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S. HRG. 112–443 

PERSPECTIVES ON DEFICIT REDUCTION: 

SOCIAL SECURITY 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 10, 2011 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Kerry, Hon. John F., a U.S. Senator from Massachusetts ................................... 1 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 2 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 17 

WITNESSES 

Roosevelt, James, Jr., J.D., president and chief executive officer, Tufts Health 

Plan, Watertown, MA .......................................................................................... 6 

Blahous, Dr. Charles, research fellow, Hoover Institute, Washington, DC ........ 8 

Altman, Nancy, chair, Pension Rights Center, and co-chair, Strengthen Social 

Security Campaign, Washington, DC ................................................................. 10 

Brill, Alex, research fellow, American Enterprise Institute, Washington, DC ... 12 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Altman, Nancy: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 29 

Responses to questions from committee members ......................................... 51 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 2 

Prepared statement .......................................................................................... 56 

Blahous, Dr. Charles: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 58 

Responses to questions from committee members ......................................... 68 

Brill, Alex: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 77 

Responses to questions from committee members ......................................... 87 

Grassley, Hon. Chuck: 

Opening statement ........................................................................................... 17 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 89 

Kerry, Hon. John F.: 

Opening statement ........................................................................................... 1 

Roosevelt, James, Jr., J.D.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 92 

Responses to questions from committee members ......................................... 100 

COMMUNICATIONS

AARP ........................................................................................................................ 103 

Center for Fiscal Equity .......................................................................................... 107 

National Committee to Preserve Social Security and Medicare .......................... 114 

(III) 

(1) 

PERSPECTIVES ON DEFICIT REDUCTION: 

SOCIAL SECURITY 

TUESDAY, MAY 10, 2011 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:09 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus, 

(chairman of the committee) presiding. 

Present: Senators Kerry, Stabenow, Carper, Hatch, Grassley, 

Snowe, and Thune. 

Also present: Democratic Staff: Russ Sullivan, Staff Director; 

Claire Greene, Detailee, Social Security; Alan Cohen, Senior Budget Analyst; Tom Klouda, Professional Staff Member, Social Security; and Joseph Scovitch, Detailee. Republican Staff: Mark Prater, 

Deputy Chief of Staff and Chief Tax Counsel; Preston Rutledge, 

Detailee; Aaron Taylor, Professional Staff; and Tony Coughlan, Tax 

Counsel. 

The CHAIRMAN. The committee will come to order. 

Before we actually proceed, at the request of Senator Kerry, I 

will turn over the introduction of our first witness to him. The first 

witness is Mr. Roosevelt. Senator Kerry is one of the senior, very 

valuable members of our committee. Unfortunately, he has another 

hearing he has to chair, and so I will turn the hearing over to Senator Kerry. 

OPENING STATEMENT OF HON. JOHN F. KERRY, 

A U.S. SENATOR FROM MASSACHUSETTS 

Senator KERRY. Mr. Chairman, thank you. That is very generous 

of you. And I thank Senator Hatch also for the privilege of doing 

that. We have a hearing starting at the same time on Afghanistan 

and Pakistan, so I appreciate your willingness to let me do this. I 

will just be very, very brief. 

We have a terrific panel here today, and I regret that I am not 

going to be able to be here to listen to it, but I will certainly follow 

the testimony. But I particularly wanted to commend to the committee the testimony of Jim Roosevelt. 

Jim is a long-time friend of mine, and of many of us engaged in 

public policy. He is the president and CEO of the Tufts Associated 

Health Plans. He is here in his personal capacity to talk about Social Security. It happens to be a topic, I guess one could say, that 

is in his DNA. His grandfather, President Franklin Delano Roosevelt, created the program. 

2 

But Jim has, himself, been deeply, deeply immersed in health 

care issues and in Social Security and social insurance issues all 

of his career, and I think he will be able to speak to us with a special understanding of the challenge of how we keep Social Security 

strong, but at the same time keep faith with the values that are 

contained in it. So I want to thank him for taking time to come 

down here today and share testimony. I thank all of the witnesses, 

and I hope you will forgive me for being a little bit Massachusettscentric and chauvinistic this morning. 

Thank you, Mr. Chairman. 

Mr. ROOSEVELT. Thank you very much, Senator Kerry. 

The CHAIRMAN. Thank you, Senator, very much. We are glad you 

were able to take some time away to come here. Thank you very 

much. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. According to FDA advisor Luther Gulick—I think 

Mr. Roosevelt was aware of this—President Roosevelt offered this 

perspective about Social Security and its relationship to the Federal budget: ‘‘We put those payroll contributions there so as to give 

the contributors a legal, moral, and political right to collect their 

pensions. With those taxes in there, no damn politician can ever 

scrap my Social Security program.’’ 

It is fitting that we have President Roosevelt’s grandson with us 

today as we consider deficit reduction and Social Security. Today 

we will ask, should Social Security be included in the legislation to 

reduce the deficit or should it be left unchanged as we consider deficit reduction? 

Should Social Security’s long-term financial imbalance be addressed in separate legislation? There are certainly different views 

on the answers to these questions, but one thing nearly everyone 

agrees on is that Social Security has been a hugely successful program. 

Social Security benefits will help 54 million Americans this year, 

Americans like Carol Lawen from Stanford, MT. Carol worked at 

the telephone company for more than 30 years, and she recently 

wrote me and said this: ‘‘I worked hard and was considered a good 

employee, gave up holidays with my family. I went in early and 

stayed late when various crises occurred in our country. My family 

sacrificed time together so that I might be able to provide money 

to care for them. I paid in every paycheck for my Social Security 

without complaint. It is now my turn.’’ 

Americans like Carol count on Social Security to be there when 

they retire. Social Security is dependable. It is fully portable from 

job to job, and it automatically increases as the cost of living increases. Unlike most other sources of retirement income, you cannot outlive your Social Security benefits. 

Social Security provides benefits to help folks get by if something 

happens to a breadwinner in their family. It helps workers who become disabled and families of workers who have died. This year, 

Social Security will provide benefits to 2 million children whose 

parents have passed away. Social Security has been a major force 

in ending widespread poverty among the elderly. 

3 

Social Security is the only source of income many seniors in Montana, and across the country, have to survive. Without Social Security, about one-half of seniors would be living under the poverty 

line. In fact, for 15 percent of seniors, Social Security is their only 

income. For 1 in 4 elderly Americans, Social Security provides 90 

percent of their income. 

What we cannot forget in this debate is that Social Security benefits are modest. Ninety-five percent of retired workers receive 

monthly benefits of less than $2,000. In fact, the average Social Security benefit for retirees is $1,175 a month, or about $14,100 a 

year. That is only $267 a month above the poverty line. 

Not only are benefits modest, but they are already scheduled to 

be reduced. The full retirement age, which is currently 66, will rise 

to 67 in the coming years. These increases in retirement age have 

real consequences. A 1-year increase in the retirement age is 

roughly equal to a 7-percent reduction in benefits. 

By law, Social Security must remain separated from the rest of 

the Federal budget, and the program cannot borrow money from 

the general Federal budget. Social Security benefits are financed 

only through payroll taxes and through the trust fund. Social Security is not responsible for the deficits we face in the general fund 

today. 

Therefore, I believe Social Security should not be part of our efforts to reduce these deficits. Since 1983, workers have been contributing more than Social Security has been paying in benefits, 

and as a result there is currently $2.6 trillion in the trust fund, 

and this balance is expected to grow. 

The assets in the trust fund mean Social Security will pay full 

benefits until 2037, and, even after that, payroll tax revenues will 

be able to pay 78 percent of benefits. Of course, we do not want 

that to happen, to have benefits paid at that low level. 

This is not a crisis. It is a long-term issue, to be sure. It is an 

issue that should be addressed sooner rather than later to give 

workers time to plan for any changes. But the current situation 

does not necessitate a rushed or severe action. 

Our deficit and debt, on the other hand, is clearly a crisis. The 

deficit is currently 9.3 percent of our economy. We do need to act 

to address our deficits and debts, and do it soon. As we consider 

how to address our deficits and debt, however, let us remember 

people like Carol Lawen who worked hard all their lives and count 

on Social Security to keep a roof over their heads and food on the 

table. We must remember President Roosevelt’s promise to insure 

a legal, moral, and political right to the benefits that America’s 

workers have earned. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Thank you, Mr. Chairman, for calling this morning’s hearing. It is a third in a series of Finance Committee hearings designed to address deficit reduction efforts as they relate to 

4 

the committee’s broad jurisdiction. This committee does have broad 

jurisdiction. 

Today’s topic is Social Security and what role does it play in our 

current fiscal calamity. What role, if any, should it play in moving 

the Federal Government out of the deficit and debt ditch that it is 

in? 

A few weeks ago, the sometime political philosopher and fulltime comedian Jay Leno discussed Social Security. Mr. Leno said, 

‘‘It’s the 75th anniversary of the introduction of Social Security 

checks. For the younger viewers who don’t know what a Social Security check is, you will never see one in your lifetime, so don’t 

worry about it.’’ Well, the latest Social Security trustees’ report 

tells us that the program will be insolvent, as the distinguished 

chairman has said, by the year 2037. That is about 25 years from 

now. 

