Social Security

SOCIAL SECURITY

Mr. DURBIN. Mr. President, President Bush and many of his supporters in Congress are trying to convince the American people about the so-called Social Security privatization plan. They are arguing that there is going to be a bargain by borrowing $2 trillion now instead of paying over $10 trillion later in the shortfall on Social Security. Once you learn the reality of the President's Social Security bargain, you understand why Americans of all ages are unwilling to buy into this Social Security privatization scheme.

The $2 trillion it would cost to transition to a privatized Social Security system would do absolutely nothing to solve Social Security's long-term funding challenge. The argument on the other side was being made yesterday by the chairman of the Republican conference, Senator Santorum of Pennsylvania. He was on a television show on which I also appeared. He was confronted with the cost of the transition for privatizing Social Security. He said:

I disagree with that. I mean, you remember the old Fram Oil Filter commercial--``pay me now or pay me later.'' And if we don't do something now to put a down payment for young people so they have an opportunity to have a hope for something better than the system now will provide them, we are looking at huge tax increases down the line, big benefit cuts down the line, and huge deficits.

As you look at the actual costs involved with the transition under privatization, you understand why this is not the bargain that has been described. The President wants to take $2 trillion out of the Social Security trust fund. He does this by saying we are going to let people invest in their own private accounts, as he calls them, with money out of the Social Security trust fund. Unfortunately, he has made no suggestion whatsoever on how we are going to pay back the amount of money being taken out of the Social Security trust fund. In fact, this taking money out of the Social Security trust fund is not going to strengthen it; it is going to weaken it.

Look at the President's proposal and what it means--the Social Security shortfall, the cost of other administration policies over the next 75 years. Presently, there are key dates for Social Security; i.e., the date when benefits paid out exceed tax revenues coming in. Under current law, it is 2018. Now we have a buildup, a surplus in Social Security, so it will continue to pay out.

Under the President's proposal, benefits would exceed tax revenues in 2012. Benefits exceed all revenues in 2028 under current law and, under the President's proposal, in 2020. The year when the trust fund is exhausted is 2041 by the current law. Under the President's privatization proposal, it is 2031.

What the President has proposed is no way to strengthen Social Security; it weakens it. This argument by Senator Santorum that we either incur this debt today of $2 trillion or face $10 trillion in the future ignores the obvious: that we would incur the debt today of $2 trillion and the debt of $10 trillion in the future.

The President presents his idea to privatize Social Security as if it is a solution to the long-term funding challenge. As I have shown with the chart, it is not. Based on the few details we have seen about the President's privatization, adding private accounts would accelerate the date in which benefit payouts exceed tax revenues. This surplus that we will continue to have until 2018 would disappear by 2012 under the President's proposal.

So why are we doing this? People have said: You Democrats are criticizing a lot; where is your plan? If we are going to start with the plan, we ought to start with some basic agreement, and it ought to be this: Whatever you put on the table should make Social Security stronger, not weaker. It should not have a dramatic cut in the benefit payments being made by Social Security. Whatever you put on the table should not incur a debt of many trillions of dollars for future generations. Sadly, the President's proposal fails on every single one of those suggestions. It does not strengthen Social Security. It cuts benefits dramatically--up to 40 percent--according to a Boston College survey that came out last week, and it puts $2 trillion more debt on younger people.

So the idea of being able to invest a little bit more of your money in something that may--if your investments are wise--mean more return doesn't hold out much hope for a younger generation that sees the debt of America being driven up dramatically by the President's proposals.

In exchange for making the Social Security trust fund financing worse, the President wants to borrow $2 trillion. This sea of red ink shown on this chart is the story of the Bush economic policy. When the President came to office, we were actually generating a surplus in the Treasury. And a surplus in our budget meant we weren't borrowing as much from Social Security; we were making it stronger.

So the plan to strengthen Social Security was there when the President arrived, but the President said: I have a better idea. Let's stop doing things the way we did in the past and let's give tax cuts primarily to the wealthiest people in America. That will really pay off.

Look what it paid off in--the biggest deficit in the history of the U.S. At a time when many of us warned the administration you cannot really look into the future and say with any certainty what America will face, be careful about cutting taxes, the administration said: Step aside, we have a majority and we are going to pass it. If you don't like it, just step aside.

