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November 5, 1998
MEMORANDUM FOR THE PRESIDENT
FROM:
Bruce Reed
Gene Sperling
Elena Kagan
Sally Katzen
SUBJECT:
State orthe Union/Budget Ideas
This memorimdwn provides a brief description of new ideas we are considering for the State of the
Union, Some work has been done on fleshing them out, but many need additional work and further
vetting through the interagency process. Most of these ideas involve increased spending, and you
will beve to make choices among them andlor scale them beck as you consider the FY 2000 budget.
Aithough our offices have worked together on many. if not most, of the ideas in this memo, we have
noted, where possihle, which of our offices has the lead role with respect to each proposal. Options
relating to Social Security are not included in this memo.
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EDUCATION AND TRAINING (DPC/NEC as specified)
1. Ending Social Promotion. Last year's budget proposa1 included $200 million for Education
Opportunity Zones in districts that agreed to remove bad teachers. turn around failing schools, and
end social promotions. The proposal required. authorization. which Congress wil1 never give us. For
next year, we recommend a simpler approach that uses existing authority and focuses entirely on
ending social promotion. We would like to expand our after-school program from $200 million to
$700 million and give a disproportionate share ofthts money to districts that end social promotion,
These school districts could use the money (as Chicago does) to provide extra help after school and
mandatory summer school for students who need it (Cost; $300 mHiion above FY99 budget.)
(DPe)
2. Teacher Quality and Recruitment. Now that wc're on track to begin hiring 100,000 new
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teachers to reduce class size, we have an even greater responsibility to help communities aUract
talented neW teachers to the profession, We envision a livc~part strategy on teacher quality and
recruitment: (I) a $100 million increase in the teacher recruitment scholarsbips: we enacted this year
in the Higher Education Act. which would put us on course to attract 60,000 new teachers at high~
need schools over the next five years; (2) a $60 million initiative -- modeled after the successful
Troops-to-Teachers program -~ that would hclp states expand alternative certification routcs and
attract talented people from other professions, such as military personnel and employees in fions
being downsized~ {3} a nationwide crackdo"vn on teacher education schools, including new
regulations authorized by the Higher Education Act to require report cards for education school5-~ (4)
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a $50 million increase in the Eisenhower program to send secondary school teachers who teach
outside their field back to college to take additional courses in the subjeets they're teaching, coupled
with a new requirement that new secondary teachers pas' competency tests in a subject before they
can teach it; and (5) a high-profile effort to help states make the most ofthe 15 percent set-aside for
teacher quality in the recently passed class size legislation. (Co,t; about $210 million above FY99
budget). We are also exploring a politically interesting counter to private school choice: vouchers
for private school teachers -- i&.. an incentive program to encourage private school teachers to teach
in public schools. (DPC)
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Work..site Schools. One of the most promising new education ideas sprouting up around the
country is the creation of public schools at work sites, designed primarily to serve employees'
children. School districts provide the teacbers and curriculum; companies provide facHities and
upkeep. Thes" schools-at·v.'Ork ,erve a host of objectives at once, by (1) providing new facilities at
no cost to the district; (2) increasing parental involvement in the schools and parental satisfaction
in the workplace; (3) reducing employee lurnover and absenteeism; and (4) increasing school
diversity. because work sites are more diverse than'residential neighborhoods. We propose a S100
million increase in an existing discretionary program to provide grants to 100 ccmmunities to laWlch
work-site schools. We also could seek a stand·alone hill (like the charter school law) to advance this
idea. In addition. we are worki~g with Treasury to develop a tax credit for businesses that start on~
site schools, similar to the Kohl business tax credit for on~site child care that is already in our budget.
(Cost; $100 million for start-up grants. No estimate yet for tax credit, but it will be very smaiL)
(DPCINEC)
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4. Public SI!hool Choice. As support grows for private school vouchers, we must continue our
efforts to expand choices within the public schools, Charter schoots are one answer, and we
recommend a $20 million increase, to $120 million, to keep us on track to 3,000 charter school, by
2002. Work~site schools are another. We also recommend increased funding for (1) an existing
grant program that helps urban and suburban school districts reduce racial isolation by fonning
interdistricL magnet' programs; and (2) magnet schools on university campuses, especially in urban
areas. (Cosl: $25 million for interdistrict magnet programs; $15 million for 10 university-based
,ehools.) (DPC)
5. Scbool Leadership Academies. Research has shown that an effective principal is the single
most important indicator of school success, yet litHe has been done at the national or state level to
improve the management skills of principals, We propose a small in'hiativc to create school
leadership academies that would provide training in management, teacher evaluation, scbool
discipline. and other areas to elementary school principals in high-poverty districts. (Cost: $50
million) (DPC)
6. Class sil.e. To stay on course to reach 100,000 new teachers in seven years, we will ask for $13
billion in the FY2000 budgct We are planning an ambitious rollollt nfthe class size initiative over
tbe next ycar, as we award first~ycar funding, issue guidance to local districts on how the program
works, and so on. We ahio will press Congress 10 restore the local matching requirement and
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strengthen the provisions to require competency testing of new teachers. (DPe)
7. Adult Literacy. According to the National Adult Literacy Survey. 44 million adults struggle
v.ith a job application. cannot read to their children, or are left on the we1fare rolls because they lack
basic skills. We are considering; (l) Workplace; a new tax credit andlor Federal grants to encourage
employers to provide adult basic education classes at the worksite. and setting aside funds for work
based literacy projects Yvithin Wetfare-to-\Vork competitive grants (se welfare section ofthis memo);
(2) CQmmunj~: expanding the infrastructure and funding for adult basic education through the Adult
Education program! encouraging the development of programs focused on easing the transition to
the U.s. for new immigrants (through ESLand civics classes), subsidizing the provision of child care
on college campuses and other adult education sites. and IUlUlching a national inforn:ation campaign
to make people aware of the problem offunctional illiteracy and of available services; and (3) J:l=:
using the new Learning Anytime Anywhere Partnerships to create software for adult basic education
using $200 computers (e.g.• WebTV, game players) and subsidizing public housing projects that
create computer literacy programs. (NEC)
8. National Campaign to Open Doors of College.' Notwithstanding enonnous strides we have
made in reducing the financial barriers to college, too many families assume college is more
expensive th~Ul it really is and are not aware of the aid that is available (Even among low-income
youth with high test scores, one-fourth say they have not been abJe to get much information about
financial aid for college). We are planning: (I) Jaunching a major national public information
campaign about college costs and financial aid (e.g. naming a national chairman such as Bm Cosby.
having a national college visit day, etc.). (2) building on the authority in the new GEAR UP program,
providing every middle school (e.g. 7th grade counselor) with the ability to give students a "21st
Century Scholar Certificate," indicating the financial aid that they are eligible for, and (3) seeking
to provide every high~poverty middle school with u college partner, This does not require any new
investment, just some focus and creativity. (NEe)
9. Improving the College Success Rate, Getting people in the doors of college is not enough to
close the racial and income opportWlity gaps, For example, only 21 % of African~Amcrican and
18% of Hispanic students who begin college complete a bachelor's degree within 5 years compared
to 30% of White students_ We are considering a package of policies; including: (1) a super-Pel!
.b'11Ult for the lowest income families andlor to encourage a full-time focus on school in the fit:St year
. ofcollege (this would be expensive); (2) expanding successful mentoring and other support services
in colleges (inc~uding those aimed at graduate school preparation); (3) promoting college course·
taking while in high school; (4) improving articulation between two-year and four-year col1eges~ (5)
encouraging partnerShips between predominately minority-serving and predominately majority
serving institutions of higher education (particularly to promote graduate st:udy); and (6) establishing
a bridge fellowship program for graduate study ill science and technology fields for minorities and
women. (l'EC)
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to. School Modcrnil.ation. The current assumption is that we will repeat this year's proposal for'
tax credits to build and renovate schools covering the interest on nearly $22 billion in bonds. We
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however, critically comparing our current proposal against other possible mechanisms to ensure
we have the most effective approach. (NEC}
11.
Furtber Expanding Junior ROTC. In response to the Los Angeles riots, Colin Powell
proposed and Congress approved in 1992 an expansion of 'he high school-based JROTC. Since
then, 1,000 units have been added primarily in urban areas, bringing the tntal to nearly 2,600 units
with 400,000 participants, The budget increased over thai period from $76 million to $166 million.
There is a waiting list of more than 450 schools that would like to have a JROTC unit. Because
DOD does not plan any further expansion, these 450 schools on 'he waiting list will not likely be
added. We could propose adding another 900 units over the next few years, to reach the authorized
maximum of 3,500. Cost: about $235 million. (NEC)
12. Training American W orke.. for Current and Future Skills Gaps. We should
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challenge the private sector to make specific commitments to train mQre American workers:, which
they pledged to do during the debate on HI-B vi,.... They could provide more college scholarships
for women and minorities, partner with community colleges to develop cutting~edgc curricula. and
encourage their employees to serve as telementors for middle schoo! students to get them excited .
about math and science. In addition. we are working on: (l) a program to foster partnerships
("Regional Skills Alliances") between industry and training providers to train both employed and
unemployed workers; (2) competitive grants to encourt,ge companies to develop programs In which
they subsidize the training of individuals who they then commit to hire; (3) extenslons and/or
expansions of some of the current training tax provisions (sueh as the lifelong learning tax credit and
Section 127);and (4) a major infonnationalfmedia campaign by the Departments of Education and
Labor to inform all Americans about available training opportunities, finaneitd aid. and job search
assistance to allow them to develop the skills required for employment opportunities around the
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country. (NEC)
13. Making Job Training Universal. We are considering an initiative to make job training more
wUversal. TIle first component of this initiative would be to seek a significant increase in dislocated
worker funding ¥~ about $190 million -- 50 that we are on path to provide training to every dislocated
worker who wants or needs it within five years. The second component would be to ensure that
every unemployed person is eligible for core labor market services1 e.g.~job search ttSsisumce. The
final component would be to take the steps necessary to ensure that every worker, regardless of
where they live, would be able to have access to a One-Stop Career Center (where they can learn
about job training, cmpioyr:ncnt service activities, unemployment insurance, vocational
rehabilitatioll, adult education, and other assistance.) (NEe)
14. Community Computing Centers. We have roughly 650 computing commulli~y centers. wh~
empower low~incomc Americans in the Information Age by teaching them to type a cover letter ~d
a resume, search for job vacancies on the Internet, or even start an Internet-related business. These
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efforts should be expanded. (NEC)
Sebool safety - sec CRIME s.eli...
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SERVICE OJPC)
1. AmeriCo:rps Seniors. In the wake of John Glenn's return to space, we have an opportunity to
give other senior citizens a mission. We propose adding $25 million to the current AmcriCorps
program to ,;reate a senior corps of 10,000 volunteers to serve as tutors and mentors and in
afterschool programs. We would build on a successful demonstration program that recruits seniors
to serve 15-20 hours per week over a fixed period of time in schools and other community centers.
In exchange, seniors would be eligible for small incentives, including awards to participate in senior
learning programs. By inspiring responsibility among seniors, this initiative would provide an ideal
complement to Social Security refonn. John Glenn has expressed some interest "in playing a role in
AmeriCmps now that he's retired. We could invite him back to the State of the Union and place him
in charge of a national effort to inspire seniors to serve. (Cost: $25 million)
2. Expand AmcriCorps. We propose expanding the AmeriCorps program from its current level
of 50,000 members per year to approximately 70,000 per year, with the goal of reaching 100,000
per year by the end of this Administration. These additional members could be targeted to serve
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'primarily in after-school and summer school programs. (Cost: $75 million)
3. Expand Service Component of Work-Study Program. Nearly I million students now receive
federal work-study funding. Despite our efforts, colleges and universities are required to use only
7 percent of their work-study money for students employed in community service. The higher
education lobby would object, but we could propose a substantial increase in that requirement -- c.g.,
phasing it up to 25 percent over the next 3 years.
