CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR THE FISCAL YEAR 2006
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Mr. GRAHAM. I will try to be brief. I see the Senator from North Dakota, Mr. Conrad, has come to the floor.
First, I thank Senator Conrad, who has been a good ally in trying to define the problems the country faces. There are about $40-something trillion in promises we have made to the public through different entitlement programs and there is not money to pay those promises. That is what gets us here.
It is time for the country to come to grips with the idea we promised a lot of retirement benefits, we promised a lot of medical benefits, Medicaid benefits for people who are disabled and poor people, and we do not have the revenue streams over time to support those benefits. So 2 years ago Senator Conrad and myself worked on a resolution trying to define the problem. There are many different views of whether it is a problem or a crisis, how to fix it, where the accounts fit in, should we borrow the money, should we raise revenue.
Quickly, I believe that without restructuring benefits and restructuring taxes you cannot get there from here. I know a lot of people do not want to hear that, but in 2018 we begin to pay out more in benefits than we collect in taxes, and it only gets worse over time because when I was born in 1955 there were 16 workers for every retiree. Today there are 3 1/2 , and 20 or 30 years from now there will be 2. So it is nobody's fault. It is not the Democrat or Republican Party's fault.
The fact is, there has been a huge demographic change in the country called the baby boom. It is a big elephant working its way through the system. We need to adjust for it, and we need to make promises in the future, starting now, that we can afford to make and that are honest promises.
My goal, and I believe this about Senator Conrad, is to restructure Social Security and other entitlements in a fiscally responsible way so future generations do not live in fear of the check not coming,
the benefit not being there, and we are willing to make some hard decisions. But this amendment is not about those hard decisions. This amendment is about, Where do we stand as a nation vis-a-vis Social Security.
If I may, I will read some of the findings:
(1) Social Security is the foundation of retirement income for most Americans;
Not only is that a true statement, it is an essential statement for us to make as a body, Republican and Democrat, because half the seniors today who receive a Social Security check would be in poverty if it were not for the Social Security check. So it is the foundation of retirement income for many Americans.
(2) preserving and strengthening the long term viability of Social Security is a vital national priority and is essential for the retirement security of today's working Americans, current and future retirees, and their families;
I think we can all agree on that. We did 2 years ago. The word ``crisis'' or ``problem'' is not in there. ``Vital national priority'' is because for millions of Americans this is what you count on when you retire.
(3) Social Security faces significant fiscal and demographic pressures;
What does that mean? It means what I said before. Senator Conrad and I agreed 2 years ago that in 1950 there were 16 1/2 workers for every retiree; in 2002, 3.3. And over time it comes down to two workers per retiree because families are smaller.
(C) without structural reform, the Social Security system, beginning in 2018, will pay out more in benefits than it will collect in taxes;
And that 2018 number varies: 6 months, 12 months. That is the right timeframe. What does that mean for average Americans? It means for the first time in the history of this system, the first time ever, we will pay more out in benefits than we collect in taxes. It is true that we have collected more in taxes than we have paid in benefits, and we put them in Treasury notes and borrowed the money to operate the Government. I do not like it. To Senator Conrad's credit, he does not like it either. That has been the practice of both parties here. But that is not the reason Social Security is going to run out of money.
If you took all the notes and redeemed them and put the money back in the system, you buy solvency for a period of time, but by no means do you fix the problem. So 2018 is an important date. It is a historic date. It is the first time in the history of this program we pay out more in benefits than we collect in taxes.
Now, what does that mean over time?
(D) without structural reform, the Social Security trust fund will be exhausted in 2042, and Social Security tax revenue in 2042 will only cover 73 percent of promised benefits, and will decrease to 68 percent by 2078;
Now, the definition of ``bankruptcy'' we can argue about, but it is usually an inability to pay the obligations when they come due. In 2042, it is not bankrupt in terms of no money to be paid. In 2042, according to the Social Security Administration, only 73 percent of the benefits will be paid. So to do nothing means that we start paying more than we collect and eventually we have to cut benefits across the board. And by 2078, 68 percent of the benefits are able to be paid.
There are millions of Americans who could not suffer that in their retirement life because when these cuts come by doing nothing, they come across the board. They do not treat somebody who makes $30,000 differently than they treat somebody who is in the Senate who now makes $160,000. I think we should try to avoid that in a bipartisan way.
