U.S. GOVERNMENT PUBLISHING OFFICE

33–480 WASHINGTON : 2019

SOCIAL SECURITY’S SOLVENCY CHALLENGE: 

STATUS OF THE SOCIAL SECURITY TRUST FUNDS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SOCIAL SECURITY 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JULY 14, 2017 

Serial No. 115–SS05 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

PETER J. ROSKAM, Illinois 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

TOM RICE, South Carolina 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

RICHARD E. NEAL, Massachusetts 

SANDER M. LEVIN, Michigan 

JOHN LEWIS, Georgia 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

TERRI SEWELL, Alabama 

SUZAN DELBENE, Washington 

JUDY CHU, California 

DAVID STEWART, Staff Director 

BRANDON CASEY, Minority Chief Counsel 

SUBCOMMITTEE ON SOCIAL SECURITY 

SAM JOHNSON, Texas, Chairman 

TOM RICE, South Carolina 

DAVID SCHWEIKERT, Arizona 

VERN BUCHANAN, Florida 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

JASON SMITH, Missouri 

JOHN B. LARSON, Connecticut 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

LINDA SA ́ NCHEZ, California 

iii 

C O N T E N T S 

Page 

Advisory of July 14, 2017, announcing the hearing .............................................. 2 

WITNESS 

Stephen C. Goss, Chief Actuary, Social Security Administration ....................... 5 

QUESTIONS FOR THE RECORD 

Questions submitted by the Subcommittee on Social Security of the Committee on Ways and Means to Stephen C. Goss, Chief Actuary, Social 

Security Administration ...................................................................................... 30 

Questions submitted by Representative Jim Renacci, of Ohio, to Stephen 

C. Goss, Chief Actuary, Social Security Administration ................................... 31 

SUBMISSIONS FOR THE RECORD 

Michael G. Bindner, Center for Fiscal Equity ....................................................... 33 

David Barnes, Director of Policy Engagement, Generation Opportunity ........... 39 

Strengthen Social Security Coalition ..................................................................... 41 

(1) 

SOCIAL SECURITY’S SOLVENCY CHALLENGE: 

STATUS OF THE SOCIAL SECURITY 

TRUST FUNDS 

FRIDAY, JULY 14, 2017 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, SUBCOMMITTEE ON SOCIAL SECURITY, Washington, DC. 

The Subcommittee met, pursuant to call, at 9:56 a.m., in Room 

2020, Rayburn House Office Building, Hon. Sam Johnson [Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON SOCIAL SECURITY 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

Friday, July 14, 2017 

SS–05 

Chairman Johnson Announces Hearing on 

Social Security’s Solvency Challenge: 

Status of the Social Security Trust Funds 

* NEW TIME * 

The new hearing start time is 10:00 a.m. as noted below. 

All other details remain unchanged. 

House Ways and Means Social Security Subcommittee Chairman Sam Johnson 

(R–TX), announced today that the Subcommittee will hold a hearing entitled ‘‘Social 

Security’s Solvency Challenge: Status of the Social Security Trust Funds.’’ The hearing will focus on the status of the Federal Old-Age and Survivors Insurance (OASI) 

and Federal Disability Insurance (DI) Trust Funds and the effects of delaying action 

to address Social Security’s future insolvency. The hearing will take place on 

Friday, July 14, 2017 in room 2020 of the Rayburn House Office Building, 

beginning at 10:00 a.m. 

In view of the limited time to hear witnesses, oral testimony at this hearing will 

be from invited witnesses only. However, any individual or organization may submit 

a written statement for consideration by the Committee and for inclusion in the 

printed record of the hearing. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page 

of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to make a submission, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a 

Word document, in compliance with the formatting requirements listed below, by 

the close of business on Friday, July 28, 2017. For questions, or if you encounter technical problems, please call (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any materials submitted for the printed record, and any written comments in response to a request for 

written comments must conform to the guidelines listed below. Any submission not in compliance with these guidelines will not be printed, but will be maintained in the Committee files 

for review and use by the Committee. 

All submissions and supplementary materials must be submitted in a single document via 

email, provided in Word format and must not exceed a total of 10 pages. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

3 

All submissions must include a list of all clients, persons and/or organizations on whose behalf 

the witness appears. The name, company, address, telephone, and fax numbers of each witness 

must be included in the body of the email. Please exclude any personal identifiable information 

in the attached submission. 

Failure to follow the formatting requirements may result in the exclusion of a submission. All 

submissions for the record are final. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TDD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available at 

http://www.waysandmeans.house.gov

f 

/ 

Chairman JOHNSON. Good morning. I have decided that we are 

going to start the hearing early, and since you all are here, is that 

all right with you? 

Mr. GOSS. That sounds just great. 

Chairman JOHNSON. We all know Social Security provides important retirement and disability benefits that millions of Americans rely on. Yet, as we will hear again today, Congress needs to 

act so we can be sure that those benefits will be there for our children and our grandchildren, just like they are for seniors and individuals with disabilities today. 

Today, we will hear from the Social Security Chief Actuary about 

the findings in this year’s report. And while the report had some 

good news for the Disability Insurance program, make no mistake, 

Social Security faces serious challenges. The Trustees Report tells 

us the Social Security trust funds will be exhausted in 2034. At 

that point, individuals face across the board benefits cuts if Congress doesn’t act. 

Once the trust funds are exhausted, Social Security will only be 

able to pay 77 percent of promised benefits. That is wrong and simply unacceptable. The Trustees also tell us today it would take $12.5 trillion to 

make Social Security solvent over the next 75 years. That is not 

a little number. And the number gets bigger every year. In 2011, 

when I first held a hearing on a Trustees Report, it was $6.5 trillion. 

Fixing Social Security will require tough choices, choices that 

will affect the lives of millions of Americans, and I can tell you, 

they aren’t easy choices. And while we all may have differing views 

on how to solve it, not talking about the problem won’t make it go 

away. And if we wait until the trust funds are exhausted, the 

choices become more difficult and some of the options won’t be on 

the table any longer. 

Last December, I introduced my plan to fix Social Security. My 

good friend from Connecticut, Mr. Larson, also has a plan. And I 

appreciate my friend’s recognition that Social Security is in trouble 

and we need to fix it. While our plans are very different, they both 

fix Social Security permanently. I believe any plan to fix Social Security should do so permanently. Social Security is too important 

not to give workers and their families that certainty. It is not 

4 

enough to just push out the trust funds’ exhaustion date by a few 

years. When Congress acts, we need to be sure we finally got Social 

Security on the right track for good. 

In addition, to permanently fix the program, I believe Social Security solvency should meet the following principles: First, it 

should modernize Social Security to reflect today’s workers and 

their families. Second, it should reward hard work. Third, it should 

protect the most vulnerable. And, lastly, it should improve retirement security. Millions of Americans rely on this important program now, and millions more pay in with the expectation of future 

benefits. 

Congress has a responsibility to the American people to make 

sure that our children and grandchildren can count on Social Security, just like seniors and individuals with disabilities do today. We 

need to take this responsibility seriously, and that is why this Subcommittee will continue to talk about Social Security’s solvency and 

the cost of delay. Americans want, need and deserve nothing less. 

I now recognize Mr. Larson for his opening statement. 

Mr. LARSON. Well, thank you, Mr. Chairman. And we are in 

concurrence. We could give one another’s speeches, I think, at this 

particular point. As we like to say often, Congress should be about 

the vitality of ideas. And I commend the Chairman because he has 

been a stalwart in making sure that we address this issue. And at 

this point, his last term in Congress, we are especially heartened 

by the fact of his determination to put forward legislation that will 

meet the test of the 75-year requirement. 

While the news that we receive today is better than some might 

have expected, especially on the disability side, it does remain, as 

the Chairman has pointed out, our desire, and I believe that to be 

true of everybody on the Committee, to reach a conclusion where 

we make this solvent into the future for all generations. And to the 

Chairman’s point, we do have plans, competing, but with the general concept in mind that we want to make Social Security solvent 

into the next century. 

We believe that we have to enhance Social Security along the 

way. We think it is unacceptable for many people, especially working women, that they retire into poverty. We think it unacceptable 

that our COLAs have been determined by a CPI that doesn’t actually reflect what the real costs the elderly incur are. We think it 

unacceptable that we haven’t really changed Social Security since 

1983. It is an insurance program. Have any of your insurance premiums gone up since 1983? Of course they have. And so, we think 

that it is vitally important to make sure, especially with the solvency, that we look at this and combine both the old-age and retirement and disability together, and then provide the actuarial assistance to make sure the program is solvent. We believe to do 

that, we have to increase the contribution to the fund. These are 

difficult choices, as Mr. Johnson has indicated, but if you phase 

that in over 25 years, we would, in essence, be doing what should 

have been done in 1983; indexing this in a way so that there were 

gradually, as it kept pace with the actuarial concerns of a population, the modest increases that would be necessary. This takes us 

well beyond the 75-year period by following these adjustments, and 

5 

also, making clear that we need to enhance the program on behalf 

of so many beneficiaries. 

We also believe that many seniors who find themselves in the 

workforce deserve a tax break, and by indexing this appropriately 

from what was done in 1983 to, as Mr. Johnson says, what needs 

to be done today to modernize it, we can accomplish that. We have 

a lot of talent on this Committee, and many individuals, as we listen to some of the concerns of Social Security, and my colleagues 

on the other side have been leaders in talking about the technological changes that would be needed that also could produce from 

antiquated systems that don’t provide the best up-to-date information that we could have. So I concur with the Chairman. I thank 

him. 

We are looking forward to having a hearing on this where we are 

able to put the vitality of ideas to the test with both competing programs, and what I hope will be a great solution for the American 

people. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Mr. Larson. I appreciate your 

comments. Mr. Schweikert, do you care to make a comment? 

Mr. SCHWEIKERT. I have a dozen questions. Why don’t we wait 

until after his testimony? 

Chairman JOHNSON. A dozen questions. 

Mr. SCHWEIKERT. Oh, yeah. I am going to go fast. 

Chairman JOHNSON. Well, we will let you have two. How is 

that? As is customary, any Member is welcome to submit a statement for the record. Before we move on to testimony today, I want 

to remind our witness to please limit your oral statement to 5 minutes. However, without objection, all the written testimony will be 

made part of the hearing. 

We have one witness today. Seated at the table is Stephen Goss, 

Chief Actuary, Social Security Administration. Mr. Goss, welcome 

to our hearing. Thank you for being here. Please, proceed. 

STATEMENT OF STEPHEN C. GOSS, 

CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION 

Mr. GOSS. Thank you very much, Chairman Johnson, Ranking 

Member Larson, Members of the Committee, for the opportunity to 

come and talk to you again about the Social Security Trustees Report and the status of these trust funds. As you all know, the Social Security Trustees Reports have been coming out from the 

Board of Trustees every single year, starting in 1941, updating you 

on what the status of the program is, and what our challenges are 

in the future to assure that the scheduled benefits will be able to 

be paid to all future generations on a timely basis, and in full. 

This year, we project a combined OASI and DI trust funds, as 

Chairman Johnson indicated, to deplete the reserves in 2034, at 

which point there would be continuing income coming in to pay 

thereafter for essentially the indefinite future, about 75 percent of 

scheduled benefits, not what is desired and we’re looking forward 

to fixing that. At that time, in 2034, if no changes were made, we 

would be in a position where we would have 25 percent lower benefits. 

6 

So the options, really, for changes in the future, are either to 

enact changes that will lower benefits by about a third, increase 

revenues to this program by about—I am sorry, lower benefits by 

25 percent, increase revenues by about one-third, or some combination of those two. 