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HEALTH CARE (DPCINEC as specified below)
I. Long-Tcl'm Care Initiative. This package could include: (1) a tax credit of up to $1,000 for
people with"three or more limitations in activities of daily living (ADL) or their caregivers, at a cost
of about $6 billion over 5 years; (2) a plan for OPM to offer federal employees a choice of
high-quality private long-tenn care insurance policies at lower-than-market prices; (3) a family
caregiver support program, costing about $500 to $750 million over fi ve years, that would provide
grants to states for "one-stop shops" to assist families who care for severely impaired elderly
relatives through counseling, training, and respite services; and (4) a nursing home quality initiative,
costing about $500 to $750 million over five years, that would include new enforcement provisions
~, increased penalties), new funds for surveys ofrereat offenders and improved surveyor training,
and perhaps a new commission to oversee HCFA's nursing home enforcement efforts and to
investigate other kinds of facilities where health care is offered (~, assisted living facilities).
(DPCINEC)
2. Disability Proposals. A health-related disabilities package could include: (1) the Jcffords
Kennedy Work Incentives Improvement Act, which enables people with disabilities to go back to
work by giving them an option to buy into Medicaid and Medicare, at a cost of about $1.2 billion
over 5 years; (2) a proposal, costing $50 million over five years, to promote the deinstitutionalization
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of Medicaid beneficiaries by developing viable community-based care alternatives for people
residjng in nursing homes after a ..
insurance
e
p
in"; and (3) a proposal to make Medigap supplemental
Wwith·disab. ,
eparate work-related disabilities package could incl : a tax credit of $1,000 to $5,000 for
working people with disahUities to assist them in
or the costs associated with employment,
coslofabout $1 to 2 billio
; a new competitive grant program, developed by your
disabilitIes
oree, to increase the employment Tate of adults with disabHities; and efforts to
ensure· that new technologies are designed so as to be accessihle to people with disabilities (::.se:.:e_ _~
technology section). (DPClNEC)
3. Health Insurance Coverage Expansions. We could propose again, in somewhat new and
improved forms: {l} an initiative to encourage smaIl businesses to fonn purchasing cooperatives for
health insurnnce, costing ahout $50 to 100 million over 5 years; (2) proposals to improve outreach
for childrenls health insurance; and (3) a proposal, more limited than last year's, to provide a
Medicare buy-in for certain people ages 55 to 65, benefiting ahout 30,000 people and costing $500
million over 5 years. (DPClNEC)
4. Biomedical Research. We should again propose an increased investment in biomedical research
-- perhaps (depending on how we treat tobacco money in the budget) between $500 million and $1
billion. (DPC)
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5. Antibiotics (Super Bug) Initiative. Resistance to antibiotics is becoming a public health crisis.
causing prolonged illnesses and even death. A new initiative, costing about $25 million each year,
could address this problem through: (l) a major outreach and education campaign involving
hospitals, health professionals, and managed care organizations; and (2) new research and,
surveHlance efforts to understand where and why antibiotic resistance occurs and to develop
effective responses. (DPC)
6. Bioterrorism Initiative. This Initiative, costing $100-300 million each year, would: (1) train
epidemic inteHigence officers who can coordinate with state health departments to identi ry and
respond to attacks~ (2) develop a mass casualty emergency response system that includes primary
care, emergency transportation. and decontamination abilities; (3) create and maintain a stockpile
of phannaceuticals; and (4) improve research to develop new vaccines and antibiotics to be used in
the event of attack. (DPC)
7. Protecting bt:ncficianes from HMO withdrawals from Medicare. This year, a number of
HMOs pulled out of Mcdicarc with only a few months notice, leaving 50,000 beneficiaries with no
plan options in their areas, You announced that the Administration would develop legislation to
prevent this behavior in the future, and we arc currently reviewing the best approaches. (DPe)
8. Redesigning and increasing enrollment in Medicare's premium assistance program. Over
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3 million low-income Medicare beneficiaries are eligible but dQ not receive Medicaid coverage of
their Medicare premiums and cost sharing, Many more may not get enough assistanCe through a new
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provision that is supposed to help higher income beneficiaries. We are developing a range of
proposals, costing up to $500 million over five years, to use Social Security Offices to educate
beneficiaries about this program, reduce administrative complexity for states, and give them
inc.nti yes to engage in more aggressive outreach efforts, (DPCINEC)
9. Prescription drug coverage for Medicare beneficiaries. We are considering a variety of
proposals to address the lack of coverage for prescription drugs in Medicare, including a
means-tested Medicrud option, an approach that would apply only in managed care, a traditional
benefit for all beneficiaries, and an unsubsidized purchasing mechanism that uses Medicare's size
as leverage for drug discounts for beneficiaries, If desirable, a proposal could be included in,the
budget or coordinated with the March release of the Medicare Commission's recommendations. The
cost varies significantly depending on the proposal, ranging from $1 ·to 20 billion a year,
(DPCINEC)
10. Disease Initiatives. We are working on several initiatives designed to combat particular
diseases. These initiatIves, which you could choose to do individually or in combination, are: (I)
an asthma initiative., which wilJ curb recent steep increases in asthma cases especially among young
children, by disseminating new treauuent guidelines to state and local public health programs and
encouraging them to work with schools~ child care organizations, businesses, and other community
organizations; (2) a mental illness initiative that will accompany a Surgeon General's report on this
subject (and perhaps a White House Conference recommended by Mrs. Gore) and will include
public-private partnerships to improve access to prevention and treatment, reforms in federal health
programs to improve delivery of mental hearth services, and funding increases in the mental health
block grant; and (3) a heart disease initiativc, which could include; a new partnership with aging
networks to evaluate and improve nutrition; cfforts to measure s':lccessful prevention approaches and
replicate them nationwide; and the creation of a network of educators. churche.s, and community
based organizations to launch a nationwide awarencss campaign. In each of these initiatives~ the
public health efforts described above would supplement NIH funding of research projects. The
estimated cost of these initiatives is $50 million for asthma, $1 00 million for mental illness, and $20
million for h"art disease, (DPC)
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11. Food Safety. We are working on a food safety initiative that will highlight safety standards and
enforcement. Included in this initiative arc: (1) a repackaged and somewhat modified legislative
proposal giving the FDA and USDA additional enforcement powers (~. mandatory recalls and
civil penalties); (2) additional food-specific regulations and/or guidelines ~~ for certain fruits and
vegetables); and (3) more extensive adoption of our mode1 codes for restaurants and food service
workers. In addition, we will focus on improving coordination with state imd local agencies that
regulate food safety in order to develop a wholly integrated national inspection system. (DPC)
TOIlACCO (lJI'e)
I. State Menu. Our best vehicle for enucting tobacco legislation next year will be a legislative
waiver of federal Med(caid claims to thc states' expected $200 billion settlement with the tobacco
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companies, We will seek bipartisan agreement on a menu of uses for the federal share of state
money. with tobacco control and child care as our top priorities. We will try to use this measure as
a vehicle for other key elements of our tobacco policy, such as FDA jurisdiction and warning labels,
2. Price increase. One of the most difficult budget decisions wHJ be whether to assume a tobacco
tax increase in our budget request, and if so, what to do with the money. There are strong argwnents
on each side of the question whether to include a tobacco tax increase in our budget. If we do
assume tobacco revenue, the candidates for it include: (1) assistance 10 tobacco farmers (about S J
billion a year); (2) the long-term care tax credit (about 51 billion a year); (3) other lax cuts, such as
a child care I stay-at-home tax credit andlor a reduction in the marriage penalty; (4) NIH research;
(5) public health programs; and (6) the Medicare trust ftmd andlor a new prescription drug henefit
for Medicare beneficiaries,
FAMILIES AND CHILDREN (DPCINEC.s specified)
I. Expansion of tb. Cbild Care and Development mock Grant (old policy). We propose to
expand the Child Care and Development Blodt Grant as we did in the FY 1999 Budget The block
grant is the primary federal child care subsidy progmm, helping low-income working families to pay
for child care, Currently, between one and two mmion children are served by the program> leaving
roughly nine million children who are eligible but unserved. This proposal w011ld cost at least $7,5
billion over live years. (DPC)
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2. Tax Relid for Parents, Including Parents who Stay at HOllie. We arc considering replacing
our last year's proposal to expand the Child and Dependent Care Tax Credit with. new proposal to
benefit all parents! including those who stay home. This change will address the criticism that OUf
child care initiative did little for stay-at-home parents. We are reviewing proposals to (1) double the
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child tax credit to $1,000 per child for children under the age offour, at a cost ofabout $12 billion
over five years; (2) increase the standard deduction for each child under the age of three by $1,000,
at n cost of about $3 billion over five years; or (3) expand the Child and Dependent Care Tax Credit
as we did la<;t year and extend its benefits to parents with children below age three by assuming
minimum child care expenses of$150 each month, at a total 00$1 of about $2l billion over five years.
Each of these proposals can be dialed up or down by adjusting either the age threshold or the dollar
amount. (DPClNEC)
3. Tax Credit for Businesses Providing Child Care. We could again propose to provide a tax
credit to businesses that provide chUd care services for their employees. '1l1C credit, which covers
25% of qualified costs but may not exceed $150,000 per year, costs $500 minion over 5 years. To
further build on this concept, we also propose lo provide tax credits to busrl1c;;,.'jcs that provide on~siic
schools (see education section). (DPCfNEC),
4. Parent Puid Leave Plan. Many workers cannot afford to take unpaid Icave following the birth
or adoption of a child, even though they have access to an unpaid leave policy through FMLA or
voluntary employer benefit plans. To address this problem, we arc considering a proposal to provide
eligible parents who already have access to unpaid (cave \\ith partial wage replacement for a sct
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period of time. The cost of the program, which would be administered through the Unemployment
Insurance System, varies according to the selected eligibility criteria. If we choose, for example, to
give $200 per week for four weeks to new parents with median income (about $37,000) or below,
the cost will be about $875 million for FY 2000 (including start-up and administrative expenses).
(DPC)
5. FMLA Expansion to Businesses with 25 Workers (old but unarticulated policy). Under
current law, workers are eligible for FMLA coverage only if they work at a business with 50 or more
employees and if they have worked at least twelve months and 1,250 hours for the employer. In your
last State of the Union, you called for covering more workers under the FMLA, but did not fully
articulate how you would do so. We could now advance a specific proposal to lower the FMLA
threshold to 25 or more workers, which would expand coverage for up to ten million more American
workers. (DPCINEC)
6. Parent Education and Support Fund. We are considering proposals to create a competitive
grant program administered by HHS to fund parent education and support programs, including home
visitation programs and "second chance maternity homes" to support teen mothers and teach
parenting skills. This fund could cost about $500 million over five years. (DPC)
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7. Adoption Registry. We are working on plans to create an Internet-based adoption registry of
foster care children waiting to be adopted, so that prospective adoptive parents can learn about these
waiting children. Funding this registry would require very smally increase in HHS's Adoption
Opportunities Grant Program. (OPC)
COMMUNITY EMPOWERMENT (D1'CINEC for all)
1. CDFI Tax Credit. We are looking at a proposal to extend tax. incentives to encourage
investment in eDFIs, which would leverage additional private investment in distressed areas and
stimulate the economic revitalization of those areas. Under the proposal, $100 million in non
refundable tax credits would be made available to the CDFI Fund to allocate among equity investors
in qualified CDFls using a competitive process.
