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Mr. HARKIN. Mr. President, I come to the floor today along with my colleague from Vermont to introduce a concurrent resolution expressing the sense of Congress that the so-called chained CPI should not be used for the purpose of calculating Social Security benefits or benefits for disabled veterans.
As we work to reduce the deficit in a balanced and responsible manner, many have discussed changing the measure of inflation used to calculate the cost-of-living allowances to a measure of inflation called the chained CPI.
Now, some claim that the chained CPI is a more accurate measure of inflation because it takes into account the fact that consumers may change their spending behavior and substitute items with lower priced increases for items with higher priced increases. As a result of this feature, the chained CPI results in a lower measure of inflation.
All of this may seem very technical, but the impact of requiring Social Security or veterans disability COLAS--cost-of-living adjustments--to be based on the chained CPI is anything but technical. It will have real and negative impacts on our seniors and those who become disabled as a result of service in the Armed Forces. In fact, the most adversely impacted would be the oldest and the poorest. I do not think anything could be more unfair or inappropriate or unnecessary.
As this first chart shows, the chained CPI is a real cut in Social Security benefits. According to Social Security Works, this policy would reduce annual Social Security benefits for the average worker at age 75 by $658 a year, by age 85 by $1,147 a year, and by age 95 by $1,622 a year. Over on this side of the chart we see the cumulative cut; in other words, what would happen over the years. From age 65 to 75 people would lose about $4,600, by age 85 they would lose $13,900, and by age 95 they would lose $28,000.
I think a couple things this chart shows is that people are penalized for living longer--the longer they live, the more they are penalized.
Now, one might say: Well, $658 a year by the time you are age 75, that does not sound like a lot. Yes, not to some of us, not to us with our incomes. Look at the kind of retirement programs we have. If you are in the upper quintile, of course, that does not seem like much. But, again, if we look at a second chart I have, we will see who really kind of gets hurt, and it is the poorer you are.
Let's put it this way: Let's say you are 65, and your total income is less than $12,554 a year. That puts you below the poverty line. The total amount of your income that comes from Social Security is 84.3 percent. Well, you might think, if you are making less than that, wouldn't all your money come from Social Security? Well, the answer is yes, but--and I question people about this--if you are making that little amount of money, and you are over 65, you are probably working at some part-time job. Maybe you are baby-sitting, maybe you are cleaning houses, maybe you are a greeter at a store. You are probably doing something to add to your income, but it would only amount to about 16 percent. Most of it comes from Social Security.
We can see from this chart, even after you get up to $20,000 a year, it is about the same. About 84 percent of your money comes from Social Security. So if you take a cut in Social Security, and you are lower income, that is where you get whacked the most.
Of course, when you get up here to the fifth quintile, you are making more than $57,957 a year. Only 17 percent of your income comes from Social Security. So you say, well, if you took $600-some a year from that, yes, you can probably afford it. But even if you look at up to $57,000 a year in the fourth quintile, almost half--43.5 percent--of your total income comes from Social Security. So even if you are making $30,000, $35,000 a year, after age 65 half of your income comes from Social Security.
So, again, when you start making these kinds of cuts in the chained CPI, you might say: Well, it is only $658 a year. For someone in the lower quintiles, that is like a month's worth of food, perhaps 6 weeks' worth of food. Tell me that does not have an effect. Of course it has an effect.
If you are in the upper income, you probably do not have that much to worry about. That is why the pernicious effect of chained CPI is that the longer you live, the more you are penalized; and the lower your income, the bigger whack you are taking out of your total income. So, again, as people get older, they are more likely to have depleted all their sources of retirement income, assuming they have any to begin with.
So a couple of facts I think are pertinent: First, today only one in five Americans has a defined benefit pension that will last until the day they die--one in five. When I first came to Congress it was one in two. One out of every two Americans had a defined benefit pension that would last them until the day they died. Now it is one in five, and it is getting less all the time.
Second--and this startles a lot of people--50 percent of the American populace have less than $10,000 in savings--less than $10,000. One out of every two Americans has less than $10,000 in savings. Well, you can see, if you have that when you retire, that is going to be gone pretty soon, so then you are going to rely, again, strictly on Social Security.