The two most significant changes in this years’ report, already 

alluded to by the Chairman and Ranking Member, are, first of all, 

the DI solvency side. We are happy to report that on the DI solvency side, we have a 5-year extension of the period over which we 

are projecting benefits to be fully payable under the DI program. 

This follows on from the Bipartisan Budget Act of 2015, where we 

had the reallocation that moved us from 2016 out to 2022. Last 

year’s Treasury report gave us one more year, and this year’s report is taking us 5 more years out to 2028. The reasons for this 

seemingly dramatic extension of 5 years is that we have had continuing, ever since 2010, declining numbers of applications coming 

in for disability. This is not just for Social Security, but also for 

SSI. It is really quite remarkable. We are studying hard all the 

reasons for this. 

In addition, we have had a continuing lower disability incidence 

rate. A percentage of people who could be applying for and receiving disability, we are having fewer people actually start to receive. 

We have actually had declining numbers of beneficiaries under the 

DI program since 2013. The absolute number has actually been 

coming down. 

So what we are doing this year for our projections is, obviously, 

accepting the reality of what has happened lately, and projecting 

out from that on a somewhat more gradual basis, not having the 

very next year, some applications will come right back up, but have 

it take 2, 3, 4 years. What we have done, however, with the Trustees, is we still maintained the same ultimate disability incidence 

rates by the end of the 10-year period of the short-range projection 

period. That is obviously under review. We are going to have to 

monitor very closely what continues to happen. 

The overall solvency of the OASDI program, we still have the reserve depletion date for OASI and DI combined of 2034. For the 

OASI program all by itself, the retirement survivors, that is still 

2035, the same as last year. We actually have higher reserve levels 

for the OASDI program through about 2033. But the actual deficit 

for the 75-year period, as a whole, has risen from 2.66 to 2.83 percent of payroll. And .05 of that, about a third of that, is just from 

the change in the valuation period, bringing in one extra year at 

the end of the 75-year period. Some other things that have contributed to that are the more recent data, like somewhat lower birth 

rates, lower immigration flows. Offsetting that somewhat, though, 

is that we have had higher death rates, less improvement in death 

rates than even we had been projecting, and many of them projecting much more improvement. Ever since 2009, death rates have 

not been improving in this country, as I think all are familiar with 

at this point. 

We also had a little change that we might talk about more, accepting a slightly lower level worker productivity for the future. I 

really do want to comment again, because both the Chairman and 

Ranking Member mentioned this. The real factor, the reason we 

7 

are having this big increase over the next 20 years in the Social 

Security cost is not disability anymore, but it is in the retirement 

area. The baby boomers are all moving up into the retirement age, 

and not the working ages. And they are being replaced at working 

ages by the lower birth rate generations following, which is fundamentally changing the age distribution of our population going 

forward. 

Finally, I really want to say, once again, that it is really a joy 

and a pleasure working not only with you, but really, your excellent staffs. You all have amazing staffs and amazing staff work. I 

can’t tell you how lucky you are on that, but I am sure you realize 

it. And we really are looking forward to working with you and 

them to assure benefits will continue for the over 60 million beneficiaries we have now, the over 170 million workers contributing, 

and all future generations. 

Thank you very much. 

[The prepared statement of Mr. Goss follows:] 

8 


33480A.001

The 2017 Annual Report of the Board of Trustees of the 

Federal Old-Age and Survivors Insurance and Federal 

Disability Insurance Trust Funds 

Testimony by Stephen C. Goss, Chief Actuat·y, Social Security Administration 

House Committee on Ways and Means, Subcommittee on Social Security 

July 14, 2017 

Chairman Johnson, Ranking Member Larson, and members of the subcommittee, thank you very 

much for the opportunity to speak to you today about the 2017 Social Security Trustees Report. 

This report has been produced and submitted to the Congress every year starting in 1941, the 

year after monthly benefits were first paid from a Social Security trust fund. 

By law, the Trustees are required to report annually on the financial operations of the trust funds 

for the illllllediate past year, the projected operations of the trust funds over the next 5 years, and 

the actuarial status of the trust funds. 

2017 Report 

For the 2017 Trustees Report, we have two main changes from a year ago. First, based on 

continuing lower-than-expected disability application and incidence rates, the projected reserve 

depletion date for the DI Trust Fund is extended an additional 5 years, from 2023 in last year's 

report to 2028 in this report. Second, the long range (75-year) actuarial deficit is increased from 

2.66 percent to 2.83 percent of payroll. TI1e principal reasons for the increase in the deficit are 

the change in the valuation period, recent data for several demographic fuctors, and an 

assumption tor a slightly lower level of worker productivity for the future. 

During calendar year 2016, the Old-Age and Survivors Insurance (OASI) Trust Fund reserves 

increased by $21 billion, nearly $13 billion more than proj ected in last year's report. The 

Disability Insurance (Dl) Trust Fund reserves increased by $14 billion, about $6 billion more 

than projected in last year's report. At the beginning of2017, the combi.oed OASI and OJ Trust 

Fund reserves were close to $2.85 b·illion, about three times the annual cost of the program. 

Over the oext 5 years, the combined reserves will grow steadily, reaching $3.00 trillion at the 

beginning of2022. However, combined reserves will begin to decline in 2022. The decline is 

projected to be $18 billion in 2022, but increases thereafter as the baby-boom generations 

continue to move into retirement ages and are replaced at working ages by the lower-birth-rate 

generations bom after 1964. The OASI and DI Trust Funds, individually and combined, are 
9 


33480A.002

2 

projected to be fully solvent through the next 10 years, thanks, in part, to the enactment in 

November 2015 of the payroll tax rate reallocation included in Bipartisan Budget Act of20 15. 

At the time of enactment, we estimated that the date of tmst fund reserve depletion for 01 would 

be extended 6 years from 2016 to 2022. In the 20 16 Trustees Report, we projected that DI 

reserves would not deplete until 2023, largely due to the lower-than-expected recent level of 

benefit expenditures. For this year's report, we are proj ecting an additional 5-year extension of 

the DI reserve depletion date, to 2028. Applications for disability benefits have been declining 

steadily since 2010, and have continued to be below our prior projections. The total number of 

beneficiaries paid from the DI Trust Fund has now been falling since 2013. 

Actuarial status of the trust funds is assessed on the basis of the projected ability of the tmst 

funds to pay benefits scheduled in the law in nail and on time. Under the law, all income is 

invested in tmst nmd reserves on a daily basis, and benefit obligations and administrative costs 

are paid on the basis of redeeming bonds held by the trust funds as needed. The Jaw provides no 

ability for the trust funds to borrow or receive revenue from other than specified taxes and 

interest on the reserves. Thus, should reserves become depleted with continuing tax revenue less 

than needed to meet current obligations, benefits scheduled in the law would not be payable in 

full on a timely basis. 

Ta" R.ate 

Fortunately, in the entire 82-year history of the program, the Congress has always made timely 

adjustments in the law to avoid reserve depletion and any sudden reduction in benefits paid. The 
10 


33480A.003

real purpose of our reporting on the actuarial stat1.1s of the trust fi.mds is to illustrate to the 

Congress any expected shortfall in financing of scheduled benefits so that further adjustments to 

the Jaw can be made on a timely basis. 

3 

Under the intennediate assumptions used for the 2017 report, we project that the combined 

reserves will be depleted in 2034, the same year as in the last report, with continuing income 

under current law equal to 77 percent of program cost at the time of depletion. By the end of the 

75-year projection period, income under current Jaw is projected to equal 73 percent of the cost 

of the program, slightly Jess than the projected 74 percent payable in last year's report. The 

projected revenue for the OASDI program for 2091 is now projected to fall short of scheduled 

revenue by 4.48 percent of taxable payroll, somewhat more than the 4.39 percent shortfall 

projected for 2091 last year. 

In essence, this means that by 2034 we will need adjustments in the Jaw so that (I) the scheduled 

revenue for the OASDI program will be increased by about 33 percent, (2) scheduled benefits 

will be reduced by about 25 percent, or (3) some combination of these adjustments is enacted. 

Enacting changes well before reserve depletion, even if with delayed effective dates, will allow 

more options to be considered, more advance waming for those affected, and a more gradual 

phase-in of adjustments. Over the past 25 years, Trustees Reports have projected reserve 

depletion as early as 2029 and as late as 2042. 

OASDI Annual Cost a nd Non-Intet·est Income as Pet·cenl of Taxable Payt·o!J 

Cost: Scheduled but not 

fully payable benefits 

l ---------------

Payable benefits as percent Expenditures: Payable benefits= income 

of scheduled benefits: after trust fund depletion in 2034 

2016-33: 100% 

2034: 77% 

2091: 73% 
11 


33480A.004

4 

Considered alone, the separate DI Trust Fund will require some adjustment before 2034. Even 

with the changes in the BBA 20 I 5 and the financially favorable recent experience, D1 reserves 

are projected to become depleted in 2028, at which time continuing income would be equal to 93 

percent of scheduled cost. By the end of the 75-year period, scheduled income is projected to be 

sufficient to cover 82 percent of scheduled cost. 

DI Annual Cost and Non-lntel'est Income as Pel'cent of Taxable Payr·oll 

Cost: Scheduled and 

payable benefits 

-----

Cost: Scheduled but not 

fully payable benefits 

______ l __ ___ ____ ___ _ 

Expenditures: Payable benefits-= income 

after uust fund depletion in 2028 

The 5-year extension of the reserve depletion date for the DI Trust Fund in this year's report 

reflects: 

a) Another year, 2016, with disability applications and incidence rates falling well below 

our expectations. The number of applications for 2016, when the economy had not yet 

risen to the sustainable full employment level, was below the annual level at the peak of 

the last economic cycle (2007), and 

b) An extension by several years of the period over which disability incidence rates will rise 

to the ultimate assumed levels. 
12 


33480A.005

5 

The figure below shows the continued decline in Social Security disability applications received 

at the state Disability Determination Services through 2016, falling well short of expectations for 

several years now. 

Given the degree of decline in applications through 2016 in an economy that is still well short of 

full recovery even to the sustainable fi.a ll employment level, we are now projecting that 

applications will rise gradually to a level somewhat lower than in recent past reports. However, 

we and the Trustees believe it is too early to lower the ultimate level for disability incidence 

based on this recent experience. 
13 


33480A.006

The figure below shows the more gradual rise to the ultimate incidence rate assumed for this 

year's report. 

For the last several reports, we have assumed that the age-sex-adjusted disability incidence rate 

would rise quickly back to the expected ultimate rate of 5.4. Tit is rate represents the number of 

newly disabled workers per I ,000 insured workers exposed to the risk of becoming disabled. 

Because actual incidence rates have continued to fall even with the economy still well short of 

full recovery, we have extended the period over which incidence rise to the ultimate assumed 

leveL The temporary elevated levels of incidence in years through about 202 1 in recent reports 

rellects the expectation that the backlog of disability cases awaiting a detemtination from an 

administrative law judge will be eliminated in the next 3 to 4 years. 

6 

Expressed as a percent of the total Gross Domestic Product (GOP) of the United States, the 

scheduled cost of the OASDI program is projected to rise from 4.9 percent in 2017 to about 6 

percent for 2035 and later. Projected scheduled revenue is lower over this period, between 4.5 

and 4 .8 percent of GOP. The fact that scheduled annual non-interest income, largely the 12.4 

percent payroll taxes paid by employees and employers, is no longer sufficient to cover annual 

program cost is primarily due to the changing age distribution of the adult population. The fact 

that projected OASDI cost as a percent of GOP is basically stable after 2035 speaks to the 

sustainability of the program's benefit and revenue structure. The changing age distribution will 

simply require adjustments in scheduled income and/or cost. 
14 


33480A.007

7 

SUSTAJNABILITY: Cost as Percent of GDP 

Historical Estimated 

Cost 

Non-interest Income 

The cost as percent of GOP closely follows the ratio of beneficiaries to covered workers, because 

the average benefit under the program is designed to rise at about the same rate as average 

earnings. 

