[Extensions of Remarks]
[Pages E2128-E2130]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

PERSONALIZING SOCIAL SECURITY

______

HON. NICK SMITH

of michigan

in the house of representatives

Wednesday, October 29, 1997

Mr. SMITH of Michigan. Mr. Speaker, once in a while, a speech is made
that really makes sense for America. Recently Jim Martin, president, 60
Plus Association, made one of these speeches. On Social Security's 62d
anniversary, Jim talked about the importance of personalizing Social
Security.
Jim notes that the likely alternative to personalizing Social
Security is a tax increase. Since 1971, there have been 36 Social
Security tax increases. A Social Security tax increase does not make
economic sense and more importantly it is not fair to working
Americans.
Jim Martin, representing seniors all over America, supports the
introduction of my Social Security Solvency Act, personalizing Social
Security by offering each worker his or her own personal retirement
savings account.
Thank you, Jim, for your thoughtful remarks.

Personalizing Social Security: Unplugging the Third Rail

(By James L. Martin)

When I came to Washington as a newspaper reporter in 1962,
John F. Kennedy was in the White House, Neal Armstrong had
not yet walked on the moon, Strom Thurmond was a Democrat and
the problems with Social Security were perceived by few,
other than Barry Goldwater.
So, today, August 14, 1997, on the 62d anniversary of
Social Security, the 60 Plus Association becomes the first
seniors group to publicly go on record to overhaul the
system, releasing a paper it commissioned by economist
Richard A. Hart, entitled ``Personalizing Social Security:
Unplugging the Third Rail.'' Why did a senior citizens group
decide to tackle the issue of Social Security reform? Let me
answer by citing a question I'm asked often about the program
signed into law by President Franklin Delano Roosevelt on
August 14, 1935.
The question is always the same, ``Jim, why get involved?''
After all, the theory goes, even if the current system is
going bankrupt, ``your seniors are protected, so why bother
with the uncertain future of this politically volatile
issue?''
Believe me, it would be easy to take a head-in-the-sand
approach as so many do, including, I'm sorry to say, other
senior citizens groups. Unfortunately, this attitude