If you assume the current retirement age of 67 sticks, it would 

mean that the younger viewers Mr. Leno is talking to are 42 years 

and younger. For all of you Americans 42 years of age or younger, 

if Social Security remains as it is, as New Yorkers say, ‘‘Fuhget 

about it!’’ 

Twenty-five years from now may seem like a long way away. As 

the old saying goes, in politics a year can seem like eternity. By 

the way, I do not know how folks can look their constituents age 

42 or under in the eye and say there is no problem. For that matter, how do folks look at their constituents, even over 42, who hope 

to still be alive in 2037, and say there is no problem? 

So let us be clear about this. There is a scheduled benefit reduction come 2037. This is not just a problem of how to finance the 

benefits that are scheduled for 2037 and beyond. Rather, under 

current law Social Security benefits are scheduled to have an approximate reduction of 24 percent in 2037. That is right: there will 

be a 24-percent reduction in Social Security benefits under our current law. That is something that we all have to take into consideration as we consider this. 

Some might ask, what does that have to do with the current fiscal picture? Take a closer look at the facts and figures from the last 

trustees’ report. We have found that a good chunk of the 25 years 

of delay of reckoning depends on a fundamental assumption. For 

many years, the Social Security trust fund ran surpluses. Under 

the unified budget, these surpluses financed the size of the deficits 

the Federal Government was running. By law, the so-called trust 

fund was made whole by the issuance of Treasury IOUs to the 

trust fund to reflect the surpluses and interest. 

In the late 1990s, under the Republican Congress and Democratic President, that trend reversed briefly, but returned back to 

normal under Congresses and Presidents of both parties. Now, 

these notes can be serviced in only three ways, and these three 

ways are higher taxes, spending reductions, or more debt. You can 

see that recent fiscal history shows a direct relationship between 

Federal deficits, debt, and the trust fund. 

The Social Security trust fund surpluses reduced the apparent 

size of the deficit, but pressed up on the debt limit. That all 

changed last year. Last year, payroll taxes and other revenues 

were less than payments out of the Social Security trust fund. The 

5 

trust fund ran a cash flow deficit for the first time since the major 

Social Security reform of 1983. 

We can sit here like the proverbial three monkeys: one of us can 

place his hands over his eyes and say he sees no fiscal evil; another 

of us can place her hands over her ears and say she hears no fiscal 

evil; another of us can place his hands over his mouth and mumble 

he says no fiscal evil. 

But be sure, these IOUs sitting in the Parkersburg, WV offices 

of the Treasury’s Bureau of Public Debt are claims against the Federal Government. They have to be paid. How will they be paid if 

the trust fund comes to rely on them? If someone wants to tell me 

that question has nothing to do with the current deficits and debt, 

I think I have an old bridge, like in Manhattan and Brooklyn, that 

I would like to sell to them. 

The trustees’ report is as plain as day on the long-term fiscal 

problems with Social Security. Social Security trust fund surpluses 

hid the magnitude of the damage of recent fiscal practices. With 

the trust fund reversing itself, the day of reckoning is drawing 

near. Now that, Mr. Chairman, is why we are here. We need to 

look at the role of Social Security with respect to the origins and 

continuous causes of the unsustainable deficits and debt. 

It is only proper that this committee air these issues out and 

look at them as sincerely and as credibly as we can. It is only proper that this committee explore the options for Social Security solvency. The President so far has missed the opportunity and does 

not make a bold commitment to entitlement reform and deficit reduction. Social Security has been once again treated as the third 

rail of politics. Unfortunately, eventually the financial electricity of 

that rail will run out if it is not reformed. 

So I am in particular looking forward to the witnesses’ testimony 

today. I have to leave early, so I apologize if I have to leave before 

this is all finished. But I look forward to hearing from each one of 

you. These are serious problems. I hope we can work them out. The 

distinguished chairman and I, and others on this committee, will 

do our best to do something. 

The CHAIRMAN. Well, thank you very much, Senator. I appreciate 

that. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. I would now like to introduce our witnesses. We 

have quite a distinguished panel. Senator Kerry has already introduced our first witness, Mr. James Roosevelt. Thank you, Mr. Roosevelt, for attending. 

Our second witness is Dr. Chuck Blahous, who is a research fellow at Hoover Institute and a public trustee of the Social Security 

and Medicare trust fund. Dr. Blahous, thank you for being here. 

Next, Nancy Altman, co-director of the Strengthen Social Security Campaign, chair of the board of the Pension Rights Center, 

and the top assistant to Chairman Alan Greenspan in his capacity 

as chairman of the 1983 Greenspan Commission, a commission 

that many of us refer to quite frequently. 

Finally, Alex Brill, a research fellow at the American Enterprise 

Institute. Good to see you, Mr. Brill. I know we saw you a few 

years ago in another capacity. Good to see you back. 

6 

Each witness will present their views on how Social Security will 

be treated. Thank you all for coming. I look forward to your views. 

I know you are not going to pull any punches, you are going to say 

what you think. Your statements will automatically be included in 

the record, and I urge you to summarize your statements for about 

5 or 6 minutes or so. 

Mr. Roosevelt, you are first. 

STATEMENT OF JAMES ROOSEVELT, JR., J.D., PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, TUFTS HEALTH PLAN, WATERTOWN, MA 

Mr. ROOSEVELT. Good morning, Chairman Baucus and members 

of the committee. Thank you for inviting me to testify here this 

morning. 

I would like to begin with another quote from my grandfather, 

President Franklin Delano Roosevelt. A little over 75 years ago, he 

spoke these words: ‘‘We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, 

but we have tried to frame a law which will give some measure of 

protection to the average citizen and to his family against povertyridden old age. This law, too, represents a cornerstone in a structure that is being built but is by no means complete. It is a law 

that will take care of human needs and at the same time provide 

for the United States an economic structure of vastly greater 

soundness.’’ 

Social Security has been the most successful government program of the past 75 years, as the chairman has noted. No program 

has touched more American lives and benefitted more American 

families. Today, approximately 52 million Americans receive Social 

Security benefits each month. Even those who have not drawn a 

single Social Security check or direct deposit have benefitted. While 

it was forged in the heat of the Depression, Social Security remains 

every bit as relevant and important to Americans today. 

With only minor adjustments, this program will be there for 

Americans who have not yet been born. Social Security has truly 

transformed American society. In 1959, 35 percent of Americans 

aged 65 and older had family incomes below the poverty line. 

Today that figure is 10 percent, marking more than a 70-percent 

reduction in the proportion of elderly Americans living in poverty. 

In my grandparents’ day, old age was something to be feared. 

Today, despite financial challenges such as the high cost of prescription drugs, Social Security provides retirees with much greater 

financial security and peace of mind. If we took away Social Security benefits, it is estimated that nearly half of elderly Americans 

would have incomes below the poverty line. 

We associate Social Security with retirees, but nearly 1 in 5 recipients of Social Security benefits are children under the age of 18, 

survivors. Supposedly it is the enormous bulge of retirees from the 

baby boomer generation that will sink Social Security once and for 

all. And indeed the generation of Americans born between 1946 

and 1964 who drew their first retirement checks from Social Security in 2008 will place heavy demands upon the system as they 

reach their retirement years. 

7 

But this is also the generation that has been paying into the system since they started working in the early 1960s. In fact, the projected deficit of Social Security beginning in 2037 is not really a result of the baby boomers. Forward-thinking Social Security Administration actuaries had already accounted for them. Instead, 

changes in the projected deficit have more to do with factors such 

as economic and wage growth, productivity, and disability rates. 

But these important parts of the story are usually left out. Instead, the purveyors of fear want you to believe that the baby 

boomers are retiring on the backs of their children and grandchildren. If you buy this premise, then they pull out their frightening statistics showing a declining number of contributors supporting a rising number of beneficiaries to ‘‘prove’’ that the program is unsustainable. 

Now let us take a true measure of where we are. Social Security 

has not only been the most effective government program, it has 

been the most responsible government program. Social Security 

costs are funded out of its own dedicated revenue stream. It does 

not, and cannot, borrow money to finance its operations. It has not 

added one cent to the deficit. There is no deficit financing. Social 

Security, furthermore, returns more than 99 cents to beneficiaries 

of every dollar collected. I dare anyone to find a private retirement 

plan that can claim that level of efficiency. 

By the end of calendar year 2010, the Social Security trust fund 

will have a positive balance of $2.6 trillion. It is estimated that Social Security revenues, including interest on the trust fund, will 

continue to exceed expenditures through 2024. 

As a result of interest earned on the trust fund balances, the 

trust fund surplus will continue to expand to an approximate $4.3 

trillion in 2023. After that year, it is projected to balance and the 

fund will begin to decline, and still reserves will be sufficient to pay 

full benefits, as the chairman has mentioned, through 2037. After 

2037, Social Security would still be able to pay 76 percent of benefits. I think if Americans understood the true financial picture, the 

poll numbers that are sometimes cited suggesting that people are 

not counting on Social Security in the future would be reversed. 

Doubt would give way to confidence, fear would give way to security. 

As the May 2010 report of the Senate Special Committee on 

Aging concluded, there are any number of small, incremental measures that would keep Social Security fully solvent for the next 75 

years. 

