The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“REFORMING SOCIAL SECURITY” mentioning the U.S. Dept of Agriculture was published in the House of Representatives section on pages H5791-H5798 on July 13, 2005.
The publication is reproduced in full below:
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REFORMING SOCIAL SECURITY
The SPEAKER pro tempore. Under the Speaker's announced policy of January 4, 2005, the gentleman from Arizona (Mr. Shadegg) is recognized for 60 minutes as the designee of the majority leader.
Mr. SHADEGG. Madam Speaker, I rise today to engage, I hope, in a discussion with my colleagues about an important issue confronting our country, and it is an issue on which we have already begun a national dialogue. It is an issue that, at least before the last few months, was an issue of bipartisan concern, and that is reforming Social Security.
As you know, Madam Speaker, the former President of this Nation, Bill Clinton, raised this issue during his tenure in office and noted that the Social Security program in its current structure is in trouble and in need of reform. It is facing several serious problems.
One of them is the solvency of the program over time. And another is its fairness to the younger generations. There is a new idea here in Washington and a simple idea that has surfaced just within the last few weeks on Social Security reform that does not solve the entire problem in one fell swoop, but would start us on a path and would address the most egregious problem of all, and that is the structure of Social Security which simply is unsustainable in its current form. So I want to focus this discussion this afternoon largely on that new idea.
It is an idea that responds as the House should respond to the concerns and the interests of the American people about what is happening with their Social Security taxes, their payroll taxes. Let me begin with some of the basics.
As I think all Americans understand on both sides of the aisle, the Social Security system as it is structured today is a pay-as-you-go system. It is a system where those of us working today in the workforce pay in our payroll taxes and those payroll taxes by and large immediately go out the door to pay the retirement benefits of the Americans who are retired today. That is the structure of the current system, and that is the structure that many countries around the world created some 35 to 40 to 50 years ago.
Germany, I think, was first to substitute a Social Security program for its elderly based on this premise, that is, that we would tax workers to pay retirement benefits for those retired. There was nothing wrong with that proposal when initiated because at that time the workforce was dramatically larger than those who were on retirement. Indeed, I think most Americans now know that in 1935 when Social Security was created, there were some 42 Americans working for every American collecting retirement benefits. Clearly, 42 workers can, through their payroll taxes, support one retiree. But as most Americans know by today, those numbers have changed dramatically.
In the 1950s, it went to where we had roughly 15 or 16 workers per retiree. Again, that was sustainable. But now we face a new problem. The reality is that the workforce relative to the number of people retired has shrunk and today in America there are only 3.3 working Americans paying payroll taxes to support each individual currently retired and collecting Social Security taxes. If the trends continues, and it will, that is unsustainable. Very soon we will be down to where there are two workers and even less than two workers paying Social Security taxes, payroll taxes to support each retiree. That simply cannot be sustained over time. And so we have a problem with the structure of Social Security. We also have a problem with its long-term solvency. And, most importantly, I think we have a problem with what is referred to as generational fairness.
We all know that solvency is the issue of whether or not we have the money set aside to pay the benefits we have promised, and in point of fact we do not. While the system runs a short-term surplus today, we collect more in Social Security taxes than we pay out today in Social Security benefits. That short-term Social Security surplus of revenues in over benefits paid out will end as soon as 2017. Indeed, the surplus itself will begin to shrink, that is go down, year to year as early as 2008.
So this is a problem that confronts us very soon, and as the actuaries have told us and as I think Americans understand, the trust fund which we would have to begin drawing upon in 2017 to pay the promised benefit will itself be depleted by 2042. Thus, we have a long-
term solvency problem with the current structure where we have a shrinking number of workers per retiree.
But the other issue that is not discussed very often is the issue of generational fairness. Generational fairness is a term I use, and I think most Americans and my colleagues understand it, but then when I talk to an audience they say they do not understand it so let me try to make that point clear. Solvency is one issue, but generational fairness is a separate issue. As it turns out under the Social Security system that we have today in America, my grandparents, most Americans' grandparents, collected an effective rate of return on the Social Security taxes they paid, that is, on the payroll taxes they have paid into Social Security, when they collected their benefits, on average they got a rate of return on the money they had put in of about 5 percent.
Now, 5 percent is not a great rate of return. You and I would like to be able to invest our money and get 8 or 10 or a better rate of return on the money we invest; but for a program which is designed as this program is designed to provide a floor of protection for those Americans who have either not been able to or have not, in fact, set aside money for their retirement, if you got a rate of return on the money you put into Social Security of 5 percent, you were doing fairly well.
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That is a decent rate of return. But because of the current structure of Social Security, that is not continuing. Indeed, our children, my children and my grandchildren, will get a rate of return of less than 1.6 percent; and, indeed, for many of them, their rate of return will be negative, that is, they will pay in more in social security taxes than they collect in their lifetimes, on average, in Social Security benefits. That is generational fairness, and it is simply not fair.
I think most Americans would agree that creating Social Security, the Social Security program we have, creating a floor of protection so that all Americans can enjoy their retirement years, safe in knowing that they have money to pay for their groceries and to pay their rent is a laudable goal, and with a rate of return of 5 percent on your money, you can do that. But with a rate of return of 1.6 percent or less, or a negative rate of return, our children and our grandchildren, if we do not make changes, will in fact not have a secure retirement. Indeed, they will not have the funds when they go to retire to even minimally get by.
