-
https://clinton.presidentiallibraries.us/files/original/e8d075a12a4c8dc3804331d61bc0774d.pdf
1ecbfec7b98ba97ef8e64bb4cbfed621
PDF Text
Text
FOIA Number:
2006-0469-F (2)
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Speechwriting
Series/Staff Member:
Michael Waldman
Subseries:
OA/ID Number:
14537
FolderlD:
Folder Title:
SS [Social Security] Briefing Book 4/98 [2]
Stack:
Row:
Section:
S
92
4
Shelf:
Position:
3
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
�SSA Facts And Figures in Brief
Solvenpy
toncy
'enefits by program type
(FY1998, est.)*
OASI
$324.8 billion
DI
$49.2 billion
SSI
$27.4 billion
Black lung
$0.6 billion
Totil
$402.0 billion
Administratioe budget
(1998)*
SSA
$6.5 billion
(DOS portion
$13 billion)
ToUl
SSA's annual budget is about 25%
of the Menl budget and roughly 5,6%
of the nation's GDP.
Average payments
(1998)
Average retired worker $761Anonth
Average disabled worker $717/month
Average Fed. SSI payment" $363Anonth
Maximum SSI individual $494/month
Maximum SSI couple
$741/month
Average earner
reUring in
J938/month
^ogram Impact
•
•
•
•
•
•
•
The povertyrateamong the elderly
has declined by 62 percent over the
last 30 yean, largely due to Social
Security benefits.
Without Social Security, 495 percent
of all benefidaries would fall below
the poverty line.
Sodal Security benefits provide
S percent or more of total income
O
for two-thirds of aged beneficiaries.
For 30 percent of aged benefidaries,
the Sodal Security benefit
represents 90 percent or more of
their total income.
The Sodal Security approximate
replacementrateas of 1£8 for
workers retiring at age 65 is:
Low earner
5794
Average earner
4394
Maximum earner
2596
Ninety-five percent of people age 65
or over in calendar year 1997 were
receiving benefits or will when their
spouses retire.
Three out of four workers ages 21
through 64 can count on receiving
benefits if they become disabled.
About 98 percent of children under
18 can count on benefits if a working
parent dies.
In 1996, Social Security and SSI
payments kept 1.4 million children
out of poverty.
Tares
(1998)
FICA tax rate 7.65% (U« s m s«ufto)
o i
[employee/employer each p y this rate]
a
Social Security wage base $68,400
Trust funds
(FY1998)*
Receipts
$479 billion
Interest (induded
in Receipts)
$47 billion
Outgo
$382 billion
Reserves
$729 billion
Retirement test
(1998)
Age 62-64
$9.120^ear.$760/(nonth
(offset $1forevery $2 over limit)
Age 65-69
$U300/ycan $1,208/month
(offset $1forevery $3 over limit)
People
• 96 percent of all workers (148 million
workers) are covered under Sodal
Securily.
• lout of eveiy 6 Americans receives
Social Security.
Benefidaries in current pay
(FY1998, est)*
OASDI
Retired workers
273 million
their dependents
3.4 million
Survtvors
74 million
Disabed workers
4.6 million
their dependents
1.6 million
Total
443 million
SSI
l^mitiion
Aged
Disabled Adult
43 million
Disabled Children
1.0 million
Total
6.6 million
Blade Lung
0.1 million
Children
(FY1998. est.)*
Title D
33 million
Title XVI
1.0 million
US. population
(Includes American Samoa, Puerto Pico,
Guam, and Virgin Islands, 711198, est)
Total
2803 mlQioa
Age 65 or older
353 million
• Actuarial Balance
--Year Cost Ex -»cds Taxes
OASI
DI
OASDI
2014
2004
2012
--Year Cost Exceeds Taxes + Interest
OASI
DI
OASDI
2021
2007
2019
-Year of Trust Fund Exhaustion
OASI
DI
OASDI
2031
2015
2029
• Even when the trust fund reserves
are exhausted, there will still be
sufficient tax income to pay 75
percent of benefits due.
• There are about 35 million
Americans (13 percent bf the
population) today over the age ot 65.
By 2030, there will be 70 million
(20 percent of the population).
• In 1960, there were 5.1 covered
workers for each retiree. Today there
are 33. By 2030 there will b only
e
about 2.
• CY 1998 OASDI Program costs= 11.6
percent of taxable payroll. By 2030.
this will increase to approximately
173 percent
• COLAforCY1998 was 24 percent
• The average benefit increase for
CY 1998 is about $15 • month.
• Trust fund reserve was about
$650 billion it the end of 1997—
or more than 11/2 years of benefit
obligations.
• According to our budget
assumptions, in 1998 income to
the trust funds b expected to exceed
outgo by $100 billion. In 2003
income will exceed outgo by $147
billion.
• Increasing Retirement Age
65 years, 2 months
2003
66 yean
2009
67 yean
2027
This means that
—if you are 60 years old in 1998. you
can receivefoilretirement benefits
at age 65 yean and 2 months;
—if you are 55 years old inl998,
you can receive full retirement
benefits at age 66; and
—if you are 38 yean old in 1998,
you can receive fiUl retirement
benefits at age 67.
�SOCIAL SECURITY FACT SHEET
March 12,1998
OASDI assumptions (percent per year)
Intermediate
High cost
Labor force growth
0.1 percent
0.6 percent
-0.5 percent
Output per worker
1,16 percent*
1.6 percent
0,8 percent
Total real GDP growth
:
Low cost
1.3 percent
2.2 percent
0.3 percent
Output per hour is assumed to grow at 1.26 percent per year, and hours per worker to fall by 0.1 percent per year.
Productivity growth (output per worker)
Actuarial imbalance in OASDI
1.16
2.23
1.64
1.69
2.37
0.89
3.3 (rough estimate)
0
Historical experience: productivity and labor force growth
1960 H to 1973
IV
1973 IV to 1990 m
19931 to 1997IV
Civilian employment
2.0 percent
1.9 percent
1.9 percent
O t u per worker*
up t
2.4 percent
0.8 percent
1.1 percent
•
2.7 percent
3.0 percent
Total real GDP growth 4.2 percent
•Output per hour averaged 2.8 percent per year in the first period, 1.1 percent per year in the
second period, and 1.1 percent per year since 1993.
�Exhaustion dates and actuarial imbalances
Date of OASDI Trust Fund
exhaustion
75-year actuarial imbalance
Intermediate
2029
-2.23
Low cost
NA
+0.21
High cost
2018
-5.54
Other economic and demographic assumptions
Intermediate
Low cost
High cost
CPI (percent per year)
3.5 "
2.5
4.5
Unemployment rate
(percent of labor force)
6.0
5.0
7.0
Fertility rate (now 2.01)**
1.9
2.2
1.6
Male life expectancy at
age 65 (now 15.5 years)
18.8
16.5
21.9
Net immigration (persons
per year), including both
legal and illegal
900,000
1,150,000
750,000
2.4
1.3
Covered workers per
1.8
beneficiary (currently 3.3)
** Defined as average number of children who would be bom to a typical woman in her lifetime if she were to
survive the entire childbearing period. The 1996 level is 2.01.
Impact of immigration rate under other intermediate assumptions
Net immigration per year (including illegal
immigrants, but also netting out emigrants)
Actuarial imbalance in OASDI
900,000
2.23
750,000
2.33
1,150,000
2.10
�Net national saving rate as % cf GDP
Net national saving rate
1992
3.1
1993
3.4
1994
4.3
1995
5.1
1996
5.7
1997
6.4
With projected surplus, 1999-2003
Roughly 7 percent
International saving rates
Household saving rate,
projected for 1998
Gross national saving rate,
1996
U.S.