I am not here to advocate for one solution or the other. What I 

am here to say is that there are many people who have figured out 

how we can make modest changes to Social Security that will keep 

benefits flowing to Americans for decades to come. 

The United States does not have a Social Security crisis. It never 

did. What we do have is fear of a crisis. It is a fear that has been 

fed by the propagation and accumulation of myths about the program. If we let our fears rule our judgment, we will undo the greatest government program in our history, one that has eliminated 

poverty for millions of Americans and supported millions of families in time of need. 

8 

By law, the receipts and disbursements of the Social Security 

trust funds are excluded from the President’s budget and the budget resolution passed by Congress. Social Security has its own revenue source. It is prohibited from borrowing funds or going into 

debt and can only pay benefits from its own funds. Since Social Security has not contributed in any way to the deficit, it makes no 

sense to consider it as part of the solution. Our support for Social 

Security is rooted in the obligations that we have to each other as 

Americans. Social Security embodies my grandfather’s determination to free us from fear by securing the American people against 

some of the hazards and vicissitudes of life. 

In conclusion, it would be tragic if that nameless, unreasoning, 

unjustified terror which paralyzes needed efforts to ‘‘convert retreat 

into advance,’’ to use his words, was manipulated to destroy his 

greatest legacy. 

Thank you. I will be happy to take questions. 

The CHAIRMAN. Thank you very much, Mr. Roosevelt. 

[The prepared statement of Mr. Roosevelt appears in the appendix.] 

The CHAIRMAN. Dr. Blahous? 

STATEMENT OF DR. CHARLES BLAHOUS, RESEARCH FELLOW, 

HOOVER INSTITUTE, WASHINGTON, DC 

Dr. BLAHOUS. Thank you, Mr. Chairman, Mr. Ranking Member, 

and members of this distinguished committee. It is an honor to appear before you today to discuss Social Security. As suggested, I am 

going to skip over most of the material in my written statement 

and just make three relatively quick points, I hope, in my spoken 

remarks. 

First is that, by any measure, we have a financing shortfall to 

deal with in Social Security. Now, the way it would manifest itself 

under current law is that, over the next several decades—the next 

2 decades in particular—costs in the program would rise relatively 

sharply to the point where, by the 2030s, the annual cost of paying 

benefits would be roughly 1 out of every 6 taxable dollars that 

American workers earn. If we have a no-action scenario, then in 

2037, as has been said already, benefits would be reduced by 22 

percent upon trust fund exhaustion. 

The second point is that costs are growing for very specific reasons. The first reason is simply that we have an aging population, 

a lot of baby boomers entering the retirement rolls over the next 

several decades. 

Second, we have a system that is predominantly financed on a 

pay-as-you-go basis. The vast majority of expenditures at any given 

time are financed from incoming payroll taxes. So financing in a 

system like that is relatively sensitive to changes in the worker-tocollector ratio. Before the baby boomers began to enter retirement, 

that ratio was a little over 3:1. It will be down to about 2:1 by the 

mid-2030s. 

The third reason the costs rise is rooted in program amendments 

in the 1970s. If we still had the benefit formula in place that President Roosevelt established, we actually would not have a financing 

shortfall right now. But there were a series of program amendments in the 1970s, changes made to the benefit formula, such that 

9 

initial benefits grow in proportion to the average wage index, which 

over time tends to be somewhat faster than inflation. 

So you put these three factors together—the fact that we have 

a lot more elderly to support, we have a system that is mostly payas-you-go financing, and the rise in per capita benefit levels—those 

three factors together add up to costs that grow faster than the underlying tax base. 

My third and final point, Mr. Chairman, is that delay in dealing 

with this shortfall does bear specific adverse consequences, and for 

real individual people on Social Security. If we acted today, the 

best case scenario, we would face choices that are difficult, but at 

least comparatively benign. We would not have to change benefits 

for people now in retirement or on the verge of retirement. We 

would not necessarily have to raise taxes, although we could certainly do that as part of the solution. 

We could allow, even if we did not raise taxes, for an increase 

in the per capita benefit levels going forward relative to inflation, 

whereas, as I indicated before, the worst-case scenario is the noaction scenario where you have a sudden 22-percent benefit reduction in 2037. But I would submit that this illustration of the generic cost of delay in some ways understates the practical consequences of delay, and those arise because we have a pretty firm 

bipartisan agreement that it is undesirable to cut benefits for people after they start collecting them. 

So, it is more likely that when we do a solution we are going to 

want any changes to benefits to be prospective rather than to affect 

people in retirement. So, if you look at this 2037 illustration I just 

gave, that 22-percent benefit reduction would hit people already in 

retirement, and we probably do not want to do that. 

So if we ask, how big would the benefit reductions have to be in 

that year if we confine them to new retirees, well, it turns out that, 

even if we cut off benefits entirely to new retirees in that year, we 

still would not have the system in balance. So you start working 

through the problem backwards and asking, well, how soon would 

we have to act if we did not want to have unprecedented tax burdens or affect people within, say, 5 years of retirement? We would 

really need to act in just the next couple of years. 

Finally, Mr. Chairman, I would say that there is an even potentially more compelling reason as to why delay in resolving the 

shortfall is costly. That is simply that it is difficult to get people 

to agree on how to fix Social Security. Republicans and Democrats 

have different views about how to do it, and it is hard to breach 

those differences. It becomes harder as time goes by, and the adverse consequences for affected parties become sharper and more 

severe as a consequence of delay. 

For a good reference point, I would ask you to look at the 1983 

reforms where we literally came within a few months of the benefit 

checks not going out. In order to keep the system afloat, we had 

to do some pretty severe things. We had to delay COLAs, we had 

to apply new income taxes to benefits, we had to accelerate an increase in the payroll tax, and we brought in new Federal employees. That was a very difficult negotiation. 

But, if we were to similarly wait in the 21st century to the point 

where the trust funds are in the process of being depleted before 

10 

acting, we would face a far, far more severe situation, and even the 

short-term measures we would have to take would be several times 

greater—in fact, more than 3 times greater—than the ones we enacted in 1983. It is certainly open to question whether or not we 

would be able to accomplish that on a bipartisan basis so as to preserve Social Security’s self-financing nature. 

So in closing, I would just end with some sentences from a paper 

I recently co-authored with Bob Greenstein of the Center on Budget and Policy Priorities. ‘‘Social Security faces a significant shortfall 

which policymakers would be better off addressing sooner rather 

than later. Reasonable and well-intentioned people will have differences over the best way to do it. We share a common interest, 

however, in taking action to do so at the earliest possible time.’’ 

Thank you. 

The CHAIRMAN. Thank you, Dr. Blahous, very much. That was 

interesting. 

[The prepared statement of Dr. Blahous appears in the appendix.] 

The CHAIRMAN. Ms. Altman, you are next. 

STATEMENT OF NANCY ALTMAN, CHAIR, PENSION RIGHTS 

CENTER, AND CO-CHAIR, STRENGTHEN SOCIAL SECURITY 

CAMPAIGN, WASHINGTON, DC 

Ms. ALTMAN. Thank you. Chairman Baucus, Senator Hatch, distinguished members of the committee, I would like to make four 

points. First, by law, Social Security cannot add a penny to the deficit, and cutting Social Security’s benefits does not subtract a single 

penny from the Federal debt. 

For those who are used to thinking about Social Security as just 

another spending program and about Social Security contributions 

as just another tax, the fact that cutting Social Security does not 

cut the Federal debt may be hard to believe, but this is the unambiguous operation of the law. 

The key is that Social Security is a defined benefit pension plan 

with its own separate income, outgo, and reserve fund. The law requires that Social Security’s income only be used for the payment 

of benefits and associated administrative costs. Any surplus must 

be invested and held in trust until needed. 

The law prohibits Social Security from paying benefits unless it 

has sufficient income to cover the cost, and Social Security has no 

borrowing authority to acquire that income. It does not borrow, it 

does not deficit spend. Cutting Social Security’s benefits increases 

its reserve, but does not change by a penny the amount of debt the 

Treasury must issue to operate the government. 

Second, some Senators are proposing to control Federal spending 

by enacting a so-called universal cap, but it is important to understand that, unlike the general fund, Social Security already has an 

automatic spending cap. If Social Security’s revenue ever were insufficient to cover its costs, benefits would be reduced automatically across the board. 

Third, including Social Security within deficit legislation, even if 

the goal is stated to be solvency, not deficit reduction, risks the appearance of raiding Social Security. Many Americans believe that 

politicians have stolen their Social Security money. The reason is 

11 

easy to understand. The American people are constantly bombarded with irresponsible rhetoric about Social Security. 

Some politicians casually refer to the interest-bearing Treasury 

bonds purchased by Social Security as just IOUs without acknowledging that all Treasury obligations backed by the full faith and 

credit of the United States could be labeled just IOUs. Some warn 

ominously that Social Security’s reserves have already been spent, 

again, not acknowledging that, whenever a corporation or governmental entity issues bonds, the issuer spends the money and repays the investor with future revenue. 