Projected Numbe•· of OASDI Beneficia•·ies per 100 Cove•·ed Workers 
15 


33480A.008

8 

The ratio of beneficiaries to covered workers in tum follows closely the "aged dependency ratio" 

(population age 65 and over as a percent of the working age population age 20 through 64). The 

figure below illustrates that the large increase in this ratio between 2010 and 2035 is due 

primarily to the drop in birth rates from about 3 children per woman historically (3.3 during the 

baby-boom years) to about 2 children per woman in recent years. 

Changes in longevity through declines in death rates play a more gradual but steady role in the 

trend of the aged-dependency ratio. Changes in death rates over age 65 are important for the 

actuarial status of the OASDl program. Fortunately, mortality projections used in the Trustees 

Reports have provided a sound basis for evaluating the acnaarial status of the program in the past. 

While some have suggested assuming dramatically faster mortality improvement, the track 

record for the Trustees Reports, plus the very substantial deceleration in mortality improvement 

since 2009 suggest that projections in the 2017 report represent a sound basis for evaluating 

prospects for the future. 

Sum man' Measures of Actuarial Status 

The T mstees Report uses several summary measures and tests to indicate the acnaarial status of 

the tmst funds from different perspectives. The actuarial deficit for the OASDI program as a 

whole increased from a 75-year shortfall of2.66 percent of taxable payroll in last year's report to 

2.83 percent of payroll in this report. The actuarial deficit is the excess of the cost for full 

scheduled benefits over the next 75 years, including the cost of having a reserve at the end of the 
16 


33480A.009

9 

period equal to I 00 percent of ammal cost, over the scheduled income for the program over the 

next 75 years, including the starting trust fund reserve level, all expressed as a percent of payroll. 

Another summary measure is the unfunded obligation of the program. This is the difference 

between projected program cost in the next 75 years over the projected revenue (plus starting 

reserves). For the 2017 report, the unfunded obligation increased in present value dollars and as a 

percent of GDP over the 75-year period. 

Unfunded Obligation th1·ough 2091 

Estimate fo1· 2016 Trustees Repo1·t $11.4 tJ·iiJion PV 0.89% of GDP 

Change valua tion date only $11.9 trillion PV 0.91% of GDP 

Estimate fot· 2017 Trustees Report $12.5 tl"illion PV 0.95% of GDP 

Changes in Assumptions and Methods 

On balance, changes in legislation, assumptions, recent experience, and methods had a small 

negative effect on the actuarial status of the OASDI program. 1l1e table below highlights the 

main factors in the change in the actuarial balance for this year. 

Principal Reasons fo1· Change in 2017 OASDI Trustees Report 

Actuat·ial Balance- Net change of -O.J 7 percent of payroll 

Valuation pet·iod -0.05 pet·cent 

Legisla tion/Regulation (11011 -implemelllatioll of2014 DAPrVDACA) +0.00 pe1·cent 

Demogt·aphics (lower rece111 fertility ami immigratiou; ltiglter receut mortalii)J) -0.03 pe1·cent 

Economics (i11cludi11g lower IL•I'el of labor produclivil)' a11d poleutial GDP) -0.08 pet·cent 

DisalJHity (recent experience and assumptions) -t-0.03 JH" ·cenl 

Othet· progt·am data and methods improvements -0.04 pet·cent 

The change in the valuation period, effectively adding a year to the end of last year's 75-year 

period, increases the actuarial deficit because of the relatively large annual deficits at the end of 

the period. 
17 


33480A.010

10 

For this report, we assumed that the 2014 executive actions establishing the Deferred Action for 

Parents of Americans (DAPA) program and expanding the Deferred Action for Childhood 

Arrivals (DACA) program would not be implemented. Recent directives from the Department of 

Homeland Security have con.fim1ed this assumption. The net effect on tbe combined OASDI 

Trust Funds is negligible. 

Lower recent experience lor both birth rates and net immigration contribute toward au increase 

in the actuarial deficit. Continued higher-than-expected death rates and lower-than-expected 

disability application and incidence rates have significant but offsetting effects. Also, during the 

recent recession and partial recovery, productivity (economic output per hour worked) has not 

increased as fast as previously expected. For the 2017 report, we have accepted that a portion of 

this loss in labor productivity will be permanent, thus increasing the actuarial deficit. Finally, 

several changes were made in projection methods, the most significant being better recognition 

of earnings late in career for future generations that are assumed to start receipt of retirement 

benefits at older ages. 

The Tn1stees apply a short-range test of fmaucial adequacy that requires that reserves remain at 

or grow to at least 100 percent of annual cost over the next 10 years. The OASI Trust Fund as 

well as the combined OASI and 01 Trust Funds satisfy this test. The DI Trost Fund once again 

does not. 

Section 709 of the Social Security Act also requires that the Trustees report to Congress when a 

Trust Fund is projected to have reserves below 20 percent of annual cost in the future. In order to 

give Congress ample time to consider necessary adjustments, the Trustees make such reports 

when the reserve ratio is projecte-d to be below 20 percent within the next I 0 years. Again this 

year, the Trustees have submitted this notice to the Congress tor the Dl Trust Fund. The DI Trost 

Fund reserve ratio was 31 percent at the beginning of this year and will rise to 65 percent at the 

begitming of2019, due in part to the tax rate reallocation enacted last year. The ratio will then 

decline and will faU below 20 percent by the beginuing of 2026, and witbout Congressional 

action, reserves wiU become depleted in 2028. 

The Trustees also report on tbe long-range test for close actuarial balance. This test requires that 

the program satisfy the short-range test of financial adequacy and, in addition, maintain a 

positive reserve throughout the remainder of the 75-year projection period, indicating the ability 

to pay all scheduled benefits in full on a tinlely basis. At tltis time, neither the OASI nor DI Trost 

Funds individually or combined meet this long-range test. While the fmancial and benefit 

stmcture of the OASDI program is sound, adjustments are needed to accommodate the changing 

age distribution of the population over the next 20 years that is largely the result of persistent 

lower birth rates after 1964. 
18 


33480A.011

II 

Actua•·ial Opinion 

The Social Security Act requires a statement of actuarial opinion from the Chief Actuary of the 

Social Security Administration regarding the reasonableness of assumptions and methods used in 

tbe report. I am happy to indicate that tbe actuarial opinion for tbe OASDI Trustees Report bas 

never included a qualification of the assumptions and methods used to project the actual cost and 

operations of the trust funds under current law. However, starting with the 20 14 report, the 

actuarial opinion has included a caveat regarding a reference in the OASDJ report to an appendix 

on federal budget accounting i.n the Medicare report. This appendix, first introduced in 2004, 

describes tbe implications of proj ected OASDI and Medicare Tntst Fund operations under the 

customary budget scoring convention. This caveat warns the reader that discussion of the trust 

funds in relation to the overall federal budget and in1plications for federal debt held by the public 

are distorted and misleading because of use of this budget scoring convention. This convention 

presumes that OASOI obligations scheduled in the law that cannot be paid in full and on time 

after Trust Fund reserve depletion, will nonetheless be paid at the expense of the General Fund 

of the Treasury. The General Fund is presumed to borrow from the public as needed to pay full 

scheduled benefits after reserve depletion. The problems with this convention are: (1) the Jaw 

does not pennit such general fund transfers, either before or after trust fund reserve depletion; (2) 

there has never been a precedent for a change in the law providing such transfers; and (3) results 

presented in the budget scoring context do not provide clear disclosure that they are hypothetical 

projections presuming a change in law that would allow for the indicated general revenue 

transfers to the trust fi.mds after reserve depletion. 

Please note that the 2017 and all prior years' Trustees Reports are available at 

https://www.ssa.gov/oact/pubs.html, along with a wide variety of additional actuarial analyses 

related to the reports and to changes policymakers have considered for making adjustments to the 

program. 

Conclusion 

Based on the experience of the past year and the intennediate assumptions of the 2017 Trustees 

Report, tbere are two mai11 points I would like to make. First, the date of DI Tmst Fund reserve 

depletion bas been extended 5 years to 2028. Second, the actuaria l status of the combi.ned OASI 

and 0 1 Ttust Funds i$ slightly wotseued compated to last year's tepott, witb a slightly lat·get 

actuarial deficit over the long-range period. The long-known and understood shift in the age 

distribution of the United States population will continue to increase the aged dependency ratio, 

and in tum increase the cost of the OASDI program as a percentage of taxable payroll and GOP. 

Once this shift, reflecting the drop in the birth rate after 1964, is complete around 2035, the cost 

of the program will be relatively stable at around 6 percent ofGDP. We look forward to working 
19 

f 


33480A.012

12 

with this Committee and others in developing the adjustments to the law that will be needed to 

keep the program in good financial order providing retirement, disability, and survivor benefits 

for nature generations. 

Again, thank you for the opportunity to talk about the 20 17 Trustees Report. I will be happy to 

answer any questions you may have. 
20 

Chairman JOHNSON. Thank you, sir. I appreciate your testimony. And we will now turn to questions. As is customary, for each 

round of questions, I will limit my time to 5 minutes, and ask my 

colleagues to also limit their questioning time to 5 minutes as well. 

Mr. Goss, with the Disability Insurance trust fund solvency date 

shifting 5 years later, some folks may think we don’t need to talk 

about Social Security right now, and can just wait. I want to make 

sure we are all on the same page. Isn’t it true that the longer we 

wait the harder it gets? 

Mr. GOSS. Chairman Johnson, you are entirely correct. The one 

thing we know, and I think you alluded to at least some of this, 

is that a perfect example of what the 1983 amendments, the last 

major change we had, where one of the big factors in that was increasing the normal retirement age. That was implemented with a 

17-year delay. So if we enact something relatively soon, even if it 

is not implemented into the future, that gives the people who will 

be affected lots of advanced warning, which is a really good thing. 

It also allows many more options to be considered than if we wait 

until the last minute. And it allows us to phase in changes more 

quickly. So it is all good, when acting sooner, if there is some delay 

to implementation. 

Chairman JOHNSON. Thank you. Mr. Goss, one of the big headlines from yesterday’s report is the Disability Insurance trust 

fund’s solvency date doubling the program’s years of solvency, 

which seems like a big change. How confident are you that we 

aren’t just going to lose this additional solvency a few years from 

now? 

Mr. GOSS. Well, there is no question that there is a risk of that, 

but our estimates on this point, as with all our estimates, we would 

say we are about equally likely to have the solvency date extend 

further as to come back. The tricky part of the Disability Insurance 

trust fund is that we have a relatively low level of trust fund reserve, and also, our revenue income, even after we get past the tax 

rate reallocation, compared to our cost of the program, are pretty 

close together. So any significant fluctuation of either one of those 

could cause us to deplete sooner or later. But at this point, based 

on the data we have, the 5-year extension looks pretty solid. And, 

if anything, if applications and incidence rates stay anywhere near 

as low as they have been lately, we might very well have a greater 

extension and have need to change our ultimate incidence rates 

going into the future. But time will tell. We just wish we had the 

crystal ball to be able to tell you with any certainty. 

Chairman JOHNSON. Well, thank you. We often hear that if we 

would just raise Social Security taxes, it will solve all of Social Security’s problems. But it is important for folks to understand the 

facts. Social Security earnings up to a certain amount, called the 

taxable maximum, are subject to payroll taxes. What is the taxable 

maximum this year? 