4.2
16.6
Japan
11.1
30.8
Germany
11.0
20.0
UK
10.8
14.6
France
13.6
18.7
17.1
Canada
4.6(1997)
Source: OECD Economic Outlook, December 1997
Percentage of first receipt of retirement benefits by age
Year/Age
62
63-64
65
66+
TOTAL
1960
10.0
7.9
35.3
46.7
100
1970
27.8
23.2
36.9
12.1
100
1980
40.5
22.2
30.7
6.6
100
1990
56.6
20.2
16.6
6.7
100
1996
60.1
18.3
15.7
5.9
100
�Debt
Gross Federal Debt
Publicly held debt
Held by government
accounts
1981
$994.8
$785.3
$209.5
1992
$4,002.1
$2,998.8
$1,003.3
1993
$4,351.4
$3,247.4
$1,103.9
1998
$5,543.6
$3,796.8
$1,746.7
2003
$6,336.2
$3,652.1
$2,684.1
Projected surplus as % of GDP (from Analytical Perspectives)
Current services (NDD
grows at inflation)
Discretionary grows at inflation
plus population growth
2000
0.1
0.1
2010
2.3
2.2
2020
2.3
1.8
2030
1.6
0.6
2040
1.4
-0.1
2050
0.7
-1.4
Publicly held debt as % of GDP - impact of surpluses
Current services (NDD
grows at inflation)
Discretionary grows at inflation
plus population growth
1998
45.5
45.5
2000
42.1
42.1
2005
30.3
30.3
2010
15.8
15.9
4
�Worker-beneficiary ratio
Intermediate
assumptions
Low cost
High cost
1960
5.1
5.1
5.1
1980
3.2
3.2
3.2
1997
3.3
3.3
3.3
2010
3.0
3.2
2.8
2020
2.4
2.6
2.2
2030
2.0
2.3
1.8
2070
1.8
2.4
1.3
Year turning age 65
Male
Female
Total
1945
13.0
15.4
14.3
1998
16.2
19.8
18.1
2030
17.7
21.1
19.4
Life expectancy at age 65
�Elderly poverty rate
Elderly poverty rate
1959
35.2
1970
24.6
1975
15.3
1985
12.6
1992
12.9
1993
12.2
1994
11.7
1995
10.5
1996
10.8
1996, without Social 48
Security benefits
�FY 98
2003 99-2003, total
Social Security receipts
Social Security outlays
Social Security balance
2001
2002
1743
1733
1794
1785
1863
1834
1949
1860
10
9
29
89
83
220
479.5
381.5
98
Balance
2000
-10
Total receipts
Total outlays
99
1658
1668
..iion
502.3
396.2
106.1
528.6
412.8
115.8
554
431.6
122.4
583.8
450.2
133.6
614.5
470.7
143.8
621.7
Size of OASDI Trust Fund
.
2028
1945
$650 billion
Special issue bonds: Not traded publicly, always redeer^able at par, carry yield equal
to yield on marketable Treasury bonds with maturity of 4 OT more years
Non-interest income will fall below expenses by 2012. Total Income (induding interest) will fan below expenses by
so the Trust Fund will start declining then. The Trust Fund Is expected to be exhausted by 2029.
Impact of transferring surpluses: Date of exhaustion
Surpluses from:
Bonds
Equities
1999-2003 ($200 billion)
2031
2034
1999-2008 ($1.1 trillion)
2037
2046
Bend points
PIA equals:
90 percent of first $455 of average indexed monthly earnings (AIME), plus
32 percent of $455 through $2741, plus
15 percent of AIME over $2,741
Economic assumptions
OMB
Productivity growth
Population growth
CPI
Real interest rate
SS
1.3
2.3
3.4
1.3
O.f
3.5
2.7
�Net national saving
% of GDP
1992
3.1
1993
3.4
1994
4.3
1995
5.1
1996
5.7
1997, Q1-3
6.4
With $40 billion more per year ($200 over 5), would increase to 7 percent
Elderly poverty rates
1959
1970
1975
1985
1992
1993
1994
1995
1996
35.2
24.6
15.3
12.6
12.9
12.2
11.7
10.5
10.8
OASDI administrative costs as % of contributions, FY f996 = 0.8 percent
Social Security beneficiaries, December 1996
N m e (in mtlfrons)
u br
Retired workers
Spouses and children of retired workers
Disabled workers
Spouses and children of disabled workers.
Survivors of deceased workers
TOTAL
.
•
'26.9
3.4
. 4 , 4
1.7
• 7.4
43.8
Social Security benefits are the major source (over 50 percent) of Income for 66 percent of beneficiaries.
They are 90 percent or more of income for 30 percent 6f beneficiaries.
�Retirement age under current law
ulJ benefit at age:
Applies to workers who attain age 62 in year
65
1994-1999
)5, 2 months
2000
>5, 4 months
2001
55, 6 months
2002
55, 8 months
2003
55, 10 months
2004
66
2005-2016
36, 2 months
2017
36. 4 months
2018
36, 6 months
2019
56, 8 months
2020
66, 10 months
2021
67
2022
:
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
�a ii n a /i ii a i
Social Security!
[Card
123-45-6789
m
�/
/r.~7--\ ,•
Reduce Benefit's
Add Revenue
New Investment Policy Options \ f*
�Raise retirement age
Reduce cost-oMiving adjustment
Reduce benefits across the board
Reduce benefits for those who can exceed
income thresholc
�Life expectancy ha's gone up from 61 to 76;
it makes sense to ask people to work longer
before claiming full retirement benefits
ilJ
^^^^^^^^
�This could hurt people:
•w/Y/2 physically demanding jobs
+with serious health problems
+who can not find work
�il
1
i
'
•
-I
• .1
Many economists believe that the formula
used for these adjustments overstates the
increase in the cost of living, resulting in
unwarranted automatic overpayment.
�Experts know what they are doing and
politicians should not interfere with the
process
COLAs are too important to most
beneficiaries
�We have over promised the amount of future
benefits and all future beneficiaries should
contribute something
�L:-.-'
G:rV
Not a good option because low-income
people will need Socical Security benefits
�Preserve benefits for those most in need
Reduce benefits for those who are less
dependent on Social Security
�o Punishes those who saved to add to their
Social Security '
< Moves program towards welfare
>
�nil fl
0 Tax Social Security like a private pension
> Raise wages subject to payroll tax
> Raise percentage of payroll tax
�We should not treat Social Security different
than a private pension
Low-income beneficiaries would be
protected by the progressive income tax
L
�Social Security is different from a private
pension
• government sponsored
• benefits are essential to low and
modest income beneficiaries
�Highly compensated workers pay payroll
taxes on proportionaley less of their wages
�c Payroll taxes are too high
o If payroll taxes were raised further, highly
paid workers are less likely to recover
contributions
�A modest increase in payroll tax can help
keep Social Security strong
�mmvm i
A payroll tax increase will worsen the rate
of return for future beneficiaries
�ft
//,•/ // \
J
t. /j:-'-'-;''
Hire mangers to invest
Let individuals invest
• Invest in addition to Social Security
• Invest as a part of Social Security
• Invest instead of Social Security
�:
->\ V7
Social Security would receive higher returns
on its investment
Social Security, not individuals, would bear
the risks of the market
I
:
�Social Security could become involved in
the market
Investment decisions could become highly
politicized
�r\.
/nx TV= - - /r\" o ^
v - s crri T; J O
o Increases the rate of return on workers'
contributions
< Increases national savings
>
o Allows more control over retirement funds
and decisions
�High changeover and administrative costs
Increased risk of investment loss
Does not provide adequate disability and
survivor benefits
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The titlefromthe original document is
indicated below.
Divider Title:
�Principles for Saving
Social Security First
1. Strengthen and protect Social Security for the 21 st
century
2. Maintain universality and fairness
3. Provide a benefit people can count on
4. Preserve financial security for disabled and lowincome beneficiaries
5. Maintain fiscal discipline
�Social Security
is more than a Retirement Program:
One-third of Beneficiaries are not Retirees
Disabled workers and
/
dependents
6 million
Retired workers
27 million \
14%
Spouses and children
' of retired workers
3 million
61%
17%
Survivors of
deceased workers
7 million
�Social Security is a Crucial
Source of Income for the Elderly
Percent of Elderly Beneficiaries
18%
Social Security is principal source
of income (over 50 percent of income)
Social Security is only
source of income
�RKERS PER
BENEFICIARY
5.1
liC)
J
�*1
THE SOCIAL SECURITY TRUST FUND
2.0
0.5
0.0-0.5
-1.0
•1.5
•2.0
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
7
�CONGRESSIONAL FACT SHEET: SENATOR RICK SANTORUM (R-PA) '
Committees:
•
Aging
•
Agriculture,Nutrition, and Forestry
•
Rules & Administration
•
Senator Lott recently appointed Senator Santorum Co-Chair of the Senate Task Force
on Social Security. Senator Santorum will chair the Task Force with Senator Judd
Gregg (R-NH). Five other Republican Senators serve as members of the Task Force;
Abraham (MI), Collins (ME), Gorton (WA), Kyi, (AZ), and Roth (DE).
