Social Security
SOCIAL SECURITY -- (Senate - April 05, 2005)
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Mr. DURBIN. I thank my colleagues.
Sometimes by accident the Senate lapses into something which perilously resembles debate. This may be one of those moments.
For those who are following it, welcome to the Senate as I hoped it would be. I congratulate my colleagues on the Republican side and my colleague Senator Stabenow for engaging in this debate.
The first question the American people ought to ask is a very basic question: Congress, if you did nothing, if you didn't change one word in the Social Security law, how long would the Social Security system make payments to every retiree with a cost-of-living adjustment every single year? To listen to my colleague from Pennsylvania, it sounds as though doomsday for Social Security is right around the corner. But the professionals tell us it is 35 to 45 years away; 35 to 45 years if we do nothing.
President Bush and Senator Santorum and others have said, but what about beyond that date? That is a legitimate challenge to all of us. When I came to Congress in 1983, I faced that challenge on a bipartisan basis. We met that challenge. We extended the life of Social Security for 59 years with commonsense changes. That is what we should do again.
Yet the President comes to us and proposes privatization. Now I have said it. I said the word which drives the Republicans into a rage. They don't want to use ``privatization.'' It is as Senator Bumpers said, they hate privatization like the devil hates holy water. But the fact is when the Cato Institute dreamed up this scheme, that is exactly what they called it.
So now the Republicans have a softer side of privatization; they call it personal accounts. But it comes down to the same thing. If you are going to take money out of the Social Security trust fund to invest it in the stock market, the first and obvious question you have to ask is, does this strengthen Social Security? The President has already answered that question: It doesn't. It weakens Social Security. It means the Social Security trust fund will run out of money sooner. That is obvious. You are taking money out of the trust fund.
What else does it do? It forces you to cut benefits for Social Security retirees. There is less money in the trust fund. You cannot pay out as much in a pay-as-you-go system. That is fairly obvious.
How would they achieve that? The White House memo that
was released said they would move to this new price index. Wage index to price index does not mean much to the average person until you sit down and ask, what does that mean in realistic terms? So we ask, what does that mean for today's retirees? What if we had dealt with a price index instead of a wage index?
The yellow line on the chart suggests current law; the red line price indexing. What it tells us is 20 or 30 years from now, under the President's approach, we would see a 40-percent cut in benefits paid to Social Security, forcing millions of seniors below the poverty line. That is part of privatization. The other part, the part which they hate to talk about, is that as you drag these trillions of dollars out of the Social Security trust fund, the only way to make it up is to add it to our national debt, $2 trillion to $5 trillion of national debt over 20 years, debt that is financed by Japan, China, Korea, and Taiwan, debt our children would carry.
So there we have the perfect storm. All three have come together: A privatization plan that doesn't strengthen Social Security but weakens it; a privatization plan that is going to cut benefits dramatically in the outyears; and a privatization plan that is going to create a deficit of $2 trillion to $5 trillion.
If we moved to the President's plan immediately, the Social Security system would go bankrupt even sooner, be insolvent even sooner. How can that be the right approach?
Now, let's get down to the politics of this situation. This is all about choices. We have made some choices. We had a vote as to whether we were going to cut taxes in America or save Social Security. Look at these Bush tax cut votes where we asked our Republican friends who wanted to join us in saving Social Security, are you willing to sacrifice a penny in tax cuts to make Social Security stronger. Time after time after time, to amendments offered by Senator Byrd, Senator Harkin, Senator Conrad, Senator Reid, Senator Hollings, they have said no, we would prefer tax cuts even for the wealthiest people in this country rather than to strengthen the Social Security trust fund. The reason the Social Security trust fund may be in peril in the outyears is we have taken so much out of it to finance tax cuts.