Mr. GOSS. For this year, 2017, the tax maximum is $127,200. So 

anybody making more than that—— 

Chairman JOHNSON. If the taxable maximum were raised to 

cover 90 percent of earnings, what would the taxable maximum be 

this year? 

21 

Mr. GOSS. To cover 90 percent, it would be about double that, right around $250,000, to just a little bit less. 

Chairman JOHNSON. Some have suggested we should get rid of 

the taxable maximum, and instead, subject all earnings to payroll 

tax. Mr. Goss, if all earnings were subject to payroll tax, would Social Security be solvent? 

Mr. GOSS. It would be solvent longer. It would not be solvent 

sort of into the indefinite future. 

Chairman JOHNSON. Okay. So the answer is no. At what point 

would costs once again exceed income? 

Mr. GOSS. If we were to enact a change with no—let’s see—if 

we were to enact a change with no benefit credit for the extra, we 

would actually solve about 80 percent of the long term, and we 

would be good to well into the 2060s for the solvency. 

Chairman JOHNSON. Into the 20 what? 

Mr. GOSS. Into the 2060s. Let’s see. 

Chairman JOHNSON. Really? 

Mr. GOSS. No, I am sorry. If we gave no benefit credit at all and 

taxed all income, our solvency date would move from 2034 to 2083. 

Now, if we give benefit credit tax, if we were to tax all earnings 

and then include in our computation of benefits the extra earnings 

that were going to be taxed, then we would extend the solvency 

date out to 2067 for the program as a whole. 

Chairman JOHNSON. Out to 20 what? 

Mr. GOSS. Out to 2067. 

Chairman JOHNSON. Yeah. I was told 2026. 

Mr. GOSS. Pardon? 

Chairman JOHNSON. I was told 2026. 

Mr. GOSS. Oh. Well, 2026 would be the—would be the date at 

which the annual income would then start to fall below the annual 

outgo, but we would still have significant reserves at that point 

that would carry us for solvency purposes out to 2067, so you are 

exactly right. So on a cash-flow basis, the point at which income 

would again fall below our cost of paying all the benefits, 

which—— 

Chairman JOHNSON. So the income would reduce to where it 

wouldn’t cover what we are doing? 

Mr. GOSS. Right. The current income would not be sufficient. We 

would have to draw on the reserves. 

Chairman JOHNSON. So even if we get completely rid of the 

taxable maximum, the program will be running cash flow deficits 

within the next decade. Is that true? 

Mr. GOSS. That is correct. 

Chairman JOHNSON. That sure doesn’t get us much. As I said 

before, we clearly can’t tax our way to solvency. Mr. Larson, do you 

care to question? 

Mr. LARSON. Oh, absolutely. Thank you, Mr. Chairman. And 

thank you, Mr. Goss. Usually, when I go out to do town halls, I 

carry with me two things: The actuary report on the bill that we 

have submitted, and a Starbucks. And I do so to make a point. The 

first point I make to people, and I think you can confer on this. The 

Social Security is an insurance plan. It is not an entitlement. It is 

an insurance plan. It is an insurance plan that you are assessed 

through FICA. FICA is the Federal Insurance Contribution Act. 

22 

Whose contribution? Yours. The last time insurance premiums 

went up in Social Security was in 1983. Is that correct? 

Mr. GOSS. That is correct. 

Mr. LARSON. So has anyone in this audience or anywhere in the 

country’s insurance not gone up on actuarial assumption since 

1983? And the answer, of course, is, of course they have gone up, 

because they keep pace with the assumptions and changes that are 

ongoing, except for Social Security. So had, I believe, our predecessors indexed this system appropriately, we wouldn’t be having 

this discussion, it would have been taking care of itself incrementally. 

So, I ask you, as I go out to these town halls, and you have done 

the analysis on our bill, can you confirm that our bill doesn’t have 

any cuts in terms of people’s benefits? 

Mr. GOSS. That is correct. 

Mr. LARSON. In fact, we increase people’s benefits because they 

also have not kept pace. In fact, we find more people retiring into 

poverty, unfortunately, most of them women, because of their time 

in the workforce, and they—or because for every dollar their marital counterparts receive, they receive $0.77. Is that accurate? 

Mr. GOSS. No question, but that all wage rates are lower for 

women. 

Mr. LARSON. Also, we wanted to make sure with our program 

that we would offer middle income tax relief for seniors. And I 

know this will interest my colleagues. How is it that you have tax 

relief for seniors? Well, because, again, we haven’t made a change 

since 1983. In 1983, we said, if you are single and making more 

than $25,000, your Social Security is taxed. And if you are a married couple, then it is $32,000. So we changed that to $50,000 and 

$100,000, thereby giving 11 million seniors a tax break. So we 

think that these are all important things, and the differences—and 

I don’t think they are big differences, actually. I understand clearly 

the desire on both sides to make sure that the Nation’s insurance 

program is solvent beyond 75 years, which, again, by your report, 

the bill that we have submitted does. Mr. Johnson’s bill does that, 

as well. It takes—it makes it solvent beyond the 75-year period. 

That is the position we need. The differences are that we believe 

that with a modest tax, and we believe that you should increase 

the fund by 1 percent. You said it very well at the outset when you 

said, well, look, here is your alternatives. You can make cuts by 

about a third, I believe you said. 

Mr. GOSS. By about a quarter. 

Mr. LARSON. By about a quarter. 

Mr. GOSS. Revenue by about a third. 

Mr. LARSON. Revenue by a third. 

Mr. GOSS. Or some of each. 

Mr. LARSON. Or some of each. So we believe that especially 

with so many people finding themselves in the position where Social Security is their only retirement—the only retirement they 

have. Now, we can lecture them, and say, you should have been 

wiser. But tell that to people who saw in 2008 their 401(k)s become 

101(k)s through no fault of their own. Yet, the one program that 

isn’t going to fail them, that is there, and never missed a payment, 

is Social Security. 

23 

So I believe, with the intelligence we have on this Committee, 

that we have an opportunity to solve this. I thank the Chairman, 

because Rich Neal pointed out to me the other day, we have not— 

and Mr. Johnson says this all the time—really taken this on as a 

Committee in more than 25 years. We have postponed any kind of 

difficult decision as it relates to this. And now, as you pointed out, 

the baby boomers are upon us. I think we have a moral obligation 

to take action, whatever that outcome is, whatever this Committee 

thinks the best alternative is, we ought to have that competition, 

and we ought to have a vote. And I thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, sir. Mr. Schweikert, you are 

recognized. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. And it is actually—don’t make fun of me—it was this hearing that was one of my 

primary reasons I wanted to be on Ways and Means. And I have 

a dozen different things that are bouncing in my head, and then 

you always get the things from your really smart staff that say, 

don’t ask that. 

But on your team, do you actually have a demographer, someone 

that basically does population statistics? 

Mr. GOSS. We do indeed. We have 57 folks in our office; we have 

about six or seven economists; in addition to actuaries; and we 

have four or five demographers full-time, all the time, working on 

demography. 

Mr. SCHWEIKERT. Would you ever allow me to geek out with 

one of them? There are a couple things in the numbers that have 

always bothered me. And part of this, actually, is where everyone 

on the Committee has been, trying to understand with the crash 

and the birth rates—and you saw what the report showed from this 

first quarter of the year, we have hit an all-time low, and a cascade 

effect of those birth rates for future generations. And I am curious 

because in sometimes reading over your documents, I am not sure 

I am seeing the stressing of today’s birth rate—if it were to hold 

in sort of the long-term numbers. And I just want to see that is 

being properly modeled. 

Mr. GOSS. We would love to—we have never been called geeks 

before. I don’t think—we would love to geek out. 

Mr. SCHWEIKERT. Oh, I mean that with love. 

Mr. GOSS. We do have a sensitivity section in the Trustees Report that actually explores, what if the total fertility rate stayed 

low forever? 

Mr. SCHWEIKERT. Will you ever allow someone to have your 

sensitivity analysis on—I don’t know what program you write in, 

but to make it available for one of us who would just like to play 

with it online and move some numbers up and down, because we 

have had discussions here of—as we are doing tax reform and other 

things, would any of those have any influence on population 

growth, or even immigration reform, and the ability to also see the 

cascade benefits or stresses from that? 

Mr. GOSS. Oh, absolutely. The models are pretty complicated. 

We would be really happy to sit down with you, your staff, anybody, and work through the implications. We have scored comprehensive immigration reform plans. There was one in the Senate 

a couple years ago. 

24 

Mr. SCHWEIKERT. But that was in the past 10 years when you 

did that scoring, wasn’t it? 

Mr. GOSS. It has been awhile. It was 2011, I think, maybe. But 

we have all these cascading effects built in. 

Mr. SCHWEIKERT. I actually have that in one of my binders. 

Now, can I ask something that is a little uncomfortable. On the DI 

numbers, and please forgive me, because I was doing this partially 

with your information, and partially on my own, the mortality statistics on some of the male population who were enrolled in DI, 

how much of the extension and the longevity is because we have 

so many of our brothers, particularly, killing themselves? 

Mr. GOSS. That is a really good question. We do have built in 

to our disability projections, mortality is one of the ways in which 

people cease receiving benefits, of course. 

Mr. SCHWEIKERT. But isn’t that the point where you saw some 

real noise between last year and this year? 

Mr. GOSS. We saw some noise. It is relatively modest. We have 

been seeing, ever since 2009, small increments of death rates being 

higher than we have been projecting, and we have been modifying 

for that. Those have had very small effects. For the program as a 

whole, I think it was on the order of .03 or .04 percent of payroll. 

Mr. SCHWEIKERT. So that is about half of what I thought. 

Mr. GOSS. So for DI it would be much less than that. 

Mr. SCHWEIKERT. Good. It was just one of those—you see some 

of the statistics of the population of the current mortality rates, 

and then sometimes you will come across another number set that 

says how many of those were actually enrolled in DI programs. 

And we have been struggling, saying,—is that in the noise? Okay. 

And I am trying to watch my time. On big Social Security, 176 million workers in our society, 60 million receiving benefits today. So 

our ratio now is 2.9 workers? 

Mr. GOSS. Roughly, 172. 

Mr. SCHWEIKERT. Yeah, but 2.9 workers for every beneficiary. 

But, also, even if I take your current number on number of years 

left in the trust fund, so if I am 56, I should expect if I take my 

retirement at, what, 72, I am getting a 25 percent discount unless 

we do our job and change the numbers? 

Mr. GOSS. True. But we have total confidence in changes, because we never hit that point ever in the past. 

Mr. SCHWEIKERT. But the hard math as of your report today— 

is a 56-year-old or younger—— 

Mr. GOSS. Uh-huh. 

Mr. SCHWEIKERT [continuing]. When they go to retirement and 

pull their max benefits, they would be receiving a 25 percent reduction in that benefit? 

Mr. GOSS. Yes. 

Mr. SCHWEIKERT. So just to sort of put it in perspective—we 

have a long on-ramp and we need to start getting on that freeway 

now. 

Mr. GOSS. Exactly. 

Mr. SCHWEIKERT. And the beauty of this is whether you would 

be on the right or the left functionings math, with a number of levers. This is something we can all do together. Just one other idioVerDate Sep 11 2014 07:44 Feb 22, 2019 Jkt 033480 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33480.XXX 33480
25 

syncrasy, could you tell me the formula, just the—of the STIF that 

is paid for the special treasury bills back to the trust funds? 

Mr. GOSS. Ah, yes. So every penny that comes into the system 

is required to be invested immediately into interest-bearing securities, backed by the full faith and credit of the U.S. Government. 

There are a couple of options, we could actually buy marketable securities. Lately, we have been getting special issues to the trust 

fund. Any special issue to the trust fund that is provided in a given 

month, the coupon rate on that is precisely what Treasury measures as the average effective market yield on all outstanding marketable treasury securities as of the prior month, with the remaining duration or call or maturity of 4 years or more. 

