Social Security

SOCIAL SECURITY

Mr. DURBIN. Mr. President, I thank my colleagues for staying this evening. The world's greatest deliberative body does not spend a lot of time debating. That was one of the biggest surprises that I learned when I first came over to the Senate. I hope tonight, if we have a good debate, it will set a standard that will lead to even more debates on the Senate floor.

For 66 years, Social Security has been America's insurance policy. Social Security has been America's promise that when all else fails, the monthly check from Social Security is going to be there to help you pay for your food, your utilities, and your prescription drugs.

Social Security has never been Uncle Charlie's red hot investment tip, that stock that just could not lose. Social Security has always been that rainy day fund that your dad and your grandfather told you to take care of first before you even listened to Uncle Charlie.

Some politicians do not like Social Security. It is an old idea. It has been around for several years. It is conservative. It is a Government program. It was created by Franklin Roosevelt during the New Deal. It is also the horse, though it never sets a track record, that always finishes the race.

The critics want to dismantle Social Security for a flashy, dazzling money maker that just cannot lose. They want to cut the current Social Security monthly benefit and add higher administrative costs at the expense of your parents' retirement and your own.

Now, they tell us that Social Security privatization adds up, but like that hot stock tip, their privatization argument is all about faith and not facts. As every good magician, they want to divert your attention from the most important part of their presentation.

The supporters of privatizing Social Security cannot explain how they will fill the $2 trillion hole in the Social Security trust fund that will be created when people lift out money to put in privatization personal accounts. If they were honest about their $2 trillion shortfall, they would tell you that the options are very limited and very painful.

For one thing, they might suggest we raise payroll taxes to make up the difference, but who needs an increased payroll tax with this lame economy? They could tell you honestly that we can raise the retirement age under Social Security and make up for the $2 trillion shortfall in privatization. But is that something you want the Government to mandate at this point in your life? Or they could cut Social Security monthly benefits, but that might come just at the time when your mother's prescription drug bill goes up $100 a month.

If it turns out that Uncle Charlie's hot stock tip, or the Republican privatization of Social Security, fails, guess who ends up holding the bag. Well, first, your parents, then you as their children, and ultimately, when the bottom falls out, future taxpayers.

The bad news about Social Security is not the bedrock principle on which it was founded. The bad news about Social Security is that this President and this Republican Congress, with their tax cuts for the wealthy and recordbreaking deficits, are endangering Social Security and Medicare at exactly the wrong time.

This is a news flash from those who are supporting privatization, which I think they should crawl across every TV screen in America whenever this debate starts, and it ought to say, just so you did not miss it: The baby boomers are on the way.
We have only known that for 50 years. We have seen them coming. We know they expect Social Security to be there because they paid into it. So instead of historic deficits and Social Security privatization schemes, how about some conservatism for a change? How about protecting the Social Security trust fund?

In closing, this is a historic moment. Since the Republicans chose the issue of privatizing Social Security as our topic tonight, it now can be said officially to Republicans across America that it is now safe to say privatize Social Security again. For 3 years, they would not do it while the Dow Jones was diving, the Standard & Poor's was sliding, mutual funds were muddling, and corporate robbers were led away in shackles. Welcome back Social Security privatization. But there is one problem: the Republicans may now think it is safe to dive again into the Social Security privatization pool, but when it comes to common sense that pool is still empty.

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Mr. DURBIN. Paul Krugman of the New York Times summarized this pretty well.

Social Security as we know it is a system in which each generation's payroll taxes are mainly used to support the previous generation's retirement. If contributions from younger workers go into personal accounts instead, the problem is obvious.
Who will pay benefits to today's retirees and older workers? Privatization creates a financial hole that must be filled by slashing benefits, providing large financial transfers.

The obvious question to the supporters of privatization is, Where will you find the $2 trillion that makes your proposal honest? Without filling that financial hole with $2 trillion, you have a theory that is too good to be true.

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Mr. DURBIN. I ask my colleagues on the Republican side, they say it is voluntary and all about giving people a choice.
What kind of choice do you give people who do not want to open a personal account, who don't want to privatize? The choice you give them is to see their monthly Social Security benefit reduced. The average benefit of $900 will go down, if you decide that you don't want to play the stock market, you don't want to invest.

I have to ask you, How voluntary is that, if you are going to reduce the monthly benefit payment to those who do not sign up? And, the ultimate cost of this, since you cannot come up with a way to pay for the $2 trillion, could be as much as 40 percent of that current $900 monthly value. How voluntary is that? What kind of choice does that person have, when they lose the benefit they counted on all their working years?

