Mr. Speaker, I rise today to address this House and the people of the United States of America on a very, very timely subject: Social Security and, more specifically, the opportunity to reform Social Security. Now, recently, the President,…
Mr. Speaker, I rise today to address this House and the people of the United States of America on a very, very timely subject: Social Security and, more specifically, the opportunity to reform Social Security. Now, recently, the President, President Bush, has been given a whole lot of credit, or blame, whichever your perspective may be, for even bringing this issue to the forefront of the American people and to this body.
I have the pleasure of serving on the Committee on Ways and Means of this House of Representatives; and, of course, it is going to be the obligation of the Committee on Ways and Means to deal with this issue and try to bring some consensus to the subject of how we might reform, fix, strengthen Social Security, an institution that has served generations of America very, very well, going back to the era of just post the Great Depression when my parents were just about to enter the working environment themselves as young adults.
So we do this with some degree of trepidation, but we also do it with a considerable sense of obligation to our children; in my case, a grandson now, knowing that an entitlement program such as Social Security that is especially critical to the survival, and I say that word advisedly, survival of so many of our senior citizens and especially the lower-income members of our senior citizen population who absolutely rely on Social Security for their very sustenance, we should pass that benefit, that promise of America on to our children's generation and all generations to come. That is not an easy challenge, as we are going to talk about in the time I have had allotted to me tonight.
Now, as I said at the beginning, at the outset, President Bush seems to get a tremendous amount of credit these days for bringing this to our attention. If the truth be known, President Bush was not the first one to point this out. In fact, if we go back to the very beginning, Franklin Roosevelt himself, often called the Father of Social Security, told us then that the plan put in place, the plan we are still on, was but a starting point, was but a beginning; that it would not be sustainable, nor adequate, forever; that at some point in the future, he even used the word ``annuity,'' an annuity would have to be created, a prefunded liability, a prefunded liability set aside to augment Social Security, because Social Security was never going to be adequate for the entire challenge in front of us.
Now, in addition, and much more recently than Franklin Roosevelt, our last President, the 42nd President of the United States, Bill Clinton, recognized the challenge in front of us and the obligation in front of us to reform Social Security. Now, President Clinton, as this poster to my left says, President Clinton in his State of the Union address in January 1998 said: ``We will hold a White House conference on Social Security in December. And one year from now, we will convene the leaders of Congress to craft historic, bipartisan legislation to achieve a landmark for our generation: a Social Security system that is strong in the 21st century.'' Bill Clinton.
President Clinton appointed that commission, and it was headed by Democrat Senator Daniel Patrick Moynihan.
President Clinton, just a month later, in February of 1998 also had these words to say at an address at nearby Georgetown University: So that all of these achievements, these achievements meaning the economic achievements, our increasing social coherence and cohesion, our increasing efforts to reduce poverty among our youngest children, all of them, all of them are threatened by the looming fiscal crisis in Social Security. President Clinton said that.
Now, recently, very recently, President Bush has been attacked for even suggesting that there is a problem, perhaps even a crisis with Social Security. I submit to my colleagues again that President Clinton certainly thought that there was, and I say to my colleagues I certainly think that there is as well. We will talk about that in the next little while.
How was Social Security established? Well, again, when my parents were young adults back in the mid- to late 1930s, coming out of the Depression, I am sure that in this very same Chamber, Members of the House of Representatives, led by a directive from President Roosevelt, felt an obligation to some of our seniors that were struggling; and coming out of the Depression, I am quite certain times truly were tough.
And this great Nation wanted to be there for those that needed us the most and had every right to ask for a bit of a helping hand so that they might have dignity in their last days. So Social Security became the program to provide just a little bit of support to maintain that dignity as people lived out their last days.
When it was established in the beginning, there was but a 2 percent tax placed on the first $3,000 of income a worker had. Now, there are a couple of other little details that are of fairly great significance. Back when it was established, for every beneficiary, every individual who received a Social Security benefit, there was about 42, 43 workers that paid the tax that created the immediate revenue to provide the benefit to that one worker, about a 42 to 1 ratio.