Mr. SCHWEIKERT. Four years or more? 

Mr. GOSS. Four years or more, so it is a medium- to long-term 

yield rate. The actual effective market yield is—well, right now—— 

Mr. SCHWEIKERT. Because a year ago—— 

Chairman JOHNSON. The gentleman’s time is expired. Mr. 

Buchanan, you are recognized. 

Mr. SCHWEIKERT. Do you know what your number is right 

now? 

Mr. GOSS. The number—I believe it is in—well, for the new 

issues, I believe it is in the 2s. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. Sorry for going 

over. 

Chairman JOHNSON. Mr. Buchanan, you are recognized. 

Mr. BUCHANAN. Thank you, Mr. Chairman. I appreciate you 

coming back. I have been on the Committee for awhile, so we always kind of like your updates. I am from Sarasota, Bradenton, 

Florida. We represent, probably, I think, the top two or three most 

seniors of any district in the country. And, of course, Florida in 

general. I am concerned about all of the seniors, but I also am concerned about our children and grandchildren. I have four grandchildren under 3, so I am very concerned. I am glad we are looking 

out 75 years. But let me—and I do want to—my colleague had 

mentioned, there is a lot of truth, and I see it every day—I did a 

town hall the other day. A third of Americans, when they get 65, 

I have heard, you know, don’t have anything but Social Security 

and Medicare. And another third have something, but not enough. 

And then another third got lucky or whatever. So that is why these 

programs—and I agree—are so critical that we do the right thing. 

I want to ask, because this is maybe, you know, a more sensitive 

issue for some people, but the reality—and these are things—I do 

a lot of town halls and these are things that I get. The trust fund, 

in the 1960s, they took all the money out of it, so there is an IOU 

from the Federal Government. Is that correct? 

Mr. GOSS. I believe for the entirety of the existence of the program, it has been required that we invest. 

Mr. BUCHANAN. Let me ask it a different way. How much 

money is there ideally, in theory, in the trust fund? 

Mr. GOSS. It depends on the way in which you formulate the 

loss the way in which it should be funded. 

Mr. BUCHANAN. My understanding, there is nothing in the 

trust fund other than an IOU from the Federal Government because they used those funds. It is my general understanding that 

26 

in the 1960s, that is kind of what I hear. My concern is, and I am 

sure you don’t take a look at that, when you look at the viability 

of Social Security to 2032 or 2034, you are taking into account the 

ability of the Government to be able to do its part and pay back 

the trust fund. Is that correct? 

Mr. GOSS. Absolutely. 

Mr. BUCHANAN. So when you are running the last 10 years, there is $10 trillion worth of debt in deficits. I have been pushing 

since I have been here, a constitutional balanced budget amendment, like 49 out of 50 governors have, that simply says you don’t 

spend more than you take in. But if you look 10 years ago, when 

I first got here, it was almost $9 trillion in debt. Today we are $20 

trillion in debt. So when you look at the viability of Social Security, 

you are counting on the ability of the Federal Government to meet 

its obligations. Is that correct? 

Mr. GOSS. That is correct. 

Mr. BUCHANAN. Okay. I just want to make sure that is on the 

record. Because I think it is something we have to deal with, especially when you look at—and there is plenty of blame to go around. 

This isn’t a Democrat or Republican issue, but I think it should be 

something that gets looked at. As a business person and the guy 

that was on bank boards, the ability to pay is something we look 

at seriously. 

Let me get down to one basic—a couple of basic issues. On 

COLA, I get asked by a lot of the seniors, I guess we received a 

little bit of an increase, .3 of 1 percent, the year before, nothing. 

And then there were some increases over the years. The argument 

I hear is, look, our costs in the last couple of years have gone up. 

We are not seeing anything extra in COLA. How are you guys figuring this COLA? So maybe you can comment. 

So last year was little or nothing, and the year before was nothing in terms of COLA. Where are we at today, or how can you explain what has taken place in the last couple of years? 

Mr. GOSS. Well, the latest projection, and very uncertain, of 

course, is for the next COLA, December of this year, of 2.2 percent. 

We will see. We determine the COLA based straight up on the 

basis of the material that comes from the Bureau of Labor Statistics, they do the survey of urban wage earners and clerical workers, 

a big survey across the country, of how much the price of the market basket of things they buy changes over time. And when the 

price of things they buy goes down, as it did two COLAs ago, we 

ended up not having any adjustment. Last year we had a small adjustment because the price came back to somewhat higher than it 

had been 2 years prior. 

Mr. BUCHANAN. What are you projecting this year? 

Mr. GOSS. We are projecting this year 2.2 percent. 

Mr. BUCHANAN. So is that fair, if seniors ask me, the projection is 2.2, is there a fairly good chance that is going to be somewhat a reality? 

Mr. GOSS. Probably somewhere between 11⁄2 and 21⁄2 would be 

a good guess, because there is a lot of uncertainty. And the thing 

that has really driven the volatility of prices in this market basket 

in recent years is the price of energy, in particular, petroleum products. And we continue to see lots of fluctuations of that every time 

27 

we go to the gas pump. So that has really been kind of the issue. 

But we are expecting on the order of a couple of percent for this 

next upcoming COLA. 

Mr. BUCHANAN. Thank you, Mr. Chairman. I yield back. 

Chairman JOHNSON. Thank you. Mr. Pascrell, you are recognized. 

Mr. PASCRELL. Thank you, Mr. Chairman. Thanks for putting 

this together and being one of the pioneers to say, let’s prepare for 

the future. 

Chairman JOHNSON. Thank you. 

Mr. PASCRELL. I think that is important. I have traveled with 

Brother Larson in many communities to talk about the legislation 

that my friend from Connecticut has talked about. But I am 

alarmed, Mr. Chairman, I am alarmed at the fact that the budget 

that was presented this year, The New Foundation for American 

Greatness, that was the title of the book which contained the budget, had a $64 billion cut in disability, Social Security Disability. So 

I know that you don’t directly deal with that, but that was alarming to me, in view of us trying to package something. When they 

say we have 16, 17 years to do this, but I don’t know if that is accurate or not. But about the COLA, that we can talk about. And 

what we need to understand, in dealing with Social Security issues, 

is that COLA is very important for seniors who live on fixed income. 

Now, that COLA should represent, to me, the actual expenses 

that seniors have to put up with day in and day out. Instead, you 

know, there are so many exceptions to the rule. And it is so antiquated, the formula that we use. We never capture what that 

COLA is because we are afraid to deal with the reality of, well, 

how do we address that in terms of cutting checks for people every 

month? Now, they paid into it; I paid into it; you have paid into 

it, and we want a fair return at the end. The legislation that the 

gentleman from Connecticut has talked about reflects it. The legislation is right on concerning how we will adjust that COLA to be 

more realistic about what seniors get in that check that was cut, 

wherever it was cut. And will you agree with me? 

Mr. GOSS. I believe Mr. Larson’s bill would change to the CPIE 

for experimental—— 

Mr. PASCRELL. Right. 

Mr. GOSS [continuing]. Some people say. It is based on 62-andover population’s market basket approach. 

Mr. PASCRELL. Let me ask you this, Mr. Goss. First of all, is 

Social Security bankrupt? 

Mr. GOSS. By any normal meaning of the word, I think we have 

to say no. As Chairman Johnson and others have said, even if we 

reach the point of reserve depletion, we still will be able to pay initially 77, more or less, on the order of—— 

Mr. PASCRELL. And it appears from those same numbers that 

we are not on the verge of bankruptcy. No, we are not bankrupt 

today, but we are going to be bankrupt tomorrow. Now, we can’t 

say that right now. Has Congress needed to shore up Social Security, the trust fund in the past? 

Mr. GOSS. Numerous times, and it has always stepped up. 

28 

Mr. PASCRELL. Have the actions that the Congress took in the 

past to shore up the trust fund, we hear a lot about that, resulted 

in any substantial benefit cuts? 

Mr. GOSS. It has at times. The principal benefit reduction was 

actually back in the 1977 amendments when there was actually a 

need for a major change in the benefit formula, but there were in 

the 1983 amendments, there was a mix between additional revenue 

and—— 

Mr. PASCRELL. Right. Has Social Security ever failed to pay 

anyone’s benefits? 

Mr. GOSS. Social Security has never reached the point of reserve 

depletion, and failed to pay the scheduled benefits on a timely 

basis. 

Mr. PASCRELL. What I think your answers are, and I will be 

very quick, Mr. Chairman. It says, to me, that Congress will need 

to take action to extend the trust fund solvency, but we do not need 

to cut benefits or substantially restructure the program to do this. 

Would you agree with that? 

Mr. GOSS. It is certainly possible to extend the solvency without 

benefit reductions. 

Mr. PASCRELL. Mr. Chairman, thank you, and good luck on 

your endeavor. 

Chairman JOHNSON. Thank you, sir. Mr. Rice, you are recognized. 

Mr. RICE. Thank you, Mr. Chairman. They called for a vote, so 

I am going to be quick. There are a whole lot of major issues that 

are facing this country that have been over our heads for a long 

time, and I believe are holding our economy back: tax reform, 

healthcare, infrastructure, but none more important to more people 

than Social Security. It affects such a large swath of our population, it is so critical to their everyday life. 

One question was referred to earlier that I get all the time, but 

I want you to state this in more simple terms for the folks back 

home. I frequently hear, well, Social Security would be all right if 

the Federal Government hadn’t robbed the Social Security bank. In 

fact, the money—the money comes in, and it is in a trust fund— 

and I always respond, the only problem with Federal trust funds 

is if they are not funded, you can’t trust them. That being said, you 

have to invest that money, you just don’t leave it in the closet, you 

have to invest it. When dealing with Social Security, you want to 

invest it in something that is rock solid, like something backed by 

the full faith and credit of the U.S. Government, so you loan the 

money to the government. Now, is the government cheating Social 

Security in any way in that transaction? 

Mr. GOSS. The government—there is no way we could say the 

government is cheating Social Security. Every penny that has ever 

gone to the trust fund, when it is needed, it comes back with interest. 

Mr. RICE. And I have looked at the rate that the government 

pays Social Security on that trust fund, and in the last decades, 

that rate has averaged higher than the government pays on the 10- 

year treasury bill. Can you confirm that? 

Mr. GOSS. The rate—the whole things we have in the trust fund, 

many of them were issued years ago when the rates were actually 

29 

higher. So we retain those bonds until we redeem them at the 

higher rate. The average yield is higher than the current new issue 

rate. 

Mr. RICE. So the government, in borrowing money from Social 

Security, could borrow it from other places cheaper. The government could go and borrow that money on the market for a 10-year 

treasury bill cheaper than the rate it is paying to Social Security. 

Mr. GOSS. Well, actually, for new money to be borrowed today 

from the trust funds or from the market, they pay exactly the same 

rate for new money that is being borrowed. For older existing 

bonds, they are paying us possibly a higher rate. But if somebody 

in the populace is holding a marketable treasury that is 10 years 

old, they will be getting a higher rate also. 

Mr. RICE. Just to be crystal clear, I don’t want to complicate this 

for my folks back home: The rate that the government has paid to 

the Social Security trust fund, to borrow that money from the Social Security trust fund, is higher for the last two decades than 

what the government pays on the 10-year treasury bill? 

Mr. GOSS. I respectfully would suggest that the rate of any new 

bond issued is issued with a coupon rate exactly according to what 

the current effective market yield is. 

Mr. RICE. That is new bonds. But on the whole pile, the average 

rate—— 

Mr. GOSS. The average rate for existing bonds that we are holding is higher than the current effective market yield for bonds. 