Mr. SANTORUM. I assume what the Senator is referring to is the proposal by the administration to use price indexing versus wage indexing. Is that correct?

Mr. DURBIN. I was talking about the overall $2 trillion.

Mr. SANTORUM. Maybe I am confused. When the Senator says what change would then occur, my guess is—I am confused by the question.

Mr. SUNUNU. If the Senator from Pennsylvania will yield on this point because it was a confusing question, to say the least, but I think it gets the facts completely wrong. There are pieces of legislation that protect the guaranteed minimum benefit and that make no changes to those in the current system. To suggest that simply the act of proposing to allow some worker to control 2 or 3 percent of what they earn every week in a private account means that somebody else's benefits will be cut is simply demagoguery.

The Senator from Pennsylvania addressed the question of pay me now or pay me later. To be sure, if you allow personal accounts to be set up, you won't have as much money flowing into the trust fund today, but you will earn a rate of return and increase the value of those accounts in such a way that the total value of all the assets in your retirement system will be greater in the long run.

I think the Senator who worked on Wall Street understands that fact. I think anyone who has an IRA or a 401(k) understands that fact.

The legislation that has been introduced in a bipartisan way in this Chamber and in the House has been scored by the Social Security actuary to increase the solvency of the Social Security trust fund over that 75-year window.

That may be a frustration to those who vehemently oppose personal accounts in any way, shape, or form, but it is a fact.
The Social Security actuaries are not partisan in this debate.

The PRESIDING OFFICER. The next question is from the Senator from Pennsylvania.

Mr. SANTORUM. Thank you, Mr. President.

I reiterate the first question which the Senator from New Hampshire offered, which is, What specific plans are out there?
But I am not sure we are going to get an answer to that tonight. I will go to a second question.

We hear a lot, as I mentioned in my remarks, about their guarantee, and I know both Senators know about the Fleming v. Nestor case in 1960—a U.S. Supreme Court case that said that Social Security benefits are not guaranteed. You do not have a private property right to Social Security benefits. It is a political promise.

We saw evidence of that in 1977 and 1983 with those amendments to the Social Security Act which reduced benefits. So we are talking about this great guarantee, this incredible, infallible promise. Yet we have seen cuts in Social Security by previous Congresses.

My question is, Can the Senator tell me that the 1977 and the 1983 amendments are not examples of what you would call a guaranteed benefit and how those reductions in benefits square with you telling the American public that there is a guaranteed benefit?

Mr. DURBIN. Mr. President, let me just say that we can argue for some time as to whether this is a guaranteed entitlement. This much I can guarantee you. In a nation where 40 million people rely on Social Security for their checks, and where their families rely on receiving them, trust me; the people who are elected to this Chamber and the House of
Representatives will be responsive to guaranteeing the future of Social Security. There is much less political risk when it comes to the future of Social Security than there is market risk when you decide that you are going to take a chunk of your savings and hope that you happen to retire at the right moment when the stock market is on the up tick rather than the down tick. The market risk is far greater than the political risk.

We might be able to suspend the rules of political science in this debate. We certainly cannot suspend logic, common sense, and mathematics.

If you wonder why this Nation is in deficit, listen to the argument on the other side. They will allow workers to opt out of Social Security and go into personal accounts and argue here calling this demagoguery when we raise the question that even if these workers opt out, that did not endanger Social Security. That doesn't add up. Once the workers opt out, there is not enough money to make current payments to retirees. They cannot explain to you how they will make up the difference.

That is the problem—if we are going to maintain benefits, make it voluntary and not penalize current Social Security retirees. You have to explain to us how we make up the difference.

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Mr. SUNUNU. Mr. President, we always hear the opponents of personal accounts talk about risk. They love to talk about the fact that the market was down yesterday or the day before, or a particular stock didn't perform well. But, of course, nobody is talking about investing their retirement savings in the market the day before they retire. We are not even talking about investment for 1 or 2 years. We are talking about investing for 20, 30, or 35 years. Everybody knows the market goes up and down. But in a portfolio that is balanced and that is mixed with stocks and bonds, or with a blend of the two, the return over the long term will be strong but will be much higher than you could otherwise get from Social Security.

As a proof of that, I ask my colleagues if they can find any 20-year period in the last 100 years when this stock market didn't outperform U.S. Treasuries?