Now, those are the basics that have been involved in this debate from the outset, and there are lots of ideas on the table. President Bush has put ideas on the table to deal with both the issue of solvency and the issue of generational fairness so that we can make the program financially sound for the future. Indeed, he would like to make it financially sound forever, not just for the 75-year horizon that the Social Security trustees base their analysis on. But also he would like to make sure that we guarantee the next generation as secure a retirement as this generation has had and as the last generation had.
Now, I know a lot of Americans glaze over and say, wow, I have heard so many different ideas on Social Security and on Social Security reform that I get confused. People talk to me about personal accounts. People talk to me about benefit cuts. People talk to me about increases in taxes. I want to talk about a new idea, a new idea which can solve a part of the Social Security problem and stop a practice which is offensive and a bad idea.
When I went home and did my town halls with my constituents in Phoenix, AZ, discussing the issue of Social Security, I had to explain to my constituents this short-term surplus that we have. That is the fact that today, and every year since 1983, we have been collecting more in Social Security revenues than we are paying out in benefits. So we have a surplus. And I had to explain to my constituents, as my colleagues here in the Congress have had to do, that that excess money is not being set aside for Social Security.
Indeed, the Social Security surplus that Americans are paying in collectively through their payroll taxes, that is the money in excess of the amount spent today for those retired today, is being, I would say quite frankly, misappropriated by the Congress of the United States and the Federal Government. Because when Americans pay payroll taxes to fund the Social Security program, they believe, and they have an absolute right to believe, that their money, paid as payroll taxes to fund Social Security, should be and is being used for Social Security. But that is not true today, and it has not been true since 1983.
That money, this short-term surplus of Social Security revenues or Social Security benefits paid out, is in fact taken each year by the United States Congress and spent for general government purposes. It is spent to fund the Department of Agriculture. It is spent to fund the Department of Defense. It is spent to fund the Department of Health, Education and Welfare. It is spent all over this government for general purposes having nothing to do with Social Security. And I will tell you, my constituents, when they learn that, are angry.
Now, I mentioned a moment ago that there are many ideas for reforming Social Security. And some back home say, Congressman, it is all too confusing to me. I do not understand. That is the central key element of this new idea. When I went home and when my colleagues went home to address the issue of Social Security reform, and when the American people understood that we are misappropriating the Social Security surplus to things other than Social Security, they got angry; and they said, well, I do not care how and I do not understand how you reform the entire Social Security program, but the one thing you better do, Congressman, the one thing you owe to us, the American people, the one thing you owe to every single person collecting Social Security and every single person paying social security taxes is to stop stealing, stop raiding the Social Security surplus, those payroll taxes paid in for our future retirement, and using them for general government purposes. And that is precisely what this new idea does.
A colleague of mine in the Senate, Jim DeMint, first elected to the House and served with me here in the House, has dropped a piece of legislation, and I and a group of members on the Ways and Means Committee in the House have dropped a piece of legislation that will do precisely that. It will take, from the moment it is enacted through a 10-year period, from roughly today through 2017, the Social Security surplus that comes in and it will stop spending that money on anything other than Social Security. Now, how do we do that?
What we will do is allocate that surplus to every single American who is paying payroll taxes under the age of 55, and we will set up an account in their name and we will put that money in that account. Now, for the first 3 years, the accounts will be invested in U.S. Treasury bonds, the safest investment in the world and the same kind of investment where your social security taxes are being invested today.
But the key difference, the critical difference is that we will stop using that money for general government purposes, we will stop using it to hide the real deficit and the real debt, and we will allocate it to Social Security.
Talk about a simple notion. I, an American taxpayer, Joe Smith in my district, an American taxpayer who works at a job and pays payroll taxes, he may be one of those American taxpayers who pays more in payroll taxes than in income taxes. We are going to say to him, Beginning with the passage of this bill, which is called the GROW Act, we will make sure that every single dime you pay in payroll taxes to fund the Social Security System goes to Social Security.
Now, a portion of it will go to current retirees, but the rest will no longer be spent for Forest Service pickup trucks or for national defense or for welfare benefits, or for any other purpose than Social Security. And the way we will do that is to put it into an account in your name.
I think that is a simple, straightforward basic idea that the American people can address and they can understand, because it is not complicated, and they can embrace and say, well, if we cannot fix all the problems with Social Security, we ought to at least get started. And I am extremely excited and encouraged that this simple notion of taking the Social Security surplus that we will have for the next decade and locking it away in individual, and use the overused term lockboxes, in the name of each American taxpayer so that we do not spend it on any other purpose, I think, is a great idea whose time has come.
By the way, these will be individual accounts. They will be in the name of each payroll taxpayer. They will be inheritable. It will be their money. Indeed, just to show you how different it is than the current system: under the current system, if you pay payroll taxes this year, and you pass away 2 years from now, and you are under the age of 65, that money that you paid in goes away. It is lost forever.
If we enact this simple bill, locking away just the Social Security surplus, and you work for 2 more years after the program goes into effect and then you pass away, still under the age of 65, instead of getting nothing, your spouse or your children or your grandchildren will inherit every dime of that money. It is your money; and when you pass away, it becomes their money.