By 1950, shortly after I was born, demographics had changed and there were but 16 workers to pay for one beneficiary.
Even today, we have barely three workers paying for one beneficiary. And by the time my children approach their retirement, there will be barely two workers to pay for one beneficiary.
Now a couple of other little details, and fairly significant and important details, is back in the beginning when Social Security was established, the retirement age, the age when one was eligible for benefits was established at 65. Now, today, we think that that is pretty generous, makes sense. That is when people typically retire, a little bit earlier, a little bit later, about 65.
But, of course, the interesting little fact back in the late 1930s was that the average life expectancy was only about 60. So most people, before they even reached the age of 65, the eligible age for the benefit, had passed on.
Those that did survive typically did not live nearly as long as we all live today; thankfully, I certainly plan to. So there were not as many living in retirement, and they were not living nearly as long.
Today, of course, life expectancy is closer to 80. There is a whole lot more of us and, again, far fewer people paying that benefit.
That really is the essence of the challenge in front of us. Some would have you believe that this is some great debate about public policy differences, very different views of the world, maybe the left spectrum, the right spectrum of the political debate going on here. I do not think it is.
Frankly, I think it is pretty much a case of arithmetic. The numbers are in front of us. And the challenge is a result of the changing demographics.
There are a couple of other things that I think we need to have in front of us in our minds as we approach this debate, just simple little facts. Now, this chart shows current time, 2004, current year, last year; and the revenue that comes into the system, into Social Security, is marked on this line.
You will note that the zero indicates the break-even point. In other words, this is the benefits; this is over time. And right now indicated in black is the surplus. So we have more money coming into the system than there is going out. That is a good situation. You can pay your bills if you are running your house that way. That is a great opportunity.
But, very shortly, things are going to start to change. You will notice, in 2008, about right here, instead of a growing surplus, the line goes the other direction and continues in that direction. Why does that happen? Because in 2008, the very first of the baby boomers, those born in 1946, turn 62. And under the current system, you are eligible for early retirement at age 62 and start drawing benefits. In other words, you change from being a payor into the system to a payee, receiving the benefits.
And current statistics tell us that about 55 percent of our people opt for early retirement. So with that big wash of baby boomers coming at us here very shortly in 2007, the whole workforce, the whole demographic is about to change on us, to where we begin that decline of a growing surplus of revenue, more revenue coming into the system than we have benefits going out.
And we begin the decline. In 2018, the actuaries tell us at Social Security, this point, revenue actually is less than revenue coming into the system, is less than the obligation of the benefit. Now, many say that, you know, what is that problem? Is it a problem? Is it a crisis? Well, I do not know about the world you all live in, but in my household, when your expenses exceed your income, it is a crisis. And there seems to be a huge debate going on out there, is it a problem? Is it a crisis? Is it bankrupt? Is it insolvent? I submit to you, when you do not have enough money to pay the bills, you have got a real problem on your hands, and that is what we are facing very, very shortly.
In addition to that, I want to stay in kind of current time frame here, at this point, at 2008, when those first baby boomers start to retire, here is the other impact we are going to have to deal with right here in this chamber, the United States House of Representatives, in charge of the revenue and the paying of the bills for the United States of America right here.
We know we are in a deficit situation today. I submit to you that all Members on both sides of the aisle in this chamber, Democrat, Republicans alike, are concerned about our deficit spending. Think about this, folks: When we begin this decline, yes, that surplus as indicated in black, we have been living on that for a long, long time. We have been paying the bills of this great Nation: We have been paying for our veterans benefits; we have been paying for Medicare; we have been paying for education; we have been doing the great projects of this great Nation, the United States of America.
We have been running the country on that. Now, we will talk some more later about whether that is good or bad public policy, but it is a fact of life and Democratic administrations, Republican administrations, Democratic Members of the House when they were in the majority, Republican Members of the House when they were in the majority, have done exactly the same thing.