I have a chart which shows what the tax cuts mean, the Social Security shortfall and the cost of other administration politics over the next 75 years. The Social Security shortfall is about the same as the President's tax cuts for the top 1 percent of Americans. If we took the money we are giving in tax cuts to the wealthiest people in America and put it back into the Social Security system, we would not be having this debate. We would be talking about other issues that are equally if not more important.
Look at this chart. As a percentage of gross domestic product, Social Security will be at 48 percent in the year 2075. Look at Medicare and look at Medicaid. As we talk about this light at the end of the tunnel, 35 or 45 years from now, there is a locomotive looming, about to run over us, called Medicaid and Medicare and cost of health insurance.
So why aren't we sitting down on a bipartisan basis as we did in 1983, working out commonsense solutions that don't privatize Social Security, weakening it, cutting benefits, creating a massive debt for our children? Why don't we work on a bipartisan basis to make it stronger?
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The PRESIDING OFFICER. The minority is now recognized and has 1 minute to pose a question.
Mr. DURBIN. Mr. President, I will ask the first question. If you take up to 2 percent out of the Social Security trust fund--and it is a pay-as-you-go system--it is clear you don't have enough money to pay the benefits. The White House memo suggested that the way to deal with this is to reduce the amount of benefits paid to Social Security retirees. So I would like to ask my Republican friends if they support the White House memo that called for the price index that would cut benefits for Social Security retirees in years to come up to 40 percent.
Mr. SANTORUM. I would answer that and say that as you see, we have a surplus right now that can be used to fund these accounts for the next 10 years. After that we run a deficit in the Social Security Program, and we would have to come up with a way of financing that deficit.
What the President has suggested is that with Social Security, if we fix it the old-fashioned way, the way you did in 1938, which was increase taxes and cut benefits, workers would be paying more and getting less. With personal accounts, you have the opportunity of getting more because you use the compound interest, you use the miracle of the markets, and a balanced investment portfolio that is being used by pension funds all over the country to fund their accounts. And so what we would suggest is you initially use the surplus money and then you balance for future workers--again, no reduction in benefits today, but you balance for future workers.
What the President has talked about is a promise, a lower promise of benefits but a better opportunity for a return because you have the personal savings accounts which can exceed the promised benefit. So you have at least the opportunity to do as well as the current system promises but cannot pay--promises but cannot pay--and you have the opportunity of not having to have future tax increases, again, because you are able to compensate with the amount of money that is earned in these accounts, again, because of the compounding of interest and because of the diversified portfolio of investments you have.
To me, this is a balanced approach. It takes the good part of the Social Security system which is the security of having money go into this old system, keeps that in place for about two-thirds of the money, and a third of the money will be able to offset what would have to be a future reduction of benefits with the growth in the personal account.
The PRESIDING OFFICER. The time of the Senator has
expired. The majority is now recognized for 1 minute to ask a question.
Mr. SANTORUM. I thank the Chair. I would like to ask a question about the 6 percent of the workforce that does not participate in Social Security. They are State and local workers. My first question is, Do you support requiring--just as you did in 1983 by requiring Federal workers to participate in Social Security--those State and local workers to participate in Social Security? And if you do not, then why would you deny current workers who are in the Social Security system the opportunity to have a personal account like those workers do and allow them to continue to have their funded pension system and funded Social Security system, not allow current workers to have at least a partially funded Social Security system?
Mr. DURBIN. I might say that many of these people are teachers and firefighters and policemen who pay into their pension systems. They understood the arrangements when they went in and usually pay as much or more than Social Security requires. And for us to now change their system and bring them into Social Security fails on two counts. First, it doesn't solve the Social Security solvency problem. It is worth about 20 percent of the total that we are dealing with. And second, it is going to demolish their own pension plans. So you are going to find these people who are being interrupted into their current employment paying into pension plans who will now either pay more into Social Security and/or less into their pension plans.