Even more disturbing, some have argued for cutting Social Security by quoting Willie Sutton, the notorious bank robber who, when 

asked why he robbed banks, replied, ‘‘Because that’s where the 

money is.’’ The quip presents an unintended picture: bank robbers 

and politicians, eager to steal the money of hardworking Americans. 

To consider Social Security in deficit legislation, even with the 

explanation that the inclusion has nothing to do with the deficit, 

risks reinforcing the widespread belief that Congress is improperly 

commingling Social Security’s dedicated monies with the government’s general operating fund revenue. 

To avoid even the appearance of impropriety, Congress should 

keep discussions about Social Security totally divorced from general 

budget discussions and considered in its own legislative vehicle 

after debt reduction legislation is done. 

My final point. When Congress does take up the issue of Social 

Security, it should follow the will of the American people who are 

overwhelmingly united on the issue. With all due respect to Dr. 

Blahous, our polling shows—and many polls show—Republicans, 

Democrats, independents, people identified as Tea Partiers, people 

who have union members in their household, all feel the same way 

outside of Washington. 

Poll after poll indicates that the American people, by overwhelming percentages, want Social Security’s projected deficit 

closed solely by increasing its revenue, ideally progressively and 

not by cutting benefits, including strong opposition to raising the 

retirement age. 

A great many experts, including the late Robert M. Ball, whom 

many on this committee knew, believe that that is exactly the right 

policy. This is one of those fortunate moments when the best politics is also the best policy. 

I see I am out of time, so let me conclude by saying that Social 

Security can be restored to actuarial balance through the normal 

legislative process with open hearings and debate, as it always has 

been, as long as Congress is committed to its basic structure that 

has stood the test of time and works with those experts who believe 

that the American people have it right. Thank you. 

The CHAIRMAN. Thanks, Ms. Altman. That was a very strong 

statement, very effective. 

[The prepared statement of Ms. Altman appears in the appendix.] 

The CHAIRMAN. Mr. Brill? 

12 

STATEMENT OF ALEX BRILL, RESEARCH FELLOW, AMERICAN 

ENTERPRISE INSTITUTE, WASHINGTON, DC 

Mr. BRILL. Thank you, Chairman Baucus, Ranking Member 

Hatch, and members of the committee. My name is Alex Brill, and 

I am a research fellow at the American Enterprise Institute. Thank 

you for the opportunity to appear before the committee this morning to testify on Social Security and our country’s deficit and debt 

challenges. While the U.S. continues to experience troubling and 

large annual Federal deficits, I will focus my testimony on our 

long-range fiscal outlook this morning. 

As confirmed by the Congressional Budget Office, without substantive legislative action, large deficits will continue for years to 

come. This means that we are imposing an ever-increasing burden 

on future generations who must service that debt. 

Some policymakers will argue that Social Security is separate 

from our broader fiscal challenges. I disagree. Immediately addressing the challenges facing the Social Security program offers 

an opportunity to improve our country’s fiscal soundness, lift an 

undue burden from future generations, and strengthen our economy’s long-run growth prospects. As many experts, including the Social Security actuaries and the Congressional Budget Office, have 

warned, Social Security is on an unsustainable path. 

While there is some uncertainty about the exact year when the 

trust funds will be depleted, there is no plausible scenario in which 

they are not depleted in the coming decades. Any near-term legislative agenda to address the Federal Government’s long-term deficit 

and debt challenges should include some Social Security policies 

geared at least at mitigating the projected shortfall without harming the U.S. economy. 

In short, Congress should simply take a first step, pursuing incremental policy options for Social Security, and it can begin now. 

One sizeable step forward could do much toward delaying trust 

fund depletion and help future retirees better anticipate the benefits they will actually receive. In fact, recent research has confirmed how Social Security can crowd out private savings and lead 

to less labor market participation by older workers. While performing a critical function, Social Security also imposes certain 

costs. 

I encourage the committee to consider three incremental policies. 

First, raising both the normal retirement and the early retirement 

age. Such a policy could both narrow the Social Security financing 

gap and foster economic growth. As proposed by the President’s 

Fiscal Commission, this policy eliminates almost one-third of the 

75th-year financing gap. In addition, raising the early eligibility 

age from 62 to 65 could increase Gross Domestic Product by about 

5 percent. 

Second, modifying the benefit formula to slow future benefit 

growth. Improved solvency could be achieved through a variety of 

reforms to the benefit formula, including modifying the formula’s 

second and third rate, adjusting the indexing of the bend points, 

or establishing a fourth bend point that reduces benefits for workers with high lifetime average incomes. 

Third, adopt an index for the annual Social Security cost of living 

adjustment that better reflects inflation. Under current law, the 

13 

metric used to adjust benefits for inflation may be over-estimated 

and can be more accurately measured using a chain-weighted Consumer Price Index. This change is estimated to eliminate about 

one-sixth of the financing gap in the 75th year, and was also included in the President’s Fiscal Commission’s recommendations. 

With any reform we consider, we must not forget the most vulnerable among us. Strengthening benefits for low-income individuals would exacerbate the trust fund imbalance modestly, but, combined with any of the options outlined above, the program’s longterm financing could be enhanced while benefits for low-income retirees are increased. For example, President Obama’s Fiscal Commission proposed a minimum benefit of 125 percent of poverty for 

any individual with 25 years of work. 

In closing, I would urge the committee to acknowledge the significant expected shortfall in Social Security and to consider taking 

at least one step now to mitigate this problem. Reform options do 

exist that are both pro-growth and fiscally sound. 

Thank you. I would be happy to answer any questions. 

The CHAIRMAN. Thank you, all of you. 

[The prepared statement of Mr. Brill appears in the appendix.] 

The CHAIRMAN. I think it is fair to say that Social Security probably is in a little better shape than is commonly believed. I think 

that is a point you made, Ms. Altman, and personally I agree with 

you. Second, it is clear that, on an actuarial basis, for at least the 

next 75 years, Social Security is going to have to be faced up to, 

and we have to make some changes. 

But I think the question of the day really is, to what degree do 

Social Security payments in and out, the trust fund, et cetera, contribute to the current deficit and debt questions? The big question 

today in, certainly, Washington, is the debt limit and how we increase the debt limit, by how much, and so forth, and to what degree that is joined with efforts to reduce the debt and deficit. There 

are lots of ideas around here on that point. But I would just like 

to settle, as much as I possibly can—maybe I am naive—the degree 

to which Social Security does, today, contribute to our debt and deficit and the degree to which it does not. 

Now, Ms. Altman, you made a very strong statement in that regard. You say it does not, categorically. One penny saved in Social 

Security does not reduce our national deficit by one penny. Essentially that is what you said. I would like to ask Dr. Blahous whether you agree, and, if you do not agree, why. I want to just try to 

settle this. To what degree does it add to the deficit or does it not 

add to the deficit? 

A separate question would be—to the degree to which it does or 

does not—when to address the question of Social Security. Then 

the question after that is, when this body addresses it, what should 

some of the changes be? But first, does it or does it not add to the 

Federal budget deficit today? 

Dr. BLAHOUS. Can I give you a 2-part answer? 

The CHAIRMAN. Answer any way you want. 

Dr. BLAHOUS. There was actually much that Ms. Altman said 

that I agree with from a technical perspective, even though I am 

coming to different conclusions. I think I would agree with her with 

respect to Social Security’s impact on the gross Federal debt, beVerDate Nov 24 2008 15:20 Jun 27, 2012 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 R:\DOCS\74663.000 TIMD
14 

cause the gross Federal debt includes debt that is issued to the Social Security trust fund. 

So, to the extent that you reduce a Social Security benefit payment, it results in an increase in the Social Security surplus, which 

in turn creates an increase in the debt paid to Social Security. And 

so the gross Federal debt remains unchanged. You would reduce 

the publicly held debt by doing that, but not the gross Federal 

debt. So I agree with her technical point. 

From a unified annual Federal budget deficit standpoint, I think 

my emphasis would be a little bit different. It is important not to 

conflate the deficit and the debt. Certainly net in the aggregate 

since the 1980s, Social Security has not added net, on average, to 

our national deficit and debt. The present value of the surpluses 

that Social Security ran in the 1980s, 1990s, and 2000s exceeds the 

size of the operating deficit that Social Security is running now. So 

I agree with that point. 

In terms of its actual annual impact this year, I would say it is 

adding to the annual deficit. Right now the amount of tax revenue 

coming in to fund Social Security benefit payments is less than the 

cost of those benefit payments. 

The CHAIRMAN. But you are excluding interest. 

Dr. BLAHOUS. Right. But the interest payments do not affect the 

unified Federal deficit. They increase the balance of the trust 

funds, so the trust fund continues to rise, but basically the cash 

flow deficit in 2011, under CBO’s latest report, is about $130 billion, and then $85 billion of that would be made up from a general 

revenue transfer to reimburse the trust funds for the payroll tax 

reduction. That is a general revenue transfer. That does not affect 

the unified budget deficit. Then the other $45 billion of that cash 

deficit would be made up through an interest payment. Those payments increase the balance of the trust funds but they do not have 

an impact on the unified Federal deficit. So I agree on some points, 

and I would emphasize others somewhat—— 

The CHAIRMAN. Ms. Altman, we will give you a chance to respond. 