This is not a gimmick. This is not a paper scheme. This is not a ledger entry here in Washington that never matters. This is hard, cold cash in the pockets of your children or your grandchildren beginning to accumulate the day this legislation takes effect.
There are lots of other good things to say about it, but I have been joined by my colleague from Texas (Mr. Hensarling), and I have talked fairly long about this topic for a moment so maybe I will let him chime in and vary the discussion a little bit.
Mr. HENSARLING. Madam Speaker, I thank the gentleman for yielding to me, and I especially appreciate his leadership on this issue. Tens of millions of Americans, future generations, are going to have their retirement security threatened unless we do something and do something today. Every day that we postpone trying to help save and reform Social Security it is costing us an extra $200 million. The time to act is now.
Madam Speaker, for me this is much more than one's average congressional debate. This is something I take very, very seriously and very personally. I take it personally because my parents are in their 70s. Now, Social Security is an important part of their retirement security. They worked very hard their whole lives to earn that Social Security, and nobody has a plan that will take their Social Security away. As their son, as a Congressman, I am dedicated to making sure that my parents and every one of that generation gets every penny of Social Security that they have earned. I have a sacred obligation to my parents.
I have another sacred obligation. I have a 3\1/2\-year-old daughter and a 22-month-old son. And if we do not do something and do something today, Social Security as we know it will not be there for my children. We are rapidly approaching the point where we are going to lose the security from Social Security.
My colleague from Arizona, who is a great leader on this issue, and everyone should appreciate his helping coauthor the GROW account legislation, he very ably laid out for the American people, Madam Speaker, the challenges we are facing in Social Security. As much as Congress would like to, we cannot repeal the laws of demographics. So Social Security, as it was envisioned, took money from current workers to pay for current retirees. Now, that worked very well 50 years ago when we might have had 40 workers paying into a system for every one retiree. But that is not true today. Instead, we are down to 3\1/3\ workers now supporting every retiree, and we are rapidly on the road to having only two workers support every retiree. So we have this phenomena of having more and more retirees and fewer and fewer workers paying into the system.
Another challenge we have in Social Security, as far as demographics is concerned, is great news for seniors; it is just not particularly good news for the Social Security System. When Social Security was first created, the average life-span of an American worker was 60 years of age. You could not even draw your retirement until 65. Many folks had their name called on the roll up yonder before they could ever get a penny of retirement. Well, now, thanks to the marvels of modern medicine and technology, the average life-span of an American worker has increased to 77.
So, again, Madam Speaker, we have more and more retirees that are living longer and longer and fewer and fewer workers supporting them. And that is putting an incredible financial pressure on the system.
Something else it is doing is it is eroding the security in Social Security. Look at the amount of money people paid into a system versus what they took out. My grandparents, who are decreased, were born roughly in 1900. They received about a 12 percent rate of return on their Social Security. That is great. My parents, who were born in the late 1920s and early 1930s respectively, they receive about a 4 percent rate of return on their Social Security. Not bad.
People in my generation, represented by those who were born in roughly 1960, we are getting about 2\1/2\ percent rate on our Social Security. That will barely cover the rate of inflation. And my children, who I spoke about earlier, they are due to receive a negative rate of return.
Madam Speaker, that is absolutely unfair. We need to do something, and we need to do something today. But something as big as reforming Social Security needs to be done on a bipartisan basis.
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I wish we could be joined by Members on the other side of the aisle who would come in and work with us on a bipartisan basis to try to do something about Social Security. Members cannot deny the underlying demographic challenges in this program.
Right now the Government Accountability Office, the Social Security trustees, and any agency that has looked at the problem says that the unfunded liability of Social Security is now $10.4 trillion. Nobody in America knows how much money that is, but to try to bring it down to a level we understand, that means every man, woman and child in America, to try to solve the long-term fiscal instability of this program, would have to write a $30,000 check out today to try to solve that problem. Surely that is not going to happen.
For those who continue to deny the problem, as so many of our colleagues on the other side of the aisle do, right now it is written in the current law that if we do not act, if we do nothing, if we ignore this problem, in 2042, there will be an automatic benefit cut of almost one-third.
Madam Speaker, I may not be here in 2042, but I hope and I pray that my children will be, and for generational fairness we need to do something.
What the gentleman from Arizona (Mr. Shadegg) has laid out is a simple plan and a very simple first step. I am surprised it is even debatable in this body. But for years and years and years the Social Security surplus has been taken by Congresses, and I will admit both Republicans and Democrats. They have taken the surplus and spent it on other areas of government. They have spent it on Medicare wheelchairs that cost five times as much as what they did at the VA. They spent it on $2 million studies of the sexual habits of older men, and that is a study I do not even care to know what the results said. The list goes on and on and on.
That money needs to be dedicated to Social Security and nothing else. Those on the other side of the aisle said wait a second, this is very risky to create personal accounts for the Social Security surplus.
Madam Speaker, what is really risky is for Americans to leave their retirement security in the hands of Washington politicians and bureaucrats. The Social Security trust fund has been raided over 49 different times. Congress has just stepped in and spent that money on something else.