Mr. DURBIN. Mr. President, if you will look at the funds to invest in for individuals, virtually all of them suggest there is going to be an administrative cost in that instance. Most of them require a minimum investment of $2,000 because, frankly, the administrative costs can be so overwhelming. You tend to ignore that when you talk about the creation of personal accounts.

The British, in their experience in the United Kingdom, found that the administrative costs got out of hand to the point where they had to step in after several years. They also will step in because fraud was taking place. People were deluding future retirees into believing they were going to win in the market if they invested. That is a case in point where they tried to take the retirement savings in the United Kingdom using your model, and it didn't work. The administrative costs were far greater than they anticipated. Also, there was a fraud involved.

Taking money and putting it in the stock market is an option every American should have. But to use the Social Security funds of an individual for that purpose raises a risk that is too great for some people.

If the Senator from Pennsylvania suggests in the Thrift Savings Plan, the Federal retirees—he did not say that is part of our retirement; that is our savings account, over and above our retirement. I support what Al Gore supported, as do most Democrats, Social Security Plus. That allows people to invest in the Social Security over and above their Social Security.
That would give them a chance to take advantage of a good market and not be eaten alive by administrative costs or defrauded out of the basic needs to survive.

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Mr. SANTORUM. The Senator from Illinois mentioned the British system. The Senator from Illinois knows that the current Prime Minister of Britain, who is not a Conservative-Republican but a Labor-Democrat, if you will, has suggested expanding the personal retirement accounts in Britain, saying they have learned from their mistakes, the system has been improved and reformed, and he wants to expand the system to create more opportunities.

Just recently—in the last couple of years—Sweden—that conservative bastion in Scandinavia—has gone to personal retirement accounts. Most European companies have done so. Almost all of the South American countries have done so. Russia and China are going in that direction. The rest of the developed world has recognized the power of the market as a reliable tool to finance long-term commitments for retirement. Not here in America. Now, that is not a surprise because when we adopted Social Security in the late 1930s, we were one of the last to do so.

I ask the Senator who asked the question, if it is good enough for the rest of the world, why isn't it good enough for us?

Mr. DURBIN. I thank the Senator from Pennsylvania. It is rare of him to argue that the social programs in Russia and China should be emulated here in the United States.

It is interesting he would start with the British because they certainly have a much grander view when it comes to government responsibility on health care. If we were to guarantee the same type of health care protection to Americans as the British, not only for retirees but for the people, perhaps we could follow their logic in saying we may have failed over the last 10 or 15 years with their private savings accounts but people were not hurt that badly.

In the United States, if the experiment which the Senator has suggested with Social Security benefits tries and fails, we will have a generation or two of retirees on the hook, people who will not have what they anticipated they would have at the time of retirement. Then where does the burden fall? It falls on their children, first, to try to take care of their parents, and ultimately on the rest of the taxpayers.

This noble experiment, unfortunately, still has this big gap in it—$2 trillion—which the Republicans, suggesting privatization of Social Security, cannot come up with. Until they do, we are going to have to cut benefits. Cutting benefits is certainly not the answer to providing any kind of security for our retirees.

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Mr. DURBIN. Mr. President, I have listened carefully to the debate tonight and I have listened to the suggestions to privatize Social Security with personal accounts, and I have waited to hear the following: If you take current people paying into Social Security for today's retirees out of the mix, who is going to make up the difference? Who is going to make up the money that is lost currently being paid to retirees?

That is an unanswered question. Until that question is answered, this cannot be an honest proposal. That gap, that failure of any discussion on privatization of Social Security, leaves current retirees in the lurch—and those about to retire—because people will be bailing out if they decide to take personal accounts proposed by the Republican side—and nobody makes up the difference.

I will say that the Republican side has been resolute in saying they will not even consider looking at the tax cuts that
President Bush has proposed twice now during his administration, resolute in their belief that though they have failed to revive the economy—these tax cuts have driven us into the deepest deficits in our history—and though the total cost of these tax cuts will be three times the amount of money that we need to save Social Security on a permanent basis, they are resolute that we cannot ask one millionaire in America to give up a penny in his Bush tax cuts—too much, too far to go.
It shows you how this cannot be resolved in honest terms because unless and until we are all committed to the future of Social Security, unless and until we realize that rich and poor in this country all benefit from having this insurance policy—which Franklin Roosevelt conceived so that our parents and grandparents could live in dignity—we will continue to reach a stalemate in this conversation.

Stick with the basics. We should not cut current benefits. We should make any program voluntary, and it should be an add-on to the Social Security retirement. It should not be in place of it, unless you can come up with an honest answer of how we are going to fill the hole.

I yield the floor.