Ms. ALTMAN. Thank you. The law is unambiguous. So let me 

read it: Social Security ‘‘shall not be counted for purposes of the 

congressional budget.’’ Dr. Blahous talked about a unified budget, 

and that is perfectly appropriate for economists to talk about. You 

are trying to figure out those fiscal effects, and so forth. But with 

Social Security, by law, there is no unified budget. Social Security 

is not part of the budget. So that $14.3 trillion debt that we are 

at, the limit that you are going to have to raise—or at least have 

to vote on whether to raise in a few months—if you cut Social Security, that $14.3 trillion does not change. It does not put any room 

into the debt limit. 

The CHAIRMAN. All right. 

Do you agree with that, Dr. Blahous? 

Dr. BLAHOUS. I do agree with that. 

The CHAIRMAN. All right. My time has expired. Thank you. 

Senator Hatch? 

Senator HATCH. Thank you. 

Let me ask Dr. Blahous this. Now, I am concerned about those 

on the bottom level who barely get by on Social Security who may 

15 

not have much in the way of savings. Let me just have you approximately estimate. Let us say we have a couple. Both of them 

are over 70 years of age, and both of them have elected to take Social Security at age 70. The husband worked, and let us say he is 

the sole breadwinner and has made approximately $150,000 to 

$200,000 every year. The wife does not work. What would be the 

combined Social Security payment, approximately? You do not have 

to be exact, but approximately what would be their annual total 

Social Security from the trust fund? 

Dr. BLAHOUS. So the husband is the primary wage earner? 

Senator HATCH. He is the primary wage earner. The wife may 

have worked early in her life, but only maybe 1 or 2 years. 

Dr. BLAHOUS. So we will assume maybe she is getting the 50- 

percent non-working spouse benefit. 

Senator HATCH. Right. 

Dr. BLAHOUS. And the husband’s wage profile—he is a medium 

wage earner? What is his—— 

Senator HATCH. Well, he is at $150,000 to $200,000 a year. 

Dr. BLAHOUS. Oh. All right. So he is $150,000 to $200,000. So he 

would be, for Social Security purposes, a maximum wage earner. 

Senator HATCH. Right. 

Dr. BLAHOUS. Very approximately, we are talking, he would 

probably get a replacement rate of somewhere around 30 percent 

based on the wage cap. So we are talking in the neighborhood of 

$30,000 a year, plus a 50-percent bonus for her non-working spouse 

benefit. 

Senator HATCH. So you are talking about $40,000 to $45,000. 

Dr. BLAHOUS. Right. Now, past a certain point they are going to 

run up against the family maximum. 

Senator HATCH. And when would that be? 

Dr. BLAHOUS. Off the top of my head, I do not know the family 

maximum, but they would be bumping up against it. I mean, certainly, if they are getting $40,000 or so a year, they would be on 

the very high end of Social Security. 

Senator HATCH. Well, there are a lot of people who are on that high end getting $40,000 to $45,000 a year. The average wage in 

this society is what? 

Dr. BLAHOUS. The average wage index is about that amount now. 

Senator HATCH. Yes. Well, why would we be paying Social Security to those who really are not working and making a good living, 

and paying that much money in Social Security to people like that, 

even though they waited until age 70, when we have people who 

are getting $16,000 a year out of Social Security? Now, they paid 

in more, they naturally should make more. But do we not have the 

wrong system of having that continue to go up and up on the top 

level and not making very much headway on the bottom level? 

Dr. BLAHOUS. I think you are hitting upon a very important 

point. 

Senator HATCH. Well, I think it is important, because I cannot 

imagine why we would be paying people who have been, not 

wealthy, but nevertheless very comfortable, almost as much, if not 

as much, as the average wage in this society, while leaving those 

at the bottom with very little. They could not live on $16,000 a 

year, whatever it is. Why do we do that? 

16 

Dr. BLAHOUS. Well, historically the reason is that, in the 1970s, 

there were changes made to the benefit formula that pegged the 

initial benefit formula to the growth in average wages. 

Senator HATCH. No, I agree that we made the changes. But why 

do we keep doing that? Do you not have a recommendation that 

there is a limit to what—should we not have a slower growth on 

the top level, faster growth on the bottom level? Would that not be 

a better approach to take? 

Dr. BLAHOUS. Well, if I could take off my trustee’s hat for a second and not be speaking for the trustees—— 

Senator HATCH. Yes. I do not hold you to your trustee role. 

Dr. BLAHOUS. But certainly—and I agree with Alex—constraining the growth of benefits on the high-income end in excess 

of inflation should be an important part of any Social Security solution. 

Senator HATCH. I think it is immoral for us to be paying people 

who clearly are making a good living and clearly are fairly wellto-do compared to the average person who is down at that lower 

level. And we keep raising them up in what I consider to be excessive rates. I am just trying to be fair here. I mean, I guess if you 

are 70 years of age and you are making $150,000 or $200,000 a 

year, you are going to be very glad that you are getting another 

$40,000 to $45,000 a year from Social Security, when Social Security is potentially going to have some difficulties, and is right now 

having some difficulties. 

Dr. BLAHOUS. A potentially useful set of figures is in a report 

that CBO did in 2003, where they basically said that, of the projected cost growth in Social Security, 55 percent is as a result of 

population aging, the other 45 percent is the result of the per capita growth in benefit levels. So this phenomenon you are talking 

about is pretty significant from a fiscal perspective. 

Senator HATCH. My time is up, Mr. Chairman. But I just wanted 

to make that point, because it just seems to me that it is out of 

whack right now. 

The CHAIRMAN. Not to be argumentative, but is it not also true 

that about 95 percent of benefits go to beneficiaries who receive 

$2,000 a month or less? You are talking about a narrow group of 

people, 5 percent maybe. 

Senator HATCH. I think it is more and more. I think it is more 

than 5 percent. But even 5 percent. Why would we be paying these 

people? 

The CHAIRMAN. Yes. 

Dr. BLAHOUS. Well, sir, the actual number of people who actually 

are lifetime maximum wage earners is relatively small. Actually, 

historically—it might be more in the future—it has actually been 

about 1 percent. That often catches people by surprise, but a lot of 

people will have zeroes in their earnings history, so the number of 

people who are actually steady maximum wage earners over an entire career is a pretty small percentage. But certainly the point is 

well-taken that there is a significant amount of benefit growth that 

is in excess of inflation to people—— 

Senator HATCH. There are a lot of people who are more than the 

1 percent, or 5 percent, whatever that may be, in the middle who 

17 

are getting quite a bit out of Social Security while those on the 

lower—— 

The CHAIRMAN. Senator Grassley? 

Senator HATCH. Those are real problems, I think. 

The CHAIRMAN. Thank you. 

Senator GRASSLEY. Mr. Chairman, I intend to use my time not 

to ask questions, but to make a statement on this subject. 

The CHAIRMAN. This is getting to be a trend of yours. 

Senator GRASSLEY. Well, do not count on anything when you are 

in Congress as a trend. [Laughter.] 

OPENING STATEMENT OF HON. CHUCK GRASSLEY, 

A U.S. SENATOR FROM IOWA 

Senator GRASSLEY. As is often noted, Social Security is one of the 

three legs of a 3-legged stool for financial security. Mr. Roosevelt 

notes in his testimony that this grandfather also believed this 

when he championed the program. The other legs include personal 

savings and employer-sponsored retirement programs. We worked 

hard in the year 2006 to strengthen the employer-sponsored leg 

with the Pension Protection Act, and, as statistics from the last few 

years show, individuals are doing their part to improve their personal savings. 

However, the Social Security leg is still quite wobbly and needs 

fixing to give 21st-century retirees 100 percent of the monthly benefits that we get today so that they can count on it once they leave 

the workforce. A Wells Fargo/Gallup poll from February of this 

year shows that non-retirees do not expect to rely on the Social Security leg much when they retire. 

While they expect it to be a major source of income in retirement, 

there are five other sources that they expect to rely on before Social 

Security. Specifically, these sources are: (1) individual retirement 

accounts, including 401(k) plans; (2) individual stock and mutual 

fund investments; (3) a work-sponsored pension plan; (4) home equity; and (5) other savings, including savings accounts or certificates of deposit. Those five, before Social Security. 

The same poll shows that retirees will rely on these same sources 

of income but will rely on each of these sources in a completely different manner. For retirees, Social Security will be the secondlargest source of retirement income, second only to work-sponsored 

pension plans. 

I mention this poll because some believe that we can put off fixing the Social Security leg of the financial security stool. Those in 

this camp argue that the Social Security trust fund can pay promised benefits until 2037. They also argue that Social Security is not 

adding to the deficit right now, so it should not be part of a current 

deficit reduction debate. 

But, as this poll shows, today’s workers are not fooled. They 

know that the longer we wait, the harder it gets. The aging population is shifting. The ratio of workers to beneficiaries decreases 

from 3:1 to 2:1. As supporters of delaying reform acknowledge, 

waiting until 2037 to address the problem ensures that beneficiaries will see a more than 20-percent decrease in benefits. There 

are only three ways to save Social Security from future insolvency: 

(1) raise taxes; (2) adjust benefits either by adjusting the formula 

18 

for calculating benefits or increasing the retirement age; and 

(3) earning a higher rate of return. 