(E) without structural reform, future Congresses may have to raise payroll taxes 50 percent over the next 75 years to pay full benefits on time, resulting in payroll tax rates of as much as 16.9 percent by 2042 and 18.3 percent by 2078;
What that means is if you want to restore full benefits, you are going to have to go and get more money because from 2018 to 2042 you tap all the reserves. At 2042 you have a scheduled benefit cut. To avoid it, you have to bring new money to the table. And if you did it by raising payroll taxes, you would have a massive tax increase in payroll tax rates, which would make us less competitive in a global economy against China and everyone else because the payroll tax is a significant problem for business. But it is the way we fund Social Security, and we should not raise it unless we absolutely have to. To do nothing means it is going to be raised in a dramatic fashion.
(F) without structural reform, Social Security's total cash shortfall over the next 75 years is estimated to be more than $25,000,000,000,000 in constant 2004 dollars or $3,700,000,000,000 [in 2004 dollars] measured in present value terms;
In English that means you need $3.7 trillion of new money today to get this thing solvent to 2075. And we are
talking about trying to take 1 percent out of the Medicaid program. How do you get $3.7 trillion of new money put in the system today to keep Social Security solvent for the next 75 years? I don't know how to do that without some sacrifice. There is a way to do it, and we will talk about that, I guess, down the road. But that is a fact. We are $3.7 trillion short of the money we need to keep this system afloat until 2075.
(G) absent structural reforms, spending on Social Security will increase from 4.3 percent of gross domestic product in 2004 to 6.6 percent in 2078;
When you add Medicare, Medicaid, and Social Security together, it is 25 percent of the gross domestic product.
Now, listen to this: In 2080, 25 percent of the gross domestic product will be spent on Medicare, Social Security, and Medicaid. Right now, the entire Federal budget, everything we spend, is 20 percent. These three programs will outpace what we spend on the entire Government if we do nothing. So is this a problem? To me it is. I probably will not be around in 2078, but I don't want to pass on to people who are going to be around in 2078 a huge problem they can never work themselves out of.
(5) the Congressional Budget Office, the Government Accountability Office, the Congressional Research Service, the Chairman of the Federal Reserve Board, and the President's Commission to Strengthen Social Security have all warned that failure to enact fiscally responsible Social Security reform quickly will result in 1 or more of the following:
(A) Higher tax rates.
That is one way to avoid the benefit cuts. We talked about that.
(B) Lower Social Security benefit levels.
To not put new money in means you reduce benefits across the board.
(C) Increased Federal debt or less spending on other federal programs.
That is what you would need to do if you did not raise the taxes: borrow money, cut other programs.
The sense of the Senate--this is what we agreed to by voice vote. Everything I have read to you was agreed to by voice vote 2 years ago. It is not preferring one solution over another. It is not saying where accounts are good or bad or that indexing is good or bad. It is defining the problem in responsible terms, picking dates that other people have told us exist, being honest about the unfunded liability, being honest about the consequences of doing nothing. And from this I hope we can find a way to do something in a bipartisan fashion.
The sense of the Senate says:
(1) the President, the Congress, and the American people including seniors, workers, women, minorities, and disabled persons should work together at the earliest opportunity to enact legislation to achieve a solvent and permanently sustainable Social Security system;
(2) Social Security reform--
(A) must protect current and near retirees from any changes to Social Security benefits;
I think we all agree with that.
(B) must reduce the pressure on future taxpayers and on other budgetary priorities;
(C) must provide benefit levels that adequately reflect individual contributions to the Social Security system; and
(D) must preserve and strengthen the safety net for vulnerable populations including the disabled and survivors; and
(3) the Senate should honor section 13301 of the Budget Enforcement Act of 1990.
I hope we can still agree on this because this is as true now as it was 2 years ago. It is more important than it was 2 years ago to define the problems in honest terms without prejudicing any solution proposal.
I want to publicly thank Senator Conrad for stepping to the plate, as he has in the past, to put on the table that Social Security has a problem. We have done a joint op-ed piece defining this problem, and for that I am grateful.
I will reserve the remainder of my time.