And here is why: Because if we did not use that to pay the bills, we are either going to have to drastically reduce the bills we pay, in other words cut programs, or we are going to have to go borrow even more money. It has got to come from someplace. And it has been coming from that black part of this graph.
So as that decline begins, as that line starts to turn down, and we have less of a growing surplus, we have got to go get the rest of the money to run this Government from some place.
And as you can see, the part that is in red, we not only lose the surplus, we start getting into a situation where fairly rapidly, this is just 2002 right here, by 2040, which is about the time, one side or the other, where my four kids are going to be retiring, by about 2040, we have got a serious problem on our hands. This is the deficiency between the money coming into Social Security from taxes and the benefit going out.
That is not the total obligation; that is just the deficit, just the deficit on an annual basis between the money coming into the system and the money going out. And, again, in addition to that, we do not have, at this point, any given year, we will not have the benefit of this surplus that we have been living on until now to pay the additional bills of this country.
Well, some say, go to the bonds, go to the trust fund, the Social Security Trust Fund. Give me just a minute on that. This is the way it works. And again, this is not devious. This is not some scheme that this administration or this majority cooked up. This is the way the system has worked for a long time.
Republicans, Democrats, this administration, that administration, this is how it works. By law, when you have got a surplus, the Government is obligated to sell those bonds; basically sell them to themselves because we write them. They are a special bond; they are not a bond like you take out on the street corner and sell to individuals or
pension funds or even other nations. We sell them to ourselves.
It has been referred to as an IOU, and in fairness, I think that is a pretty good analogy, because the Federal Government is saying we are going to take this money, we are going to pay all of the other bills, and that is why it is gone. But as evidence that it is a debt back to ourselves, the Federal Government, we are going to write a bond, a loan, if you will. We are going to sign it, U.S. Government promises to pay the United States Government so many billion dollars and trillions of dollars, and it earns interest.
So we think, well, that is great. Let us just go to that drawer in West Virginia, open it up and cash in those bonds, and we will pay all of those with those bonds, will we not? Where do we get the cash to redeem the bonds? From the tax revenue that comes into the United States Treasury year after year. And, folks, we have been using that money. We will use that money in the future to pay all of the other bills of the Federal Government. It is a classic take it from the right hand and put it into the left.
Now, that may seem like a subtlety, it is not a subtlety. It is a very important fact to remember. Yes, there are bonds, and yes, I guess, technically in a way, there is a trust fund. But it is the Federal Government, the U.S. Government, promising itself that it will pay itself back with its own money from the taxpayers, with interest.
Some choose to look at this thing in complete isolation of every other part of the Federal Government and say, oh, no, we can go out to 75 years. And if you do the math and are a little bit generous in your assumptions and you take all of the money that will come into the system and all of the bonds that will be created and add to that the interest earned, you can pay the bills.
And you can for quite a while. Not forever, but for quite a while. But, what happens is you dry up almost all of the rest of the government to do it. Because that deficit has to come from some place. And by taking the cash to close that deficit from all other programs and services in this country, most of which are on a growth curve themselves, by the way, you might sustain Social Security for a while longer, but at what price?
That is what we are dealing with in this chamber, and we are going to have some tough choices to make. I am joined in this Special Order by a good friend of mine, a new colleague from the great State of Texas (Mr. Conaway).
And the gentleman from Texas (Mr. Conaway) comes to this chamber, as many do, with considerable credentials himself, having had more than just a little bit of experience in the financial world. And it is a pleasure to have you with me tonight on this very important subject.
Mr. Speaker, I thank the gentleman because I think he has made one of the key points in this whole debate and one that, frankly, frustrates me a little bit having been a community banker before I came to this Chamber. We do not hear enough talk about the difference between a funded and unfunded liability. And I completely agree with the gentleman. The promise has been made. The liability is on our books. I know we do not show it that way. We do not draw up the balance sheet of the United States of America quite the way that the private sector is familiar with seeing balance sheets drawn up. But the liability is there.
