future generations continue to benefit from this safety net and social contract we have with our citizens. But in order to do this, we must fix the system.
This is a personal issue for me. Forty years from now a young mother in Columbus, NE, may be left to raise four children on her own. I want her family to have the same access to the same safety net that my family had, and the promise that no matter where one starts in life, with a little help they can finish where they want.
I am 58 years old. I am at the front of the baby boom generation. My daughter is 14 years old. My son is 12 years old. I do not want to fail their generation. That means addressing these entitlement program issues now, while we have time to do it in a wise, careful, and responsible way. This is a defining debate for today's leaders. Doing nothing is irresponsible and cowardly. It is in America's interest to deal with our challenge today. We have it in us to do what needs to be done. We can preserve, protect, and improve Social Security for all future generations of Americans.
I send my bill to the desk and ask that it be assigned to the appropriate committee.
I yield the floor.