There are two ways to raise taxes: we can increase the amount 

of the premium that workers and employers pay by increasing the 

tax, and we can increase the amount of wages subject to the tax. 

Currently, workers and employers each pay 6.2 or 12.4 percent on 

incomes up to $106,800. 

As we all know, Social Security is a pay-as-you-go system, so today’s workers are paying this tax to provide benefits to today’s retirees. In other words, these taxes that today’s workers are paying 

are not going to pay their own benefits. The benefits for today’s 

workers will be paid by taxes that their children and grandchildren 

pay. Workers are also impacted by tax increases on employers. 

Economists agree that employers’ share of the Social Security tax 

is passed on to workers through lower wages. Those who argue 

that Social Security reform should not be part of a deficit reduction 

need to keep in mind that my colleagues, particularly on the other 

side of the aisle, seem to think that income tax increases rather 

than spending reductions are needed to manage the deficit problem. As long as income tax increases are part of the debt and deficit conversation, Social Security reform must also be a part of the 

conversation, as long as Social Security tax increases are considered as a solution to Social Security solvency. 

We should not consider such tax increases without considering 

the overall burden on individuals, from higher taxes to lower income. We need to think about whether it is fair asking workers to 

fork over more of their hard-earned dollars for little or no increase 

in retirement benefits. Social Security is the most successful government program ever. All workers, current and future, should be 

guaranteed some level of benefits from Social Security, but we need 

to ensure that we do this as fairly as possible. 

That is the end of my statement. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Carper? 

Senator CARPER. Thanks, Mr. Chairman. 

To all of our witnesses, good morning and welcome. It is nice to 

see you all. Thanks for joining us, and for your thoughts. 

I was State Treasurer of Delaware after I got out of the Navy. 

When I got to be State Treasurer, in our State we had no pension 

trust fund. None at all, just a cash deal. No monies had been set 

aside to pay benefits. One of the things I got when I was elected 

in 1976, one of the things our legislature focused on, was creating 

a real pension trust fund. It is one that is fully amortized, has been 

for a long time, and we are very proud of that. 

I got to Congress in 1983. The first thing they told us on January 

3, 1983, after we had raised our right hand and taken that oath 

to defend our country and Constitution, they said, by the way, Social Security is going to run out of money this year. And they did 

not say, we are going to see some imbalance between monies coming in and going out; they said we are going to run out of money. 

They did not say, we are going to reduce Social Security checks by 

25 percent or so; they said we are going to run out of money, and 

you need to do something about it. 

19 

Fortunately, we had some really smart people. The Blue Ribbon 

Commission, as you will recall, chaired by Alan Greenspan, came 

up with a variety of benefit cuts and revenue enhancements that 

enabled us to put Social Security on pretty safe footing for a number of years. 

I said at the time, I never want some future Congress to be in 

the situation that we were in. I never want to be there, looking 

over that precipice. If we are smart, whenever we see things turning the wrong way in terms of monies coming in and monies going 

out of these trust funds, we will make some very modest adjustments—very modest adjustments—in order to get us on a sound 

footing for a long, long time, for like 75 or 100 years. 

On the argument on the deficit, I am one of those people who do 

not think we use Social Security to balance the budget, but I do 

think we can make some tweaks in Social Security that are fairly 

modest and put it on a sound footing for certainly the rest of my 

life, and I think maybe for the lives of my sons who are 21 and 22. 

They do not think it is going to be there for them. I would like to 

make sure that it is there for them, and for their children as well. 

There are a number of fairly, I think, modest changes that have 

been proposed. This is from my briefing notes for today. There are 

about four or five things that we can do to put Social Security on 

very sound footing for, certainly the rest of this century. Number 

one is to gradually phase in some progressive changes to benefit 

formulas by 2050, and that would reduce somewhat the benefits for 

upper-income and higher-earning folks. That is one thing. Another 

is to gradually increase the taxable maximum to cover about 90 

percent of earnings by 2050. Right now, I think we are at about 

83 percent. The third is to apply the chained CPI, the COLA, so 

that the market basket more reflects what folks in their 70s, 80s, 

and 90s are actually buying. A fourth is to pretty much pursue the 

formula suggested by the Deficit Commission, to raise the full retirement age to 68, very gradually, by 2050, raise it to 68 and very 

gradually raise it on up to 69 by 2075. The last one will be to cover 

newly hired State and local workers after 2020. Some are not covered, some are, but to gradually cover new-hire workers and local 

workers by 2020. Those are the five. 

If we eventually get all those things, we would end up raising 

enough money to pay—over-pay—for any shortfall, I think, by 

about 130 percent. We only need 100 percent, so we would end up 

with about 30 percent left over. We would have a big surplus then, 

at least in Social Security. 

Let me just ask you to react to those ideas, each of you, if you 

would. Why do we not just start right here. Is it Mr. Brill? 

Mr. BRILL. Thank you, Senator Carper. I agree with everything 

you said this morning. It was consistent with my testimony, which 

suggests a variety of incremental changes. Not all of the ideas that 

you mentioned just now were included in my testimony. Perhaps 

the only difference in my remarks was that I have emphasized the 

importance of just making any step forward. 

So, while certainly it is the case that, combined, those five would 

over-solve the problem in a sense, that would not be a bad situation to be in. I am advocating this morning that we even just make 

a dent in it, with any of those five on the benefits side. I have some 

20 

concerns on the tax max proposal, but any of the other proposals 

would certainly be steps in the right direction. 

Senator CARPER. Thank you. 

Ms. Altman? 

Ms. ALTMAN. Senator, let me start by saying that the question 

about Social Security and how to restore the actuarial balance is 

a political question, not an economic one. We can afford it. The 

question is, at what level and what changes do we make. 

So going through yours, let me take them a little bit out of order. 

The 90 percent, restoring the maximum to what Congress intended 

it to be, that should be done today. That is something that every 

commission has—— 

Senator CARPER. I am going to ask you to move along quickly. 

Ms. ALTMAN. That one is fine. Newly hired State and local workers: it makes good policy sense. Politically, it is very tough, especially with what is going on with State and local pension plans. 

The phase-in of benefits: I think that is a terrible idea, quite frankly. It is a very careful balance of equity and fair return, and you 

would really hurt middle-class Americans and the benefits they receive, really reducing their benefits substantially. They would not 

get a fair contribution. 

Chained CPI: as you know, beneficiaries have not gotten a CPI 

the last 2 years under the current CPI. Chained CPI is less than 

that. A lot of people think the current CPI is too low. There is a 

CPI–Elderly which focuses on that population and that weights 

health care costs much more because they have more substantial 

health care costs. So, rather than chained CPI, I think you should 

be going with CPI–E. 

Senator CARPER. All right. Let me just thank you for those. I am 

running out of time, so let me ask our last two witnesses to just 

briefly respond. 

Would you, please? 

Dr. BLAHOUS. I would just say that, if I were king for a day, 

there are obviously some of those provisions that I like less than 

others, but none of us gets to be king for a day. The question is, 

is that a balanced package of reforms that might conceivably get 

bipartisan support? It tracks pretty closely to a lot of things the 

Simpson-Bowles Commission put together. It is roughly 50/50 on 

taxes and expenditures. I think it would be a reasonable bipartisan 

compromise. 

Senator CARPER. Good. Thanks so much. 

Mr. Roosevelt? 

Mr. ROOSEVELT. Yes, Senator Carper. Thank you. I would like to 

point out that Social Security benefits that are received are taxed 

on a progressive basis in the income tax. That has not been mentioned so far, so that deals with some of the question of highincome retirees. I would support definitely increasing the cap on 

taxable wages right away. 

I would associate myself with Ms. Altman’s comments. I would 

oppose raising the retirement age unless we also deal with the disability system, which now requires total disability, essentially, and 

affects people in different occupations, desk-bound versus physical 

labor, in very different ways. 

Senator CARPER. All right. Good. 

21 

Mr. Chairman, I would just make an observation. First, thank 

you all for those comments. One of the things, in talking to some 

folks who have done a lot on these issues even more than I have, 

they said at the end of the day if we could put Social Security on 

sound footing for the next 75 or 100 years, and the other part of 

the agreement is to somehow encourage our Republican colleagues 

to support revenues as part of the package going forward, that 

would not be a bad trade. So I would just lay that at everybody’s 

feet, and I thank you for giving me this much time. 

The CHAIRMAN. You bet. Thank you very much. 

Senator Stabenow? 

Senator STABENOW. Well, thank you very much, Mr. Chairman. 

I first want to thank you for holding this hearing and proceeding 

to focus on Social Security in and of itself. I strongly believe that 

we should be doing this within the context of looking at Social Security separate from other critical issues that need to be dealt with 

to address the deficit, but we all know that Social Security is in 

a very different spot and needs to be addressed for the long term, 

for 75 years. But I very much appreciate you doing this in the way 

that you are doing it, Mr. Chairman. 