There have been over 20 tax increases in the Social Security system. Every time you are getting the same benefits but your taxes go up, your rate of return goes down. We are losing that security out of Social Security. There have been multiple benefit cuts. For example, the taxation of Social Security benefits that took place in the early 1980s. Also, very importantly, that the gentleman from Arizona (Mr. Shadegg) pointed out, right now we have no ownership rights in our Social Security. None whatsoever. There have been several Supreme Court cases to tell us that we do not own our Social Security.
So this is a very simple plan. We know we do have some remaining years of surplus: 10, 11, 12 years of surplus remaining. Let us take that. Let us dedicate that to Social Security and let us get it out of Washington and put it into an account with your name on it that you own and that can be inherited and passed on, something that Washington cannot waste. What a simple proposition, and I am just saddened this is even debatable at this time.
I hope anyone who is listening to this debate will let their voice be heard. We need to enact our grow accounts. We need to keep the security in Social Security for future generations.
Mr. SHADEGG. Madam Speaker, I would like to engage in a brief discussion to make this a little more followable or reasonable for our listeners to understand.
Like me, I assume the gentleman has done town halls at home on this topic.
Mr. HENSARLING. Madam Speaker, I have done at least 30.
Mr. SHADEGG. And what reaction did you get back home when people began to learn from at least 1993 forward to today, we have had an ongoing surplus of Social Security revenues over the benefits we pay out to those currently retired?
Mr. HENSARLING. Madam Speaker, I think it is one of the most violent reactions I have ever seen at a town hall meeting, particularly when seniors realize they have worked and paid into this system, and for decades, Congress has taken that money and spent it on big government. They wanted it stopped today.
Mr. SHADEGG. Madam Speaker, I am guessing the gentleman's experience is like mine, Americans have a simple image in their mind that if these are payroll taxes taken to fund Social Security, we ought to be using them to fund Social Security.
Mr. HENSARLING. Madam Speaker, it is a very simple idea and they have been told for years that money is in the trust fund. In a technical legalistic sense maybe it is in the trust fund, but in any practical sense it is not. That money has been taken away and an IOU left in its place. That is like a person writing an IOU to themself. The only way that IOU can be redeemed is by raising taxes on the American people.
People who are entering the job force today, if we do not do something to try to make up that IOU, their payroll taxes are going to have to be increased 43 percent and what is that going to do to younger families and job creation in America.
Mr. SHADEGG. Madam Speaker, the gentleman mentioned that we are quickly approaching the point where Social Security no longer has the word ``security'' in it. I have a female constituent in Arizona, born in Hungary, moved to the United States, lived here all her life, paid into Social Security. She comes to my town halls, and she used to come to my coffee cup meetings on Saturday mornings. Years ago she stood up and made it very clear that, based on a point the gentleman made a few moments ago, it is not accurately described as Social Security, it is more accurately described as social insecurity. Because as the gentleman pointed out, the United States Supreme Court has ruled in a series of decisions that if the Congress were to decide tomorrow to not fund Social Security, to not pay the benefits but to use that money for some other purpose, it could do so. If a taxpayer were to sue and say no, wait a minute, that is my money that I paid into the Social Security system so it would be used for my retirement, that taxpayer would simply lose that lawsuit.
So her description of it is because it is in the hands of the politicians and they can take it away at any time, she describes it as social insecurity.
It is important for our listeners to understand these GROW accounts would change that and change that forever. We would be taking the surplus and putting it aside in the name of the taxpayer, and from that instant forward it would be their money and they could keep it. That is a dramatic change in the system.
Mr. HENSARLING. Madam Speaker, it could not be more simple and I cannot believe that at least in my district in Texas that 99 percent of my constituents would not want to embrace that idea. Such a simple idea that number one, Social Security ought to be used for Social Security, pure and simple.
Second of all, you know own it. Washington cannot take it away. Social Security is used for Social Security, and you own it and Washington cannot take it away. That is what the GROW account is all about. There is nothing more to it. It is that simple, yet it is that important.
Again, I think we need to emphasize for those soon-to-be retired, we will be running surpluses. These people will be okay, but it is future generations. That is the challenge that we face now. Too many people in this town care about the next election and not the next generation. We could ignore this problem if we wanted to for 5, 10, 12 years, but how do you look yourself in the mirror and know that you have set the Nation on a course to cut your children and grandchildren's Social Security by a full third or to raise their taxes by 43 percent.
That is why it is so important that we start the GROW accounts, dedicate Social Security to Social Security, and let taxpayers own it, not Washington.
Mr. SHADEGG. Madam Speaker, we have been joined by the gentlewoman from North Carolina (Ms. Foxx) and I am thrilled to have her join in the discussion about what we do about Social Security, reforming Social Security, and about the new idea of the GROW accounts, of taking just the surplus that Congress has been stealing and spending on general government, take that Social Security surplus and dedicate it to accounts in the names of individuals so it is their money and so every dime of Social Security taxes goes to Social Security.
Ms. FOXX. Madam Speaker, I thank the gentleman for yielding me this time, and all those who have developed the legislation to save Social Security which we call GROW.
I am going to repeat some of the things that both Members have said because I think it is important to repeat them. There are many times when we have to say the same things over and over in order to get the message across.