So a lot of us watched as these tax cuts were enacted. Look at the deficit projected from the tax cuts. Now the President wants to make it worse. The President is proposing adding to this national debt by privatizing Social Security and not paying for it. The President is suggesting adding even more debt to future generations and doing so by making the tax cuts permanent.

Now, people like tax cuts. That is appealing. Every politician would like to get up before every audience and say I am going to cut your taxes and get a little round of applause. Then you look at it and ask, is that smart to do? The first obvious question is: Under President Bush's tax cuts, who wins and who loses?

I can tell you what the numbers show. Of the tax cuts that will take effect this year, 90 percent will go to people making over $200,000 a year. Over 50 percent of the new tax cuts will go to people with incomes of more than a million dollars a year. Half of the tax cuts that will take effect this year will go to people making over a million dollars a year.

At a time when the budget cannot find enough money for health care, particularly for the elderly in nursing homes and for children in poor families with mothers working two or three low-wage jobs, this President want to make his tax cuts of hundreds of millions of dollars to those making over a million dollars a year permanent. At a time when we are closing down Amtrak, when this administration is not properly funding veterans health care, they want to make tax cuts to people making over a million dollars a permanent.

Well, it is a program that hasn't worked to this point. Over the last 4 years, we have seen our deficits get dramatically worse. The President talks about the Social Security funding shortfall over an eternity. It will be interesting to take a look at what, first, the cost of privatizing Social Security will be. The amount provided in the President's budget for Social Security is zero. That is why the President's proposal has exactly that much credibility--zero.

If the President really believed in his privatization plan, he would put it in the budget. Why didn't he? Because it costs so much money; $754 billion is the lowest estimate for the first 10 years of the President's plan.

Look at the next 10; it is $4.5 trillion. We talk about trillions of dollars here in Washington. The President won't talk about this at all. He will not include the cost of his privatization plan in the budget because it costs too much. He cannot afford to pay it.

Take a look at, over the long haul, what it means. If he makes his tax cuts permanent through 2078--a long period of time--this is how much money will be taken out of the Treasury, $2 trillion. Then look at the Social Security shortfall. It is one-third of that amount. If the President decided, here is a radical idea, we are not going to give tax cuts to people who make over a million dollars a year--you seem to be doing OK in America; this country has treated you pretty nicely, so we are not going to give you a tax cut--if we just said that and put the money in Social Security, it would be strong.

Maybe there are other things we could do to make it even stronger. But this administration is bound and determined to give these tax cuts to the wealthiest people in America.

I think when you take a look at this, you also have to remember something else. Who owns America's debt? Who holds America's mortgage? Who are the creditors we have to worry about? It turns out, it is foreign countries, primarily China and Japan. The U.S. economy is now increasingly dependent on a handful of foreign central banks for our economic stability and security. It is not only shortsighted to come up with privatization plans that you do not pay for, tax cuts for wealthy people that you don't pay for; it is shortsighted to be even more dependent on foreign countries that hold our debt.

Listen to this. Last October the chief currency analyst at MG Financial Group, one of the oldest companies in the retail foreign exchange industry, said as follows:

The stability of the bonds market is at the mercy of Asian purchases of U.S. treasuries.

Let me translate. What if the mortgage on your home was in the hands of someone who on any day could call you and say ``pay it all off''? It is not like 15, 20, or 30-year mortgages but a mortgage they could call in tomorrow. What if they started worrying about your financial circumstances? What if they worried that you would not have a paycheck next week or somebody was sick in your home? Will they start worrying about whether you are going to make the payments? Getting nervous, they could call in that debt. It can happen. It can happen in this world. In the world situation, when they lose confidence, as this gentleman is suggesting, in the U.S. economy and the U.S. budget, we become even more vulnerable, and foreign countries such as China and Japan can say, all right, we will not call in your mortgage, we will just raise the interest rate. What will we do then? There is no place to turn. They can say, incidentally, we are not that confident about your dollar. We are going to start saying you have to convert your dollar into euro dollars or some other currency.

All of these factors complicate our lives dramatically. The more we are in debt, the more we are dependent on foreign countries. These countries, coincidentally, export to the United States dramatic amounts of goods and services that cost us valuable jobs in America. It is no coincidence; Japan, China, Korea, other Asian countries that hold our debt are also holding America's workers by the throat.

They understand they have us.