Let me also just say that I think Social Security is a great American success story. Prior to Social Security, half of the seniors in 

America were in poverty. Mr. Roosevelt, thanks to your family’s 

leadership, your grandfather’s leadership, we now have 10 percent 

of the retirees in America in poverty. I wish it was not 10 percent, 

but it is a whole lot different than 50. It is my understanding that, 

without Social Security today, we would be right back at least at 

45 percent of seniors in poverty. So I consider that a great American success story that we should all be very proud of. 

The other piece I would just say for the record that we have not 

talked about is that Social Security really is three things, all of 

which are very important to families. It is retirement, it is a pension system, and thank goodness that pension system was not in 

the stock market a couple of years ago. I shudder to think what 

would have happened to retirees if it had been. Second, it is disability. It is a disability insurance policy. Third, it is a survivor’s 

policy. We all know people whose breadwinner passed away when 

the children were little, and they survived, moms and kids, because 

of Social Security. So I view those, again, as a great American success story, and really part of the best of America in terms of our 

values. 

So when we look at going forward, I also think it is very important again, Mr. Chairman, for the record, just to say what Ms. Altman said, but to say it again: Social Security is self-financed, cannot borrow, spends less than 1 percent on administrative costs, and 

has a surplus. Frankly, I wish more Federal programs were that 

fiscally responsible. We would be in a very different spot right now 

if that were the case. 

But we do know that, starting in 2037, Social Security will only 

be able to make 78 percent of its obligations if we do not move 

ahead and make some responsible improvements. So I also believe 

that small changes now are important for the future, to be able to 

guarantee that integrity and success story. 

22 

So one of the things, Mr. Roosevelt, I wanted to ask you to speak 

more about is the question of raising the eligibility age, and there 

has been a lot of discussion about proposals from colleagues. In 

your statement you said raising the eligibility age could create unacceptable hardship for whole groups of workers. I wonder if you 

might talk about whom you believe would be hardest hit as a result 

of that and what that might do as well to elderly unemployment 

going forward. 

Mr. ROOSEVELT. Yes. Thank you very much, Senator. If you work 

in an occupation like mine as a lawyer or a health insurance executive, raising the retirement age would not impose undue hardship. 

I can sit behind a desk for quite a few more years. If you work in 

daycare, running after little kids, or if you work in construction or 

many other physical occupations, raising the retirement age is an 

unthinkable proposition. 

That is why, if we simply raise the retirement age, we are imposing undue hardship on many Americans. If we revamp the disability system, which has both operational and categorical problems right now, we could come to a more equitable way of addressing that. That is a very difficult problem to address, however. 

It is important to recognize that when we talk about the increase 

in life expectancy, when life expectancy was calculated at the time 

Social Security began and 65 was set as the retirement age, many, 

many infants died of childhood diseases and were included in that 

calculation. Those are curable today. So, in fact, life expectancy has 

only increased for people who reach age 65 by about 3 years over 

the time the Social Security system has been in place. 

So given that we are already on a path to raising the retirement 

age to 67, we need to look at that in a very sophisticated way and 

not make a simplistic adjustment in that age that would be unfair 

to many people. 

Senator STABENOW. Thank you. 

Ms. Altman, I wonder also if you might speak to that, as to what 

groups you think would be impacted with raising the retirement 

age. Do you think a hardship provision would effectively protect the 

people whom we are talking about? 

Ms. ALTMAN. What people do not understand, because of the 

way—it is very complicated. Because of the way Social Security’s 

benefit formula works, actually raising the retirement age, as 

Chairman Baucus said in his opening remarks, is the equivalent of 

a 7-percent across-the-board cut in benefits. It is mathematically 

indistinguishable. So, someone who has to retire early gets the biggest reduction. 

In addition, though, with respect to the hardship exemption, in 

1983 when Congress increased the age to 67, they asked the Social 

Security Administration to look at a hardship exemption. It sounds 

like the right approach, and yet it is a very, very complicated thing 

to do. 

For example, you have caregivers, usually women, who often 

have to leave the workforce early because they are caring for a sick 

husband. Is that hardship or is that not hardship? You have a recession where a lot of people become unemployed. There has been 

a spike in EEOC age discrimination claims. Is that a hardship or 

23 

not? We already have a disability program that has a very large 

backlog. A hardship exemption is likely to do the same thing. 

The beauty of Social Security is that it is universal, that we all 

have the same rules. The idea is to make adequate benefits for everyone. We are in the middle of an experiment now with raising 

the retirement age, and I agree with Mr. Roosevelt, we should not 

be raising it further. 

Senator STABENOW. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman. Thank you for putting this issue on our radar screen. I think it is one we need to be 

talking about and hopefully doing something about. I want to 

thank our panelists for your ideas about that today. 

I would like to come back, if I might, because one of the big discussions you hear around the country, or you hear at least here in 

Washington, is that we do not need to do anything on this until 

2037 because that is the drop-dead date when the so-called trust 

fund would be depleted. I am interested in just more the timing of 

when we deal with this and what happens if we do not deal with 

it. 

So, if you would perhaps shed some perspective on what happens 

to benefits, for example, in 2037 if we do not reform Social Security 

today, and how does this really bear on the whole issue of deficits 

and debt? I think that has been covered a little bit. It sounds like, 

Dr. Blahous, you addressed that in your remarks earlier. But there 

is a sense around here that we really do not have to do this now, 

there is no urgency attached to this because of the ‘‘2037’’ date. I 

am interested in your perspective on that. Yes, please. 

Dr. BLAHOUS. I am strongly of the view that time is of the essence, probably more so than your typical Social Security expert. 

We are in a very different situation from where we were in 1983. 

In 1983, we came to a point where we had a crisis in the trust 

fund, but the trust fund balances, until that time, had been kept 

pretty small. 

So at the point we reached trust fund depletion, or the threat of 

it, annual operations in Social Security were still pretty close together. They did not have that big of an immediate crisis to deal 

with in terms of the money coming in and the money going out. 

We are in a very different situation now. We have this very big $2.5-trillion trust fund. So if we say we are going to ride that trust 

fund for the next several decades and just raise general revenues 

to redeem those bonds and then deal with Social Security, by the 

time we would be dealing with Social Security then, annual income 

and annual outgo would be far, far further apart than they were 

in 1983. 

So the size of the adjustments we would have to make just to 

preserve self-financing in the program and keep the program going 

in the short term would completely dwarf anything our political 

system has been able to do in the past. So not only would the 

changes we would have to do be more wrenching, I am substantially skeptical that our problem would be politically solvable while 

retaining Social Security’s historical character as a self-financing 

program. 

24 

Senator THUNE. What happens to benefits, though? I mean, what 

would happen just in terms of 2037? 

Dr. BLAHOUS. Well, there would be a 22-percent sudden benefit 

reduction. That would affect people already in retirement, not just 

new retirees. So that would actually affect some people who are on 

the rolls already. 

Senator THUNE. Or the other alternative would be, you would 

have to have a huge, massive payroll tax increase to bring benefits 

up to what they would need to be. 

Dr. BLAHOUS. Right. It would have to go up to a 16-percent payroll tax. 

Senator THUNE. What is the rate of return on an individual putting their money in Social Security today? Does anybody know the 

answer to that? 

Dr. BLAHOUS. It depends on whether benefits are cut as you suggest, or we raise taxes. But generally speaking, we are talking an 

internal real rate of return of somewhere at 2 percent or below. 

Somewhere between 1.5 and 2 percent would be my guess. I do not 

want to be held to the precision of that, but somewhere around 

there. 

Senator THUNE. Some of the measures that are being considered 

are measures that would deal with inflation. You talked a little bit 

about indexing and how benefits are determined. If you consider 

measures of inflation used to calculate benefits, are benefits more 

or less generous in real terms today than they were when the program was started? 

Dr. BLAHOUS. In real terms they are substantially more generous. That is because of changes to the benefit formula that were 

enacted in the 1970s. 

Senator THUNE. All right. And of all the prescriptions that have 

been thrown out, and you have heard a number of them—and I 

heard you, Ms. Altman, say that you thought getting to the 90- 

percent level of taxable income would be the first suggestion. If you 

had to rank them in terms of—I know you probably look at this the 

way we look at it, in terms of what is politically feasible. What 

would be the first, simplest, least painful thing that we could do 

that would at least prevent what I think is, if we wait too long, a 

real problem from getting much, much worse? 

Ms. ALTMAN. If you increase or restore the maximum wage base 

to 90 percent and you do it gradually over about 30 years, it translates to, for someone making $106,800, about $120 a year in additional contributions for which they will get a higher benefit. So it 

is a very modest change, and it eliminates about a third of the 

shortfall. 

So as I say, as a freestanding bill, I mean, I am very concerned 

that this not be part of the deficit debate and debt reduction because of the perception of it. But that is something that, as I say, 

you do not have to do anything else. You do that and you have already moved the ball out maybe 5, or 6, or 7 years. That is something that all the commissions have gone for. 

Senator THUNE. Yes. 

Mr. Roosevelt, you expressed resistance to raising the retirement 

age, and I heard your rationale for that. But that, around here at 

least, is typically something thrown out that is considered to be one 

25 

of the more immediate solutions, assuming it is phased in, obviously, over a period of time. 

But I am interested in the other panelists’ and your ideas about 

the retirement age and whether or not it would make sense to increase retirement age from 67 where it is today. Dr. Blahous? 