We have heard a lot about Social Security reform. I just came here this year. This is my first term. I was told it was going to be an exciting term, and a lot of things would be done, and I cannot think about something more exciting than save Social Security.
There are a lot of strong opinions about doing this, but we get some of our best ideas not from Washington but from places like the Fifth District of North Carolina that I represent. That is why I commute to Washington to vote but return home every chance I get.
Recently, as I often do, I stopped by a restaurant in my district to have breakfast. While I was there, I engaged the people there in a discussion about Social Security reform. I shared with them some of the same things you have been talking about, and many people do not understand the fundamental facts about Social Security.
We have got to make sure that our current retirees and those near retirement have the peace of mind of knowing they are going to get their full Social Security benefits for their entire retirement. The government has promised them that, and that is an obligation we have. But we also have to make sure that the benefits are there for our children and grandchildren. The folks in Bojangles that I talked with understand this and certainly agree with us, but we know right now that Social Security is financially broken.
I think that the President has done a good job of explaining that to the people, but again over and over we have to say it. As the gentleman from Texas (Mr. Hensarling) said, back in 1950, we had 16 workers working for every person drawing from Social Security, for every beneficiary. Today there are just over 3 workers paying for each person receiving benefits. Within two decades only 2 people will be supporting each retiree.
I love his phrase about the law of demographics. He is absolutely right. We can repeal a lot of laws here and pass a lot of laws, but we simply cannot repeal the law of demographics, and we are facing that in this country. We have to deal with it. We have to understand that is a reality that has to be dealt with.
The life expectancy is much longer today than it was when Social Security was created. As he said back in 1929, people were only expected to live 57 years. In 1937 when Social Security was adopted, people were expected to live to only 60. Well, Social Security was set up to be drawn out at age 65. The people who set up Social Security never expected many people to draw from Social Security. But today, most people live to be 80, and it is not too much in the distant future that most of us are going to be living to 100.
The fact of the matter is that Social Security will begin running out of money in just 13 years and be completely broke in a matter of decades. For the millions of Americans who depend on Social Security, it is simply unacceptable. If we do not reform Social Security, taxes will have to be doubled or tripled in order for the system to keep its promises to future retirees.
In less than 40 years if we do not make changes, the government will have to take at least 30 to 40 percent of every worker's wages to pay for Social Security benefits. Compare that to 1940 when workers paid only 1 percent of their salary into the system, and that was basically the promise that was made when Social Security was adopted.
President Bush has called on Congress to help fix the Social Security system, and I agree with him that we have to take action. I think that the GROW accounts are a great step in the right direction. We have to protect Social Security benefits for our current retirees and near retirees while giving younger workers more ownership and control over their Social Security taxes.
I like the idea of giving workers control and putting their money into their personal accounts. This gives them control over their money and the government less opportunity to misuse it. I am confident that once people focus on the facts and study this issue, they will realize that Social Security reform is essential.
Many people have been misled about the need for reform. However, once they have the facts, and I am convinced of this, they agree that something has to be done to protect the retirements of our future generations. We have a responsibility to save Social Security so our children and grandchildren can receive the benefits that we have enjoyed.
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Several different programs have been recommended to deal with the Social Security problem, but I am convinced that the plan that has come together to be called the GROW accounts is the best plan that we have right now to move us in the right direction. As other people have said, we have an obligation not only to the people who are currently drawing Social Security but those who are coming after us to make sure that their money is where they can draw it out and look to their retirement.
One of the things I ask people about all the time, too, is can anybody live on the average benefit that Social Security gives them. It is my understanding it is $921. That is the average benefit. So far in all the town hall meetings that I have had and all the discussions I have had, nobody that I know of says they can live off $921 a month.
I think that this discussion we have had on Social Security is performing a couple of good services for us. One, it is focusing on the problems with Social Security; but it is also raising the awareness of the American public that you cannot just depend on Social Security for your retirement. You have got to be looking to other ways to have the kinds of funds that you need to live comfortably in your retirement, and I think that that is the other benefit that this discussion on Social Security has brought about.
I again want to commend the gentleman and his colleagues for what they have done in bringing to us the GROW accounts, and I want to tell you that you have my support on this. This may not be where we end up on salvaging Social Security, but it is certainly a step in the right direction. As they say, a journey of a thousand miles begins with one step. We are taking the first steps. I want to thank you for doing that and pledge my support to you in educating the American public about this and hope that even more good ideas will come as a result of the discussions.
Mr. SHADEGG. If the gentlewoman will remain for a moment, I would like to just ask her, I presume you have done Social Security town halls back home.
Ms. FOXX. We have.
Mr. SHADEGG. If they went like mine, you got a lot of feedback and a lot of confusion about how the Social Security system works.
Ms. FOXX. We did.
Mr. SHADEGG. I suppose, like a lot of us, people are confused about, well, what is the right overall solution and they are not quite sure exactly which reform measure is the right one to do. Is that right?
Ms. FOXX. That is right. But they do know, as you have pointed out before, that they and others have paid money into the government and they were expecting to get that money back with some reasonable rate of return, some interest paid back on it. That is the deal we made with them.