Social Security, Savings, or Pension Legislation: Bills Sponsored
th
In the 105 Congress through March 30, 1998, Senator Santorum has sponsored no
Social Security solvency or national savings bills of interest. He has indicated that he
will have a solvency proposal shortly.
Bills Co-Sponsored
S.2, Roth: Bill to amend the Internal Revenue Code of 1986 to provide tax relief for
American families. The bill includes provisions for increasing availability of Individual
Retirement Accounts.
. "'
S.883, Gregg: Bill to amend the Internal Revenue Code of 1986 to encourage savings and
investment through individual retirement accounts, to provide pension security,
portability, and simplification and for other purposes.
Senator Santorum's Social Security Reform Positions
Although he has not put forward his own formal proposal. Senator Santorum has
indicated his support for reducing the 12.4 percent wage tax to 7.4 percent for all workers
under 50. Those workers would then invest the other 5 percent in mutual funds or other
pension investment vehicles. Upon reaching 65, a worker would be required to use the
investment accounts to purchase an annuity. If the worker's investment account were
greater than the sum needed to purchase an annuity equal to current law Social Security
payments, they would be able to keep the difference. If their investment plan fell short,
the government would make up the difference. He is studying several proposals for
reducing the payroll tax on younger workers by 1 percent but has not decided on a plan
yet. [As reported in the Harrisburg Patriot News March 31, 1998.]
�Notes
"Santorum knows the consequences of being accused of being a foe of Social Security.
In 1994 prior to winning election to the Senate, he told college students that he would
support raising the age for full Social Security benefits to 70, to save money. A blizzard
of attacks on the issue threw his campaign off track and cost him votes." [3/98]
"In the Wolford Senatorial campaign President Clinton singled out Rep. Rick Santorum
as one who wanted to tamper with the retirement for the elderly. Santorum Clinton said,
wants to raise the retirement age to 70 or higher. "Well he can't do that if you don't let
him," Clinton told the crowd." [11/94]
Santorum Quotations on Social Security
Response to President's State of the Union Message (no date)
"Entitlement reform must also be a high priority this year. Without reforms, federal
spending on Social Security and Medicare will take any expected budget surpluses and
quickly turn them into deficits. But reforms must not pass additional burdens to working
families and future generations. Instead, reforms must capitalize on the entrepreneurial
spirit of the American people."
Press release Feb. 3, 1998
"Precisely because entitlement reform is one of the most pressing issues confronting the
country
It is imperative that we give serious consideration - now - to viable options,
such as personal investment accounts. Otherwise, we will be forced to resort to
unpalatable ones, such as increasing taxes or cutting benefits..."
"
if the President would like us to safeguard the anticipated budgetary surplus until
we have reformed Social Security, the new spending he calls for in his current FY1999
budget would quickly erode any such surplus. We need a budget that respects the
agreement so carefully reached last summer
so that we can realize the original goals of
that agreement: lower taxes and the start of serious entitlement reform."
Philadelphia Inquirer Story "Substitute for Social Security" Jan. 21, 1998
"Younger workers should be required to invest more of their money in individual
retirement plans and less in Social Security, U.S. Senator Rick Santorum said yesterday.
Santorum proposed diverting 80% of the combined employee-employer contributions
into individual investments."We should give people the opportunity to invest in their own
future
We're going to fall off a cliff, demographically ... You can redesign the system
all you want. It will not work. At some point people are going to lose out a little on what
they're owed. Most of the industrialized nations have realized the jig is up, that they
cannot afford the Social Security system."
�CONGRESSIONAL FACT SHEET: SENATOR ROBERT KERREY (D-NE)
Committee Assignments
•
Committee on Finance; Subcommittees on Health Care, International Trade, and
Taxation and IRS Oversight
•
Committee on Agriculture, Nutrition, and Forestry; Subcommittees on Production
and Price Competitiveness (Ranking Member) and on Marketing, Inspection, and
Product Promotion
•
Select Committee on Intelligence (Ranking Member)
Legislation
Senator Kerrey has been an active participant in the Social Security reform debate and
has co-sponsored several pieces of reform legislation (including S. 825 in the 104th
Congress, which he co-sponsored with Senator Simpson). The Moynihan plan, which
Senator Kerrev co-sponsored, is the most recent bill supported bv Senator Kerrev and
provides the most accurate indication of his current thinking.
•
Cosponsored S. 1792, the Social Security Solvency Act of 1998. Introduced by
Senator Moynihan (D-NY), the Act would return Social Security to a pay-as-you-go
system by reducing payroll taxes. In addition, the Act would increase the taxable
wage base, reduce annual COLA's to CPI minus 1 percentage point, increase the
retirement age to 70 by 2073, eliminate the retirement earnings test, and create
voluntary retirement savings accounts.
The net effect of the OASDI provisions in the plan is to reduce lifetime Social
Security benefits by about 30 percent. For those who contribute the full amounts to
voluntary individual accounts over an entire working lifetime, total benefits
(including the annuity provided by the individual account) under the
Moynihan/Kerrey plan could be close to current law. But for those who choose not to
contribute to the voluntary individual accounts — who are likely to be
disproportionately from the lower and middle classes — their Social Security benefits
will be reduced by roughly 30 percent with no offset from an individual account. For
this reason, Henry Aaron called the plan the "My Lai" of Social Security reform.
•
Cosponsored S. 425. to establish a Cost-of-Livine Board to provide for an accurate
determination of the cost of living. This legislation was introduced by Senator Roth.
•
Consponsored S. Res. 50. to express the sense of the Senate that all cost-of livingadjustments required by statute should accurately reflect the best available estimate of
changes in the cost of living. This resolution was introduced by Senator Roth.
�Statements
In a September 17, 1997 speech entitled Who Owns America?, Senator Kerrey spoke at
length about his vision for Social Security:
"First, what I would do would be to reduce the employee share of the Social Security
payroll tax by 2 percentage points and place the savings in personal investment plans ... I
proposed in the past to do this and we proposed as well to pay for this change while
permanently solving the Social Security solvency problem by bringing the Consumer
Price Index in line with the true cost-of-living, indexing the eligibility age for Social
Security to life expectancy, and a handful of other modest, arcane, and difficult-todescribe changes.
"Second, let's take a tenth of one percent of what we collect in payroll tax, which is about
$4 billion a year and open a $1000 investment account for each of the approximately 4
million babies bom each year in America, and what leads to that conclusion again is the
understanding that the most important variable is the length of time over which savings
occurs. It is that length of time that matters.
"Third, let's take the $500 per child tax credit that was just enacted, make it available to
every American child, and require that it be placed in the child's investment account for
the first five years. Now you may not like any of these changes, but I'm offering them to
suggest to you that there's an easy answer to the problem of the rich getting rich and the
poor getting poor, and that if you think that the problem that needs to be solved, only
through long term savings, are we going to be able to solve. These three changes alone
would give every American the chance to own a piece of their country."
�CONGRESSIONAL FACT SHEET: CONGRESSMAN EARL'POMEROY (D-ND)
Committee Assignments and Caucus Memberships
•
Committee on Budget
•
Committee on Agriculture, Subcommittees on Forestry, Resource Conservation, and
Research and on Risk Management and Specialty Crops
•
Member of the Public Pension Reform Caucus, a group formed in August 1995 by
Congressmen Jim Kolbe (R-AZ) and Charlie Stenholm (D-TX) "to provide Members
of Congress and their staff a bipartisan forum to discuss, research, and examine the
problems confronting the Social Security program and the various options for reform"
•
Member of the New Democrat Coalition, a group formed in late 1996 by
Congressmen Cal Dooley (CA), Jim Moran (VA), and Tim Roemer (IN) and which
describes itself as "moderate lawmakers who have pushed a pro-growth agenda of
fiscal responsibility and education reform"
Legislation and Other Activities
Introduced H.R. 3503. the Retirement Account Portability (RAP) Act of 1998 March 19.
1998. The RAP Act would remove some of the impediments to pension portability by
easing "roll-overs" among private, non-profit, and state and local government pension
plans, by permitting after-tax contributions to be included in such roll-overs, and by
reducing current vesting requirements for employer contributions from five to three years.
Gene Sperling advocated passage of RAP Act this year at Congressman Pomeroy's press
conference to announce the bill's introduction.
Original cosponsor of H.R. 1656. the Secure Assets For Employees (SAFE^ Plan Act of
1997 The SAFE Act - introduced by Congresswoman Nancy Johnson (R-CT) - would
permit certain employers to establish and maintain a SAFE annuity (an individual
retirement annuity) or a SAFE trust (a trust forming part of a defined benefit plan), both
to be funded by the employer.
