HEARING OF HOUSE COMMITTEE ON THE BUDGET HOUSE OF REPRESENTATIVES - SOCIAL SECURITY: DEFINING THE PROBLEM
February 9, 2005
BREAK IN TRANSCRIPT
Mr. Wicker. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for your testimony.
Let me follow up on a point that Mr. Portman was making. Right now, say you have got a couple out there in their late 20s, early 30s, got a couple of kids, and they are struggling along trying to pay their bills. Right now, we are taking 6.2 percent of everything they make in FICA taxes.
As I understand it, what we are promising them right now is something that is going to get them somewhere around a 1 percent return when they finally get to retirement age, plus or minus, but it is a very low 1 percent return. Is that right, Mr. Secretary?
Secretary Snow. It is. It is a very low return.
Mr. Wicker. Let me just observe: If we could do better than that for our hardworking families out there, we ought to do better than that. We ought to take action that gets them a better return if we are going to take that much out of their paycheck.
I was gratified to hear our ranking member acknowledge that there is a problem. I mean, I think that is a start. There is a question about whether it is a crisis or how urgent it is. But at least we are all acknowledging that there is a problem.
Now, in the past, when Congress has decided to address the problem, they have done what I think you referred to, Mr. Secretary, as a temporary fix, kicking the can down the road for a few years.
There are things that we could do again, totally different from what I think the President is going to propose. We could adopt a means test for benefits in the future. In other words, we could take 6.2 percent of people's money--and they get to certain income levels--and say, well, you are not going to get it anyway. We could reduce benefits. Certainly, Congress has, in the past, raised the payroll tax. We could, again, raise the retirement age. Congress did that many years ago. It is just now sort of coming home to roost there. We could increase the earnings limit. Without doing anything else, we could adopt a lower cost-of-living index. All of those things, I think, are not going to be very popular among the American people.
But let me ask you, if we did any of that, would it help that young couple that is 29-years-old or in their early 30s with two kids and paying 6.2 percent of everything they make, would it help them get a better return at the end of the day?
Secretary Snow. It would, Congressman, that is a good way to frame the issue. It would if the personal retirement accounts are included as part of this as well.
Mr. Wicker. OK. But I am not hearing much support from my friends on the left about the personal retirement accounts. Absent the personal retirement accounts, kicking the can down the road, means testing, reducing benefits long-term, raising taxes, raising the retirement age, raising their earnings limit, that still gives that couple 1 percent at the end of their working life, doesn't it?
Secretary Snow. I think that is right, and that is why the opportunity the personal retirement account affords people should be part of any solution, because it does give them--I think the math on this is irrefutable. Congressman Portman took you through some of it, but the math on this is irrefutable.
For a young person who has 40 years or 45 years to put away money and who earns the long-term average of a blended bond in equity, they are going to come out way, way, way ahead of that 1 percent.
Mr. Wicker. Right, but let me agree with a very important point the ranking member made. It is going to help when we can get specifics on the administration's proposal, because I certainly appreciate that you cannot answer the very specific questions that members on both sides of the aisle have, until we do get the specifics.
But I do understand that whatever the administration proposes, it is going to be voluntary, is that correct?
Secretary Snow. Absolutely. In other words, that couple can decide to get into personal savings accounts, or they can stay with their 1 percent for whatever reason.
Also, there is going to be the same guaranteed benefit at the end of the day and whatever the administration proposal is. We are not just going to hang them out there to float.
Secretary Snow. The whole proposal is voluntary for younger people. Of course, not available to 55 and older who are--all their benefits will be secured.
Mr. Wicker. Yes, I would think you may start getting a few complaints from those 55 years of age and older that they cannot buy into these personal accounts.
But thank you very much for your testimony.
BREAK IN TRANSCRIPT