Mr. SHADEGG. And when they discover, as our colleague from Texas (Mr. Hensarling) explained, that we are actually taking that short-term surplus that we have, the excess of revenues we are getting in this year over the benefits we are paying out this year and we are spending it on other things, as he pointed out, we are spending it on phenomenally expensive wheelchairs or we are spending it on Forest Service pickup trucks or we are spending it on welfare benefits or we are spending it on whatever other program is out there and not spending their Social Security taxes to set aside for Social Security, not on Social Security benefits and not on paying future benefits, what kind of reaction did you get from your constituents?
Ms. FOXX. They are very upset by that. And the question is, why have you been spending the money? I am in the fortunate position, I have not been in Congress before, so I can say, I did not do that, although the gentleman from Texas is absolutely correct, it has been done by both Democrats and Republicans, so we have to fix this situation.
Mr. SHADEGG. I think it is a fair question for us to ask as Members of Congress today, and I think the gentleman from Texas was very fair on that point, both Republican Congresses and Democrat Congresses have used the Social Security surplus for non-Social Security purposes. I guess the question, though, that I want to ask you and a question that I have thought about is, could I go home to my constituents and justify to them that it is appropriate for me to take their Social Security taxes and spend them on some other purpose? I think the answer for me is no. Have you given that question some thought?
Ms. FOXX. I have. I agree with them. And when my constituents say that to me, again through this education process, they have learned the problems that have been created by Social Security and, again, they have understood these laws of demographics that we have explained. They want us to stop this. It is a pretty simple thing. Most of the people in my district are just down-to-earth folks with a lot of common sense. There is some sort of rule, what is that law, when you are in a hole, the first law is to stop digging. They just say to me, just quit doing it.
Mr. SHADEGG. Just quit digging. Quit stealing that Social Security surplus and spending it on other things.
Ms. FOXX. That is right. So the proposal you have made I think is again a step in the right direction. Down the road we may find that we have to do other things, but the most important thing is to get people to get control of their retirement. As I said, I think that this issue has brought up the point that they cannot just depend on the Federal Government to look after them. I think we have performed a cruel hoax actually on the people of this country by letting them think that their Social Security was going to take care of them in the manner to which they have become accustomed. It is only one part of it, but it should be a secure part of their retirement. As the gentleman from Texas has said, the security part has gone away.
Mr. SHADEGG. I want to thank the gentlewoman for her contribution to this discussion and invite her to stay and discuss it further.
I do want to build on a couple of points she made. First of all, I want to make it clear that this is not my idea. I am one of the people advancing it. Here in the House, it will be introduced by the gentleman from Florida (Mr. Shaw). I think his name will be the second on the bill. The first name on the bill will be that of the gentleman from Louisiana (Mr. McCrery), who is the chairman of the subcommittee on Ways and Means that deals with Social Security, so it will be the gentleman from Louisiana (Mr. McCrery) and then the gentleman from Florida (Mr. Shaw) and then the gentleman from Wisconsin (Mr. Ryan) along with the gentleman from Texas (Mr. Sam Johnson). Those will be the original cosponsors along with myself here on the House side.
But I think there are literally dozens, maybe even hundreds, I would hope, of Members here on the House side who will be cosponsors of the bill when it is introduced. I have to give credit where credit is due. The original idea, as I mentioned earlier, was brought to the Congress by my former colleague here in the House, now a member of the United States Senate, Jim DeMint, and there are at least 11 Senators who have already signed on as a coalition to try to build support for this idea on the Senate side as well. I think it is important that we build momentum for that.
When we have these discussions, it is useful for the listening audience to know that they can go other places to learn more. The policy committee which I chair has a Web site with substantial information about this idea of taking the Social Security surplus and dedicating it to individual accounts for individual taxpayers and making it their money forever; but I am certain that at your personal Web site and at my personal Web site, they can gather other information and learn about it.
The thing that occurred to me in that question about how do you oppose this, and our colleague from Texas (Mr. Hensarling) said, Gosh, I don't even understand why this is even debatable, I would hope that Members listening to this debate, but, hopefully, Americans listening to our discussion tonight, might say to themselves, I would like to learn a little bit more about GROW accounts, I would like to at least ask my Member of Congress whether she or he thinks it is appropriate to take my payroll taxes that I pay in for Social Security and spend those on something other than Social Security, whether it is wheelchairs or jet airplanes; and if they say, no, it is not really appropriate to take the payroll taxes that I pay in for Social Security, FICA, that I get on my little pay stub and use those for something else, to ask their Member of Congress whether she or he will vote to dedicate the Social Security surplus, we have 10 more years of surplus that we know of without any reform at all, we have 10 more years of surplus, do you favor allowing the Congress to continue to steal that money and spend it on other things, agricultural programs, you name it, or will your Member of Congress agree to vote to dedicate the payroll taxes that we raise for Social Security solely to Social Security?
I certainly hope that Americans across the country when they see their Member of Congress this coming weekend or sometime over the August break, I hope they will confront them and ask them that question because I think it is the question we have to answer. Maybe we cannot solve the whole Social Security problem in a single blow. Maybe we cannot do it all at once; but the one thing we can do, and I like the way you say it, we can stop digging the hole deeper by taking the Social Security surplus and spending it on something other than Social Security.