2. Microcredit Initiative. We are working to identify means to increase support for microenterprise
finance, both domestically and intemational\y. We arc examining whether to build on Senators
Kennedy's and Domenici's PRIME legislation which would provide technical assistance to
microcnterprise. We arc also looking at increased funding for COFI initiatives specifically targeted
to mieroent4!rprise. On the international side, we are looking at whether we can increase
microenterprise funding through USAID or MDBs, especially to countries hardest hit by the financial
cnSlS.
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3. Clean -Water, Parks, and Communities Bonds. We are examining three proposals to
encourage "green" infrastructure projects. The first model uses the same financing mechanism as
your school construction proposal for a menu of projects: protecting and improving water quality;
cleanup of contaminated sediments; waterfront reclamation and revitalization; stormwater runoff
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control; purchasing of green spaces to prevent sprawl; park enhancements and revitalization, and
brownfields cleanup. The second model. which provides a smaller incentive than the first modeJ,
wouJd create new tax-exempt bond authority for these state and local areas to invest in clean water)
parks, and conununities. The advantage ofthis model is that it builds on the current system of bond
finance. The final model would allocate tax credits (like the Low-Income Housing Tax Credit) to
states and local areas to provide to the developers of these green infrastructure projects.
4. Employment Tax Credits. The Work Opportunity Tax Credit .nd the Welfare--To-Work Tax
Credit encourage employers to hire and retain members of certain economicaUy disadvantaged
targeted groups. Both credits will expire on June 30. 1999. Under this proposal the two credits
would be made permanem.
S. Re-Develop 10,000 Abandoned Buildings. Abandoned buildings are a symbol of urban blight,
and an action plan to turn this around win be a powerful signal of change, We are examining
different proposals to help re-develop 10,000 abandoned buildings. combining several existing
programs Of providing grants or tax incentives to spur private-sector redevelopment of these sites,
6. Low-Income Housing Tax Credit. Last year) you proposed a 40-percent expansion OftJIC Low
Income Housing Tax Credit to spur the private sector to develop more affordable rental housing for
low-income Americans. We recorrunend that you again ask Congress to take this action, which
would restore the value of the credit to its 1986 level and help develop an additional ISO,OOO
180,000 affordable housing unit.;; over the next five years, This proposal would cost $1.6 billion over
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five years,
7. Homcowncnbip Tax Credit. We are examining two kinds of tax credits to promote
homeownership among lower-income families, who generally do not benefit from the mortgage
interest deduction. The first proposal wou1d use the model of the Low~Income Housing Tax Credit
to create a Low-Income Homeownership Tax Credit Under this proposal, low-income fam!11es
wouJd receiV1} a tow- or zero-interest second mortgage, which would reduce their upfront costs ~,
downpayment and closing costs) and investors would. receive tax credits in return. The second
proposal is a $5,000 tax credit for first-time home buyers in Empowerment Zones or Enterprise
Communities.
8. Housing for the Elderly Initiative. This proposal is designed to improve housing for elderly
people and thereby provide an alternative to nursing home care. In addition to providing capital to
improve and modify such housing to meet the needs ofcldcrly residents, the initiative would provide
housing vouchers for low income elderly who live in housing developed through the Low~lncomc
Housing Tax Credit. Because the tax credit helps subsidize rent. this proposal would allow us to
leverage our resources and provide more vouchers to the poor elderly,
9. Incremental Tcnant~bascd Section H Vouchers. To huild on our success in this rust year's
budget, we recommend s.eeking an additional 50,000 welfare~to~work housing vouchers and another
25,000 vouchers to'meet the needs of the homeless, including elderly homeless and homeless
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veterans,
10. Homeless.ess. We are working on a three-part proposal that would: (I) assist the
approximately 250,000 homeless veterans by increasing residential alternatives. comrnunity~based
contracted care, job preparation activities, stand down activities (community~sponsored events that
conduct one-stop service delivery programs for homeless veterans), tllc distribution of clothing, and
lang-tenn housing; (2) allow V A to sell surplus property with 10 percent of proceed, going to
homeless veterans; and (3) start a demonstration project targeted to the chro!1ically homeless to test
the most promising models for moving the chronically homeless to self~sufficiency using a
combination of pennanent housing and links to mainstream services. Cost: $105 million -- $60
million far V A and $45 million for HUD demonstration project.
RURAL!AGRICULTURE (NECIDPC as specified)
I. Strengthening the Safety Net. To help farmers suffering from the depressed export markets and
natural disasters, we arc considering various reforms of the crop insurance program and closing gaps
in the emergency loan program. We are paying special attention to programs that will help small
family fanns. (NEe)
2. Bringing the knowledge ofland grant colleges to every rural American: The USDA spends
$1.6 bHlion on agricultural research. much of it at America's land grant colleges and universities.
The government could provide grants to ensure that this information is available on the Internet and
•
is well-organized ~-S() that all rural Americans can easily access infonnation on topics such as crops,
livestock, rural development, natural resource conservation, and food safety, (NEC)
3. Emergency Medical Services in Rural Areas. The presence of viable emergency systems is
critical for residents in rural areas, because of the high rates of injury associated with jobs in these
areas and the tong distances to hea1th providers. This proposal, costing about $50 million, would
provide funds to Slates and local communities to improve access to 911 services or alternative
emergency systems. It also would fund programs to help rural communities train local citizens in
CPR and first responder techniques and to recruit and retain emergency personnel. (DPC)
~
0..0u
4. Rural Tl·ansportaUon. Transportation is crucial to the efforts of residents and businesses in
ruml America to improve the livability of their communities and expand their economic activities:
We arc developing u rural transportation initiative that will help those who live and work in rural
\.
areas by improving the ability of farms and businesses to obtain materials and move their products
to markets, and by making it easier for small communities to attract additional commercial jet air
~
service. (NEC/DPC)
~_..j
c....
TECHNOLOGY (NEC)
1. Curhcuts on the Informatioll Highway. We are looking at several options that would m.l.kc
information technology usable by people with disabilities in a manner that improves their lives: (I)
•
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13
investing in R&D (e.g., texHo-speech, automatic captioning, speech recognition); (2) giving
disabilities groups a seat at the table as the standards for new teebnologies are developed; (3) making
the government a model "user" ofaccessible technology; and (4) explore opportunities for greater
deployment In addition~ the tax credit for work-related impainnent expenses for people with
disabilities could be used to expand the market for assistive technology.
2. A Digittll Library for Science, Math and Engineering. We need to get every young student
and undergroduatc excited about math. science and engineering. We are exploring creating a «digital
library," which would contain lectures from Nobel Prize laureates, have an ability to track and
replicate cutting~edge scientific experiments, and make it easier for students and tcachers to locate
the best instructional material on the Internet
•
3. InfonD:!Ition Technology Researeh Initiative. Increasing aUf investment in information
technology research, which is currently about $1 billion of the federal research budget, could lead
to the following breakthroughs;' supercomputers that Crul. more rapidly petform important functions,
such as designing life~saving drugs and predicting severe weather systems; wireless networks that
can bring telemedicine and distance learning to rural America; u device of the size of a paper that
could monitor the vital signs of a senior citizen) send a "911" message in the event of a medical
emergency, and provide an exact location uSing global positioning technology; new software tools
that can help us cope with uinfonnation overload" by discovering patterns in huge quantities of data;
and intelligent spacecrafi that can explore the Solar System, Options have been developed at roughly
$100, $200 and $400 million in FY2000; and $1, $2 and $3 billion over 5 years.
4. 21st Century Research Fund. One initiative that you announced in last year's budget that we
think is important to continue is the 21 s.t Century Research Fund -~ which provided across-the-board
support for civilian R&D at agencies such as NIH, NSF, and Energy. For FY99, Congress provided
a 10 percent increase for basic research, so this is an area where bipartisan cooperation is possible.
Currently. the FY2000 budget reflects only a 2% increase in civilian research,
CRIME (tlPC)'
I. Crimc Hill 11. The 1994 Crime Act will expire at the end of the FY 2000 budget cycle,
guaranteeing that the next Congress will consider major crime legislation. We recommend tbat you
get a jump on this debate by using your State of the Union and FY 2000 budget to challenge
Congress to pass a new crime bill that huilds on the core elements 'of the successful 1994 Act -- more
police, smarlcr punishment, and more prevention. Most of the money required is already built into
future budgcts~ continuation of the COPS program, however, will require new funds totaling about
$1 billion, We believe that a new Crime Act should include the following elements:
•
•
Community-Oriented Policing and Prosecution Services (COPPS). Your pledge to help
fund 100,000 more police is likely to be fulfilled before the cnd of next summer. A new
COPPS initiative (note the extra "P" for "Prosceution'\ costing about $1.4 billion in the first
year, could include funds to: (1) hire, redeploy, and retain fin estimated 1,,500 m()re pollee
each year; (2) provide modern technology and equipment and support training in modern
I'
I.>
c...---"
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14
policiJtlg techniques, with a special emphasis on "hot spots" technology; (3) hire, train, and
equip prosecutors to join local police in fighting crime on a more community-based, pro
active basis; and (4) support partnerships between law enforcement and community-based
groups to prevent crime in their areas.
•
A new focus on probation supervision and coerced abstinence. The punishment title of
the crime bill now focuses largely on prison construction; we recommend shifting the focus
to- a new "Certainty of Punishment" initiative that will support the expanded use of probation
supervision and of drug testing and treatment.
•
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Gun iinitiatives. A new crime bill should include your longstanding fireanns priorities -
juvenile Brady, Brady II, federal CAP legislation and child safety locks. It also could include
new proposals to: (1) close the loophole that exempts many fireanns sales at gun shows and
flea markets from Brady background checks; (2) expand the Youth Crime Gun Interdiction
Initiative (YCGII) -- to trace all crime guns and investigate gun traffickers -- to an additional
'20-40 cities; and (3) assemble gun strike forces -- teams of federal prosecutors and ATF
agents, acting with local law enforcement -- to target cities with high levels of gun violence
and crack down on gun traffickers.
•
VaIUl!s-based crime prevention initiative. In addition to other crime bill prevention
progrmns, we could invest in promoting values-based crime and violence prevention efforts,
such as those of Rev. Eugene Rivers. Funds from this program would go to comprehensive
prevention programs run by faith-based and other institutions seking to instill and reinforce
COmITIOn sense values in troubled youth.
2. Safe, Disciplined, and Drug-Free Schools. At the White House Conference on School Safety,
you announced that you would overhaul and strengthen the Safe and Drug-Free Schools Program.
Under this proposed refonu, funds will be appropriately targeted to schools with serious drug and
crime problems, and schools will have to adopt rigorous, comprehensive school safety plans that
include: tough but fair discipline policies, such as zero tolerance for guns and drugs; safe passage
to and from schools; effective drug and violence policies and programs; annual school safety and
drug use report cards; links to after school programs; efforts to involve parents; and crisis
management plans. We also could include in this package (1) funds for states that adopt a policy of
drug testing first-time applicants for drivers' licenses and (2) funds for school districts that adopt a .
policy of drug testing middle and high school students with parental consent. We believe that these
rcfonus will require up to $450 million in new funding in FY 2000.
