No Support for Benefit Cuts

[National Dialogue Moderator <moderator>]

		No Support for Benefit Cuts

I would like to respond to a question asked by Mr. Pete Baker concerning who
supports my legislation.

There are several components of H.R. 1043, which I introduced, that have
broad support with the American people.  A key element of this bill is that
it does not raise the retirement age, does not cut benefits, does not shift
the risk onto individuals, and does not raise tax rates.

Both the Gregg proposal and the Kolbe proposal would increase the retirement
age not once, but many times over.  That means people will lose several
years worth of Social Security benefits, and pay more Social Security taxes.
This is a real benefit cut.   The Gregg proposal would decrease cost of
living adjustments.  Again, this is a real benefit cut.  The Kolbe proposal
changes the bend points which translates into yet another direct cut in
guaranteed benefits.  This proposal also increases the number of computation
years in determining benefit levels from 35 years to 40 years.  Currently,
benefits are based on your average earned income from your highest 35 years
of work.  If you add five years of lower wage figures, your average will go
down, and your benefits will be cut.  I don't think the authors of these
plans will dispute that this is a cut, but they justify these cuts by
offering the promise that individual accounts may make up for these cuts.
You have to decide if the phantom profits of individual accounts are worth
the guaranteed cuts that they are proposing.  They also assert that you have
to compare their cuts, to the cuts that they insist must occur to make the
system actuarial solvent.  However, as H.R. 1043 clearly demonstrates, no
cuts are necessary to maintain the current system.

So, I believe on this part of my plan, there is broad support among the
American people.

Another component of my plan that has broad public support is the component
that transfers 62% of the projected budget surpluses to Social Security.
This has been widely endorsed by major economists, most of the Democratic
party of both the House and the Senate, and many Republicans as well.  I
believe Alan Greenspan himself has endorsed the concept embodied by this
piece of H.R. 1043.

Another popular proposal included in H.R. 1043 is raising the cap on taxable
wages covered by Social Security.  When Social Security was created 90% of
all wages were below the cap.  However, that has fallen in recent years so
that Social Security taxes cover just 86% of wages, and in the year 2007
will apply to only 84.7 % of wages.  That means that people who are earning
more, are paying relatively less Social Security taxes. Currently, 93% of
Americans pay Social Security taxes on all of their wages.  However, the few
people who make more than $72,600 do not, because of this cap.  My
legislation would raise the cap, so that these workers would pay their fare
share, and in return they would receive slightly increased benefits as a
result.  There is widespread popular support for this proposal and many
national organizations have called on Congress to raise this cap.  The Kolbe
and Gregg proposals, I believe, both adjust the cap so that it will cover
more wages as well.

The final component of the plan creates an independent Social Security
Investment Oversight Board which is authorized to hire independent,
politically insulated investment managers and requires them to invest a
small portion of Social Security assets in broad index funds.  Most of
Social Security's funding will still come from payroll taxes and interest
from government bonds.  Most state and local governments already invest
pension funds in the market and federal employees currently invest in the
market through the Thrift Savings Plan.  I am not aware of anyone who has
accused Congress of tampering with the market due to this type of collective
investment.  Nevertheless, there is opposition to this proposal, but I do
not believe it is warranted.  I am convinced the investment could be
accomplished without undue political influence.  This is the lowest cost,
most efficient, and most prudent way of increasing the rate of return on
Social Security assets and is supported in principle by the current
Administration.

The legislation that I have proposed, H.R. 1043, is also supported by
Americans for Democratic Action, OWL (the Older Women's League), and the
2030 Center. 

I apologize for this long response.  Perhaps I should end there for now.

Thank you.

Representative Jerrold Nadler