Appointed bv the President to serve as a delegate to the National Summit on Retirement
Savings to be held June 4' and 5 of this vear. Mandated by the SAVER Act, the
National Summit is designed to increase public awareness about retirement savings by
providing information about the types of pension plans that are available. Congressman
Pomeroy was a cosponsor of the House version of the SAVER Act.
h
lh
Co-hosted the House Democratic Caucus "alternative" hearing on Social Securitv on
March 30. 1998. Franklin Raines, Henry Aaron, Hans Reimer (2030 Center), Max
Richtman (National Committee to Preserve Social Security and Medicare), and four
citizens (all of whom were receiving Social Security in one form or another) testified at
�the event.
Statements
In his written testimony for the April 1, 1998 Ways & Means hearing on Congressman
Archer's National Commission bill (H.R. 3546), Congressman Pomeroy stated: "Social
Security is simply the most important and most successful program ever undertaken by
the federal government. Saving the budget surplus to preserve this program must be our
highest priority."
He has expressed reservations about a commission: " I do believe, ... that we must think
long and hard before deciding that a commission, rather than the Congress itself led by
this able Committee, is the best body to develop bipartisan recommendations on Social
Security's future."
In addition, he sharply criticized Congressman Kasich's bill to devote surpluses to
individual accounts (H.R. 3456). Congressman Pomeroy described the bill as "counter to
the Save Social Security First pledge and the aim of comprehensive reform." Moreover,
"We must also remember where the budget surplus Mr. Kasich would spend this year will
come from ~ from excess reserves in the Social Security Trust Fund. So what he is really
proposing to do is to take money out of the current Social Security program ~ with all its
strengths for American families ~ to initiate an untested experiment in individual
accounts. This plan is quite simply the beginning of the end of Social Security as we
know it."
In his written testimony for a Senate Labor Committee hearing on March 17,1998,
Congressman Pomeroy stated: "As we debate the reforms necessary to solidify the longtermfinancingof the program, we must remember the relationship between Social
Security and the private pension system. ... Plain common sense tells us that with
workers being asked to assume more risk in the private pension system now is not the
time to dump substantial additionalriskon them through the public pension system.
Instead, we must preserve Social Security's defined benefit safety net." The
Congressman made similar remarks before the Ways & Means Subcommittee on Social
Security last year.
�CONGRESSIONAL FACT SHEET: CONGRESSMAN KENNY HULSHOFF (R9' MO)
h
Committees
•
Member, Ways & Means, Social Security Sub-Committee
Social Security views
Congressman Hulshof is a freshman member. During his 1996 campaign, he advocated
repeal of the income taxes on benefits paid by higher income seniors on Social Security
benefits that had been enacted in 1983, and expanded in 1993.
Mr. Hulshoff s statements in hearings on Social Security suggest he wants to move
cautiously. At one hearing, he said it was important to discuss options for fixing Social
Security in a non-emotional manner. He has discussed the Chilean system in hearings,
but in a questioning manner. For example, he noted that the Chilean people had no
confidence in their prior Social Security system and were ready for radical change. He
expressed doubt that the American people were ready for radical changes in their Social
Security system.
Mr. Hulshoff has also expressed concern about how people might invest money placed in
private accounts. He wondered whether it would be invested wisely and what would have
to be done for individuals who do not.
He has pot signed pp jis a co-sppngpr to any Social Security solvency legislation.
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
�PANELIST FACT SHEET:
GARY BURTLESS
Current Position
Senior Fellow (Economic Studies), The Brookings Institution. Research interests include
public finance, aging, saving, labor markets, income distribution, social insurance, and
various other areas.
He is current writing a book entitled Privatizing Social Security: The Troubling Tradeoffs, with Barry Bosworth. The book is expected out this year.
Previous Positions
Before joining the Brookings Institution, Burtless was an economist with both the United
States Department of Health, Education, and Welfare and the United States Department
of Labor. He was a consultant with the World Bank from 1990 to 1997, and he has been a
consultant for the Social Security Administration since 1986.
He received his A.B. from Yale University in 1972 and his Ph.D. from the Massachusetts
Institute of Technology in 1977.
Social Security Views
Burtless appears to hold a moderate position on Social Security reform, arguing that the
focus should be on improving the rate of return to younger workers and increasing
national savings, not whether the system is "privatized."
Quotations on Social Security
"Any transition to a private system must overcome a majorfinancialhurdle, liability to
workers who are already retired or who will retire soon...Claimed economic advantages
of privatization can be obtained in either a public or a private retire system; however, in
either case, a short-term consumption sacrifice is needed." [3/97]
A higher rate of return "can be achieved within the current public system by raising
contributions and investing in assets that earn better returns or by introducing a new
private retirement system with individual investment accounts." [3/97]
"It is 'administratively feasible' to require workers and/or their employers to make
contributions to individual retirement accounts....From both an administrative and an
enforcement standpoint, it would make sense to have SSA (or some affiliate of SSA)
collect and invest contributions if the contributory requirement is small (less than 3
percent of covered pay." [2/98]
�PANELIST FACT SHEET:
FRED GOLDBERG
Current Position
Goldberg has been a partner with Skadden, Arps, Slate, Meagher & Flom LLP since
1993. He was previously a partner at Skadden, Arps from 1984 to 1986.
Previous Positions
Before rejoining Skadden, Arps, Goldberg held a variety of executive positions and
policy making roles in the Federal government. In 1992, he was the Assistant Secretary
for Tax Policy at the Department of the Treasury. From 1989 to 1992, he was the
Commissioner of the Internal Revenue Service. Mr. Goldberg also served as Chief
Counsel at the Internal Revenue Service.
Goldberg was the executive director of the Kerrev-Danforth Entitlement Commission.
Social Security Views
�PANELIST FACT SHEET:
DAVID M. WALKER
'
Current Position
David M. Walker is Partner and Global Managing Director of the Human Capital
Services Practice of Arthur Andersen LLP. He is also a member of the National
Commission on Retirement Policy (a bipartisan commission, comprising leaders from the
public and private sectors, to address the retirement financing challenge).
He is an expert on the relationship of private pension and health insurance programs to
the Federal social insurance programs.
Previous Positions
Walker was a public trustee of the Social Security and Medicare Trust Funds from 19901925He has also served on the Working Group of the Public Trustees, as Assistant Secretary
of Labor at the Pension and Welfare Benefits Administration of the Department of Labor
(1985-89), as Acting Director of the Pension Benefit Guaranty Corporation (1983-85).
Mr. Walker is the author of Retirement Security: Understanding and Planning Your
Financial Future, published in October 1996 by John Wiley & Sons of New York.
Social Security Views
At the February 26, 1998, hearing before the House Committee on Ways and Means,
Subcommittee on Social Security, Mr. Walker served as a panel witness. He made
several recommendations:
~
Social Security reform should be comprehensive and should occur sooner, rather than
later.
— Increasing the retirement age should be seriously considered.
-
The retirement earnings test should be modified further.
~
Any changes to preserve Social Security should be gradual, in order to permit both
employees and employers time to adapt.
Another source has indicated that he is in favor of modest individual accounts, although
we were not able to confirm this view.
�PANELIST FACT SHEET:
MARILYN MOON
'
Current Position
Dr. Moon serves as one of two public trustees of the Social Security and Medicare trust
funds. She is also Economist and Senior Fellow in Health Policy, The Urban Institute.
Previous Positions
Prior to her position at the Urban Institute, Dr. Moon served as the founding Director of
the Public Policy Institute of the American Association of Retired Persons. She has also
worked as a Senior Analyst at the Congressional Budget Office, Associate Professor of
Economics at the University of Wisconsin-Milwaukee, and as a consultant to the U.S.
Bipartisan Commission for Comprehensive Health Care (the Pepper Commission).
Social Security Views
Moon is a strong advocate of the Social Security program.
In the 1996 book she co-authored, Entitlements and the Elderly: Protecting Promises,
Recognizing Realities, suggestions for entitlement reform include:
•
A dollar limit on the Social Security cost-of-living adjustment rather than across-theboard reductions in the COLA;
•
Accelerating the process of raising the eligibility age for full Social Sectirity benefits
(and raising the normal retirement age to 68).
•
Moon and her co-authord reject the notion of drastic measures: "it is good policy and
politics to make changes in stages."