•
3. Parity for Substance Abuse Treatment. Appropriate substance abuse treatment remains
unavailable 10 nearly half of the people who need it. To help fill this treatmcnt gap, we could
propose legislation to encourage parity between substance abuse treatment and other medical
benefits. Similar to the Mental Health Parity Act signed into law in 1996, a current draft of this
legislation would prohibit health care plans that provide a substance abuse benefit from setting
annual or lifetime dollar limits on this benefit at a lower level than those for other medical and
�•
15
surgical benefits. At the same time, we would have to ensure that federal health programs provide
parity between substance abuse treatment and other medical benefits; we are still exploring the cost
of any necessary r~fonns to these programs.
4. Binge Drinking. We arc working on a number of proposals regarding alcohol abuse, including
(1) promoting a voluntary code for alcohol advertisements directed toward minors; (2) banning
alcohol billboards near schools; (3) discouraging alcohol advertising on youth-oriented web sites;
(4) and funding educational efforts about the dangers of alcohol consumption.
WELFARE REFORM, CHILD SUPPORT ENFORCEMENT, AND CHILD WELFARE (DPC)
1. Reauthorize the Welfare-to-Work Program. Congress authorized the Welfare-ta-Work
Program for only two years; if we wish to continue our current investment in the hardest-to-employ,
we will have to propose a reauthorization of about $1.5 billion annually. Within this funding level,
we propose several set-asides, totaling $500 million, for the following specific purposes: (I) work
based English-language literacy projects for immigrants 'and others; (2) work-based substance abuse
testing and tr.:;:atment programs; (3) employment services for welfare recipients with disabilities; and
(4) a work-based program to promote responsible fatherhood, including efforts to increase low
income fathers' employment and earnings ~d ensure that they provide financial and other support
to their children.
•
2. Child SUllport. One initiative, costing just a few million dollars each year, would increase the
prosecution of egregious child support violators by establishing multi-agency teams, working with
state and local law enforcement, to identify, analyze, and investigate cases for prosecution. A pilot
project of this kind is already under way in five states; this proposal would put these units in place
all across tht: nation within the next several years. A seco~d initiative would seek legislation to
exclude doclors and other health care providers who are delinquent in child support from the
Medicare program or from programs offering health professional loans.
3. Children "Aging Out" of Foster Care. Each year, nearly 20,000 18-year-olds "age out" of the
public child welfare system. Federal financial support for these young people ends just at the time
they arc making the critical transition to adulthood. Areas for increased investment for these young
adults include: (I) expanding the independent living program, which provides services to foster care
children in this age group; (2) expanding the transitional living program, a competitive grant
program that funds community-based organizations that provide services to this population,.
including housing support; and (3) giving slates the option of using Federal Medicaid dollars to
provide health care coverage for this population. (Cost: roughly $150 million each year)
Wclfarc-to-'VorkHousing Vouchers and Tax Crcdit-- scc COMMUNITY EMPOWERMENT
Section
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CIVIL RIGHTS AND WOMEN'S RIGHTS (IlPC)
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16
1. Equall'uy. We are working on a program to be run by the EEOC and DOL to increase outreach
to businesses and employees about equal pay requirements, provide technical assistance to
businesses s(lcking to comply, improve training for EEOC emp!oyees. and expand enforcement
capabilities. In addition, the program will fund research on the natore and extent of wage
discriminati(IO, as weB as a new Women in Non-Traditional Occupations Initiative designed to
improve access of women into .occupations such as construction and high technology. Cost: ubout
$20 million for EEOC and $ I 0 million for DOL.
2. Abortion Violence. We are working on a comprehensive initiative to address violence against
providers of reproductive health services. This initiative may include: (I) a National Task Force
established by the Department ofJustice that will conduct investigations ofabortion violence, collect
and collate information related to clinic violence, and provide training to federal, state, and local law
enforcement personnel on how to address this problem; (2) special security measures, including
stepped-up I].S. Marshal support. at clinics identified (0 be at risk of violence; and (3) federal
guarantees of Joans taken out by cHnics that must rebuild after they have been attacked. Cost:
Unknown at this time.
.
TRANSl'OIlTATION (NICC/DI'C as specified)
blue-rib~JeJ;
1. Reauthorization oftll. FAA, with Foeus on Modernization and Competition. A
bi-partisan panel concluded last year that the air transportation system faces .Igridlock'; within a...j.../I
decade without sweeping changes, We are considering various policy options to incorporate into' "
the FAA reauthorization that you will propose in 1999 (it is a must pass this year) that will: (I)
improve tlle t~fficiency and capacity of thenation's aviation system, and (2) enhance competition and
service to rural areas, Some of the components of this initiative would include: centraHzing the air
traffic control services (ATS) in a perfonnance-based organization (recommended by the bi-partisan
panel); financing AT8 for commercial aviation through cost-based user fees (supported by the major
airlines}; increasing Passenger Fa(;ility Charges (PFCs) to finance airport expansion nationwide
(supported by slale and local governments); modifying federal rules on how airports can use PFCs
and other funds to encourage new airline entrants; and enhancing service to underserved areas.
•
We are also looking at ways to further competition in international aviation. The Administration has
extended the benefits ofcompetition by negotiating dozens ofbilatera1 open~skjes agreements. We
could pres.>; our trading partners for World Wide Open Skies and explore lifting otber restrictions on
foreign aviation investment and operation on a reciprocal basis. (NEe)
2. Auto Safety. We are making headway on auto safety. Last year, the number and mtc or auto
fatalities declined. However, we still have a long way to go -- more than 40,000 Americans die in
auto accidents each year, at a direct cost ofSI 50 billion, 'Ine keys are seatbelts (more) and alcohol
(less). We arc working on a comprehensive initiative that would include: (l) meeting the President's
goal of 85 percent seatbelt compliance by the year 2000, which would save 4,000 lives and nearly
$7 billion; (2) promoting education initiatives like the Buckle-Up Ameriea campaign; (3) enforcing
the TEA-21 requirement that states lower the legal blood alcohol content level from .10 to ~08: and
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17
(4) pushing 8. new Administration initiative on children's safety that will target auto accidents, among
other problems, by promoting the use ofchild safety seals, booster seals (for children ages 4-8), and
bicycle helmets. (NEClDPC)
3. Transportation Needs oftbe Aged. With the number of Americans over 65 expected to grow
by half by 2020, we should begin addressing the need to ensure their continued mobility,
independence and safety in their later years. We are only beginning to look at this issue with DOT,
which plans to hold six town meetings soon with senior citizens~ medical experts, lransportation
safety specialists, and others to discuss the problems and challenges and identify best practices. The
U.S. \Io,rill host an international conference on this topic next year, in connection \'lith the United
:Nation's Year ofOlder Persons. This may be combined with the
the elderly initiativcs. (NEC)
long~term
care and the housing for
P
~I
~l~
4."Smart (;rowth" and Sustainable Development. One of the biggest challenges facing '0'~
America's communities is that "sprawl" development is threatening the long~tenn economic vitality<::!./.. '
and quality oflife in America's urban. suburban and rural areas. Although land use decisions should
rernruu the domain ofstate and local govenunent~ the federal government can be an effective partner, .
First, we will continue investing in sustainable transportation, TEA-21 authorizes a record $41
billion over the next six years for transit; increases tax-fi't.>e transit benefits; and expands
communities' ability to transfer funds from highway construction to transit, bicycle and pedestrian
programs~ telecommuting and other forms of transportation that reduce congestion and pollution,
Second, we will provide incentives to make it easier for communities to pursue smart growth
policies. by exploring ways cities can capture the air quality benefits of sustainable development and
by supporting n private sector initiative that would encourage mortgage lenders to consider the
savings from Ulocation efficiency"in making mortgage determinations for homebuyers, (NEe) ~
•
ENERGY (NEC)
to
1. F:leetrieity Restructuring. You eQuid call on Congress
cnact legislation, to make the
electricity industry more competitive and to provide more choices for industrial, commercial and
residential
The AdmRinis.trution's
Cfofirnpetitio"b Act will dsavc
consumers .<t
I IOn a year- eta1 l competitIOn WI not on y Improve e IClcncy, ut also re uce
the twowthlrds waste of energy currently associated \\lith fossn~fuel generation of electricity. thereby
cutting gre(mhOllSC gas emissions. Prominent Republicans have lnciuded electricity restructuring
on their list of priori tics for 1999.
~us20tobmlel'rs.
~?mp~lhlensive IEJ~ctridty
2. Distributed Gcncratio-n ("Micropowc.r"). To increase the consumer savings and environmental
benefits from clectricity competition, the Administration will pursue legislation to eliminatc
obstacles to [he usc of small, clean efficient generation technologies (e.g., fuel cells and
rhol:ovoltuics) that c..'11l be in~tallcd at or near the electricity user's site, Moving from large, central
station gcn!!ratiol1 of electricity to distributed generation by small, dean sources is analogous to the
•
move from mainframe computers to personal computers.
~~
1
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PENSIONS (NEC)
1. Expandoo Private Pension Plan Coverage: Last year, you announced several initiatives to
expand pension plan coverage which were not enacted, but which we continue to believe are
important and have substantial support on the HilL We should again call for legislation that:
a1,lthorizes a simplified plan for small businesses that combines the best features of a defined benefit
and defIned conu-ibution plan (SMAR1), costing $313 million over five years; provides a three-year
tax credit to encourage smaU businesses to set up retirement programs, costing $508 million over
five years; and authorizes payroll deductions for lRA3. We are exploring ways to expand coverage
for moderate and lower-income workers. Consideration is also being given to ways of enabling
multiple small businesses to pool together for pension plan administration.
2. Woments Retirement Security: To underscore the importance of pensions for women~s
re-tirement se<;urity, you would calJ for legislation enacting the too initiatives you announced in late
October ~- namely ~ that time taken under FMLA should count toward retirement pian vesting
requirements and mandating that employer plans offer an option that pays less while the retired
employee is living but pays a survivor benefit equal to at least 75 percent of the benefit the couple
received while both were alive,
3. Pension Portability: You could renew your call for reducing vesting requirements from five years
to three years for employer matching contributions to 401(k) and other plans to reflect an increasingiy
mobile workforce, and more workers moving in and out of the workforce over a lifetime, We are aLl)o
exploring various options that would increase pension portability and facilitate the movement of
retirement savings between plans, where this can be done without encouraging «leakage" or loss of
worker protections - e.g., providing that federal employees can roll over retirement savings frorn
private sector qualified plans into the federal Thrift Savings Plan,
•
4. Expand Pension Right to Know Provisions: You could call for a pension right to know package
that provides for both workers and their spouses general information relating to retirement needs and
their beneHts under employer retirement plans. In addition. an employee's spouse should have the
same: rights t::> get information as the employee. before waiving the statutorily provided survivor
protection. You should caB for a Pension Right to Know package that provides information for both
workers and their spouses. We are also working on an employee education program that would
provide employees with the tools they need to work with tbeir employers 10 provide pension plans,
and are thinking about how to encourage courses in high schools on the importance of savings and
other general investment education (which eun be combined with the Consumer Literacy and
Education campaign described below). Consideration is also being given to a savings stamp book
program in tile schools (sel! savings stamps in very small amounts; when lhe hook is full, (urn it in
for a U.S. savings bond) to help educate the young about how to reach savings goals.