Mr. RICE. Thank you, sir. 

Chairman JOHNSON. As we have heard today, even with the 

improvements in the solvency of Disability Insurance, Social Security faces serious challenges. Americans deserve a fact-based conversation about the tough choices necessary so that Social Security 

is a program our children and grandchildren can count on, just as 

seniors and individuals with disabilities do today. 

I look forward to continuing this conversation and working with 

all my colleagues to strengthen Social Security. Thank you to our 

witness for his testimony. Thank you, also, to our Members for 

being here. With that, the Subcommittee stands adjourned. 

[Whereupon, at 10:43 a.m., the Subcommittee was adjourned.] 

[Questions for the Record follow:] 

30 


33480A.013

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Thank you for your testimony before the Committee on Ways and Means at the July 14, 

2017 Social Security Subconm1iteec hearing enti tled, "Social Security's Solvency 

Challenge: Status of the Social Security Tmst Funds." In order to complete our hearing 

record, we would appreciate your responses to the following queslions: 

I. A Trust Fund ratio of 100 means that reserves are sufficient !o pay one year's 

worth of benefits. What is the advantage of having reserves of this amount? 

2. The Disability Insurance (DI) Trust Fund ratio has been under 100 since 2013 and 

is projected to reach single digits in 2027. How large of an economic shock 

would be needed to cause the DI Trust Fund tO be unable 10 pay benefits in 20 19? 

What about in 2027 or 2028? 

3. When you testified before this Subcommittee last year, you emphasized the 

impor!ance of making incremental changes to assumptions. This year the 

exhaustion date for the Dl Trust Fund shifted out by five years due to a reduction 

in the projected number ofDl applications and awards. Is the change to this 

assumption temporary or pem1anent? Why? 

4. Your office regularly produces memos on Social Security plans introduced by 

Members of Congress and others. A fler the discussion at last year's Trustees and 

Congressional Budget Office (CBO) hearing, your office added a new ta,, Jablc to 

these me o~. What do these new !abies show? How can policymakers use this 

new TableT to understand the lifetime ll\X implications for a given policy 

change? 
31 


33480A.014

5. There are six Trustees, four Administration Trustees- the Secretaries of Treasury, 

Health and Human Services, and Labor, and the Commissioner of Social Se<:urity 

- and two Public Trustees. Social Security has had an Acting Commissioner 

since 2013, some of the other Trustees were only recently confirmed, and there 

are still no Public Trustees. Given all this, how did this year's report development 

process work? Did il differ from previous years? 

6. Every CBO publication includes a list of nil staff who contributed and what areas 

each person was responsible tor. Why doesn't the Trustees Report have a similar 

list that includes your office's staff and the members oftbe Trustees Working 

Group? 

7. AI one of last year's hearings, we teamed that labor force participation 

assumptions arc one of the big drivers of the differences between the Trustees and 

COO. 1 undersw.nd the Social Security Advisory Board Technical Panel on Labor 

Force Particip<ltion recently concluded its work. The panel recommended some 

changes to the Trustees' labor forec participation model. Who detcm1incs 

whether or not to accept these reconunendations? 

Question from Rep. Jim Rcnacci 

I. !low often do the Tnostees meet as a group? for this year's report, you had two 

set~ ofT ruslcc.~ to work wilh - Obama Administration Trustees and Trump 

Administration Tnostees. How did that affect tlus year's process? Are you a hie lo 

make the minutes from these meetings available to the public? 

2. We've previously heard mention of the Trustees Working Group. I'm trying lo 

get a bclter understanding of who this group is and what exactly it docs. How big 

is the working group and who participates? Docs each Trustee have an equal 

number of participants? 

We would appreciate your responses to these questions by August II, 2017. Please send 

your response lo the Hllenlion of Amy Shuart, Staff Director, Subcommittee on Social 

Security, Committee on Ways and Means, U.S. ott~c of Representatives, 2018 Rayburn 

House Office Building, Washington, DC 20515. In addition to a hard copy, please 

submit an electronic copy of your response in Microsott Word formal to 

MM.Russell@mail.hOtose.gov. 
32 

[Submissions for the Record follow:] 


33480A.015

Thank you for taking the time to answer these questions for I he record. lf you have any 

questions concerning this requesl, you may reach Amy at (202) 225-9263. 

Sincerely, 

s~~~ Sam Johnson 

Chairman 

Subcommillee on Social Security 
33 


33480A.016

Comments for the Record 

United States House of Representatives 

Committee on Ways and Means 

Social Security Subcommittee 

Hearing on Understanding Social Security's Solvency Challenge: 

Status of the Social Security Trust Funds 

Friday. July14. 2017, 9:00AM 

2020 Rayburn House Office Building 

By Michael G. Bindner 

Center for Fiscal Equity 

Chairman Johnson and Ranking Member Larson. thank you for the opportunity to submit my comments 

on th.is topic. These comments are an update to those provided last September, with material added 

regarding the President's desire to cut taxes and call it tax reform. We will leave it to invited witnesses to 

explain the difference between the future projections. except to say that both forecasts are required to be 

conservative. As the Economic Policy InstitUte found many years ago when attempts were being made to 

justify personal accounts in Social Security. there is tmly no solvency problem if more realistic estimates 

are used. Of course. that relates to the system as a whole, not on how the Trust Fund is to be reimbursed, 

as we reiterate below. As usua l. our comments are based on our four-pan tax reform plan. which is as 

follows: 

A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary 

spending with a rate between !0% and 13%, which makes sure very American pays something. 

Personal income surtaxes on joint and widowed filers with net annual incomes ofS!OO.OOO and 

single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas 

and strategic military spending and other international spending, with graduated rates between 

5% and 25% in either 5% or I 0% increments. Heirs would also pay taxes on distributions from 

estates. but not the assets themselves, with distributions from sales to a qualified ESOP 

continuing to be exempt. 

Employee contributions to Old Age and Survivors Insurance (OAS!) with a lower income cap, 

which allows for lower payment levels to wealthier retirees without making bend points more 

progressive. 

A VAT-like Net Business Receipts Tax (NBRT). essentially a subtraction VAT with additional 

tax expenditures for family support, hea lth care and the private delivery of governmental 

services, to fund entitlement spending and replace income tax filing for most people (including 

people wbo fi le without paying), tbe corporate income tax, business tax filing thwugb individual 

income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance. 

disability insurance, unemployment insurance and survivors under age sixty. 
34 


33480A.017

Lessons from the Great Recession 

The 2008 Recession triggered by our continuing asset-based Depression has both temporary and 

pennanent effects on the 101st f1md's cash flow. The temporary effect was a decline in revenue caused by 

a slower economy and the temporary cut in payroll tax rates to provide stimulus that has since been 

repealed, although the amount was added to the Trust Fund for later withdrawal, regardless of 

contributions not made. 

The permanent effect is the early retirement of many who had planned to work longer, but because of the 

recent recession and slow recovery, this cohon has decided to leave the labor force for good when their 

extended unemployment ran out. This cohon is the older 77ers and 99ers who needed some kind of 

income to survive. The combination of age discrimination and the ability to retire has Jed them to the 

decision to retire before they bad planned to do so. which impacts the cash flow of the trust fund. but not 

the overall payout (as lower benefit levels offset the impact of the decision to retire early on their total 

retirement cost to the system). In addition, it has been made easier for workers over 50 to retire on 

disability (as T have done). with many of us approved on the first try. 

The Reagan-Pepper Compromise 

When Social Security was saved in the early 1980s, payroll taxes were increased to build up a Tntst Fund 

for the retirement of the Baby Boom generation. The building of this allowed the government to use these 

revenues to fi nance current operations, allowing the President and his allies in Congress to honor their 

commitment to preserving the last increment of his signamre tax cut. 

This tOISt fund is now coming due, so it is entirely appropriate to rely on increased income tax revenue to 

redeem them. It would be entirely inappropriate to renege on these promises by ti.tnher extending the 

retirement age, cutting promised Medicare benefits or by enacting an across the board increase to the 

OASI payroll tax as a way to subsidize current spending or tax cuts. 

The cash flow problem currently experienced by the trust fund is not the tn1st fund's problem, but a 

problem for the Treasury to address, either through funher borrowing - which will require continued 

comjty on renewing the debt limit - or the preferable solution, which higher taxes for those who received 

the lion's share of the benefit's from the tax cuts of 198 1, 1986, 200 1, 2003 and 2010. Many also 

complain that this recovery is anemic. That is likely because too many upper-middle income taxpayers 

were given a permanent tax cut from 200 I. Less savings and more taxation would boost spending on 

both transfer payments and government purchases- especially transfers to the retired and disabled. 

What most threatens the Trust fund is to do a tax cut under the guise of tax reform, especially at the upper 

income levels. Upper income families were given preference in the 1980s when OAST taxes went up 

while the Reagan tax cuts were preserved. That should not happen again. 

2 
35 


33480A.018

The cost of delaying actions to add•·ess Social Security's fiscal chaUenges fo•· wo rkers and 

beneficiaries. 

Actions should be taken as soon as possible. especially when they must be phased in. as it is a tmism that 

a little action early will have a larger impact later. 

This should not be d011e, however, as an excuse to use regressive Old Age and Survivors Insurance 

payroll taxes to subsidize continued tax cuts on the top 20% of wage earners who pay the majority of 

income taxes. Retirement on Social Security for those at the lowest levels is still inadequate. Any change 

to the program should, in time. allow a more comfonable standard of living in retirement. 

The ultimate cause of the trust fund 's long term difficulties is not financial but demographic. Thus, 

the solution must also be demographic - both in temts of population size and income distribution. The 

largest demographic problem facing Social Security and the health care entitlements, Medicare and 

Medicaid, is the aging of the population. In the long term. the only solution for that aging is to provide a 

decent income for every family through more generous tax benefits. 

The free market will not provide this support without such assistance, preferring instead to hire employees 

as cheaply as possible. Only an explicit subsidy for family size overcomes this market failure. leading to a 

reverse of the aging crisis. 

We propose a SIOOO per month ref1.1ndable child tax credit payable with wages as part of our proposal for 

a Net Busiuess Receipts Tax. This will take away the disincentive to have kids a slow economy provides. 

Within twenty years, a larger number of children born translates into more workers, who in another 

decade will attain levels of productivity large enough to reverse the demographic time bomb faced by 

Social Security in the long tem. 

Such an approach is superior to proposals to enact personal savings accounts as an addition to Social 

Security. as such accounts implicitly rely on profits from overseas labor to fund the dividends required to 

fill the hole caused by the aging crisis. This approach cannot succeed, however, as newly industrialized 

workers always develop into consumers who demand more income, leaving less for dividends to finance 

American retirements. The answer must come from solving the demographic problem at home, rather 

than relying on development abroad. 

This proposal will also reduce the need for poor families to reson to abortion services in the event of an 

unplanned pregnancy. lnde.ed, if state governments were to follow suit iu iucreasing cltild tax benefits as 

part of coordinated tax reform. most family planning activities would be to increase, rather than prevent, 

pregnancy. It is my hope that this fact is not lost on the Pro-Life Community, who should score support 

for this piau as au essential vote in maintaining a perfect pro-life voter rating. 

This is not to say that there is no room for reform in the Social Security program. Indeed, comprehensive 

tax reform at the very least requires calculating a new tax rate for the Old Age and Survivors lnsurance 

program. My projection is that a 6.5% rate on net income for employees and employers (or 13% total) 

3 
36 


33480A.019

will collect about the same revenue as currently collected for these purposes, excluding sums paid through 

the proposed enhanced child tax credit. This calculation is. of course, subject to revision. 