Quotations on Social Security
".. .some proponents of changing Social Security into a system of private accounts that
individuals control argue that this is the only way to generate sufficient resources to meet
future needs. This is not so. A wide range of options can resolve the financing problems;
deciding whether to move to a whole new approach ought to be debated on its own merits
rather than on the claim that no other option can work" [10/97]
"...emphasize the importance of Social Security in the lives of most of the nation's
elderly, and how many elderly still subsist at below poverty levels. Any future changes
in the program must protect the most vulnerable ("Entitlements and the Elderly").
�MODERATOR FACTSHEET:
SUSAN DENTZER
Chief Economics Correspondent and Columnist, US. News & Work Report
Biography
Dentzer began her journalistic career with Newsweek and joined U.S. News in 1987. She
is a frequent guest on such T.V. programs as "Nightline, The McLaughlin Group, and
Washington Week in Review", and is a featured analyst on "Frontline". She is a
commentator on the American Public Radio show "Marketplace" and other radio shows
across the U.S. A specialist in the coverage of the economics of health care Susan
Dentzer covered the President's health care initiative extensively.
In her regular column "On the Economy," Ms. Dentzer has written a number of times on
Social Security. She seems to take a balanced approach to the issue, but does expresses a
great deal on concern regarding the impact of reform on low-income workers and
minorities.
MODERATOR FACTSHEET:
MATT MILLER
Senior Writer, U.S. News & World Report
Biography
Matt Miller is a nationallly syndicated columnist, and a regular commentator for National
Public Radio's Morning Edition. Miller has written for the New Republic, Washington
Post, New York Times, New Yorker and the Washington Mongthly, and served as served
as a senior advisor to the director of OMB from 1993 to 1995.
MODERATOR FACTSHEET:
GWEN IFILL
Correspondent, NBC News
Biography
Gwen Ifill covers political issues for "Nightly News with Tom Brokaw", "Today", and
"Meet the Press."
She went to NBC from the New York Times, where she was the Congressional
Correspondent and was a White House Correspondent. Prior to the Times, Ifill worked
for the Washington Post, the Baltimore Sun and the Boston Herald American.
She is a frequent guest on "Washington Week In Review"
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
1
��CO
ftc^cK
^
^^-^
(33 UJU^ PJ.^A + (jj-ot
�0<*U4
J
(•1
6o
or
'
L^JJ
�so-1 IW"
�,n«- '"^
Aloa k>.i(—
�_
_ ..W
.f
tvit
?o«s
^r.^'«.'-h
^
��^^>/A
4^0
(i> (
oJi
^
^
. .«
0 ^
4 / o lo.l/o- - in-^trt
>o
7^ ±6* ^
______
u
F£^
"iJ^D
TS^ttoxi P<~f'* In-^
6 5
1
$<~-J-(
-(
�'
1
cg^3jg)
1
��Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
�26
Table 2-2.
LONG-RUN BUDGET PROJECTIONS OF 1999 BUDGET POLICY
(Percent ol GOP)
2000
2005
2010
2020
18.8
21.1
7.6
,-10.3
4.6
2.2
1.2
2.3
3.2
-2.3
50.1
0.9
19.8
19.7
6.3
10.8
4.5
2.4
1.3
2.6
2.6
0.1
42.1
2.7
19.7
18.5
5.5
11.1
4.5
2.5
1.5
2.6
1.8
\2
30.3
3.0
19.8
17.5
4.9
11.6
4.7
2.8
1.8
2.3
1.0
2.3
15.6
3.3
20.0
17.7
4.2
13.9
5.6
3.7
2.5
2.1
-0.5
2.3
18.8
21.1
7.6
10.3
4.6
22
1.2
2.3
32
-2.3
50.1
0.9
19.8
19.7
6.3
10.8
4.5
2.4
U
2.6
2.6
0.1
42.1
2.7
19.7
18.5
5.5
11.1
4.5
2.5
15
2.6
18.8
21.1
7.6
10.3
4.6
22
\2
24
Z2
-£3
50.1
OJ}
19.8
19.7
1995
services:
Receipts
I ' ^ i ^ Outtaiys _
Outla
Discretionary
Mandatory
- — Social security
Medicare
Medicaid
Other
Net interest
Sutplus or deficit (-)
Federal debt held by the pubfic ...
Primary surplus or deficit (-)
ContinuedrapidMedicare growth:
Receipts
—
Outlays
Wscretlonary _
Mandatory
Sodal security.
Medicare
Medicaid
Other
Net interest
Surplus or deficit (-)
Federal debt held by the pubfic .
Primary surplus or deficit (-)
DiscrvtlonAry grows with population:
Receipts
Outlays
Dbcredonuy.
Mandatory.
Social security.
Medfcare
ModcnH
Other
Net interest
Surplus or defies (-)
Federal debt heU by f>e pubfic
Primary supka or defictB —
1980s, at over five percent of GDP. Furthermore, if
discretionary spending were to keep pace with population growth as well as inflation—as might be required
for the delivery of government services to that growing
population, or because of threats to national security—
the budget would continue in surplus through only
2032, and the deficit would reach nine percent of GDP
by 2070. Finally, i f the slowdown in Medicare costs
currently projected for the early years of the next century by the Health Care Financing Administration
(HCFA) were not to materialize, budget surpluses
would disappear after 2038, and the deficit would grow
to over 20 percent of GDP by 2070.
The long-run deficit outlook is much improved because of the actions taken by this Administration in
cooperation with the Congress. Eliminating the budget
deficit is expected to set the budget on a solid footing
for many years to come. If these projections are correct,
a balanced budget would not be transitory. Assuming
a continuation of the Administration's economic and
technical assumptions, the budget remains in balance
1
m
45
2.4
13
2.6
2£
0.1
42.1
17
2030
2040
1.8
20.1
18.5
3.7
16.1
6.3
4.6
32
2.0
-1.3
1.6
-22.0
0.3
20.2
18.8
3.2
17.2
6.4
5.0
4.0
1.8
-1.5
1.4
-26.8
-02
12
30J
3.0
19.8
17.5
4.9
11.6
4.7
2.8
1.8
13
1.0
13
155
3.3
20.0
17.9
42
14.1
5.6
3.9
25
2.1
-0.4
2.1
-85
15
20.1
19.7
3.7
16.9
6.3
5.4
32
2.0
-05
0.4
-155
-05
20.2
21.4
3.2
18.6
6.4
6.4
4.0
1.8
-0.4
-12
-6.4
-15
20.3
24.8
2.8
20.9
65
75
55
1.7
1.1
-45
205
-3.4
202
31.0
2.5
23.9
6.7
8.9
6.8
1.5
45
-10.7
815
-62
202
405
22
27.4
6.8
10.4
6.7
15
10.9
-202
1935
-05
19.7
185
55
11.1
45
25
15
25
15
\2
X3
3J0
195
17.6
4.9
11.6
4.7
25
15
2.4
\J0
Z2
155
32
20.0
18.1
45
135
55
3.7
25
22
-05
15
-6.7
15
20.1
195
42
16.1
65
45
32
25
-05
05
-135
-02
202
205
3.7
172
6.4
5.0
4.0
1.7
-0.6
-0.1
-10.7
-0.7
205
21.7
3.4
18.4
65
55
55
15
-0.1
-\A
-05
-15
202
245
35
202
6.7
5.1
65
15
15
-45
24.7
-25
202
295
2.7
225
65
55
8.7
15
42
-05
762
-45
2050
2060
20.3
19.6
2.8
202
21.7
2.5
202
(ei 6.7
5.05.1
5.3
6.8
1.6
1.6
-1.6
-1.0
0.7
-1.4
-27.6 -15.6
-0.9
-2.4
N
2070
20 3
251
223
fi fl
o.o
5.3
8 7
O.I
1 c
1.0
-52
18.9
-4.3
for several decades. However, the underlying problems
are not fully eliminated. Table 2-2 shows that a primary, or non-interest, deficit reappears around 2035
even under the current-services case. Although the underlying imbalance is small, i t is sufficient to begin
a slow but irreversibly increasing spiral. The recurrence
of the primary deficit means that eventually the pressure of rising entitlement claims will drive the unified
deficit and Federal debt sharply higher relative to
GDP.