So what does this conservative administration, this Bush administration propose? More debt, more dependence, more power to our creditors, such as China and Japan. How can that make America any stronger? In fact, it makes us weaker.

I sometimes wonder when I look at the long-term view whether people in the White House are stepping back to look at the reality of the world we live in; that here we are with a supplemental appropriation of $21 billion to fight the war in Iraq--and I will vote for that and every penny for which this administration asks. If it were my son or daughter, I would want them to have everything they need to be safe in this war. But at the same time, we are so dependent on foreign oil, buying it at record levels because we do not have a basic policy of energy conservation in America.

A couple weeks ago, my wife and I bought a new hybrid car, a Ford. We are driving it around, getting used to it, hoping it works as promised. Why is it that we are not pushing for more fuel-efficient vehicles so there is less dependence on foreign oil? At the same time we are appropriating money to fight this war, we are sending money hand over fist to these oil-producing countries that, through the backdoor, are sending money to support terrorism. Does that make any sense? Why would we not have an energy policy that also is about the security of America, which means an energy policy that reduces our dependence on foreign oil. Why don't we have a budgetary policy that reduces our dependence on foreign lenders, such as China and Japan?

Exactly the opposite is coming out of this administration. It is totally upside down. It lacks common sense.

Holdings of Treasury bonds by Japan were at $722 billion last October. China's rose to $191 billion. Steven Roach, the chief economist at Morgan Stanley, said:

If all we have funding our current account imbalance is the good graces of foreign central banks, we are increasingly on thin ice.

So this bargain that the administration has proposed in privatizing Social Security drives us deeper in debt, which the President will not pay for, a debt for future generations and a debt held by foreign governments, and we become their debtors and at their mercy.

We have to understand this. The President's proposal makes Social Security's long-term finances worse. It worsens our short- and long-term budget outlook by trillions of dollars. It leaves our grandchildren to pay higher taxes on our national debt. And it makes us more dependent on foreign countries, such as Japan and China. That is not a good proposal for America.

Let me tell you what I think we should do. I have lived through this before. As a new Member of the House of Representatives back in the 1980s, I no sooner arrived in town and they said Social Security is in trouble; we need to do something, and we need to do it now. I thought to myself: I got here just in time.

So President Ronald Reagan, the leading Republican, turned to Speaker of the House Tip O'Neill, the leading Democrat, and said: Mr. Speaker, let's do this together. Let's create an honest bipartisan commission and let them come back with some proposals.

Alan Greenspan, known as a Republican but respected as an economist, came forward and headed up the Commission. They came up with a list. They said here is what you have to do to Social Security to keep it strong for a long time. Take your pick, but you have to do some of these things and do them now, in the early 1980s. It was a big debate. The debate went on for a long time.

Were we going to increase the age by which people could retire on Social Security? Would we increase the payroll tax? Would we cut benefits? None of it was really that appealing. The idea of Social Security missing a payment was totally unacceptable. So we came together, Democrats and Republicans. We agreed. We passed the bill. President Reagan signed the bill.

What happened as a result of our action? We bought 58 or 59 years of strength and solvency in Social Security. And that is exactly what we should do now. Set aside this privatization plan. It is headed nowhere. The American people are not buying it. Instead, let's do this on a bipartisan basis. Let the President propose a real, honest bipartisan commission and let them come up with honest, commonsense ways, when played out over 40, 50 years, that will make Social Security stronger.

We rose to that challenge--I was here when it happened--and we can do it again. But we need to detoxify this debate, pull the ideologues, people who have these extreme views about getting rid of Social Security, get them out of the picture. We do not need them in the room. Social Security needs to be here for future generations. Both parties are usually committed to that goal, and they should be committed to it today.

I suggest the President's privatization plan is a nonstarter. It is a plan that does not have the appeal that he thought it would. I am sure there were some excited about it initially. It just is not getting off the ground.

Republican leaders, such as the Speaker of the House, said last week in a front page interview in the Chicago Tribune that you cannot force an idea such as this down the throats of the American people. I think he is right. I think he has recognized the reality. And I think he is willing, on a bipartisan basis, to look at alternatives. That is the way we should all approach it--a bipartisan approach that truly strengthens and does not weaken Social Security, a bipartisan approach that does not make wholesale cuts in benefits and add dramatically to America's debt. That is the way we should approach this issue.

Mr. President, I yield the floor and suggest the absence of a quorum.

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