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Mr. CONRAD. Mr. President, let me address the amendment of the Senator. Let me say, I am generally supportive of this amendment. I think it lays out accurately our overall situation. The fact is, we have a challenge in Social Security, not a crisis in the sense that Social Security checks are not going to be written tomorrow or next month or next year.
But the longer term problem we have is the demographic problem. That is the reality. The sooner we deal with it, the better. It is also important for people to understand that this demographic challenge is not just in Social Security. In fact, we have a much bigger challenge in Medicare; the shortfall there is eight times the shortfall in Social Security.
There are two things I want to indicate about this amendment that trouble me and I thought were going to be changed. Let me just indicate, on page 3:
Without structural reform, Social Security's total cash shortfall over the next 75 years is estimated to be more than $25 trillion in constant 2004 dollars or $3.7 trillion measured in present value terms.
I thought the $25 trillion was going to be taken out and $3.7 trillion, which was in our op-ed, was going to be the number.
Mr. GRAHAM. Using 2004 dollars would be very acceptable.
Mr. CONRAD. You are willing to strike that one phrase?
Mr. GRAHAM. Yes.
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Mr. GRAHAM. I want to stick with what we did 2 years ago. I will comment why, and I will wait until the Senator gets through.
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Mr. GRAHAM. I want to leave this debate on a positive note. Senator Conrad has been a pleasure to work with. We have some philosophical differences. Maybe we can bridge those gaps. Senator Lott was talking about my political career. I hope it is secure, but I know Social Security is not. I am not worried about that now, because most people at home have appreciated the effort on my part, and others, to bring honesty to the table.
Why did I pick the word permanent? Why did we pick the word permanent? Everything Senator Conrad said about budget forecasting is absolutely true. I think we need to understand that when we say words such as ``permanent,'' what I am trying to do is give the American public reassurance that we, as Republicans and Democrats, are going to do the same thing with Social Security that happens when you buy life insurance or you buy car insurance or you buy fire insurance; that is, when you need it, if something happens, it is going to be there. You wouldn't buy a policy from some company that could say: You are good for 10 years; After that, I am not so sure.
What we are trying to do is make a pledge and a promise to the American people that we will permanently take care of this program. We will make the adjustments as we need to, whenever they come and however they come. Our pledge is to make honest promises, keep those promises and I want to tell you why it is important.
Senator Boxer commented about her family situation. The good news is that Social Security has affected so many lives in a positive way. When I was 21, my mother died--she was 52--of Hodgkin's disease. When I was 22, a year later, my father died. He was 69. We all thought he would go first, but you never know in life. We owned small businesses, a liquor store, restaurant, and pool hall. Everything I learned about politics I learned there, and it served me well.
But when my parents died, the businesses folded. I had a 13-year-old sister. We moved in with an aunt and uncle who worked in the textile mills; they never made over $25,000. Survivor benefits mattered to my family. Without that money, it would have been tough for our family. So I know as well as anyone in this body that Social Security has a purpose. That is a good purpose. We ought to focus on making sure in the future, families like mine, who are worse off, have what we can afford to give them and what we promise to give them we will give them in a permanent fashion.
As to how we get there, I am openminded. Senator Lott mentioned, if you don't want to go into deficit and set up accounts, I will work with you. But the accounts make sense to me, because younger workers, born after 1980, get a 1.4 percent rate of return on their Social Security investments. I know we can beat that without becoming a day trader. I know we can do a better job than that. But I am not going to prejudge anybody's plan. My promise to you is if you want to permanently solve the Social Security problem, to make sure that people in the future can count on the benefits when their family needs them, I will work with you.
Senator Conrad has been great to work with. I hope we can build upon what we have done today and find a solution that will protect the safety net.
AMENDMENT NO. 152, AS MODIFIED
I send a modification of the amendment to the desk.
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Mr. GRAHAM. The Senator from North Dakota's comments are well made. ``Permanent'' to me is to do whatever we need to do at whatever point in time to secure the safety net, starting today. Senator Conrad is right; we should have started yesterday dealing with all these problems. Social Security is only a small slice of it.
This budget sense of the Senate I hope will bring us together in honestly defining the problem. I am not asking anybody to prejudice an outcome, as to how they would solve the problem. But now we have on paper what the problem is for America. Working together, I think we can solve it. If we do not, we know what happens. In that regard I think this is a good step forward.