5. Increase Retirement Security: To promote securil.y. we are continuing to work on the pension
audit bilL changes to the multi employer (collectively bargained} plan rules, and exp.ansion of
PBGe's missing participant program,
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19
FINANCIAL SERVICES (NECIDPC as specified)
1. Consumer Financial Literacy and Education. We are currently developing a set of proposals
to promote (:onsumer financial awareness and enhance consumer credit literacy, ranging from a
public awarcmess campaign to establishing an educational clearinghouse to disseminate quality
curricula to high school students. We are also working on a study to identify what the biggest
problems arc with how Americans use consumer credit, and what basic banking services and steps
they can take to help themselves (this may be very important if bankruptcy refonn is a live item next
year), Part of our focus is on reaching out to lowRincome households, building on (and expanding)
two existing government programs -- Treasury's Electronic Funds Transfer program that was a first
step in helping the "unbanked" enter into electronic commerce and a USDA extension progranl that
is providing some (limited) services to rural low-income families. This proposal would cost $5-10
million.. (NEC)
2. Consumer Financial Bill of Rights. In order to respond to the outrage conswners feel about
ATM surcharges, without supporting economically questionable regulation of ATM fees, we are
considering a proposal either for the government or for financial institutions voluntarily to make
publicly available a list of basic banking services and fees on an individual or geographic basis to
be published periodically over the Internet. The services profiled would include, but would not bc
limited to, charges for access to ATMs. We are also considering the adequacy of current credit card
disclosure requirements (again, relevant to bankruptcy reform) and other areas where information
about financial service arrangements would be helpful to conswners. This would cost $3-5 million.
(NECIDPC)
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THE WHITE HOUSE
WASHINGTON
MEETING ON CONGRESSIONAL AND THI:'<K-TANK
SOCIAL SECURITY REFORM APPROACHES
Cabinet Room
November 12, 1998
11:20 AM
AGENDA
1.
PLANS TRAT TRANSFER SURPLUSES TO TRUST FuJ\'D
II.
PLA!I'S TIIAT USE SURPLUSES TO FuND INDIVIDUAL ACCOv;\'TS
III.
PLANS THAT USE SURPLUSES BOTH TO STRENGTHEN THE
TRUST FUND AND ESTABLISH INDIVIDUAL ACCOUNTS
�A BASIC T't'POLOGY OF PLANS
We will be discussing six forms of Social Security plans. All of these plans use the surplus in
one way or another, and all could be designed to do so to a greater or Jesser extent.
Description
Title'
A. Plans That Use the Surplus to Shore lip the Trust Fund
1. Bond-only plans
Maintain current policy ofholding only Treasury securities.
2. Equities in the Trust
Introduce equities into the system, but hold them collectively.
.
Fund
B. Plans rhat Use the Surplus in Creating Individual Accounts
f3. Add-on individual
i l'iCCOWlts
4. Carve-out individual
accounts
Continue to use all oflhe current 12.4 percent payroll tax to fund
traditional Social Security benefits; make sufficient adjustments to
I the system (benefit cuts. revenue increases) to bring it into balance,
; Establish individual accounts in addition to the current system.
Divert some Qfthe current 12.4 percent payroll tax into individual
accounts. Individuai accounts replace part ofthe current system.
and could potentially be described as a tax cut. Relatively large
surpl~s transfers and/or cuts to the traditional Social Security
benefit would be necessary to restore solvency. So far. most carve-,
out plans have been "fiscally conservative" with ~ignificant cuts
through such provisions as raising the retirement age. With more
use of the surplus. the cuts could'be softened.
C Plans Tltat Use the Surplus l1i:!J.f1. to Shore up the Trust Fund
and t(1 Fund Individual Accoullts
5. Integrative plans
Use surplus to establish individual accounts. At retirement. part of
the proceeds of the accounts are used to finance traditional benefits, !
, while part provide an add-on individual account.
'
6. Hybrid plans
. Contribute part of the surplus directly into the Trust Fund, as under
' -________-'I"'("'I):...0_r"'("'2), and part into individual accounts as under (3).
�THREE BASIC REFORMS
. At this point. we want our discussion to focus on fundatnental issues of plan design that could
impact our short-term strategy for achieving refonn. and to zvoid spending too much time 0!1
details that can be worked out at a later date.
•
~Jany
of our plans cQntain.Jbree basic provisions t.ru!tJlre meant as place holders fQr
b:.enefit cuts RudLor revenu~ increases to be determjned later. The three provisions we
happen to have chosen close 44 percent of the 7S~year actuarial imbalance. There would
be many other ways to achievy similar solvency effects.
Raise tbe taxable maximum for tbe OASDJ payroll tax
'0 that 90 percent of
earnings are taxed by 2010. This would return the percentage of earnings that
are covered to where it waS in 1982 and 1983. In 1998 dollars. it would be
equivalent to raising the taxable maximum from $68.400 to $95.100. It would
raise taxes by up to SI,655 (on both workers and employers) for the ,ix percent of
workers with earnings above $68,400. We are exploring ways to raise revenues
without having such a large effect.
Cover state and local governmeDt new hires beginning in 2011.
Increase the number Qfyears used in calculating Sodal Security benefits
from 35 to 38.
•
These proposals could be replaced with an aCTQss4he-bQar.Q henefit rpt of] Q
.Iercent!- While all three ofthese proposals are likely to run into serious political
Clpposition, it is important to note that only One of these three provisions results in a
reduction in Social Security benefits for future retirees, and that the reduction equals oniy
3 percent of current~law benefits. Replacing these provisions with an across-the-boa:d
benefit cut would require a I O-percent cut in benefits in 2015 and later (or 20 percent by
2040 if the cuts were phased in more slowly). Such benefit cuts may be even less
palatable than these three basic provisions.
3
�I. PLANS THAT TRANSFER
SURPLUS TO THE
TRUST FUND
4
�TRANSFER {;NIFIED BUDGE'.f SURPLUSES To SOCIAL SECURITY
TRUST FUND A.."iD INVEST IN BONDS ONLY
Transfer 91 percent ofthe currently projected urufied budget surpluses to the Trust Fund
for as long as they jast (2033). and continue to invest the Trust Fund in govem'11ent
•
bonds only.
Do ruu include C011L'11on set of reforms.
•
KEy ATTRACTIONS OF THIS ApPROACH
•
Continues the program on a completely13efined benefit bas~ avoiding potentially
costly and risky alternative approaches.
•
Preserves benefi!s at CU1Tent law levels,
•
Prevents nearl}' an of the surplcs from being used for other purposes.
•
Very consistent with our message of the past year that surpluses have been reserved
.
pending Social Security reform.
KEy DISADVANTAGES OF THIS ApPROACH
•
See box on next page.
IMPACT ON 7s..VEAR ACTUARIAL BALANCE
NA
Common set of refonns
General reVe1111.e transfer to Trust Fund
Remaining Actuarial Balance
+2,22
+0.03
IMPACf ON BENEf1TS IN 2030
PERCENT OF CURRli:r-.'T LAW BENEFITS
,
I
Total
Low Earner
($12,000)
I
+0.0.
: Average Earner
~
High Earner
($27,000)
.
($43,000) .
I
+0.0
i
I
+0.0 .
AtTERNATIV£, VERSIO~ WITH 3 COMMON REI<"ORMS:
•
Transfer 55 percent of the currently projected DB surplus to Trust Fend for as long as
they last (2031). and continue to invest the Trust Fund onty in government bones.
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Make common set ofreforrns (cover state and local workers, raise maximum taxable
earnings limit, and increase nwnber of years i!1 computation base from 35 to 38).
�KEy CUALLENGES ASSOCIATED W!T~ BONDS ONL\' PLANS
• budget surplus toofthe Trust FundHelpnot reduce thefor the Euture? Transfers of the
' 'in Transfen;_ (be Surplus do Us Prepare mismatch between annual1ax
revenues and benefit obligations in the out years. However, to the extent that transfers
allow us to use the surplus to payoffdebt (or purchase private securities). they will
leave us in a stronger financial position when the demographic challenges a.."live.
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\ViU Transfers Succeed in Remo,'ing Surp!:uses from the BOQks? Under current
budget scoring rules, transfers used to purchase government bonds would not remove
any unified budget surplus from the baoks, and therefore would not prevent the surplus
from being used for tax cuts or new spending. However, allocating the swpluses for
Social Security could lead to a change in scoring rules.
•
!be DQuble CQunting Problem. The Trust Fund has already been credited with the
excess of Social Security taxes over benefits. The cu.'Tellt unified bUdget surplus is
entirely due to the Social Security surplus. Under OMB projections, 89 percent of
unified budget surpluses over the next 10 years are due to Social Security (under eBO
projections, 98 percent are due to Social Security), Ifwe were to transfer the s:.uplus to
Social Security, some might complain that we were crediting the Trust Fund twice,
Indeed, some people already argue that the Trust Fund is not Ureal" and that we are
"raiding" the Social Security Trust Fund to. mask :lon-Social Security deficits.
•
.M_IDP.l~j!U,Jmd Expands SodaI Securi.tx..J:.Ll,tIDund Structure, Many 'Democrats
and Republicans do not support the trust fund structure, saying that it does not truly set
aside money for Social Security a.'1d does not prevent the funds from being spent. By
tra.'1sferring additional funds to the trust fund, this type of plan would expand Social
Security's reliance on the trust fund structure.
•
,Sy,taiDing TraMf••, IfSurn]yses DQ Not Mltleri.Iize. If the full projected
surpluses do not materialize and transfers are scored as outlays, then tbe transfers could
result in budget deficits. To the extent that these deficits a.re financed by issuing debt~
then we will nol have done anything to improve the long run fiscal situation, In
addition. it may appear strange to be transferring amounts based on projections of
suipluses from many years ago.
6
�c=EANSFER SURPLUS TO TRUST FUND AND INVEST IN EQUITIES
•
Transfer 68 percent of the currently projected unified budget surpluses to !he Trust Fund
for 1999~2032 to purchase equities, Limit the share ofthe Trost Fund invested in equities
(0 25 percent.
KEy AITRACTIONS OF THIS ApPROACH
•
Continues the program on a completely defined benefit basis.
•
Achieves higher returns with low administrative costs while spreading risk across the
population and over time.
,•
Preserves benefits at current law levels.
KEy DISADVANTAGES OF THIS APPROACH
•
The government would 0\\11 between 5 a.'1d 11 percent of the stock market depending
on the methodology used. See the box on the next page for details
IMPACT ON 75·YEAR ACTUARIAL BALANCE
Common set of refonns
General revenue transfer 10 Trust Fund
Across tht; board ell1s to achieve sQlvency
Remaining Actuarial Balance
NA
+2.20
~
+0<01
IMPACT ON BENEFITS IN 2030
. PERCENT OF CURRENT LAW BE~EFITS
,
,
i
,
Low Earner
(512,000)
ITotal
,
Average Earner 1 High Earner
(527,000)
:
($43,000)
,
+0.0
!
.
+0.0
I
+0.0
ALTERhiATIVE VERS[ON WITH COMMON SET OF REFORMS:
•
Transfer 50 percent of the curr"olly projected DB swpluses 10 the Trust Fund for 1999·
2008 to purchase equities. Umit the share ofthe Trust Fund invested in equities to 2S
percent,
•
Make common set ofrefonns (cover state and local workers, raise maximum taxable
earnings limit. and increase number of years in computation base from 35 to 38).
•
Make across the board benefit cuts of 6 percent to achieve solvency.
7
�SUBOPTlON:
SAVE SOCIAL SECURIn' WITII SOCIAL SECURlTV Pu)S ACCOUNT
•
It would be possible to use the surplus remainjng after achieving actuarial balance to
fund individual accounts that are tnlly in addition to the traditional benefit. The
equities in the trust fund would be preserving the traditional structure. and the
individual accounts wO'Jld b~ on top of the full traditional benefit. Therefore, doubts
about sus~inability and risk of the individual accounts would not threate!l the
traditional Social Security program. However. Ihe plan would rely on essentially all of
the currC!'ltly projected surpluses for 30 years. Thereafter! this plan could create
demands far deficit funding on the individual accoun!s,
ISSUES ARISING FROM INVESTING THE TRUST Fu/<D IN EQUITIES
•
GovernmeDt Ownersbip of Private Securities. In the plans shown on the previous
page~ the government would eventually hold between 5 and 11 percent of tlle overall
stock market. This raises three important concerns:
1.