The gentleman is here in this Chamber just like I am, and I have told people that I cannot in my wildest dreams comprehend that there is going to be some future Congress that will say, oh, well, we have a problem. We are a little short on cash. We are just going to whack your benefits, because I think most of us like our heads attached to our shoulders. If we whack benefits, we would get our head lopped off, and probably should.
The gentleman is absolutely correct, and I commend him again. The liability is ours. The promise has been made. The challenge in front of us is to come up with the most fiscally responsible way of funding, paying for that liability.
Mr. Speaker, I thank the gentleman. I believe he has brought some clarity to the issue.
The gentleman mentioned a point that needs to be made over and over again, that is, for current retirees, the seniors that are out there I hope listening to what we are saying this evening on the floor here at the House, seniors today, current beneficiaries have absolutely nothing to worry about. We have got the money there. We can pay the bills. They are going to keep getting their checks. Nobody is talking about even touching them. Quite the opposite, making sure that they are not touched, not damaged in the least. We are not taking a thing away. And near-term retirees, like me, I am 56. I certainly do not want anybody messing
with the benefit that I hope to have there and expect to have there and will be there, because the money is there.
The gentleman is absolutely right. It is about our kids, in my case my one grandchild so far. I am working on more. I am dropping those hints, and the gentleman's six and future generations as well.
I think one of the challenges in front of us, and I have certainly heard this on my committee work on the Committee on Ways and Means from the Social Security actuaries. Yesterday we had the Comptroller General in front of us, David Walker, and he said, you guys can play with it a little here, you can play with it a little bit there by making subtle changes, and you can push out a little farther, you can extend the edge of the cliff, but you are not going to solve it unless you are bold.
We have to reform the system.
Mr. Speaker, I thank the gentleman. In fact, he recalls for me testimony made by, again, the Comptroller General, David Walker, just yesterday. This is the Comptroller General of the United States of America, in front of the Committee on Ways and Means, just yesterday; he pointed out that, even right now, 2004, if we wanted to just fix, now by fixing the system, let me define that, make it sustainable forever, perpetually sustainable, do not have to go back and do it again, keep it on the same path for benefits, same path for payroll taxes as we now have, to get it to the point where you do not start getting in the red again, way out there; to make it sustainable today, we would either have to reduce benefits 13 percent or increase taxes 15. That is for permanent sustainability, if you only play with those two factors.
Now, if you go out to 2018, that is this year right here, where we expect the line to cross and start the growing deficit cash deficits in the system, that increases. Of course, it has to have a bigger fix, 16 percent benefit cut or an 18 percent tax increase, and the gentleman is absolutely right, that the numbers that he gave us, if we wait till 2042, which is the year I believe that the CBO, Congressional Budget Office, says that is when we run out of dough, that is when all the bonds are used up, interest on the bonds. We are done. We have got to rely now just on the payroll taxes that come in on a daily, monthly basis to pay whatever benefits.
Benefits immediately would drop, he said, about 30 percent, my colleague I think said 27, or increase taxes 43 percent. We cannot go down that path, and I liken it to, this is just too much common sense, and once in a while, it actually applies in this chamber.
If your roof is leaking, when you notice that first drip, it is a little more prudent to go up on your roof and patch that roof when it is leaking just a little bit. It is cheaper. It is quicker than to wait until the entire roof collapses on you. Well, we can wait, and many are suggesting just exactly that. What is the hurry? What is the hurry?
As my colleague pointed out, these are not numbers we have somehow created. These are from the actuaries. For every year we wait, it costs us $600 billion. Why is that? Because we are trading a year like this, especially on the front end, for a year like that on the back end, $600 billion.
Now, how much is $600 billion? Well, that is about one-and-a-half times what we spend in the United States of America on our Defense budget every year. It is a lot of money, and I submit we cannot go there.