The keys to these projections are the economic assumptions, which have already been discussed, plus
technical assumptions about Medicare and discretionary
spending. The main reason why other analysts have
reached different conclusions about the deficit is because of differences with these or other assumptionsThe basic results shown here are highly sensitive to
7
'The prinuor or noo-inUrut n i r p l t u U the difference between all Mitleyt.
interaat. t a d tote] receipti. It e*n be poattire even when the total budfet ia tn
A relatively email priraary aurplua can aUbilite the budget even when the t o t u ^ J t ,
ia in deficit, and eimilariy, even a email primary deficit can deatabiliie a budte«mathemaUca are inexorable.
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
11
�INDIVIDUAL ACCOUNTS
March 31, 1998
I.
SIZE OF INDIVIDUAL ACCOUNTS
OMB Budget Forecasts
Value of individual account in nominal dollars: 5.5 percent real yield
OMB baseline
surplus with NDD at
inflation ("current
services")
OMB baseline
surplus, adjusting
for debt
OMB baseline
surplus, adjusting
for debt, but NDD
flat in nominal terms
2010
$14,455
$11,833
$21,131
2020
$80,240
$52,981
$100,805
2030
$246,928
$132,840
$290,690
2040
$649,807
$320,086
$742,604
2050
$1,415,042
$583,196
$1,480,323
Note that the "current services" baseline is just one of many baselines published in the Budget.
CBO Budget Forecasts, As Calculated by OMB for Long Run
Value of individual account in nominal dollars: 5.5 percent real yield
CBO baseline
surplus with NDD
at inflation
CBO baseline
surplus, adjusting
for debt
2010
$8,556
$6,851
2020
$29,911
$19,799
2030
$72,072
$47,708
2040
$173,662
$114,954
2050
$284,731
$161,867
�II.
VALUE OF ANNUITY RELATIVE T(j CURRENT LAW SOCIAL SECURITY
BENEFITS IN 2030 AND 2050
2030: Annuity from IA as percent of Social Security benefit, accumulation 5.5 percent real yield
OMB baseline
surplus with NDD
at inflation
OMB baseline
surplus, adjusting
for debt
OMB baseline
surplus, adjusting
for debt, but NDD
flat in nominal terms
Single low earner
74.3
40.0
87.5
Single average earner
45.0
24.2
53.0
Single high earner
34.1
18.3
40.1
One-eamer low earning
couple
46.6
25.0
54.8
One-eamer average
earning couple
28.2
15.2
33.2
One-eamer high earning
couple
21.3
11.5
25.1
2050: AnnuityfromIA as percent of Social Security benefit, accumulation 5.5 percent real yield
OMB baseline
surplus with NDD
at inflation
OMB baseline
surplus, adjusting
for debt
OMB baseline
surplus, adjusting
for debt, but NDD
flat in nominal terms
Single low earner
Single average earner
Single high earner
7$ao ip^
110
47*6-
$-3.4
11^
SZS
72^
One-eamer low earning
couple
One-eamer average
earning couple
One-eamer high earning
couple
�III.
IMPACT OF 50 PERCENT CLAWBACK
OMB baseline
surplus with NDD
at inflation
OMB baseline
surplus, adjusting
for debt
OMB baseline
surplus, adjusting
for debt, but NDD
flat in nominal terms
Actuarial imbalance
-0.37
-1.37
-0.17
Trust Fund exhaustion
date
2032
2031
2034
Over 100 percent*
55
(2035)
50 percent of
OMB baseline
surplus with NDD
at inflation
100 percent of OMB
baseline surplus,
adjusting for debt
OMB baseline
surplus, adjusting
for debt, but NDD
flat in nominal terms
0.04
-0.77
Trust Fund exhaustion
date
after 2075
2046
Share of surpluses
devoted to Trust Fund
50 percent
100 percent
60 percent
Required clawback to
(2034)
reach actuarial balance
(date of exhaustion)
*100 percent leaves -0.52 percent imbalance
IV.
INVEST IN TRUST FUND
Actuarial imbalance
�V.
2 PERCENT OF PAYROLL CONTRIBUTED
Single-life annuity
(EQUAL $ CONTRIBUTIONS] / [PROPORTIONAL TO EARNINGS]
(as a percent of current-law benefit)
Real net yield on account
2.6 percent
(all bonds)
4.57 percent
(half and half)
6.54 percent
(all stocks)
2010
6.6 [3.0]
7.2
8.0 [3,8]
2020
14.2 [6.6]
17.4
2\.6[10.0]
2030
24.4/77.47
33.6
47.2 [22.0]
2040
35.0 [16.4]
54.8
SSA [41.4]
2050
7>%2[17.8]
62.0
104.6 [48.8]
Year of retirement
at age 65
A. Steady low earner
B. Steady average earner APPROXIMATELY UNAFFECTED ON AVERAGE
2010
4.0
4.4 _ -
4.8
2020
8.6
10.6
13.0
2030
14.8
20.4
28.6
2040
21.2
33.2
53.6
2050
23.2
37.6
63.4
2010
3.0 [5.0]
3.2
3.6 [6.0]
2020
6.4 [10.8]
8.0
9.S [16.4]
2030
11.2 [18.6]
15.4
21.6 [36.0]
2040
16.0 [26.6]
25.0
40.6 [67.4]
2050
17.4 [29.0]
28.4
48.0 [79.6]
C. Steady high earner
�OMB unified surplus,
baseline projection
($ billions)
2% payroll
($ billions)
2% of payroll
plus interest cost
($ billions)
Budget impact
incl. 50 percent
takeback
($ billions)
2000
8.5
73.4
73.4
73.4
2001
28.2
77.2
87.0
85.4
2002
89.7
81.1
96.7
95.4
2003
82.8
85.3
107.2
106.1
2004
109.3
89.8
118.7
117.8
2005
136.7
94.5
131.2
.. 130.3
2006
164.3
99.5
144.8
143.6
2007
216.3
104.6
159.3
157.3
2008
258.5
110.1
175.1
171.9
2009
289.9
115.8
192.2
187.1
2010
320.5
121.7
210.7
203.1
2015
423.5
153.9
324.6
302.0
2020
471.5
192.5
486.8
434.7
2025
475.5
239.4
717.1
608.4
2030
463.8
299.5
1045.3
836.9
2035
497.7
376.1
1510.6
1131.5
2040
579.3
472.3
2165.6
1500.9
�Impact of given ''clawback" on OASDI balance and Trust Fund for 5.5 percent yield on 2 percent
individual accounts
Take-back rate
Actuarial balance
Push-back of TF Exhaustion date
.50
-1.22
+2
+5
-0.22
1.00
Notes: In the 1991 Trustees' Report, the actuarial balance was estimated at -2.23 percent
of taxable payroll, and the exhaustion date was projected at 2029.
�INDIVIDUAL ACCOUNTS
V J
March 25, 1998
1. Issues related to using the surplus to fund individuaW^counts.
using the surplus to fund equity investments for the Trust Fund
Budget
Under current scoring rules, both approaches would protect the surplus for retirement purposes
•
Under current scoring rules, both individual accounts and equity investments would be
scored as expenditures, and thus would ensure that the projected surpluses are not
dissipated for non-retirement purposes.
•
However, the current OMB and CBO method of scoring may not hold.
Individual accounts would likely put more pressure on other parts of the budget
•
I f the funding is specified as a certain percentage of payroll, pressure would be generated
as the surpluses fade.
•
I f funding is tied to the surplus, a constituency could be created for cutting government
programs in order to raise the amount of money available to be deposited. (A
constituency could also be created in favor of progressive tax cuts.)
•
Equity investments could more likely be phased out as the surpluses disappear.
Both approaches would reduce the surplus for some time, but could have different effects in the
long run
•
The long-run impact of individual accounts would depend on the degree to which the
budget recaptures any of their value.
The long-run impact of equity investments would be positive.
National saving
Reasons why individual accounts might raise saving more than equity investments
•
Individual accounts may be more effective in preventing the surplus from being
dissipated for'non-retiremeat purposes.
„ A.
, fl \ \
K
rtTN n > n r > - ^ c ^ / ' - r - ^
^ t ^ ^ S
W
Jcr.
v-j <
iv*
�-2•
Individual accounts may spur extra saving by some people via a "demonstration effect."
Reasons why individual accounts might raise saving less than equity investments
•
Individual accounts may cause a greater savings offset because they are more tangible
and they may reduce the scope of employer-provided pensions.
•
Individual accounts may create pressures for early withdrawals.
Rates of return
•
The rate of return earned on a $ 1 depends on the assets it is invested in and the
administrative costs of holding it, not necessarily on whether it is held in the Trust Fund
or an individual account
Administrative costs
Individual accounts have higher administrative costs than Social Security
•
Administrative costs in Social Security are 0.8 percent of payroll.
