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[Congressional Record Volume 141, Number 93 (Thursday, June 8, 1995)]
[Extensions of Remarks]
[Page E1194]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

                             SOCIAL SECURITY

                                 ______

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                         Wednesday, June 7, 1995
  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, May 24, 1995, into the Congressional Record.
                 Social Security: Question and Answers

       When I meet with Hoosiers I often hear from those concerned 
     with Social Security insurance and benefits. Older persons 
     seek assurance for secure payments at adequate levels. 
     Younger persons question how program changes could affect 
     their plans for retirement. Questions also arise concerning 
     the solvency of the program and the nature of proposed 
     reforms.
       What are the various parts of the Social Security program 
     and how is the program run?
       Social Security, also known as the Old Age, Survivors, and 
     Disability Insurance (OASDI), is the nation's largest 
     retirement and disability program. It pays benefits when a 
     person retires, becomes disabled, or dies, if eligibility 
     requirements are met. Family members may also be eligible for 
     benefits. It is financed through taxes on wages and self 
     employment income. More than 95% of the work force is 
     required to pay these taxes on the first $61,200 of income. 
     Benefits are dispersed through a trust fund dedicated 
     exclusively to the payment of Social Security benefits. The 
     Social Security Administration, which manages the program, is 
     an independent agency accountable to Congress. The 
     administrative costs of the program are less than 1% of 
     benefit payments.
       How is the money in the Social Security trust fund managed?
       In the past, Social Security has worked on a pay-as-you-go 
     basis: workers' payroll taxes went out almost immediately as 
     benefits to retirees. However, as of 1983, baby boomers are 
     paying for benefits of current retirees while also 
     contributing funds to finance their own future benefits. The 
     trust fund's $400 billion surplus is invested in U.S. 
     government bonds, the only investment allowed by law. The 
     federal government has never defaulted on its payments to the 
     trust fund.
       Is the Social Security trust fund included in the federal 
     budget?
       The answer to this question is both yes and no. In 1990 
     Congress took action to exclude the trust fund from budget 
     calculations. However, this has not prevented economists and 
     others from including the trust fund in their budget 
     calculations as a way to obtain a more accurate portrayal of 
     the federal budget and its impact on the economy.
       Which seniors are affected by recent changes in the Social 
     Security program?
       The 1993 budget deficit reduction package increased the 
     portion of taxable benefits for wealthier beneficiaries from 
     50% to 85%. This higher tax applied only to the top 13% of 
     Social Security recipients--couples with a retirement income 
     of $44,000 and individuals with income over $34,000.
       The House recently passed a bill amending the Social 
     Security earnings limit and income tax level. The bill 
     includes provisions that would raise the Social Security 
     earnings limit over five years to $30,000 and reduce the 
     level of income tax on Social Security benefits for higher-
     income recipients. The Senate has taken no action on this 
     bill.
       Will Social Security be used to balance the budget?
       The inclusion of the Social Security program in a balanced 
     budget amendment has greatly concerned seniors. The House 
     considered several versions of a balanced budget amendment 
     this year. I voted for measures to exempt Social Security 
     from a balanced budget amendment. The version that passed the 
     House does not exclude Social Security. The Senate did not 
     pass a balanced budget amendment.
       The budget resolution drafted by the House Leadership 
     proposes a 0.6% reduction in the Consumer Price Index (CPI) 
     as a means of slowing the Social Security program's growth. 
     Social Security COLAs are based on the CPI. Therefore, an 
     adjusted CPI would reduce the COLA starting in 1999.
       Is the Social Security program stable for the years ahead?
       The program is projected to be solvent only for the next 35 
     years. After that point, the amount of benefits being paid 
     will exceed receipts. As the baby boom generation
      ages, the reserves are projected to be drawn down by the 
     year 2030.
       What can be done to ensure that our children and 
     grandchildren will receive benefits?
       A number of proposals to ensure the solvency of Social 
     Security has been mentioned, such as reducing benefits for 
     future recipients, raising the payroll tax, increasing the 
     retirement age, or instituting a means test denying full 
     benefits to those with large incomes from other sources. 
     Various proposals have been made to privatize the system, 
     such as requiring workers to place part of their Social 
     Security contribution into a system of mandatory IRAs. Some 
     Members of Congress have proposed major changes in the 
     program, such as allowing trust fund monies to be invested 
     outside of the U.S. Treasury. No one solution is likely to 
     cure all the problems, and a good argument can be made for 
     doing several things at once.
       The Bipartisan Commission on Entitlement and Tax Reform 
     studied the stability of Social Security but was unable to 
     reach a consensus on solutions to the problem. The President 
     has created the Advisory Council on Social Security to 
     examine Social Security financing and other program issues.
       How confident can we be about the future of Social 
     Security?
       Social Security is important to the 42 million people who 
     count on the benefits for their income, as well as those 
     planning their future retirement. If future generations are 
     to receive benefits, we must recognize that some difficult 
     decisions must be made to prevent Social Security insolvency. 
     The future of Social Security is a test of democratic 
     government. A clearly foreseeable disaster lays ahead, but it 
     is not imminent. The question is whether an agreement can be 
     reached on some reasonable reforms so that older persons can 
     live in some security without hurting younger people. I do 
     not want to see the benefits of current Social Security 
     recipients reduced. The federal government has made a 
     commitment to current and future recipients, and I will work 
     to ensure that commitment remains strong.
     

                          ____________________
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