Largest Shareholder. If the Trust Fund owned 10 percent of the stock market,
the government would be the.largest shareholder in at least 70 percent ofD.S.
publicly traded corpo;oations.
2.
Political Influence on Im'cstmcnt Choices. Congress could legislate
restrictions on what the funds could invest in (e,g. no tobacco stocks).
3.
CQfPorate Go"ernanceJ~ For example, how \t,/ould govemment-o\,med
shares be voted at stockholder meetings?
.
There are different methodologies for projecting the future size of the stock market. Depending
on the methodology chosen, one obtains different estimat!?s of the share of the total stock market
held by the trusl fund. The chart below shows the share of the stock market held by the trusl
fund for two different reform plans under two different assumptions about the future growth rate
of the stock market.
1,;0,<1.0.1 ~T""'r"" ... a_ - . . ... _
..., ... 1'. . ool t _ M '~.
.....
1,*_ ,nellJo\lllo( .......1...""... tm.-_, Il""'. U1o\ (toO"'! *I'l'fi" t ... ~_
T....'M.ot..\ ........ _
110," Q! j;i~ fQgp. \ .....
"*
". ri-i-T-::!=:::::;:===r:::::::C-i
�THE PERVASIVE~ESS OF 5:0Rl'ORA TE GOI'ERMNCE ISSUES
•
While issues of government o'Wllershi? of private securities do not arise in the case of
individual accounts, issues of political influence over investment choices and of
:orpora~e governance could still be large, especially ifinvestmer.t choices were limited
to a few govenunent~authorized index funds.
WHAT IJApPENS IF THE STOCK MARKET PERFORMS POORLY?
•
1ft-i.e stock market performs worse than is projected,:he baiance in the trust fund will
be lower than projected. creating pressure for additional revenue sources or benefit
cuts. This is a common feature of plans that depend on stock market returns to fund
traditional Social Security benefits.
9
�. . . II. PLANS THAT USE THE
SURPLUS TO FUND
INDIVIDUAL ACCOUNTS
10
�FIvE KEy ISSUES CONCERJI.'1NG INDIVIDUAL ACCOVNTS
KEy IsSUE #1: PERCEPTIONS OF BE!\"EFIT LE\'"ELS
•
People might perceive that the individual account is part oftbe 10tal Social Security
benefit, and has more than made up for the reduction in the traditional benefit.
•
Alternatively, people might perceive their incividual'account as risk"}' and uncertain,
and perceive that they received a 16-percent reduction in their Social Security benefit.
•
Plans which guarantee benefit levels or which integrate the individual account and the
defined benefit may be more successful in getting people to look at their total benefit
Example:
Impact on Benefits (Percentage of Current Law)
Change in traditional henefit
AnnuHy from individual accqunt
Total
·16,3 percent
+2Q,8 percent
+4.5 percent
KEy ISSUE #2: BENEFIT GUARANTEES
Because individual 3cco~nts expose individuals to more risk, it might be desirable to shift
some of that risk to' society as a whole,
•
erQviding a Safe Iovestment Option. One way to do this would be to offer a safe
investment option -- for example, Treasury Inflation Protected Securities -- 3..fld to
design a referm package to ensure that workers who chose this safe investment option
have a r"..asonable level of benefits.
The downside of this approach is that it might encourage individuals -
particularly low·income individuals -- to take too little risk.
•
Guaranteeing Cru:.rent-Ja"" Benefits. Another option would be to let people invest
however they choose, but to guarantee that the combined benefit from traditio:lal
Social Security and the individual account would at least equal the current-law
traditional Social Security benefit (Sen, Gramm's plan adopts this approach),
A guaranteed benefit might encourage workers to take too much risk. since they
~would receive the upside gains, while the govern.inent would protect them on
the dOVlI1side. However. some argue that many investors do not take on enough
risk, Moreover, If the portfolio choices were limited to basic index funds; the
extent of this "moral hazard" pro-bIer:! would probably be m~nimaL
A guarantee shifts risk away from individuals and onto the un~fied budget We
are currently tryir.g to qua.'ltify the extent of this risk
�KEy ISSUE #3: FISCAL SUSTAlNABlLITY
For How Long Can We Afford to Fund Individual Accounts Out ofthe Surplus?
•
If remaining surpluses are spent, 2 percent individual aCCou-its can. be afforded until
around 2023.
•
Once the surpluses have run out we could continue to fJnd the individual account~ pu~
of general revenues (this would cost around 0.8 percent of GDP). or we could trigger in
t:-aditional reforms to pay for the individual accounts,
•
It might also be possible to set aside some of the extra surpluses in the early years to
prefund individual accouni contributions in later years, We present a plan like this
later in the packet.
~.------~------------------------------~
KEy ISSUE #4: DESIG!'.'ING A PACKAGE WITH "WINS" FOR BOTB PARTIES
•
Individual a~counts can be pnn:fded in a way that is more progressive than tbe
current defined benefit SodaI Security system, We could propose a negotiating
principle that the traditional benefit must remab as progressive as it currentJy is, and
t.~at any ir.d~vidual accounts must be more progressive .
•
.Q]J' reform ~ackage CQuid in.clude initiatives to reduce elderly povertL
partitula.rly among widows. and to help other needy populations. We are
developing a list of policy options in this area, For exa."11ple, if progressive individual
accounts were at least partially bequeathable, low-income families with short life
expectancies could po:entially benefit more from the progressivity of the individual
accounts than they do from the progressivity of the current system.
I
�,.
KEy ISSUE #5: F'EASIBIUTY AND COST OF INDIVIDUAL ACCOUNTS
•
lJ:JJlj"idual accgunts in foreigo~untri.cs: have nrQ\'cn very costlv. In both the U.K.
and Chile, administrative costs absorb 20 percent or more of account accumulations
under their systems of individual accounts.
•
Lower costs might be achkvaMe by limiting chQice. At the cost of severely limiting
j;hoices. it may be possible to keep costs dO\\11 significantly. Our benefit numbers
assume a very low administrative cost of 10 basis points per year. This would
,:;orrespond to a reduction in accouat accumulation of only 2 percent.
•
.L<9w-cost plans would also be low~sen'ice plans. The level of services associated
with a plan this cheap wold be very low, and in particular would compare unfavorably
with the level ofsetVices offered through most 401(k) plans. Specifically, a ba.-e
b9nes plan might offer an.."lual reporting rather than monthly or even daily reporting. a
much ::IatrOwer range of asset choice, and a far lesser ability to switch among available
assets.
•
Contributions would lae eaenilles« For individual account funding approaches that
are tied to past earnings, the delays jn making contributions into accounts could be
perceived to be very long, Under current procedures. workers' earnings for the prior
year are not verified until November in the current year, Thus, if a system of this type
were in force cllrren!ly. workers' last recorded contribution as of today might be for
1996; or workers mightjuSl have received their contributions for 1997,
•
Fundi"!: Qut of the surplus might alie.rule the perception problem. It might be
argued that since the funding of these accounts was coming from the surp!us.
individuals would not perceive the contributions to be tied to their earnings, and
therefore not see it as arriving late,
•
Other .ggTliacb~s might be possible, It is also possible, tbough not yet fully
verified, that some acceleration ofcontributions could be achieved tfu""Ough a change in
procedures.
13
�FLAT-DOLLAR ADD-ON INDIVIDUAL ACCOUNT
WITH ACROSS THE BOARD BENEFIT CUTS TO
RESTORE SOLVENCY
•
Fund $580 per worker individual accounts out of general revenue, Assume these funds
are invested 50~50 in stocks and bonds.
•
Make common set of reforms (cover state and local workers, raise maximum taxable
earnings limit, and increase number of years in computation base from 35 to 38),
•
Make additional across the board benefit cuts by revising the benefit formula. but keep
disability benefits at current-law levels,
KEy ATTRACTIONS OF THIS APPROACH
•
l
Gives individuals control over their retirement savings. Could be described as building'
wealth.
Achieves higher returns while avoiding government ownership of private securities,
KEy D1SADVANTAGES OF THlS ApPROACH
•
Surpluses are not 5ufficien! to fund individual accounts forever.
IMPACT ON i5 YEAR ACTUARIAL BALANCE
M
Common set ofrefonns
Across the board cuts 10 achjeve soJvency
Remaining Actuarial Balance
+0,97
±L22
+0.01
IMPACT ON BENEFITS IN 2030
PERCENT OF CURRENT LAW BENEFITS
i
,
i
Low Earner
Average Earner
!
High Earner
($12,000)
Common Set of Reforms
Across-the-Board Cuts Implied by
Remaining Shortfall
An.,uity provided by Individual
ACCClunt
Total
,
,
($27,000)
(543,000)
-3.0%
,
<,,0%
-3,0%
-13.3
-13,3
-13.3
+20,8
+15,8
,
I
I
+34,4
.
+18.1
I
,
,
,
,
,
I
,
+4.5
,
,
,
-0,5
i
,
�PARTIALLY VOLUNTARY INDIVIDUAL ACCOUNTS
•
Fund $290 per worker individual aCCOU:lts out of general revenue, Assume these funds
are invested SO~50 in stocks and bonds. Allow workers to w,/ulftariiy colttrfbute an.
additional 1 percent ofearnings to their accounts.
•
Make common set of reforms.
•
lvlake additional across the board benefit cuts by revising'the benefit formula, but keep
disability benefits at current·law levels.
KEy ATTRACTIONS OF TIllS ApPROACH
•
,•
Cuts in half the
accounts.
long~term
fiscal obligation of the govem.'11ent to finance individual
Preserves benefit levels for low·income workers evea if they do not make voluntary
contributions.
KEy DISADVANTAGES OF' Tms A.}lPROACH
•
Some may feel they are being asked to add an additional one percent ofpayroU taxes
simply to maintain their existing Sodal Security benefit level.
,
,
,
IMPACf ON BENEFITS IN 2030
PERCENT OF CURRENT LAW BENEFITS
Average Earner
i ($12.000)
Common Set of Reforms
-3.0%
Acros.,<;-the-?oard Cuts lmp~ied by Remaini.'lg
· Shortfall_
,
~
(527,000)
! Low El'lrner
; ($43.000)
Hi&h Earner
·3.0%
·3.0"'\
·13.3
·13.3
+17.2
Annuity provided by Indlvidua! Account
·I3.3
+10.4
+7.9
-5.9
-S.4
+1Q.8
+ 13.1
,
,
, Total without voluntary contribution
Maximum annuity pHlvided by volun~ary
Individual Account
Total.
.
.
i
,
I
-Hl.9
+8.1
i
I
,
-+lI.O .
+4.9
I
+4.7
Under current law, annual benefit levels are $6,010 for the low earner, $9,925 for the average earner, a:.d
$13.112 for the high earner.
15
,
,
I
.
�,
..
.
.
III. PLANS THAT USE THE'
SURPLUS BOTH TO SHORE
UP THE TRUST FUND AND
TO FUND INDIVIDUAL
ACCOUNTS
.
.
.
.'
16
�HYBRID PLANS:
INDIVIDUAL ACCOUNTS AND TRUST FUND EQUITY INVESTMENTS
•
Create $290 per worke: individual accounts funded oct of general revenue,
•
Invest Trust Fund assets worth 1 percent of payroll in stocks. Limit the share of the Trust
Fund invested in stocks to 25 pexent.
•
Make common set of reforms.