Dr. BLAHOUS. Well, I would just say for perspective, consider 

when Social Security was first established. You could not claim 

benefits until age 65. We added afterwards the ability to claim benefits at age 62, and that is when most people claim. That has had 

a very significant impact on labor force participation. Now, people 

claim at 62 not primarily because of physical incapacity. 

In the 1950s, for example, you had 57 percent of males in their 

late 60s in the workforce. By the 1970s, that was down to 32 percent. It was not that we had all become that much frailer or we 

had all moved into manual labor jobs, it was simply, we were basically paying people to leave the workforce at an earlier age. 

Now, the Simpson-Bowles recommendations would have increased both the early eligibility age and the normal retirement 

age gradually over time. Again, just for perspective, they would 

have done that at a rate that is actually slower than the normal 

retirement age increase under current law. 

In the last decade, normal retirement age went up by a year 

from 2000 to 2005. What Simpson-Bowles recommended was a further increase in that, but actually at a slower rate than the one we 

have already been through. So I think my first question would be, 

have we seen a substantial increase in hardship for people in physical labor jobs as a result of the retirement age increase that has 

already taken place, and use that as a basis for evaluating whether 

a further one is problematic. 

Ms. ALTMAN. As a policy matter, I think raising the retirement 

age is exactly the wrong way to go. It is mathematically indistinguishable from the across-the-board benefit cut. I have a chart on 

the last page of my testimony that really shows, even if you work 

till age 70, you would get less. It is a time when benefits are already being cut, when 401(k)s, when traditional pensions are disappearing, and people are going to be even more reliant on Social 

Security. 

As a political matter, I think there is a disconnect. You say there 

is consensus about raising the retirement age. In the country, there 

is consensus against raising the retirement age, so I think that 

should not be part of the solution. 

Senator THUNE. I mean, I would argue that the country—there 

is probably a consensus against most of the things that are—— 

Ms. ALTMAN. No, that is not true. If you scrap the cap—we 

talked about raising it to 90 percent. 

Senator THUNE. Yes. 

Ms. ALTMAN. About two-thirds of the population say, just eliminate the cap. If you do that, you are done. You do not have to do 

anything else. In fact, if you do it and keep benefits where they 

are, you can actually increase benefits, and it brings in more revenue than you need. 

Senator THUNE. All right. 

Thank you, Mr. Chairman. Thank you all. 

The CHAIRMAN. Thank you, Senator. 

26 

The question that came to my mind is, back in 1983—Ms. Altman, I suppose you are closest to this—we had a deadline facing 

us. Your commission, the Greenspan Commission, found ways to 

decrease benefits and increase taxes, basically. I think it is roughly 

50/50; I really do not know. But it was close to the deadline. The 

changes made were significant, but they were not so large that it 

caused a huge consternation in the country. 

Now, the current system will allow benefits to be paid up 

through 2037, and then at a lower rate. Most everybody agrees 

with that. I think you all agree with that. If we were to move forward—there are a couple of ways to ask you this question. What 

if, instead of making those changes the commission made in 1983, 

the commission had made those changes, say, roughly 26 years earlier? That would be 2011 to 2037. If they made those changes, the 

changes that we needed—let us put it that way—made those same 

changes 26 years earlier, just generally how much less great would 

those changes have been back then? 

But then really the deeper question, the more important question 

I am asking is, I do not think Congress is going to address Social 

Security this year, basically because I think most members of Congress agree that it is probably not appropriate to deal with Social 

Security at the same time that Congress is dealing with debt and 

deficit reduction. We will deal with Social Security separately. 

So it would be interesting to see a chart—maybe my assumption 

is incorrect; it is kind of the point that Dr. Blahous is making— 

which would show how much greater taxes would have to be, or 

how much benefit reductions would have to be over the next 26 

years as you approach 2037. I suppose that there are charts that 

show, some combination that shows, how much greater those actions would have to be over time. I am assuming they would be less 

dire today, but 10 years from now maybe a little more significant, 

and maybe 25 years from now quite significant. 

Am I correct in assuming that over time those changes would become much more significant than they would be if Congress were 

to act today? Congress is not going to act today for the reason I 

mentioned, but I think Congress is going to address Social Security 

fairly soon. It may not be for a couple of years. But, anyway, can 

one put together a graph that shows that? 

Ms. ALTMAN. Let me start. I think this is responsive. Let me 

start with something and then answer your question—— 

The CHAIRMAN. Sure. 

Ms. ALTMAN [continuing]. And that is that Social Security is currently in surplus. 

The CHAIRMAN. Right. 

Ms. ALTMAN. This year it is a $113-billion surplus. So, if you put 

changes in today, what you are doing is you are building up the 

surplus because the funds are not needed for current benefits. 

The CHAIRMAN. All right. 

Ms. ALTMAN. So the first question—and one thing I talk about 

in my statement—is to make sure everybody is on the same page 

about your goal, because, to the extent people do not think the 

trust fund is real, they do not think these are true government obligation, all you are doing is you are building up that reserve that 

27 

people are going to say does not exist. So that is an important first 

point. It is what happened in the 1990s: we built up. 

But the second point is the kind of changes you can put in. If 

there is a rate increase today, you can put in a lower rate now than 

if you waited until 2036, as Dr. Blahous says. For certain kinds of 

changes, like increasing the retirement age—or you could put a 

rate increase out in 2025; you do not need to do it now—you could 

enact it now, have it take place in 2025. So they are not all the 

same. 

But the first question is, how high do you want the reserves to 

be, whether you want those to be a permanent source of revenue 

for the trust funds, and so forth. There are some preliminary questions even before we get to solutions. I do not know if that is really 

responsive. 

The CHAIRMAN. No, that is helpful. 

Does anybody else want to respond? Dr. Blahous? 

Dr. BLAHOUS. I think you have hit upon something that is really 

important here, and that is why I want to leap in, which is that 

it is important for policymakers to understand sort of arithmetically what are the costs of delay. 

What is difficult for people in our position is that quantifying it 

in a way that is useful to you is often a little tricky. For example, 

what the trustees’ report has annually in it is a little illustration 

that says, here is how much you would have to change benefits 

across the board, here is how much you would have to change taxes 

across the board if you were to take instant action this year. 

Now, if you, as a Senator, were looking at that from your staff, 

you might look at it and say, well, this does not do me much good 

because I am not going to cut 14 percent this year from someone’s 

benefits who is already in retirement. I need to know how big of 

a change it is going to be when you factor in the fact that we are 

going to do benefit changes prospectively, and other little nuances 

that are hard to quantify but would reflect political realities. 

This is also why I mentioned in my remarks there is also the 

very real issue of, what is the amount of traffic our political system 

can handle? We could do illustrations saying, well, here is how big 

the long-term 75-year shortfall is by 2037. But, if in practical reality there is a limit to how much short-term pain the system is 

willing to impose, then that is something policymakers need to 

know as well. 

The CHAIRMAN. I understand. Right. 

Mr. Roosevelt? Then I am going to have to wrap up here. Go 

ahead. 

Mr. ROOSEVELT. All right. Just very quickly, Mr. Chairman. Another way to look at it is that, as Senator Thune mentioned, if you 

wait until 2037, or as was mentioned in response to a question, you 

would need a 2-percent increase: 1 percent from employer, 1 percent from employee. If you did that now, you could do a 1.1-percent 

increase in the tax—— 

The CHAIRMAN. Total? 

Mr. ROOSEVELT. Total, because of the way you have built up the 

trust fund. But it is important to remember that, if you do nothing, 

there is, as Dr. Blahous said, a 22-percent cut in benefits in 2037. 

The Simpson-Bowles recommendations are a one-third cut in beneVerDate Nov 24 2008 15:20 Jun 27, 2012 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 R:\DOCS\74663.000 TIMD
28 

fits, so that is worse than doing nothing. So, I think that is important to remember. 

The CHAIRMAN. I would say I really should go, but what is the 

magic of 75 years? A lot can happen in 75 years either way. 

Dr. BLAHOUS. That is very true. The economy can perform better 

or worse, we can find the elixir of youth, and so on and so forth. 

So it is very true that 75 years is not magic. It is a useful standard 

because it is a way of estimating the time that people are in the 

workforce and receiving benefits. 

The CHAIRMAN. Ms. Altman? 

Ms. ALTMAN. And if I could say, actuaries historically have used 

a valuation period as short as 30 years and as long as 80 years, 

and they have settled onto the 75 years. But it is important to understand that it actually is very conservative. No private pensions 

use that kind of long valuation period, and most other countries in 

the world do not. I think Germany uses about 30 years for their 

Social Security program. So there is nothing magical about 75 

years. 

The CHAIRMAN. It is just plucked from thin air? 

Ms. ALTMAN. No. The idea is that someone joining the workforce 

at age 20 would be 95 at the end of the valuation period, so the 

idea is, you are reassuring workers that there will be benefits for 

their entire work history. 

The CHAIRMAN. All right. Good. I am glad I asked the question. 

Thank you. You all have been very, very helpful. Thank you very 

much. 

The hearing is adjourned. 

[Whereupon, at 11:37 a.m., the hearing was concluded.] 

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