So when you put those two facts together--four out of five have no pension, and half have less than $10,000 in savings--then you see that soon after you retire, the only thing you have left is Social Security.
So it is already hard enough now for millions of people hoping to retire, but then you put chained CPI in there, and you really are hitting the oldest and the poorest.
So, again, I know people are saying: Well, we have to do something to save Social Security for those in the future. Well, I agree with that. That is why whenever I see an honest assessment of Social Security for the future, an honest assessment that says Social Security cannot continue to exist as it is, well, I agree with that--as it is. But then there are two approaches. Do you whack the benefits or do you increase the revenues that come into Social Security?
Two different approaches. You do not have to cut the benefits. In fact, I would say that by talking about chained CPI, the signal you are sending to the younger generation is: Well, maybe when you get there we will whack it some more.
A lot of young people are saying, I do not know if Social Security is going to be there for me when I get that age. When they hear people talking about chained CPI and cutting this, they are right to be worried whether we are going to keep our promise to this next generation that we will have a Social Security system they can rely on and count on.
So what is to be done? Well, last year I introduced legislation that would basically extend the life of the Social Security trust fund to 2050 and give a $65-a-month increase to every Social Security recipient, and yet extend the life of it for over 18 more years.
How do we do that? Very simply. We raise the wage cap for people who pay into Social Security from $113,000 a year, which it is now. Over 10 years we raise it and do away with it after 10 years.
There is another approach too. The National Academy of Social Insurance, NASI, did a poll earlier this year. They asked: Would you be willing to go from 6.2 percent paying into Social Security to 7.2 percent, a 1-percent increase over 20 years, if that would help secure Social Security? Seventy percent of Republicans and Democrats said yes. Over 20 years, a 1-percent increase, that is nothing.
But if you were to take that and raise the wage cap, you could increase Social Security payments by $65 a month and secure Social Security for up to 75 years. It seems to me if you want to send a message to the young people about the sanctity and stability of Social Security, you would say that rather than we are going to cut, we are going to have this so-called chained CPI.
As I said, I know it sounds technical. But it is not technical at all. I once likened chained CPI to an anchor chain. If you are standing on the boat and the anchor chain gets around your ankle and someone throws the anchor overboard, where are you going? You are going down. That is what chained CPI does. The older you get, the more you get hit on. The poorer you are, the more you get hit.
So, again, this idea that we have got to somehow cut benefits, have this chained CPI in order to save Social Security is wrong. It is wrong. There are other ways of doing it that would be widely, broadly supported by the American people. Go out and ask any group, ask any group of seniors, do you think we ought to raise the wage cap so someone who is making $500,000 a year pays in at the same rate as someone who is making $50,000 a year? Well, of course. That is not the case now. You make $50,000 a year, you pay into Social Security on every dime you make. If you make $500,000 a year, you are only paying in on the first about 20 cents of every dollar you make. After that you do not pay into Social Security.
I think the average American would say, that is not fair. What is good for someone making $100,000 a year ought to be the same for someone making $1 million a year. So there are other ways of securing Social Security. This chained CPI sends the wrong message to young people. It exacerbates the concern young people have, is Social Security going to be there when I retire?
I always tell them: Do you believe the U.S. Government will exist when you retire? They say: Well, yes. I say: If that is the case, Social Security will be there, because it is backed by the full faith and credit of the U.S. Government.
What are we supposed to do? Are we supposed to cut that full faith and credit, and tell the young people, it will be there but we may take cuts here and there may be cuts there? What is a young person to think? Am I going to have what I think I am going to be able to have and count on Social Security?
This is a trust. My friend from Vermont is always talking about this is a trust fund. It is a trust. It does not add to the deficit. Think about the word trust. Social Security trust fund. You have got to be able to trust it. Young people need to be able to trust it, that it will be there for them. The best way to undermine that is to go to this chained CPI.
With that, I yield to my good friend who knows this issue better than just about anybody I know and who has fought so hard on behalf of Social Security and keeping that trust fund and keeping the trust in Social Security.
I yield the floor to Senator Sanders.
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Mr. HARKIN. Would the Senator yield for a question?
First of all, I thank my colleague from Vermont for being a strong voice on this issue and on so many issues that affect the elderly and especially our veterans. The Senator is the chair of that committee.