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leads to a false impression that seniors are ``greedy old
geezers,'' a `gimme, gimme, gimme'' mentality which I hope to
dispel. Seniors who built this country, in Depression and war
time, through their blood, sweat and tears, deserve better.
To help dispel that erroneous image, I harken back to some
of the advice one particular senior citizen has given me, and
still does--my favorite senior--my mom, my sainted mother, if
you will, Mary L. Martin, who, in her eighties, still works
part-time! Her advice is that seniors' most valued assets are
not their social security, their retirement income or their
pensions--although these are certainly near the top of their
list--but in her opinion, seniors' most valuable assets are
their children, their grandchildren and their great
grandchildren.
So that's why I decided to involve 60 Plus, seniors group
responsibly trying to find a solution to the problem, for the
sake of our children and our grandchildren.
To put it bluntly, Heritage Foundation economist Dan
Mitchell said, or perhaps it was another often quoted
economist, Americans for Tax Reform's Peter Ferrara, who
said:
``Security was a Ponzi scheme then. It's a Ponzi scheme
now.'' But even a Ponzi scheme--borrowing from Peter to pay
Paul--worked well in the beginning, not only for Carols Ponzi
but for others, just as the so-called Social Security Ponzi
scheme worked well for seniors. But there looms now a ``run
on the Ponzi bank'' as the Baby Boomers prepare to retire.
As Mr. Hart states in his paper, ``the Social Security
retirement train is a collision course with demographics.
Social Security's pay-as-you-go system, where the taxes of
today's workers are transferred to today's retirees, leaves
it particularly vulnerable to demographic trends. As Baby
Boomers age, life expectancy is rising and birth rates are
falling. As the Social Security train heads straight into a
demographic wall,'' Mr. Hart continues, ``more and more
Americans anticipate the oncoming wreck.'' Mr. Hart is right.
More and more of us recognize the looming crisis.
A recant poll said that a majority of Democrats, for the
first time, acknowledged not only that there is a problem
with the system, but a majority of Democrats now even favor
privatization as a solution. Everybody universally agrees
there's a problem. But a solution remains elusive.
For example, President Clinton's Social Security Advisory
Council has issued its long awaited report. This 13-member
panel of experts readily agreed there is a problem but did
they agree on a solution? Well, yes and no. They offered
three solutions. It's not an exaggeration to say they split
three ways from Sunday, six endorsing one solution, five
another and two yet a third. Significantly, all three
directly, or indirectly, advocated privatization. In 1983,
President Reagan's Social Security Reform Commission came
forth with its solution to keep the system solvent for, it
said, at least another 75 years, well into the next century.
That begs the question, why another Commission so soon in
the 1990's, after the 1983 Commission? The answer is that the
system is in more trouble than previously thought. The
problem is twofold. One: The good news is that we seniors are
living longer, due to medical advances and our own better
health habits. Two: The bad news is that you younger
generations have to pay.
Of course, that's the way the system has always worked. But
before there were more than 20 workers, not three, paying
into the system for each beneficiary. One other fact that
bears noting is that when first enacted, according to the
actuarial tables, seniors died at about age 64, or as Mr.
Hart so delicately phrases it, most workers were conveniently
dead and buried before they could collect their benefits at
age 65. As 60 Plus Honorary Chairman, former Indiana
Congressman Roger Zion puts it, at a vigorous and robust 75,
he has been ``statistically dead'' for 11 years. Now that
seniors are living longer, that places further financial
strains on the system. Clearly, a day of reckoning has come.
The old fix of just raising taxes, some 51 times in 62 years,
cannot continue. There's a limit.
There have been half-hearted attempts in the past to
address the problem, half-hearted because not many
politicians want to be accused of touching the so-called
third rail. You know the old song--Social Security is the
third rail of politics, touch it and you die.
Politicians have gotten away with this third rail scare
tactic for too long, scaring seniors for political gain. Some
of us recall the 1964 Barry Goldwater-Lyndon Johnson
Presidential campaign when there was a TV commercial showing
a giant pair of scissors cutting a Social Security card with
a voice-over solemnly intoning that this would be the result
if you voted for Goldwater. Another 1964 TV commercial also
stated that a vote for Goldwater could result in U.S.
soldiers being sent to fight and die in southeast Asia. Well,
as one political wag put it, he ``voted for Barry and sure
enough, U.S. soldiers were soon sent to fight and die in
Vietnam.''
So, I would like to put politicians, regardless of party,
on notice that seniors are tired of falsely being told their
Social Security is going to be taken away. It's more likely
that a meteorite will fall on the Social Security
Administration building in Baltimore before a politician, of
either party, would propose taking away Social Security.
Let me point out how 60 Plus became engaged on this issue.
A few years ago the Third Millennium, Generation X'ers in the
18-34 age group, announced the startling news that most X'ers
believed more in UFOs (unidentified flying objects) than that
the system would be around when they retired. I responded on
a radio talk show that seniors are also aware that the system
is headed for bankruptcy. Then I added, somewhat flippantly,
perhaps, that seniors believe more in the second coming (has
it been 20 years this week?) of Elvis Presley than in the
system's future solvency and that seniors might also prefer
changes. After a few call-ins and further discussion of UFOs
and Elvis, I decided to poll senior citizens. Our poll to
approximately 100,000 seniors found that, by a surprising 3-
to-1 margin, seniors preferred a privatized system. We then
commissioned a survey by pollster Frank Luntz, an excerpt of
which is in the study we've released. The Luntz poll
confirmed our 3-to-1 ratio.
We were called by Insight Magazine, and we debated, in
print, our counterpart at the American Association of Retired
Persons, Horace Deets, in dueling 2000-word essays. If I
could sum up each essay in one word, it would be: AARP--
taxation, 60 Plus--privatization. AARP favors the same old
solution, tax increases, while 60 Plus looks for new
solutions.
Will privatization work? The privatization role model is
the Chilean system. During the 1983 Social Security study,
when Chile was mentioned as a solution, the status quo
seekers dismissed their system as a new and unproven
experiment. But, fast forward 15 years later and Chile now
has an amazing track record of success. Now the status quo
seekers try to demonize the word ``privatize,'' implying that
you have to be a stock market expert or the big boys on Wall
Street will fleece you. Nothing could be further from the
truth. There are a lot of workers in Chile who can't play the
stock market but who proudly walk around with a passport-
sized book with their name on it, keeping track of their
investments. That is one of the reasons we use the word
``personalize'' because the system would allow each and every
individual to take personal control of his or her own
financial destiny.
Since 60 Plus is nonpartisan, we credit legislators from
both parties for coming up with innovative ideas. One is
Democratic Sen. Bob Kerrey of Nebraska, from whom we borrowed
the word ``personalize.'' Another suggestion, by one of the
Generation-X'ers, is to ``modernize'' the system. Many others
on Capitol Hill deserve credit, including Republican
Congressman Jim Kolbe of Arizona and Democratic Congressman
Charlie Stenholm of Texas, co-chairs of a public pension
reform caucus which now numbers more than 70 members of
Congress, equally represented by both parties. Michigan
Congressman Nick Smith has introduced legislation to address
the problem, as have Reps. Mark Sanford of South Carolina,
David McIntosh of Indiana, Mark Neumann of Wisconsin and John
Porter of Illinois. Others safeguarding Social Security
include House Ways and Means Committee Chairman Bill Archer
of Texas and Subcommittee Chairmen, Reps. Bill Thomas of
California, Dennis Hastert of Illinois and Jim Bunning of
Kentucky. Surely, the latter, Jim Bunning, the big, burly
Hall of Fame baseball pitcher--known as a fierce competitor
in his playing days and now the father of nine and
grandfather of 31 (at last count)--would be a formidable
opponent for those who try to demagogue Social Security as
they did in the 1980s when some Members of Congress
courageously talked about reform in order to save it.
More than two dozen countries in South America, Europe and
Asia, have adopted, or are in the process of adopting, a
Chilean-style system. Even socialist Sweden is going that
route. And here, workers in three Texas counties, before a
loophole in the law was closed, opted for privatization and
their rate of return is making for a lot of serious
discussion as they prepare for retirement. Moreover, a
resolution recently passed both the House and Senate in
Oregon asking the state to opt out of the Social Security
system and create a separate retirement system for state
workers.
So the slight spark across the sky of the Chilean
experiment has become a bright constellation. It's a success
story that I believe, with all my heart and soul, can be a
guide for our own troubled system.
Incidentally, in the old days, the father of the Chilean
plan, Dr. Jose Pinera, literally visited Washington in the
dead of night because his untested plan was so controversial.
But a few years ago, the Cato Institute gave a dinner in his
honor and a number of Members of Congress allowed their names
to be placed on the host committee. What a change in
attitude. Of course, it was not lost on them that this former
minister of labor was elected to office himself, with a major
plank in his platform, his plan to privatize social security.
Having read an article years ago by Ed Crane, President of
the Cato Institute, about the social security problem, we
started searching for solutions. We kept being referred back
to the Cato Institute itself, which has taken a pioneering
road on this issue for more than a dozen years. One name kept
coming up, time and again. That name was Michael Tanner,
Cato's Director of Health and Welfare Studies, and the author
of several books on health and welfare reform. Mr. Tanner has
worked on the Social Security issue extensively, to say the
least. Spoken on it. Written on it. Debated on it,