•
Estimates of administrative costs under individual accounts vary (see below), but are
higher than investments held by the Trust Fund.
Risk
Individual accounts wouldforce individuals to bear more investment risk
•
Under individual accounts, evenfinanciallysophisticated individuals bear more of the
riskfrommarket fluctuations than under Social Security. Moreover, some
unsophisticated individuals may make poor investment decisions.
Even with equities in the Trust Fund, the system would be exposed to more investment
risk than currently. The political dynamic could be such as to preclude spreading that
additional risk over many generations of workers and beneficiaries.
Government interference in private markets
Individual accounts may appear to involve less government interference in private markets
Some proposals would allow individuals to choose their own portfolios, though others
would have the government administrating a TSP-like program. Some "government"
involvement in markets may be implicit in the choice of available funds.
�-3-
Equity investments could be perceived as injecting the government in private markets.
Difficult issues would be raised regarding investment policy, voting of proxies, and the
like. Steps could be taken to address these issues: an investment board could be created,
or investments could be limited to broad index funds. Nonetheless, this perception is
likely to pose a greater challenge for equity investments than for individual accounts.
Progressivity
Individual accounts could either increase or decrease the progressivity of the existing system
•
Funding based on a given percentage of payroll would reduce the progressivity of the
overall system, whereas a flat per capita contribution would increase it.
Equity investments would be neutral for progressivity
•
By working within the current system, equity investments of the Trust Fund would have
no effect on its progressivity.
Annuitization
•
Individual accounts would raise issues related to annuities — for example, whether
actuarially fair annuities would be available in the private sector, and whether
annuitization upon retirement should be forced.
•
By contrast, investing the Trust Fund in equities imphcitly would produce an actuarially
fair, inflation-adjusted annuity for retirees.
Slippery slope
•
Over time, individual accounts might undercut popular support for the current definedbenefit system.
2. How large an annuity could an individual account provide?
Assumptions:
contributions begin in 2000
2 percent of taxable wages
transactions costs take 10 basis points off assumed rate of return
annuitization is mandatory
real yield on annuity is the bond rate regardless of pre-retirement investment choice
�Single-life annuity^/
provided by a 2% individual account
(as a percent of current-law benefit)
Real net yield on account
2.6 percent
(all bonds)
4.57 percent
(half and half)
6.54 percent
(all stocks)
2010
3.0
3.4
3.8
2020
6.6
8.2
10.0
2030
11.4
15.6
22.0
2040
16.4
25.6
41.4
2050
17.8
29.0
48.8
2010
4.0
4.6
5.0
2020
8.8
11.0
13.6
2030
15.2
21.0
29.6
2040
22.0
34.4
55.6
2050
24.0
39.0
65.8
2010
5.0
5.4
6.0
2020
10.8
13.2
16.4
2030
18.6
25.6
36.0
2040
26.6
41.6
67.4
2050
29.0
47.2
79.6
Year of retirement
at age 65
A. Steady low earner
B. Steady average earner
C. Steady high earner
�-5-
Joint and Survivor annuity
provided by a 2% individual account
(as a percent of current-law benefit)
Real yield on account
2.6 percent
(all bonds)
4.57 percent
(half and half)
6.54 percent
(all stocks)
2010
1.8
2.0
2.4
2020
4.2
5.0
6.2
2030
7.2
9.8
13.8
2040
10.2
16.0
26.0
2050
11.2
18.2
30.6
2010
2.6
2.8
3.2
2020
5.6
6.8
8.4
2030
9.6
13.2
18.6
2040
13.8
21.6
34.8
2050
15.0
24.4
41.2
2010
3.0
3.4
3.8
2020
6.6
8.2
10.2
2030
11.6
16.0
22.6
2040
16.8
26.2
42.2
2050
18.2
29.6
50.0
Year of retirement
at age 65
A. Steady low earner
B. Steady average earner
C. Steady high earner
�-6Notes:
The figures in the table on page 4 are relevant for never-married singles and for couples
with identical earnings histories provided they each choose an individual annuity.
The figures in the table on page 5 are relevant for single-earner couples (dependent
spouse has no covered earnings).
The experience of most other couples would fall between these two cases — more toward
the former if their earnings histories are similar, more toward the latter if their earnings
histories are different.
According to SSA, about a tenth of beneficiaries are single, and about half are married to
someone with a "similar" earnings record; for these beneficiaries, thefiguresshown on
page 4 may be approximately relevant. Another tenth are members of one-eamer couples;
for these beneficiaries, the figures on page 5 are relevant. The remaining beneficiaries are
couples with quite dissimilar earnings histories; their combined annuity income would
probably be bounded between the two sets of figures.
3. Issues regarding individual accounts
A. Risk
•
To illustrate the risk that an investor in an individual account might face, we conducted a
simple Monte Carlo simulation.
Bond return:
Stock return:
mean
2.70%
6.64%
standard
deviation
2.9%
15.2%
Correlation between bond and stock returns = .18
Wages grow at the steady average pace (0.9% per year).
•
Contributions begin in 2000.
�-7-
Annuity as a Percent of Benefits
Portfolio
Percentile
All Bonds
All Stocks
50/50
Random Walk—0% overvalued
For individual retiring in 2010
5th
25th
SOth
75th
95th
2.4
2.5
2.6
2.7
2.8
5th
25th
SOth
75th
95th
12.4
2.2
2.5
2.8
3.1
3.6
1.9
2.5
3.0
3.7
5.1
For individual retiring in 2042
12.8
11.4
13.8
14.8
16.1
17.7
22.3
29.8
19.6
30.9
54.4
18.3
42.2
108.5
Random Walk—50% overvalued
For individual retiring in 2010
5th
25th
SOth
75th.
95th
2.4
2.5
2.6
2.7
2.0
2.4
2.6
2.8
1.7
2.2
2.6
3.2
2.8
3.3
4.3
5th
25th
SOth
75th
95th
12.4
13.8
14.8
16.1
18.3
For individual retiring in 2042
12.2
16.8
21.2
27.9
39.2
10.5
17.5
27.1
46.6
93.8
B. Administrative costs
Overall administrative costs include both asset management costs and servicing costs.
— Asset management fees for retail-based funds can reach 25 basis points; fees for
institution-only index funds, however, can be less than 1 basis point.
The TSP Board pays Barclays Global Investment roughly 0.5 basis point to
manage the stock index fund and roughly 1.5 basis points to manage the bond
index fund [close hold]. The Board itself spends about 7 basis points to service
each of these funds and the government securities fund, including printing
information booklets, processing payroll deductions, mailing statements and, in
�the case of the government securities fund, managing the investments. Additional
costs of unknown magnitude are borne by the Departments and Agencies.
Overall, a very rough guess is that comprehensive TSP costs might run in the
neighborhood of 15-25 basis points.
Servicing costs would be higher under IRA-type individual accounts. The
following table shows some mutual fund expense ratios as of February 1996:
Category
Expense Ratio
(basis points)
Diversified U.S. equity
99
Balanced
84
Corporate bond
67
Government bond
89
Source: Momingstar, Inc.
Even seemingly modest transaction costs can substantially reduce the accumulated value
of an individual account at retirement:
Annual
transaction cost
(basis points per year)
Percentage reduction
in value of
individual's portfolio
at retirement
10
2.4
50
11.5
100
21.5
Assumptions:
account accumulates for 40 years;
wages grow at 0.9 percent per year;
real yield on account is a steady 4.7 percent.
�-9Under the same assumptions, aggregate annual transactions costs would be as follows
(these figures are very rough):
Aggregate Annual Transaction Costs
(billions of 1997 dollars)
Annual
transaction cost
(basis points per year)
2000
Year
2020
2040
10
.1
1.6
5.6
50
.7
7.7
25.1
100
1.4
14.4
44.1
C. Progressivity
1. Concems about possible lack of progressivity are a crucial part of why some analysts
have been leery of individual accounts in the past.
2. The impact of individual accounts on progressivity depends in part on the progressivity
of contributions into the accounts.
•
If contributions are made on an equal-dollar basis, individual accounts could make
the overall system more progressive, provided low-income workers are as
aggressive in their investment behavior as the rest of the population.
•
If contributions are determined as a percent of taxable payroll, individual accounts
would make the overall system less progressive.
3. Kasich has proposed using the unified surpluses tofinancelAs on an equal-dollar
basis; Feldstein on a 2% basis.