I am joined by another colleague of mine, the gentleman from North Carolina (Mr. McHenry). Did I get that right?
North Carolina, Patrick McHenry, a great name and a proud name.
Mr. Speaker, I thank the gentleman for being with me, and he brings a slightly different perspective being I think maybe the youngest Member.
Congratulations, youngest Member of this chamber. So maybe an even fresher perspective to this issue of Social Security reform, and with that, I will yield to the gentleman from North Carolina (Mr. McHenry).
Mr. Speaker, I thank the gentleman for joining me, and my colleague puts in very good context the challenges in front of us.
I think it is important to note that right now, recognizing the substance of the problem in front of us, but especially listening, and listening certainly to Members in this Chamber, this body, the people in this town, but, more importantly, listening to America for those good solutions is what we ought to be about.
A couple of things I have already picked up on. In the last few weeks, I have had the pleasure, I guess it was a pleasure, although it was a stark message, of hearing the Deputy Commissioner of the Social Security Administration testify in front of our Committee on Ways and Means, Mr. James Lockhart. Mr. Lockhart was the first one during this new Congress to actually look us right in the eye and say ``Social Security, as it currently exists, is unsustainable.''
Now, there are a whole lot of words thrown out around here: problem, crisis, bankrupt, insolvency, all that stuff. But when the Deputy Commissioner of the program says it is unsustainable, I get that word. I also understand that over time, as I pointed out earlier in this hour, it started out with a 2 percent tax on the first $3,000, and it has been tweaked a little as we go.
Along the way, the tax that the employer pays was implemented. And many people think, well, that is great, it is not mine. I submit, though, that if you are the worker, that is coming out of the personnel costs that that company, your employer, is allocating because he thinks it is an expense for having you as a worker. It is now 12.4 percent of not $3,000, but $90,000. So it has grown.
Some are saying let us just tweak it again. We are not going to put it on a path of sustainability by another relatively subtle adjustment, subtle in some people's minds.
Now, more recently, in fact yesterday, David Walker, the Comptroller General of the United States of America, had this to say. Some picked up on but a few words of what he had to say, but I will give the first several sentences: ``Although the Social Security System is not in crisis,'' and at least one of the major papers in this town had a headline that said ``Walker Says Social Security System Is Not in Crisis,'' and stopped there. But here is what he said: ``Although the Social Security system is not in crisis, it faces a serious solvency and sustainability challenge that is growing as time passes. If we do nothing until 2042,'' and that is suggested, ``achieving actuarial balance would require a 30 percent reduction in benefits or a 43 percent increase in payroll taxes for just the period of 2042 to 2078.'' And then once again you are back in the soup. You have got a problem in front of you there. All we do is defer into the future if we do not fix it now.
``Furthermore,'' he says, ``Social Security's problems are a subject of grave fiscal challenge facing our Nation. Absent changes in budget policy, the Nation will ultimately have to choose among escalating Federal deficits and debt, huge tax increases and/or dramatic budget cuts.'' Pretty stark words. ``As the General Accounting Office's long- term budget simulation shows, substantive reform of Social Security and our major Federal health programs is critical to saving our Nation's fiscal future. Taking action soon would serve to reduce the magnitude of the changes needed to ensure that Social Security is solvent, sustainable, and secure for current and future generations.''
I submit to you, Mr. Speaker, that is the challenge in front of us: ``Take action soon to reduce the magnitude of the changes needed to ensure that Social Security is solvent, sustainable, and secure for current and future generations.''
Last week, and I will close with this, Federal Reserve Chairman Alan Greenspan had this to say: ``In my view, a retirement system with a significant personal accounts component would provide a more credible means of ensuring that the program actually adds to the overall saving and, in turn, boosts the Nation's capital stock.''
We are beginning to develop consensus. This is a huge heavy lift, but it is a lift that is necessary, as Mr. Walker said yesterday, ``to ensure that Social Security is solvent, sustainable, and secure for current and future generations of Americans.''