Is that what we want to achieve? Do we want to take pension plans that people paid into for a lifetime and weaken them? Is that our way to solve the Social Security crisis? I don't think so. I listened to my friends on the Republican side likening the Social Security trust fund to Santa Claus, the Easter Bunny, and a file cabinet. They may not recall it, but it hasn't been that long ago, 6 or 7 years ago, when we generated surpluses in the Federal budget. The Social Security Program was stronger. We were borrowing less money from it.
Since President Bush arrived we have borrowed $800 billion out of the Social Security trust fund. The so-called file cabinet has been very generous to the President when he wanted to finance his tax cuts. If he hadn't given tax cuts to the wealthiest people, that file cabinet would have been full of money for Social Security recipients, lengthening the life of this program.
Also, this whole thing about the miracle of the markets,
I commend my colleague from Pennsylvania. Thank you for finally saying the words. You said we are talking about lower benefits but the opportunity to do better. That is what it is all about. So there is a guarantee of lower benefits to Social Security and the possibility of making more money on your investment.
Does the phrase ``past performance is no indication of future results'' ring a bell? That is what you see at the bottom of every ad for stocks and bonds and mutual funds. There is risk involved. Some may profit, others may not.
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Mr. SANTORUM. Mr. President, I ask either of my
colleagues, they have heard of the solution we have put forward, and I guess the question I have is, the Senator from Illinois suggested we can fix it the way we fixed it in the past. The way it was fixed in the past is we raised the payroll tax from about 10.4 percent to 12.4 percent and we raised the base and indexed it. And then secondly, we increased the retirement age from 65 to 67. Also, we taxed benefits for the first time on higher income individuals. We taxed benefits, increased the retirement age, and we raised taxes.
So my question is: If my colleagues do not want to go the personal account route, and if they accept at some point--pick the time--at some point there will be a shortfall in the system, how are we going to solve this problem? What tax are we going to increase or by how much? How much are we going to cut benefits, or how much are we going to tax benefits?
Mr. DURBIN. Mr. President, I think it is an honest question, and it is one we should face honestly. The last time we did, in 1983, Mr. Greenspan's commission came up with a list of recommendations and said: Choose from this chart and you will lengthen the life of Social Security dramatically.
Finally, we came up with a package, as the Senator from Pennsylvania described. A final vote in the House of Representatives included 81 Republicans voting with 158 Democrats. When it came to the Senate, there were more Republicans than Democrats supporting the Greenspan Commission proposal.
Yes, it gets down to basic math, and that is what troubles me about some of the statements made by my colleagues on the floor. It seems we think we can defy the laws of gravity and the laws of mathematics, and it simply gets down to this: If you want to strengthen a program such as this, you are either going to raise taxes, cut benefits, or find some new way to generate money into that system. My colleagues' program is not a way that puts money into the system. It takes money out of the system that then can be invested, that may have a good return, and if it has a very good return, you are going to be the winner. If it goes soft on you, if you happen to have a bad investment, you are a loser. You have fewer benefits under Social Security, less money from your investments. The risk is there.
But I think we need to get down to basics. The Senator from South Carolina suggested earlier that we might as well have tax cuts; otherwise, we will spend the money. But in the years when we were generating surpluses under President Clinton, before President Bush was elected, we had the largest increase in longevity in Social Security in modern history. In a matter of 3 years, as we are building up surpluses, not spending the money on tax cuts or new programs, Social Security is getting stronger by 8 years because we are being fiscally responsible.
Now with President Bush, with the largest deficits in the history of the United States brought on by a Republican President and a Republican Congress, Social Security is going the wrong way. The latest estimate says it has lost a year in solvency. They are connected.
You cannot take the money and overspend on programs or on tax cuts and not have a negative impact on the Social Security trust fund.