4. Tax treatment and individual investor behavior would also matter for progressivity.
For example, if low-income participants are less aggressive in their investing behavior
than high-income workers, a system of lAs will be less progressive in its outcomes.
5. If expansion of social security would cause employers to cancel DB plans more than
DC plans, the overall progressivity of retirement income could be adversely affected. The
extent to which such cancellation would occur is not known.
6. There is an open question as to whether extremely progressive systems, such as the one
proposed by Kasich, would be politically sustainable.
�-10-
Single-life annuity
[EQUAL $ CONTRIBUTIONS] / [PROPORTIONAL TO EARNINGS]
(as a percent of current-law benefit)
Real net yield on account
Year of retirement
at age 65
2.6 percent
(all bonds)
4.57 percent
(half and half)
\
/
6.54 percent
(all stocks)
^
A. Steady low earner
2010
- 6.6 [3.0]
7.2
8.0 [3.8]
\
2020
U.2[6.6]
17.4
21.6 [10.0]
\
2030
24A [11.4]
33.6
47.2 [22.0]
2040
35.0 [16.4]
54.8
88.4 [41.4]
2050
3Z.2[17.8]
62.0
104.6 [48.8]
B. Steady average earner APPROXIMATELY UNAFFECTED ON AVERAGE
2010
4.0
4.4
4.8
2020
8.6
10.6
13.0
2030
14.8
20.4
28.6
2040
21.2
33.2
53.6
2050
23.2
37.6
63.4
2010
3.0 [5.0]
3.2
3.6 [6.0]
2020
6.4 [10.8]
8.0
9.8 [16.4]
2030
U.2[18.6]
15.4
21.6 [36.0]
2040
16.0 [26.6]
25.0
40.6 ^7.47
2050
17.4 [29.0]
28.4
48.0 [79.6]
C. Steady high earner
f
�-11-
4. Individual accounts, the unified budget, and the Trust Fund
A. As illustrated in the following table, rough calculations suggest that the direct cost of 2%
lAs would exceed the unified surpluses currently projected by OMB for all years except
during a relatively brief window, from about 2005 to about 2018.
B. Moreover, the "recapture" provision suggested by Feldstein takes only a modest step
toward relieving this pressure on the budget.
OMB unified surplus,
baseline projection
($ billions)
2% payroll
($ billions)
2% of payroll
plus interest cost
($ billions)
Budget impact
incl. takeback
($ billions)
8.5
73.4
73.4
73.4
2001
28.2
77.2
87.0
85.4
2002
89.7
81.1
96.7
95.4
2003
82.8
85.3
107.2
106.1
2004
109.3
89.8
118.7
117.8
2005
136.7
94.5
131.2
130.3
2006
164.3
99.5
144.8
143.6
2007
216.3
104.6
159.3
157.3
2008
258.5
110.1
175.1
171.9
2009
289.9
115.8
192.2
187.1
2010
320.5
121.7
210.7
203.1
2015
423.5
153.9
324.6
302.0
2020
471.5
192.5
486.8
434.7
2025
475.5
239.4
717.1
608.4
2030
463.8
299.5
1045.3
836.9
2035
497.7
376.1
1510.6
1131.5
2040
579.3
472.3
2165.6
1500.9
2000
,
�-12C. Benefits accumulate as shown on pages 4 and 5.
D. The impact of a Feldstein-style plan on the unified budget reflects three effects:
— Negative: Expenditure on 2 percent individual accounts
— Positive: Takeback reduces Social Security expenditures
— Negative or positive, depending on which term above dominates: Debt servicing
costs higher or lower, depending on net impact on publicly held debt.
E. Under the plan illustrated above, the period of unified budget surpluses would end about
30 to 35 years earlier — in 2022-2025 rather than 2055. Even in steady state, this plan
increase the deficit by about 2.5 percent of GDP per year in steady state.
F. The plan illustrated above (50 percent takeback rate, assumed real rate of return on IA of
4.57 percent) reduces the actuarial imbalance in the Social Security Trust Fund by 0.87
percent of taxable payroll (compared to total current gap of 2.23 percent), but pushes the
exhaustion date back by only 2 years, from 2029 to 2031.
G. According to some preliminary investigation, it would be possible to eliminate the
remaining actuarial imbalance (1.36 percent of taxable payroll) with additional reforms to
the system, while holding benefit cuts to any particular cohort of retirees to less than
5 percent for virtually all aged beneficiaries. [See separate packet from Steve Goss.J
H. An open question remains as to what would happen i f and when individual accounts
financed by surpluses were phased out because the surpluses had disappeared, and the
benefit cuts that were supposedly offset by the accounts remained in place.
5. Possible draft "principles" regarding individual accounts
The Administration has not made any decisions whatsoever regarding individual accounts. I f
such accounts were to become part of a comprehensive package, possible principles include that
individual accounts should:
•
be financed using resources above and beyond the revenues generated by the current-law
payroll tax;
be progressive;
be consistent with long-run fiscal prudence;
avoid unnecessary waste through excessive administrative costs;
be consumer-friendly, and easy to access and understand;
limit risk to an acceptable level.
�-13-
6. Research agenda for individual accounts
A. Would the system be run on a centralized basis (like the Thrift-Savings Plan) or a
decentralized basis (like IRAs)?
B. If done on a centralized basis,
1. What would be the structure of the governing board?
2. What range of investment options would be offered?
C. Should we force annuitization at retirement?
1. Only for amounts over a minimum?
2. Joint and survivor annuity required for married couples?
3. Inflation-indexed annuity?
4. Would annuity be provided by government or private sector?
5. Would there be some minimum guaranteed payout if the individual dies soon after
retirement?
D. Issues related to contributions into the accounts
1. How should the contributions be financed? From the unified surpluses or from payroll
tax revenues? If the latter, as an add-on or a carve-out?
2. If contributions arefinancedusing the surpluses, would they be distributed according
to taxable payroll, or on a flat per capita basis, or according to some other method?
E. Issues related to investment returns
1. Would there be anyfloorsand/or ceilings on allowable rates of return? (Presumably,
this would only be relevant if the system were centralized.)
F. Details of implementation
1. I ffinancedfromthe surplus, what would be the exact timing and mechanics of
transfers from the general government to the system of individual accounts?
2. I ffinancedout of payroll taxes, what would be the mechanics of collecting the
contributions?
3. If run on a centralized basis, howfrequentlywould participants be allowed to change
investment of assets?
�
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Michael Waldman
Description
An account of the resource
<p>Michael Waldman was Assistant to the President and Director of Speechwriting from 1995-1999. His responsibilities were writing and editing nearly 2,000 speeches, which included four State of the Union speeches and two Inaugural Addresses. From 1993 -1995 he served as Special Assistant to the President for Policy Coordination.</p>
<p>The collection generally consists of copies of speeches and speech drafts, talking points, memoranda, background material, correspondence, reports, handwritten notes, articles, clippings, and presidential schedules. A large volume of this collection was for the State of the Union speeches. Many of the speech drafts are heavily annotated with additions or deletions. There are a lot of articles and clippings in this collection.</p>
<p>Due to the size of this collection it has been divided into two segments. Use links below for access to the individual segments:<br /><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0469-F+Segment+1">Segment One</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0469-F+Segment+2">Segment Two</a></p>
Creator
An entity primarily responsible for making the resource
Michael Waldman
Office of Speechwriting
Date
A point or period of time associated with an event in the lifecycle of the resource
1993-1999
Identifier
An unambiguous reference to the resource within a given context
2006-0469-F
Extent
The size or duration of the resource.
Segment One contains 1071 folders in 72 boxes.
Segment Two contains 868 folders in 66 boxes.
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Text
A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text.
Original Format
The type of object, such as painting, sculpture, paper, photo, and additional data
paper
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
SS [Social Security] Briefing Book 4/98 [2]
Creator
An entity primarily responsible for making the resource
Office of Speechwriting
Michael Waldman
Is Part Of
A related resource in which the described resource is physically or logically included.
Box 59
<a href="http://clinton.presidentiallibraries.us/items/show/36404"> Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/7763296">National Archives Catalog Description</a>
Identifier
An unambiguous reference to the resource within a given context
2006-0469-F Segment 2
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Medium
The material or physical carrier of the resource.
Preservation-Reproduction-Reference
Date Created
Date of creation of the resource.
6/3/2015
Source
A related resource from which the described resource is derived
7763296
42-t-7763296-20060469F-Seg2-059-004-2015