•
Make additional across the board cut in benefits to achieve solvency.
KEy ATTRACTIONS OF THIS ApPROACH
•
Provides wins for both sides, Shores up traditional Social Security and establishes
individual accounts,
:_
•
Because individual accounts are small, sustaining them in the out years will not crea1e
much pressure on other programs.
Because transfe~ to the trust fund are modest. the peak share of the stock market
owned by the trust fund will ber.veen 3.7 and 5,7 percent.
KEy DISADVANTAGES OF THIS ApPROACH
•
Has the downsides of both individua! aCCOU;1ts and t:l.l5t fund investments: the high
administrative costs of small individual accounts ~'id the problems of government
ownership of private securities,
.
F
IMPACT ON 75-YEAR ACTUARIAL BALANCE
Common set of reforms
Tax indiv. accounts like OASDI
+0,97
+0.06
Redeem TF assets to buy stocks
,
Across th~ board cuts to achieve soiver.cy
Remaining Actuarial Balance
+0,58
±.Q....U.
+0.00
IMPACT ON BENEF1TS IN 2030
PERCENT OF CURRENT LAW I<ENEFITS
($I2,OOO)
Average Earner(;27,000)
High Earner
($43,030)
~3.0%
-3,0%
-3,0%
~8.0
·8.0
+10.4
+7.9
Low Earner
, Common Set of Reforms
! Across"the-Board Cuts Implied by R:::mai."l.mg
· Shortfall
,
i
·8.0
.
I
Annuity provided by Individual Account
+1"7,2
Total
+6.2
.
!
·0,6
.
.
·3,1
,
,
.
.
�ARE THERE WAYS TO REDUCE GOVERNMENT OWNERSHIP.CONCERNS?
•
Trust Fund.lnyestments CQuld be allocated accQrdini: to investment chokes Qr
iIldb.iru..!als jn their individual accQunts, In plans that combine Trust Fund
investments with individual accounts. it might be possible to have the Trust Fund ~,
allocate its investments according to the aggregate investment behavior of individuals
in their individual accounts. This idea ~~ and other ideas like it -- could allow
defenders of government investment to say that it was millions of individual choices
and not a government board that was allocating funds,
I
18
�PHASED IN 2 PERCENT Il'I'DIVIDUAL ACCOUNTS WITH SHORT-TERM
TRANSFER TO TRUST FUND FOR STOCKS
•
Create $145 per worker plus 0.5 percent ofeamings individual aCCQur.ts for 2000·2009.
$290 plus 1 percentthereafier funded out of general revenue,
•
Transfer VI of projected unified budget surplus to Soc~aJ Security Trust Fund and invest in
stocks, Limit the share of the Trust Fund invested In stocks to 25 percent.
•
Make common set of reforms.
•
Make additional adjustments in traditional Social Security to achieve solvency.
KEy A'ITRAcrIONS OF TillS APrROACH
•
Ultimately creates 2 percent of payroll individual aCCO\.:!1ts while strengthening
traditional Social Security as welL
KEy DISADVANTAGES OF THIS ApPROACH
•
The 2 percent ofpayroll individual account will need to be funded even after the
surpluses run out.
•
Goverr.ment would eventuaIIy own between 5,3 and 8.0 pexe:1t of the stock market
depending on methodology used,
IMPACT ON 7S-YEAR ACTVARIAL BALANCE
Across tbe board cuts 10 achjeve solvency
+0,97
+0.17
+1.01
±Q...Q1
Remaining Actuarial Balance
+0,00
Common set of reforms
Tax indiv. accounts like ordinary income
General revenue transfer to TF and buy stocks
.. '
.
,
..
.
..
.
. IMPACT ON BENEFITS IN 2030
.
PERCEl\'T OF CURREI.'T LAW BENEFITS
I
,
, Common
I-
Set ofRefo:ms
,
,
,
.1.1
Across-the-Board CUiS Implied by Remaining
Annuity provided by Individual Accounl
Total
(127,000)
·3.0%
-3.0%
Shortfall
.
Average Earner
Low Earner
(SI2,000)
,
,
,
,
,
,
Higb Earner
(14),000)
,
,
·3,0%
.1.1
.1.1
+17.1
+16.8
+]3.0
+12.7
,
,
,
+2G.4
+16.3
19
,
,
�ADD-ON INDIVIDUAL ACCOUNT WITH ESCROW ACCOUNT TO
SUSTAIN INDIVIDUAL ACCOUIHS
•
Fund $580 per worker individual accounts out of generai revenue. Assume these funds
are invested 50~50 in stocks and bonds.
•
After funding individual accounts. place 70 percent of remaining surpluses in an escrow
account invested 50-50 in stocks and bonds. Use !.he escrow account to fund individi.lal
account contributions after the unified budget surplus runs out.
•
Make common set of reforms (cover state and local workers. raise maximum taxable
earnings limit, and increase number of years in computation base from 35 to 38).
•
Make additional across the board benefit CUts by revising the benefit formula, but keep
disability bene:~ts at current-law levels.
KEy A ITRACTIOKS OF THIS APPROACH
•
Sustains individual accounts even after surpluses run out, thereby avoiding pressure to
cut other programs to fund the new individual account "entitlement."
KEy D1SADV ANT AGES OF THIS ApPROACH
•
Has $3I1le disadvantages as other plans that combine individual accounts and
government investment in private securities.
•
Some may fmd this proposal unusual and therefore not sound because it uses the
escrow account to prefund individual aCCOU:lt contributions rather than retirement
benefits ~- a type of prefunding that people are f!1ore accustomed to in their pension
plans,
'
IMPACT ON 7S-YEAR ACTUARIAL BALANCE
+1),97
Common set of reforms
Across the board cuts 1Q achieve solvency
Remaining Actuarial Bahmce
I
±Ul
+1),OJ
IMPACT ON BENEFITS IN 2030 '
PERCENT OF CURRENT LAW BEKEFITS
,
,
,
i Common Set of'l~~forms
L(}w Earner
($12,000)
-13.3
,
High Earner
($4l,OOO)
<U%
-3.0%
,
Across--the·Board Cuts Implied ~y Remaining
I Averagc Earner
($27,000)
I
·3.()''Io
-13.3
-13,3
Sho:i[all
An."luity provided by Individual Account
+34A
+20,8
Total
+18,1
+4.5
I
,
+15.8
-0.5
�FLAT-DoLLAR ADD-ON IA WITH 50 PERCENT INTEGRATION
•
Fund $580 per worker individual accounts out of general reve:1ue. Assume these fU:lds
are invested 50~50 stocks and bonds.
•
Use 50 percent of individual accounts to fund traditional Social Security benefit. Tax
other half of retirement income from individual accounts like Soci~l Security
•
~1ake
•
Make additional adjustments to traditional Social Security program to :-estore solvency.
common set of reforms.
KEy A ITRACTIONS OFTmS APPROACH
•
Creates individual acco'.mts and strengthens traditional Social Security without
government ownerslUp ofprivate securities.
•
Integration of the benefit may make people more likely to perceive that their individual
•
account is added together to their traditional benefit in providing their overall benefit.
KEy DISADVANTAGES OF TIllS APPROACH
•
When the government uses 50 percent of the individual account to fund the traditional
benefit, people may feel that they are losing half of their account rather than
u!1derstanding aU along that the account had two parts ~~ one part which funds the
traditional benefit and another part that provides addi:ional retirement income.
•
May be perceived as complicated.
•
The individual accounts would represent between 6.7 and 12.5 percent of the stock
market.
IMPACT ON 75-YEAR ACTUARIAL BALANCE
Common set of reforms
Tax individual accounts like OASDI
SO percent clawback ofindiv, accounts
+0.97
+0.06
+0.96
A&ross th~.bQard cuts to achfeye solvency
~
Remaining Actuarial Balance
+0.00
.
IMPACT ON BENEFITS IN 2030
PERCENT OF CURRENT LAW BENEFITS
Low Earner
($12,000)
I
I Common Sel of Refol1't1S
·3.0%
,
; AcrO$s~the-Board ellis Implil:d by Remaining
i
,
ShortftlU
Annuity provided by Individual Account
Ta!a)
,
I
,
I
,
,
-3,2
.... 17.2
+11.0
Average Earner
($27,000)
High Earner
($43,000)
,
-3.0%
I
,
·3.2
-3.2
I
~l.O%
,
+10.4
+7.9
+4,2
+1.7
,
,
�.:
.
.PLANS THAT FUND
INDIVIDUAL ACCOUNTS . OUT
.
OF THE EXISTING 12.4
PERCENT SOCIAL SECURITY
PAYROLL TAX
�BREAUX-GREGG-KOLBE-STENHOLM PLAN
•
Use 2 percent of the existing 12.4 percent Social Security payroll tax to fund 2 percent of
paYTOn individual accounts.
•
Mru~!Hd"QnnS to traditional Social Security
urogram:
Reduce seco!1d and third bend points by 2 percent per year for 20 years,
Reduce COLA by 0.5 percentage pOInts,
Increase normal retirement age by 2 months per year until it reac!les 70. then index.:
Cover new state and local workers.
Reduce spouse benefits from 50 to 33 percent of PIA.
Increase computation period to 40 years, but count all earnings.
Eliminate earnings test.
Credit all taxation of Social Security benefits to OASDL
Create new minimum benefiL
KEy A TIRACTIONS OF Tills ApPROACH
•
Plan is fiscally responsible
KEy DISADV""rAGES OF TillS APPROACH
•
Reduces benefits compared to present law (though not compared {o the 72 percent of
benefits that are affordable in 2032 if no changes are made).
IMPACT ON 7S-YEAR ACTUARIAL BALANCE
Rernaini:lg Actuarial Balance
I
,
+0.00
IMPACT ON BENEFITS IN 2030
PERCE~T OF CURRENT LAW BENEFITS
,
I
,
,
Low Earner
,
($12,000)
Change in Traditional Benefits
,25.1%
~ Average Earner
i,
,
High Earner
($27,000)
($43,000)
-39.5%
>e422%
l.
,
,
Annuity provided by
Individual Account
,
+16.2
+21'.6
Total
!
,
-8.9
-11.9
,
+26.2
~16.0
A K1KDER AKD GENTLER CARVE,OUT PLAN
•
A carve-out plan does not have to result in large benefit cuts. If general revenues are
used to the same extent as. in the add-on individual account (but are trar.sfclTed to the
trust fund instead of being used to fir.ance individual aCCOU:1ts. the benefit levels would
be the same. It may be harder to sustain gcnerul fund transfers to Social Securhy once
st:.t'j)luses r.m out than it would be to sustain t:-ans[ers to individual accounts.
,
,
�. ..
.
~i-.,
-,
.•
THE WHITE HOUSE
WASHINGTON
MEETING ON CONGRESSIONAL AND THINK-TANK
SOCIAL SECURITY REFORM' APPROACHES
PART II
Cabinet Room
November 24. 1998
3:05p.m.
I
III.
AGENDA
PLANS THAT USE SURPLUSES B01'H TO STRENGTHEN THE
TRUST FUND AND ESTABLISH INDIVIDUAL ACCOlJ'NTS
Discussed Last Time:
I.
PLANS THAT TRANSFER SURPLUSES TO TRUST FUND
II,
PLANS THAT USE SURPLUSES TO FuND Th'DIVIDUAL ACCOlJ'NTS
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:'1" .~·.":A BASIC typOLOGY OF PLANS
We will he discussing six foms of Social Security plans. All of these plans use the surplus in
one way or another, and all could be designed to do so to a greater or lesser extent.