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Mr. DURBIN. President Bush created a commission that was stacked to be for privatization and personal accounts, but notwithstanding that the closest option to what the President has described, option 2 from that Commission, says in the first 10 years $2 trillion would be added to the national debt, in the second 10 years $4.9 trillion to the national debt. We have asked the administration repeatedly how are they going to deal with doubling America's national debt, doubling our indebtedness to the rest of the world. How can they believe America will be stronger in years to come when America's mortgage grows and America's mortgage holders, Japan, China, OPEC, Korea, and Taiwan, if they end their love affair with the dollar, will sink us by demanding higher interest rates to continue to finance our debt? How can this be fiscally conservative, I ask my Republican friends?
Mr. SANTORUM. I thank the Senator. This is really an interesting question, and I think everyone admits that there is a gap between the amount of money coming in and the amount of money that we are going to need to pay, and that is shown by this cash deficit. The fact is, we have to somehow or another in Social Security bring these two lines together. I think everyone would agree that is the option.
Right now, the shortfall over the life of the program is $11 trillion between the revenue line and the benefit line--the benefit line being up here, the revenue line down here. How do we bring those lines together, and how do we keep it solvent in the future?
What the President suggested is that if we do some--
let us assume it is all borrowing. We cannot make any spending cuts. We borrow up to--again, according to Alan Greenspan--$1 trillion to $2 trillion over the next 15 to 20 years to prefund Social Security, just like we prefund every other retirement system in America. In fact, they are required by law to prefund. We put the money into a diversified portfolio of investments and then that borrowing at the beginning creates an elimination of the $11 trillion long-term problem. So I would ask, is a $2 trillion investment now worth saving $11 trillion and making the system permanently solvent in the future?
I would answer that question with a resounding yes, and we put the Social Security system on stable funding forever and have it supported by ownership. Of course, we all know ownership has its privileges. One of the things is it can be passed to the next generation. One can do better than the current system promises and cannot pay for. Let me repeat that. The promised benefits we cannot pay for for my generation and for future generations of Americans.
What we want to give is ownership to future generations. We want to give them a good chance. This gamble--go to every union pension plan and tell them their union is gambling.
The PRESIDING OFFICER. The Senator's time has expired.
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Mr. DURBIN. Thank you, Mr. President, and thank you to my colleagues for taking time for this debate. I don't know how much we have lit up the place with our brilliance, but at least we did our very best to explain our points of view.
My colleague from South Carolina uses an interesting analogy of the house sliding off the hill. What they have suggested for that house that is starting to slide off the hill in privatizing Social Security is, before it slides off the hill, let's rip the roof off and start a fire in the kitchen. That is what privatization does. It doesn't create a stronger foundation for Social Security or for that house. It makes it weaker. It weakens Social Security, it cuts benefits, it drives more seniors into poverty, and it creates $2 trillion to $5 trillion more in debts.
If you want to make that house stronger, you have to backfill. You have to take the money you took out of the Social Security trust fund, money you took out for tax cuts, money you took out for things we couldn't afford to pay, money that has driven us into the deepest deficits we have ever seen in America under this President. That is how you backfill a foundation to save this house on the hill.
This debate is not about solvency. I think we know now that it is about the legitimacy of Social Security. I believe in it. Most Americans believe in it. It is a safety net we have counted on for almost 65 years and we will continue to count on.
But some of my friends on the Republican side see the world much differently. They have what they call the so-called ownership society. If you can just own it, then it has to be great. The model of the ownership society is, just remember, we are all in this alone.
But we are not in this alone. When Franklin Roosevelt created Social Security, he said the American family, all workers, will contribute through their payroll to make sure, if all bets fail, if your pension system fails, if you don't have enough in savings, you can always count on Social Security. That, he said, is what the American family needs.
They need it today more than ever. Pension systems are failing. These corporations are going bankrupt and throwing their shareholders and retirees and employees to the wolves. We cannot do the same with Social Security.
We ought to be able to stand together and make even difficult choices, as we did in 1983, when a larger number of Republican Senators joined Democratic Senators to find a bipartisan solution. Privatization is not the answer. Ripping the roof off that house and starting a fire in the kitchen is not going to make it any safer.
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