I am always curious as to why it is that so many of the dark suits here in Washington are always after Social Security. I don't say there is some ill spirit there, although I will say I think the Senator might agree that there are some who would like to privatize Social Security. We know that. They have said that in the past--or partially privatize it.
It seems to me that so many people who get involved in this think it is just a little nick.
I saw a cartoon of a barber cutting somebody's hair. They had this huge ball of hair, and they were snipping just a couple of little hairs off and saying: That is all we are doing with chained CPI.
They think it is such a small thing. It always occurred to me that those people making the decisions, the dark suits, those are all people who probably have good pensions, good retirement systems. They are never going to want for anything. Yet somehow they just think, well, $658 bucks--that is not a big deal, up to 75. But, as the Senator pointed out, $658 in 1 year to someone whose income is $15,000--that could be a month's worth of food, 6 weeks' worth of food.
Mr. SANDERS. That is right.
Mr. HARKIN. That is a big whack. I would ask the Senator, again, if he has any thoughts----
Mr. SANDERS. I do.
Mr. HARKIN. On why is it that we can't listen to people and come up with another approach on this rather than this chained CPI?
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Mr. HARKIN. I have a couple of thoughts. I would say to my friend from Vermont, to those who say it is unconstitutional to do those things, I wonder if they ever read the preamble to the Constitution, which is, by the way, part of the Constitution of the United States?
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare.
That is part of the Constitution of the United States.
Mr. SANDERS. Of course.
Mr. HARKIN. How we do that obviously can vary from time to time, generation to generation, but the idea that we are here to promote the general welfare as a Federal Government is clearly in the Constitution of the United States.
Secondly, the Senator pointed out the idea that Social Security--that this is really a trust fund. People pay into it, and they take out. Now, it has had its problems.
But I ask the Senator, if unemployment today were down to less than 5 percent--say, 4 percent--what would the Social Security trust fund look like?
Mr. SANDERS. It would be much larger than it is right now because more people would be paying into it.
Mr. HARKIN. So the 2033 date--if we make no changes, they say Social Security will pay 100 percent out up until 2033. But if, in fact, we reduce unemployment to less than 5 percent, the Trust Fund will be able to pay full benefits for a longer period of time.
Mr. SANDERS. That is right. I think the point has to be made--and I see Senator Durbin on the floor as well, and he has made this point--that we can argue about how we go forward on Social Security, but we should be clear: Social Security hasn't contributed a nickel to the deficit because it is funded by the independent payroll tax.
So it is a reasonable question as to how we make Social Security solvent for 75 years rather than just the next 20 years. That is a good debate. The Senator and I have similar ideas on how we should tackle that issue. But it should not be considered as part of the deficit reduction effort. And it disturbs me very much because the administration has acknowledged that reality and we have heard them over the years say: Yes, we want to deal with Social Security but not part of deficit reduction. It bothers me that they have now injected Social Security into the deficit reduction debate.
Mr. HARKIN. There is one last thing I would say. The Senator mentioned that we have a deficit. We do. We have to address it. We all agree with that. The Senator pointed out that the offshore haven businesses are not paying their fair share of taxes.
I would like to ask Senator Sanders one other question. Isn't it a fact--well, the estimates vary; $1 trillion is not stretching the truth--to say that the war in Iraq cost us somewhere close to $1 trillion?
Mr. SANDERS. I would say that most estimates suggest that. If you look at both Iraq and Afghanistan, it may be three times that number.
Mr. HARKIN. I don't know, but I have seen estimates up to $1 trillion for Iraq only. That was all borrowed money, so that has to be paid back.
Mr. SANDERS. Yes.
Mr. HARKIN. So are we going to make the elderly, the poor, the students, and the veterans pay for that?
Mr. SANDERS. I would say the Senator makes a very good point. And I often point out to my Republican friends that I think you are looking at yourself and me as some of the major deficit hawks.
Our friends today who want to cut Social Security in the name of deficit reduction apparently didn't have a problem with the deficit when they went to war in Iraq and Afghanistan without paying for those wars and when they gave huge tax breaks to the wealthiest people in this country without offsetting those tax breaks.
The Senator's point is very well taken.
Mr. HARKIN. I thank the Senator.
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