Ms. FOXX. I think that is a very, very fair question. I think you are absolutely right. The challenge is to get a majority of the Members of Congress, in the House and the Senate, to commit to doing this. It is the only fair thing to do. Again, it is such a commonsense issue. The people of this country understand that is their money, they have worked hard for it, they and their employer are putting that money aside and they expect to be able to get that money back, again with some reasonable amount of interest when it comes time for them to retire.
People can find more information on the Internet these days than I ever even wanted to know, but they can get in touch with their Member of Congress, they can find out where he or she stands on the GROW accounts and where he or she stands on the issue of saving Social Security. I would encourage them to do so.
Mr. SHADEGG. I actually am going to spend a little time now trying, hopefully, to bring anybody who maybe joined this discussion late up to speed on this particular idea, and I want to do it first graphically.
In this discussion tonight, we have talked about what is happening with Social Security and the whole notion of Social Security reform; but we have tried to focus on a simple idea that has come forward recently to deal with the several problems that are confronting the Social Security program.
The biggest problem, of course, is that demographics make it unsustainable over time. We have too few people working and paying in benefits for the number of retirees. We have already heard about that tonight. In the long run, we are going to run out of money; but in the short run, we have a surplus and there is an idea that I think will protect America's taxpayers and strengthen our Social Security system that has just surfaced here in Washington within the last 3 or 4 weeks that I think is a brilliantly simple idea, and I want to try to explain it.
It is embodied in a bill called the GROW Act; Growing Real Ownership for Workers Account is the name of the act. It is being introduced here on the House side by several Members of the Ways and Means Committee, led by the gentleman from Louisiana (Mr. McCrery) and on the Senate side by Senator Jim DeMint and 11 of his colleagues.
I just want to explain very simply the concept of the bill. First of all, I have got a blank piece of paper here. I want to just graphically show what is going on with Social Security. The first thing I want to do is put a line on the chart which shows the benefits that we are currently paying out. Those benefits are fairly level. That line just runs across the chart from left to right. You can see benefits just move across that line. That is the amount of money we have to pay out each year to retired Americans.
I want to start with today, and I want to show revenues. To show revenues, I want to show kind of the graphic notion of this temporary surplus. Right now, we are bringing in more money than we are spending in benefits. So the surplus stands out here. But that surplus begins to go down just like that. All of this is money that we are collecting in excess of what we are spending in benefits. So this is the benefit line, I will label it ``benefit,'' and this is the revenue line. You can see because the revenue line is above the benefit, we have more money coming in in Social Security taxes today than we are paying out in benefits.
What that says is that today's retirees and near retirees are secure. We are not going to do anything to touch their benefits. If you are 55 years of age or older in America, you are safe. But let us put a date on this. This is 2005. This year is 2017. What happens is that in 2017 that surplus disappears, and we begin to have a deficit. That will be a line that goes down like this. We have to deal with our ability to pay our benefits during these years by using the trust fund.
But the question is, what do we do with this surplus? I am going to label it ``S'' for the surplus. That is the money we have that comes in in payroll taxes that my constituents have deducted from their paychecks and it says FICA on it and that is the amount of money that is not needed to pay benefits. That is extra money.
What we have been talking about here tonight is that extra money every year since 1983 with only two exceptions has been spent by Congress on something other than Social Security. They may be good things. They may be welfare benefits for those in need. They may be forest fire fighting. It may be spent for missiles or tanks for our war in Iraq, but it is being spent on something other than Social Security. Fundamentally, the American people deserve to have their payroll taxes that are collected to fund Social Security spent on Social Security.
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What the GROW Act does, this bill that is being proposed here on the House side and there on the Senate side to deal with at least a part of the Social Security problem, is to say we need to stop spending this surplus, and I am going to label the surplus as showing this block of money right here, that block of money, that we need to stop the practice of spending that Social Security surplus on things other than Social Security.
It is pretty simple when we look at it graphically. Social Security money should be spent to pay for Social Security benefits, and if there is a surplus, we should set it aside to pay the Social Security benefits of those who will retire in years to come.
Let me go through just a simple kind of a Q&A session about what this bill does because it might help people, and then I would urge people to get on the Web site of the Policy Committee or to get on the Web site of the Republican conference here in Washington and look at what this bill does and how it works. But before I do that, let me go through a Q&A, just kind of a basic so people can understand what we are talking about.
First question: What will the GROW Act do? Simply put, it stops the government from spending the Social Security surplus, a person's payroll taxes paid to fund Social Security when they retire, on anything other than Social Security. Again, in almost every year since 1983, Congress has spent this surplus of payroll taxes over payroll benefits on something other than Social Security.
How would we stop doing that, how will Congress stop spending that? The answer is we are going to put it into individual accounts. We will take this surplus. We will divide it by the number of Americans who are paying payroll taxes, and we will put it aside in an account with their name on it. From that instant forward, it is their money. It will be in an individual lock box, and that will change the way the program works rather dramatically. For one thing, as the gentleman from Texas (Mr. Hensarling) pointed out a few moments ago, people's current Social Security benefits are not guaranteed. If the government changes its mind, if Congress were to change its mind and stop paying those benefits or even reduce, people lose to that degree. Once we start taking this money and put it into a GROW account with their name on it, in my case, my daughter is young enough to enroll in this program. It would only apply to Americans under age 55. She can enroll and her name would be on an account. It would say ``Courtney Shadegg,'' and a portion of the payroll taxes that she is paying in would go into that account in her name. If she were to pass away today, God forbid, she would get nothing and she would have nothing as an asset in her estate to pass on. But the moment we establish these GROW accounts, she would have the money in that account to give to her children if she wanted to.