While these taxes could be merged into the net business income/revenue tax. VAT or the Fair Tax as 

others suggest, doing so makes it more complicated to enact personal retirement accotmts. My proposal 

tor such accounts differs from the plan offered in by either the Cato Institute or the Bush Conunission 

(aka the President's Commission to Save Social Security). 

As I wrote in the January 2003 issue of Labor and Corporate Governance, I would equalize the employer 

comribution based on average income rather than personal income. I would also increase or elim inate the 

cap on contributions. The higher the income cap is raised, the more likely it is that personal retirement 

accounts are necessary. 

A major strength of Social Security is its income redistribution function. I suspect that much of the 

support for personal accounts is to subven that fuuction - so any proposal for such accounts must move 

redistribution to account accumulation by equalizing the employer contribution. 

I propose directing personal account investments to employer voting stock, rather than an index funds or 

any fund managed by outside brokers. There are no Index Fund billionaires (except those who operate 

them). People become rich by owning and coutrolling their own companies. Additionally, keeping funds 

in-house is the cheapest option administratively. I suspect it is even cheaper than the Social Security 

system - which operates at a much lower administrative cost than any defined contribution plan in 

existence. 

Safety is, of course. a concern with personal accounts. Rather than diversifying through investment, 

however, I propose diversifying through insurance. A portion of the employer stock purchased would be 

traded to an insurance fi.md holding shares from all such employers. Additionally, any personal retirement 

accounts shifted front employee payroll taxes or from payroll taxes front non-corporate employers would 

go to this fi.tnd. 

The insurance fund will save as a safeguard against bad managemem. If a third of shares were held by the 

insurance fund than dissident employees holding 25. I% of the employee-held shares (I 6.7% of the total) 

could combine with the insurance fund held shares to ftre management if the insurance fi.tnd agreed there 

was cause to do so. Such a fund would make sure no one loses money should their employer fail and 

would serve as a sword ofOamocles' to keep management in line. This is in contrast to the Cato/ PCSSS 

approach, which would continue the trend of management accountable to no one. The other part of my 

proposal that does so is representative voting by occupation on corporate boards. with either professional 

or union personnel providing such representation. 

The suggestions made here are much less complicated than the current mix of proposals to change bend 

points and make OASI more of a needs based program. If the personal account provisions are adopted, 

there is no need to address the question of the retirement age. Workers will retire when their dividend 

income is adequate to meet their retirement income needs, with or even without a separate Social Security 

program. 

4 
37 


33480A.020

No other proposal for personal retirement accounts is appropriate. Personal accounts should not be used to 

develop a new income stream for investment advisors and stock traders. It should certainly not result in 

more "tntst fund socialism" with management that is accountable to no cause but short tenn gain. Such 

management often ignores the long-temt interests of American workers and leaves CEOs both over-paid 

and unaccountable to anyone btu themselves. 

Progressives should not run away from proposals to enact personal accounts. If the proposals above are 

used as conditions for enactment, I suspect that they won't have to. The investment sector will nm away 

from them instead and will mobilize their constituency against them. Let us hope that by then workers 

become invested in the possibilities of reform. 

All of the changes proposed here work more effectively if started sooner. The sooner that the income cap 

on contributions is increased or eliminated, the higher the stock accumulation for individuals at the higher 

end of the age cohort to be covered by these changes - although conceivably a firm could be allowed to 

opt out of FICA taxes altogether provided they made all fonner workers and retirees whole with the 

equity they would have otherwise rec.eived if they bad started their careers under a refonued system. I 

suspect, though, that most will continue to pay contributions, with a slower phase in - especially if a 

slower phase in leaves current management in place. 

One new wrinkle is that I would also put a floor in the employer contribution to OASI, ending the need 

for an EITC - the loss would be more than up by gains from an equalized employer contribution - as well 

as lowering the ceiling on benefits. Since there will be no cap on the employer contribution, we can put in 

a lower cap for the employee contribution so that benefit calculations can be lower for wealthier 

beneficiaries, again reducing the need for bend points. 

Thank you for the opportunity to address the committee. We are, of course. available for direct testimony 

or to answer questions by members and staff. 

5 
38 

f 


33480A.021

Contact Sheet 

Michael Bindner 

Center for Fiscal Equity 

14448 Parkvale Road, Suite 6 

Rockville, MD 20853 

301-871-1395 landline 

240-810-9268 cell 

No fax 

fiscalequitycenter@yahoo.com 

Social Security Subcommittee 

Hearing on Understanding Social Security's Solvency Challenge: 

Status of the Social Security Trust Funds 

Friday, Ju ly14, 20 17, 9:00 AM 

2020 Rayburn House Office Building 

This submission is made on behalf of no clients, persons and/or organizations on whose behalf 

the witness appears. 

6 
39 


33480A.022

~o GENERATION '-:11 OPPORTUNITY 

House Ways and Means Subcommittee on Social Security - Hearing on Social Security's 

Solvency Challenge: Status of the Social Security Trust Funds 

Statement for the Record 

David Bames, Director of Policy Engagement for Generation Opportunity 

July 14, 2017 

Chairman Johnson, Ranking Member Larson, members of the subcommittee, thank you for the 

opportunity to submit a statement regarding the topic of your bearing on Social Security's 

Solvency Challenge. 

Generation Opportunity represents young activists across the country, and the single biggest 

threat to our personal financial futures is the federal debt crisis being driven in part by Social 

Security. 

Many elected officials fear honest discussion of this topic, so it is welcome news to see this 

subcommittee taking the problem seriously and jump-starting a conversation about how to fix the 

program for future generations, including mine. 

When Social Security was created in 1935, the total cost of the program amounted to 0.3 percent 

of the federa l budget, and less than one-half of one percent of national GOP. That's because, 

back then, America was a much different place. For example, average life expectancy was 64, 

and only 24 percent of women were in the workforce. 

Today, average life expectancy is age 79, and 7l_percent of young women are now in the 

workforce. However, despite these and other changes, Social Security is still applying 80-yearold economic assumptions, making it a program unfit for the 21st cennuy. 

Social Security has now become the single largest federal program, costing 5 percent of our 

country's tota l GOP while devouring 24 percent of all yearly taxpayer dollars. At a time when 

our national debt is rapidly approaching $20 trillion, Social Security is projected to cost more 

than $13 trillion over the next decade. 

ln 2017 alone, the federal government will spend nearly one trillion dollars on Social Security, 

more than it spends on the military, education, housing, food, transportation, energy, and the 

environment combined. By 2027, the program is expected to grow our country's deficit by $356 

billion. 

Simply put, Social Security is failing, and unless changes are made, the program will be unable 

to pay full benefits starting just 13 years from now. 
40 

f 


33480A.023

Some claim that the solution to preserving Social Security is to raise more taxes, but history 

shows that doesn't work. In fact, since Social Security was created, payroll taxes have been 

raised 20 times. 20 TIMES! Yet, the program is still headed towards insolvency. 

Fixing Social Security isn't about throwing more money at the problem - it's about structurally 

refonning the program so it works better for current retirees and is still around for my generation 

when we reach retirement age. Otherwise, without serious change, young people must be given 

the choice to opt-out. 

My generation is proving that it knows how to responsibly plan for retirement, with studies 

showing that nearly four out of five of us save a portion of our paychecks. Technology plays a 

large role in helping us do this, as over 70 percent of young people now use mobile apps to 

manage their retirement savings. It's time that the federal government caught up and offered a 

fresh, flexible policy approach to retirement security that gives young people greater control over 

our money, our savings, and our futures. 

On behalf of tens of thousands of activists and many more young people across the country, I 

implore members of the subcommittee to work together in a bipartisan way to structurally reform 

Social Security and prevent our growing federal debt from destroying the fttture of my 

generation. Saving for our own retirement is well within our own control, but the fate of the 

federal budget is squarely in yours. 

Chairman Johnson, we thank you again for your leadership and the opportunity to offer 

comments on this important matter. 

Sincerely, 

David Bames 

Director of Policy Engagement 

Generation Opportunity 
41 


33480A.024

Written Statement of the Strengthen Social Security Coalition 

U.S. House Committee Ways and Means Subcommittee on Social Security 

Hearing on "Social Security's Solvency Challenge: Status of the Social Security Trust Funds" 

July 14, 2017 

The Strengthen Social Security Coalition is a broad-based coalition of over 320 national and state 

organizations representing SO million Americans~ including seniors, workers, women, people with 

disabilities, children, young adults, veterans, people of low income, people of color, communities of 

faith, and others. We stand together in support of Social Security, a promise made to Americans of all 

generations. Social Security insures virtually all working families against lost income in the event of 

death, disability, or old age. It currently pays benefits to over 61 million Americans. 

The 2017 Old Age, Survivors, and Disability Insurance Trustees Report (hereinafter, "Trustees Report") 

demonstrates that Social Security Is fully affordable, now and in the future. It reveals that the question 

of whether to expand or cut Social Security is a matter of values, plain and simple. 

Now in its 82"' year, our Social Security system has allowed generations of working Americans to earn 

critical wage insurance protections for themselves and their families, with incredible success. This 

success should come as no surprise, given that Social Security is conservatively managed (with 

administrative expenses accounting for less than one penny of every dollar spent), and prudently 

administered. Indeed, to help lawmakers ensure that Social Security's promises to working Americans 

are kept, Social Security's trustees are required to report annually on the financial health and 

sustainability of the program. 

What the 2017 Trustees Report Says about Social Security's Affordability 

This year's Trustees Report projects Social Security's large and growing reserve to be roughly $2.9 trillion 

in 2017, growing to about $3 trillion by around 2021. It shows that Social Security is fully funded for the 

next decade, around 93 percent funded for the next 25 years, around 87 percent funded over the next 

SO years, and around 84 percent funded over the next 7S years. Without a single penny of additional 

revenue, Social Security will have sufficient income and assets to pay all administrative costs and 

benefits in full for around one and a half decades, and around three-quarters of all benefits and 

associated administrative costs thereafter. Moreover, like the 2016 report, this year's report shows that, 

with modest legislated increases in revenue, Social Security will be able to pay all scheduled benefits for 

the foreseeable future. 

The report also shows that income to Social Security from all sources will exceed all expenditures in 

2017, which is why the program's reserves will continue to grow. Social Security has three sources of 

revenue: 

1) wage contributions from employees, matched by employers; 

2) investment earnings on Social Security's U.S. Treasury bond holdings (which have the same 

legal standing and status as other interest-bearing Treasury bonds issued by the government); 

and 
42 


33480A.025

3) dedicated revenue from the inclusion of a portion of Social Security benefits in income for 

purposes of determining income taxes owed. 

It is sometimes reported that Social Security is paying out more money in benefits than it is collecting in 

income, but that is incorrect. This claim counts only Social Security's income from payroll and wage 

contributions, disregarding one or both of its other two dedicated sources of revenue. While viewing 

Social Security's revenues in this manner suggests that it is in "cash deficit; this term has no legal 

meaning with regard to Social Security's finances. Indeed, so-called cash deficits have happened 29 

times since 19S7, without ever affecting the system's ability to pay benefits. This is because Social 

Security's revenues, from all sources, have always exceeded Its costs-and will exceed them again in 

2017. Bottom line: as the following chart shows, when income from all of Social Security's dedicated 

revenue sources is counted, its 2017 revenue will surpass its outlays. 

Projected Social Security Revenue 

by Source, 2017 

(inS billions) 

$SS.7 ' • Social Security 

B% Payroll Coo,tribul,ioros l $38.1, 

4% • Interest on Social 

Security Assets 

• Income Taxes on S<OO 

Social Security S100 

8eneflts 

so 

Rgure2 

Projected Social Security Revenue 

and Outlays, 2017 

2017 Revenue 2017 Outlays 

Source: 2017 Social Security Trustees Report, Table IV.A3, 2016. 