[[Page E2130]]

around the world often with Dr. Pinera at his side. That's
why 60 Plus, particularly Roger Zion and I, are so pleased
that Mr. Tanner has not only eloquently embraced this new
plan Mr. Hart proposes, but has joined us at today's
official release of the proposal, along with an equally
strong endorsement by today's other featured speaker, Fund
for a New Generation's Adam Dubitsky.
Richard A. Hart takes up the challenge to find a solution
in an insightful paper showing how Personal Retirement
Accounts (PRAs) can assure both dignity and comfort for
future generations of senior citizens. This paper, a
variation on a theme advanced by others, should continue the
dialogue on a system which urgently needs reform.
To those who fear Social Security's ruin, wise seniors know
that there is no Social Security Trust Fund. 60 Plus calls it
the Social Security Bust Fund as surpluses are used for other
government programs. As Democratic Senator Ernest Hollings of
South Carolina has said, ``There is no trust. There is no
fund.'' We need to alert people to keep at arm's length those
politicians who spread fear among seniors, as we stand at a
cross-roads to which direction Social Security reform should
go.
In the 60 Plus Association's opinion, some form of
``personalization'' remains the best and most feasible
option. We must guarantee present retirees their benefits as
part of a government promise to them, but we must also
safeguard current generations paying into Social Security
system so that the benefits will be there when they retire.
On August 14, 1935, President Roosevelt signed into law the
Social Security Act. On May 2, 1997, the FDR Memorial was
opened here in Washington, D.C. The Social Security system
helped seniors escape poverty, but we now know there are
major problems facing future generations. What more lasting
commemoration to FDR can we embrace than the adoption of a
system which will save it for a new age, a new era, and a new
population.

____________________