People say to their themselves how much money in this surplus would that amount? If I am just an average worker in America and you take, Congressman, that surplus and you allocate it in my name, over the 10 years that we have left during which there is clearly a surplus, without any other reform, how much money would it amount to? Well, in typical Washington terms, they give us the gross number, and it is $790 billion. But what does that mean for me, individual? On average it means that every single working American paying Social Security taxes right now would have roughly $5,000 in this account in 2017, just 10 years from now. If we were to start the accounts this year, in roughly 10 years, they would have $5,000 in an account in their name that they could pass on.
Now, what happens to that money if one passes away? The answer is it is their asset. It is just like the car they own today or the savings account they own today or the bank account or the money in their checking account. If they pass away, that money goes, all of it, 100 percent of it, to their spouse or, if they are unmarried or divorced, it goes to their other heirs. It can go to their children or their grandchildren or to their brother or sister or whoever they want to leave it to just like any other asset that they own.
How does it affect current retirees? It does not affect current retirees. Current retirees are secure because we do not need this money to pay their benefits. This is, after all, the surplus after the benefits have been paid.
What is the budget impact of establishing these GROW accounts? I would call it truth in budgeting. What it says is that once we establish a GROW account and stop taking the Security Social surplus and spending that money to fund other operations of the government, we will be able to see the real deficit each year, and that way we will be able to know honestly and straightforwardly how much money we have.
What is the upside of these accounts? Well, there are so many upsides, it is hard to explain. Number one, it is a person's asset. They can keep it. Number two, initially they get to invest it in a treasury fund. For the first 3 years they may buy a treasury bill, and that is all they will be able to do is buy a treasury bill with it. But that treasury bill will be absolutely as secure as the Social Security funds are today, and indeed I will argue it will be more secure because it is theirs forever and the government cannot take it away. But 3 years from now the legislation provides that a board, an independent board, will be able to open up these GROW accounts so that they can invest them in other vehicles. They can invest them in an investment vehicle or an investment opportunity that would make a slightly better rate of return.
They will not be able to invest them wherever they want. They will not be able to invest them in any risky scheme, and they will not be able to pick a private firm to invest them for them. But they will be able to direct how they are invested, whether they leave them in a treasury or whether they put them in one of two or three other investment options. And I want to talk about that in a moment.
But there are two other basic things I want to touch upon. First, what about the issue of solvency? Well, GROW accounts alone will not solve the solvency problem. But they actually do make the solvency of the current system better. They make it better by roughly 2 years if we enact no other reform.
Let me see if I understand this, Congressman. You are telling me that this is a portion of the solution to the Social Security problem, it will set up a GROW account, we will stop spending the surplus on things other than Social Security; so every dime of Social Security taxes collected will go into Social Security and it also helps make the program more solvent over time?
I ask who would oppose that?
Before I conclude, and I do not know quite how much time I have left, but I would like to talk about the whole notion of personal accounts versus private accounts. This is a topic that has been discussed a lot in the press, and I would dare say that many people in the public do not understand the difference between a personal account and a private account, and yet there are dramatic differences. Although they right now is that Republicans call them personal accounts or individual accounts and Democrats call them private accounts. But that is not true. There are dramatic, substantive differences.
Under this proposal the individual accounts that would be established would remain in the hands of the government. They would go to a contract manager, who would manage them for everybody and who would put them only in very, very safe investments. The three most likely investments are: a municipal bond index fund; the second one is a corporate bond index fund; and the third would be a stock index fund.
What do those terms mean? Number one, since this would be a decision made by an entity that was working for the government and it would be made for all of the money in the account, a person as an individual would not have to be particularly shrewd or in any way savvy about the markets to be able to participate because they are not going to pick the individual stock or the individual bond in which the money is invested. Rather, they will be given, like those of us in the Federal Thrift Savings Plan, a choice of probably three different investments or four different investments. They can leave it in a treasury, they can put it in a municipal bond index fund, a corporate bond index fund, or a stock index fund. And each of those will have slightly greater return.
So people do not need investment knowledge and that is very important because some critics say that one has to be a savvy investor to be able to make this work. That is simply not true.
The other point is that, because the investment decisions are made by an entity contracting with the government, the management fees are extremely low, and because they are managing a huge amount of money, the cost of investing remains extremely low.
The last point I want to make is the restriction and the difference between a personal account and a private account is not just that the government will control the funds that are picked and the manager of those funds, but also people will not be able to invest them in risky investments. Unfortunately, both Chile and England allowed true private accounts where they picked their individual stock market in which to place the money and they picked the broker and the fees were high and the investments were risky. That is not what is being talked about here.
I urge Americans to study the issue of GROW accounts. There is, I think, in reality no downside to these accounts. They enable the Congress to stop spending Social Security on anything other than Social Security, and they let each American have an individual share of the Social Security surplus that is theirs forever and can never be taken from them.
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