Indeed, the Trustees Report shows that Social Security is fully affordable. At its most expensive, in 2095, 

Social Security will cost just 6.17 percent of GOP. That is considerably lower, as a percentage of GOP, 

than most other industrialized countries spend on their counterpart programs today, as the following 

chart shows. (In 2017, Social Security is projected to constitute just 5 percent of GOP.) 
43 


33480A.026

12% 

a. 10% c 

0 8% 'o 

~ 60/a 

~ 4% 

0% 

Many Nations Spend Much More than USA on Retirement, 

Disability, and Survivor Protection 

Austria France Portugal Germany Japa n Spain Norway USA 

Source: Analvsls bv BenJamin W. Vechte of OECO Social Expenditure Database. 

Note: All data are for 2009 {most recent comparative data available). All countries com~ re-d have similar. 

defined-benefit pension systems. Private systems are excluded, as are tarceted soda I assistance proerams. To 

Increase data comparability. only half of spending was counted for program components in other countries 

that cover all government employets (and only a quar1er of spendine on thOse that cover a combination of 

government employees and members of the military/veterans). as on tv roughly half {a quarter) of such 

sp•ndtns tn USA IS Soda I security spendtna. 

Solvency Is Means to the Important Aim of Providing Working Families with Basic Economic Security 

As important as restoring Social Security to long-range actuarial balance is, it is essential to remember 

that doing so is simply a means to the end of providing America's families with basic economic security. 

Three in 5 seniors receiving Social Security rely on its modest benefits for half or more of their incomes. 

One third relies on those modest benefits for virtually all of their income. 

It is of even greater importance to women and to racial and ethnic minorities, as the following chart 

shows: 

3 
44 


33480A.027

Most Elderly Beneficiaries Rely on Social 

Security for the Majority of Their Income 

Percentage of elderly beneficiaries 

• Hispanic • Black Asian 

80% 

More than 50% More than 90% 100% 

Social Security Benefits as a Percentage of Income 

Note: Data are for beneficiaries &ge 65 or older. Income excludes noncash benefits such 

as SNAP (food stamps) or savings that might be available to supplement monthly Income. 

Source: Social Security AdmlnlslraUon, 2012 data 

CENTER ON BUDGET AND POliCY PRIORITIES I CBPP.ORG 

Social Security lifts 22 million Americans - including over a million children- out of poverty and lessens 

the depth of poverty for millions more. 

These vital Social Security benefits are extremely modest by virtually any standard. In absolute terms, 

the average Social Security benefit for all beneficiaries in M ay, 2017 was $1,248.67, or $14,984.04, on an 

annualized basis. That is less than full time, minimum wage work. It is only slightly above the official 

federal poverty line, and well below the amount needed to satisfy the Elder Economic Index, a 

sophisticated measure of the income necessary to meet bare necessities. 

Social Security's benefits are also extremely low, as compared to the retirement benefits of other 

nations, as the following chart reveals: 

4 
45 


33480A.028

Soci•l Security Replacement Rates in OECD Countries by Earnings Lnel 

Low Earntr 

-..... .._...... ....... A ... ,... 

C"-'1• 

'-'1_...-.. (_ ...... ...._ ....... (""""- se..-·11··-

Ha...,----

l•t\.q-- --

OtTOA\c __ ·-- ..... .. ~-: -

_ ...... _ ~~~~-- ·~-

··--

~Iff- sa.--- · S...\ ,.,.._ 

--oo.-

c.-..... -

t.-...s.. --J-- .. -

.,._.,-

--

Al'tragc Earner 

·=.;~=~ A..,... ;::: 

n • 

--

..,.,~ 

. .... -.4......__ If.....,._ 

tu..tt- ... ...... .___ 

·--

... __ ·--~.......­ ...... _ Sll""" .... ~ 

ot:<.

---

--- DA\·c .__, .,._,_ 

~..,. ..,...._. A...,. • ...._. ,_. .... ._.. .._...,._ 

:.,_.,~ 

c 

--.... ~ 

( .. _ ""'-'~-~ s..t\ --.:.,.,. ..,.._. 

(' ..... 

--Sa;.~ .. -

Crul ·-- ... 

--~ 

,,,... ---

Sou,....: OEC'I> ...,_ ot • Oboe<. 20tl. 

Higb Ea rner 

Not.-: These cakul.ations modd rut•"' ~ rMcS b •'Orten m~mna the labor nwtca '" 2012ac qc: 20. 

They ref<T 10 ,....,.. fWI<>=· mal< .....t<m: 101<> I« •'Dm<ll oort tdmuc:ol <>«PP "'5 --(AutO I,.. Cholc. lsrld. Mexico. v.~. "ikY~ tl'xy d•fra' •c-t.oakr••u bnlk pMAOO <'hcibtl!ty •JC"aad wr: ofsa~ fk 

.._hty . ._,.....,....., halfoflhtl\.,... aamcr (S<1.600UI2012). 1hp-cam 50%_,1hanlht 

,~earner. 

As informative as Social Security's absolute benefit size and its size compared to other nations' benefits 

are, there is a much more important measure. The best measure of Social Security's adequacy is the 

proportion of pay replaced by benefits, since replacing lost wages is the goal of the program. 

The idea behind Social Security is that it allows workers and their families to maintain their standards of 

living if and when wages are lost as the result of death, old age, or a serious and permanent disability 

that precludes substantial work. Experts estimate that workers and their families need about 70 to 80 

percent of pre-retirement pay to maintain their standards of living. Lower earners, who have less 

discretionary income, need higher percentages; higher earners, with more discretionary Income and 

other assets, need somewhat less. 

Social Security does not come close to providing sufficient income to meet the goal of maintaining 

standards of living. It appropriately replaces a larger proportion of preretirement pay of workers who 

have lower wages, but the benefits are still inadequate, as the following chart illustrates: 

5 
46 


33480A.029

120.000 

r:: 

$60,000 

$00,000 

SlG,OOO 

so 

IUghtr £arnrrs R« rh•t- Urgrr OoUar Amounts, Lo\\t.r Earners R«th·r 

.Uahtr BtntfiiJ In RelaUon to Prior Eornlngt 

Rq>laccmont Rat<S for Retired Worker A&" 6S, 2013 

Low )I .ct ... 

[.,-alec,~t-1 

Soo,.,., lGI )Sorial Se<unoy Tn..r ... lkpM Tobie V C7 

l"ott>:"MotdtUIII" dmtn. -~ ~'ftltlit ~ rl*' .... ., are ~~toSonal 

Socuri'>'•-''""F w..,t..S.•(A\\1 s.o~ 826~201)).....,m't<l sta.u< ;,SoriaJS«\\riiy....,.oo;, 201). '"l.Mo"' ~~•hotoeJ*I•-.. ~w.p <15pc"f'«'ntoflheA\\1. ~wl$11 070. \\'hll•·eare 

~~-.-..· tflflk'n, •·bote J*ol•'JfC' weat«.bor.•WSorial S«vrieyeoneMucionc.p for...,. )'al' 

&om ltfl' 2lon•-.d.~~ L~ OI6iDSoNJ Stan:ybmt6u in 2013 

It is important to note that many retirees do not have as high replacement rates as shown in the chart, 

because they retire and claim benefits before age 65. Moreover, as modest as these rates are, they will 

be declining in the future. They have been stable for decades, but are currently declining as the result of 

benefit cuts that are now being phased in, and increasing Medicare premiums, which are directly 

deducted from Social Security checks for many beneficiaries. In 1986, workers with average earnings 

first accepting benefits at age 65 received a Social Security benefit that replaced 41 percent of their 

preretirement pay, net of Medicare premiums. For equivalent workers reaching age 65 in 2005, only 39 

percent of preretirement pay was replaced. For those turning age 65 in 2030, that percentage falls to 

just 32 percent. When one accounts for taxation of Social Security benefits as well, which is an effective 

cut in benefits, that replacement rate in 2030 drops to 29 percent. 

Expanding Social Security Is a Fully Affordable Solution to Several Serious Challenges 

Expanding Social Security would help everyone. It is a solution to a number of challenges facing the 

nation. We face a looming retirement income crisis where most workers will be unable to retire without 

a drastic reduction in their standards of living. Social Security is the most universal, secure, fair, and 

efficient source of retirement income that we have, providing a guaranteed, inflation-protected source 

of income that one will never outlive. Expanding Social Security is a common-sense solution to that 

looming crisis. 

Increasing retirement benefits automatically increases disability and survivor benefit s, because they are 

based on the same benefit formula. Those benefits can and should be increased for current 

6 
47 


33480A.030

beneficiaries, as well as all future beneficiaries. Expanding Social Security would help ease the financial 

pressure on working families. Adding new benefit protections, such as paid family leave and paid sick 

days, would do even more to meet the goal of ensuring economic security for working Americans. 

Expanding Social Security is a solution to other challenges, as well. Americans are rightly concerned 

about growing income and wealth inequality. Expanding Social Security and requiring millionaires and 

billionaires to pay their fair share will begin to put brakes on the dangerous, and rapid ly growing, 

upward redistribution of Incomes and wealth. 

Recognizing that Social Security is a solution to our looming retirement crisis and other challenges facing 

the nation, serious analysts and a growing number of policymakers have advanced responsible, fully· 

funded proposals, which expand Social Security, without cuts, while restoring it to long range balance. 

Indeed, nearly 20 Social Security expansion bills have been introduced in the House and Senate just 

since 2015. In that regard, the Social Security 2100 Act was recently introduced by Rep. John Larson (D· 

CT-01), and has 162 cosponsors. Rep. Larson's bill provides important benefit improvements, including 

across-the-board benefit increases for all current and future beneficiaries, an increased special 

minimum benefit, so no one retires into poverty after a lifetime of work, and a more accurate cost-ofliving index, so these vital but modest benefits do not erode in value over time. The bill provides these 

important improvements while, according to Social Security's actuaries, ensuring that Social Security can 

pay all benefits in full and on time for the next three-quarters of a century and beyond. (A list of other 

expansion legislation is appended to this statement.) 

Overwhelming Majority of Americans, Despite Party Affiliation, Support Expanding, Not Cutting, Social 

Security 

In addition to being extremely wise policy, expanding Social Security represents the will of the American 

people. As divided as the American people are over many issues, we are not divided about our deep 

support for Social Security. Support for Social Security expansion, and opposition to benefit reductions, 

cuts across ideological divides. These view s are shared by Republicans, Independents, and Democrats. 

They are held by self-identified Tea Partiers and union households. A Pew J?OII conducted during last 

year's presidential primaries discovered that supporters of every candidate running overwhelmingly 

oppose Social Security cuts. 

The Democratic Party has recognized the importance of expanding Social Security benefits. The 2016 

Democratic platform stated: 

We will fight every effort to cut, privatize, or weaken Social Security, including attempts to raise the 

retirement oge, diminish benefits by cutting cost-of-living adjustments, or reducing earned benefits. 

Democrats will expand Social Security. 

Consistent with that pledge, around 90 percent of all Democratic Senators are on record in support of 

expanding, and not cutting Social Security. 

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33480A.031

The Coalition urges the Republican Party to join the Democrats in supporting expanding, and not cutting 

Social Security, while restoring the program to long range actuarial balance. There are numerous ways 

to increase Social Security's revenue without unduly burdening anyone. If the two Parties joined 

together to do what the American people overwhelmingly support- expanding, and not cutting Social 

Security. While allocating the cost in a way that requires the wealthiest among us to pay their fair share, 

today's beneficiaries will receive a much-deserved increase in their modest benefits-and next year's 

Trustees Report will show that Social Security is in balance through the end of the 21« century and 

beyond. 

8