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T_i_tl_'______~___________________
D_e_.c_r~iP~t_io_n _________________ :
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A. Plans ThaI Use the Surplus to Shore up the Trust Fund
II. Bond-only plans
, 2. Equities in the Trust
Fund
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Maintain current policy of holding only Treasury securities,
Introduce equities into the system. but hold them collectively,
B. Plans That Use the Surplus in Creating Imliv,'duaf Accounts
3. Add-on individual
accounts
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,
Continue to use all of the current 12,4 percent payroll tax to fund
traditional Social Security benefits; make sufficient adjustments to
the system (benefit cuts, revenue increases) to bring it into balance.
,
,
Establish individual accounts in addition to the current system.
4, Carve--out individua1
accounts
Divert some of the current 12.4 percent payroll tax into individua1
accounts, Individual accounts replace part of the current system,
and could potentially be described as a tax cut. Relatively large
SU1plus transfers and/or cuts to the traditional Social Security
benefit would be necessary to restore solvency. So far, most carveout plans have been "fiscaJIy conservative" with significant cuts
through such provisions as raising the retirement age. With more
use of the surplus, the cuts could be softened.
C. Plans That Use the Surplus lbz!h. to Shore up the Trust Fund
, and to Fund Individual Acc()ul1ts
15. Integrative plans
1
LYbrid plans
IUse surplus to establish individual accounts. At retirement, part of
, the proceeds of the accounts are used to finance trttditional benefits,
while part provide an "add-on individual account.
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Contribute part of the surplus directly into the Trust Fund, as under
(1) or (2), and part into individual accounts as under (3) or (4),
2
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. TH.R.EE BASIC REFORMS
At this poin4 we want our discussion to focus on fundamental issues of plan design that could
impact our short~term strategy for achieving reform, and to avoid spending too much time on
details that can be worked out at a later date.
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Many of our plans contain tbree basic prQ\-jsions that are meant as Rlae, holderrfor
benefit cuts andlnr revenue increases to be determined later. The three provisions we
happen to have chosen close 44 percent afthe 75.year actuarial imbalance. There would
be many other ways to achieve similar solvency effects.
Raise the t.xable maximum for tbe OASDJ payroll tax so tbat 90 percent of
earnings are taxed by 2010: This would return the percentage of earnings that
are covered to where it was in 1982 and 1983. In 1998 dollars, it would be
equivalent to raising the taxable maximum from $68,400 to $95,100. It would
raise taxes by up to $1,655 (each for workers and employers) for the six percent of
workers with earnings above $68,400, We are exploring ways to raise revenues
without having such a large effect
Cover state and local government new hires beginning in 20lL
Increase tbe number of years used in calculating Social Security benefits
from 35 to 38.
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Tbese proposals could be replaced with an aC[Qs~:tbc-:board benefit ept of 10
percent. Vlhile all three of these proposals are likely to run into serious political
opposition. it is important to note that only one of these three provisions results in a
reduction in Social Security benefits for future retirees, and that the reduction equals only
3 percent of current~law benefits. Replacing these provisions with an across~the-board
benefit cut would require a IO-percent cut in benefits for 2015 and later (or 20 percent by
2040 if the cuts were phased in more slowly). Such benefit cuts may be even less
palatable than ~ese three bMlc provisions.
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PLANS. THAT TRANSFER
SURPLUS TO THE
TRUST FUND
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�TRANSFER UNIFIED BUDGET SURPLUSES To SOCIAL SECURITY
TRUST FuND AND INVEST IN BONDS ONLY
Transfer 91 percent of the currently projected unified budget surpluses to the Trust Fund
for as long as they last (2033), and continue to invest the Trust Fund in govenunent
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bonds only.
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Do rull include common set of reforms.
KEy ATTRACTIONS OF THIS ApPROACH
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Continues the program on a completely defined benefit basis. avoiding potentially
costly and risky alternative approaches.
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Preserves benefits at current law levels,
•
Prevents nearly aH'ofthe surplus from being used for other purposes.
•
Very consistent with our message of the past year that surpluses have been reserved
pending Social Security reform,
KEy DISADVAf'rITAGES OF nns APPROACH
•
See box on next page.
IMPACT ON 7S-YEAR ACTUARIAL BALANCE (current balance is -2_19)
NA
Common set of reforms
fJrneral reVenue transfer to Trust Fund
Remaining Actuarial Balance
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+2,22
+0,03
, IMPACT ON BENEFITS IN 2030
PERCENT OF CURRENT LAW BENEFITS, .
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,
Low Earner
($12.000)
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Total
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AL TER.NATIVE VERSION WITH 3
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+0,0
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Average Earner
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($27.000)
" ·+0,0
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High Earner
($43,000)
+0,0
REFOR..,\iS:
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Transfer 55 percent of the currently projecfed UB surplus to Trust Fund for as long as
they last (2031), and continue to invest the Trust Fund only in government bonds,
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Make common set ofrefonns (cover state and local workers. raise maximum taxable
earnings limit, and increase number of years in computation base from 35 to 38).
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�KEy CHALLENGES ASSOCIATED WITH BONDS ONLY PLANS
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Will Transfers of the Surplus Help Us Prepare for the Future? Transfers of the
budget sl.;''p1us to the Trust Fund do not reduce the mismatch between arumal tax
revenues and benefit obligations in the out years. However, to the extent that transfers
allow us to use the surplus to payoff debt (or purchase private securities). they wilL
leave us in a stronger, fmandal position when the demographic challenges arrive,
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Will Transfers SuceeejjJn Removing Surpluses from the BOQks? Under current
budget scoring rules, transfers used to purchase government bonds would not remove
. any unified budget surplus from the books, and therefore would not prevent the surplus
from being used for tax cuts or new spending. However, allocating the surpluses for
Social Security could lead to a change in scoring rules.
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Ihe Double Counting Problem. The Trust Fund has already been credited with the
excess of Soclal Security taxes over benefits, The current unified budget surplus is
entirely due to the Social Security surplus. Under OMB projections. 89 percent of
unified budget surpluses over the next 10 years are due to Social Security (under CBO
projections. 98 percent are due to SS). lfwe were to transfer the surplus to Social
Security. some might complain that we were crediting the Trust Fund twice, Indeed.
some people already argue that the Trust Fund is not "real" and that we are "raiding"
the Social Security Trust Fund to mask non Social Security deficits,
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Maintain? and Expapds Sodal Security Tru.st Fund Structure. Many Democrats
and Republicans do not support the trust fund structure, saying that it does not truly set
aside money for Social Security and does not prevent the funds from being spent. By
transferring additional funds to the trust fund. this type of plan would expand Social
Security's reliaJ1Ce on the trust fund structure.
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Sustainjn& Transfers II Surpluses DQ Not ;\-'Iaterjalize. If the full projected
surpluses do not materialize and transfers are scored as outlays. then the transfers could
result in budget deficits. To the extent that these deficits are financed by issuing debt,
then we will not have done anything to improve the long run fiscal situation, In
addition, it the future it may appear strange to be transferring amounts based on
projections ofsurpluses from many years before.
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�'. TRANSFER SURPLUS TO TRUST FUND AND INVEST IN EQUITIES
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Transfer 68 percent of the currently projected unified budget surpluses to the Trust Fund
for 1999-2032 to purchase equities. Limit the share of the Trust Fund invested in equities
to 25 percent.
KEy ATTRACTIONS OF THIS APPROACH
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Continues the program on a completely defined benefit basis.
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Achieves higher returns with low administrative costs while spreading risk across the
popul3;Hon and over time.
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Preserves benefits at current law levels.
KEy DlSADVANTAGES OFTHlS APPROACH
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The government would own between 5 and 11 percent of the stock market depending
on the methodology used. See the box on the next page for details
IMPACT ON 7S-YEAR ACTIJARIAL BALANCE
Common set ofreforrns
NA
General revenue transfer to Trust Fund
Mross the board cuts to a.chieve solvency
Remaining Actuarial Balance
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+2,20
-1:{A
+0.0 i
. IMPACT ON BENEFITS IN 2030
PERCENT OF CURRENT LAW BENEFITS'
Low Earner
($12,000)
Total .
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(current balance i. -2.19)
Average Earner
($27,000)
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+0.0 c..."
High Earner
($43.000)
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'. +0.0
ALTERNATIVE VERSION WITH COMMON SETOF REFORMS;
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Transfer 50 percent of the currently projected UB surpluses to the Trust Fund for 1999
2008 to purchase equities. Limit the share of the Trust Fund invested in equities to 25
percent.
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Make common set of refanus (cover state and local workers, raise maximum taxahle
earnings limit. and increase number of years in computation base from 35 to 38).
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Make across the board henefit cuts of6 percent to achieve solvency_
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SUBOPTJON:
SAvE SOCIAL SECURITY WITH SOCIAL SECURITY PLUS ACCOUNT
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It would be possible to use the surplus remaining after achieving actuarial balance to
fund individual accounts that are truly in addition to the traditional benefit. The
equities in the trust fund would be preserving the traditional structure l and the
individual accounts would he on top of the fun traditional benefit. Therefore. doubts
about sustainability and risk of the individual accounts would not threaten the
traditional Social Security program, Howeve" the plan would rely on essentially all of
the currently projected surpluses for 30 years, Thereafter, this plan could create
demands for deficit funding of the individual accounts .
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ISSUES ARISING FROM INVESTING THE TRUST FUND IN EQUITIES
Government Ownership of Private Securities. In the plans ShO\\l1 on the previous
page, the government would eventually hold between 5 and II percenl of the overall
stock market. This raises three important concerns:
I.
Lal1lest Shareholder. If the Trust Fund owned 10 percent ofthc stock market,
the government would be the largest shareholder in at least 70 per<:ent of U.S.
publicly traded corporations.
2.
r.oUtica) Influence on lnvestment Cboices. Congress could legislate
restrictions on what the funds could invest in (e,g, no tobacco stocks).
3.
~orate
Go\'ernance lssues. For exa!nple, how would government-owned
shares be voted at stockholder meetings?
There are different methodologies for projecting the future size of the stock market Depending
on the methodology chosen, one ob~ains different estimates of the share of the total stock market
held by the trust fund, The chart below shows the share of the stock market held by.the trust
fund for two different refonn plans under two different ass.umptions about the future growth rate
of the stock market.
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�THE PERVASIVENE:SS OF CORPORATE GOVER:."'I:ANCE ISSUes
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While issues of government ownership of private securities do not arise in the case of
individual accounts) issues of political bfluence over investment choices'and of
corporate governance could still be large, especiaHy if investment choices were limited
to a few government-authorized index funds.
. WHAT HAPPENS IF THE STOCK MARKET PERFORMS POORL v?
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If the stock market performs worse than is projected, the balance in the trust fund will
be lower than projected, creating pressure for additional revenue sources or benefit
cuts. This is a common feature of plans that depend on stock market returns to fund
traditional Socia! Secu,rity benefits,
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:::::' II. 'PLANS THAT USE. THE
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�FIVE KEy ISSUES CONCERNING INDIVIDUAL ACCOUNTS
KEy IsSUE #1: PERCEPTIONS OF BENEflT LEVELS
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People might perceive that the individual account is part of the total Social Security
benefit, and has more than made up for the reduction in the traditional benefit
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Alternatively, people might think: of their individual account as risky and uncertain:
and perceive that .they received a 16-percent reduction in their Social Security benefft",
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Plans which guarantee benefit levels or which integrate the individual account and the
defined benefit may be more successful in getting people to look at their total benefit.
Example:
Impact on Benefits (Percentage ofcurrent law benefits)
Change in trdditional benefit
Annuitx from indivigua! accQunt
.
Total
-16.3 percent
+2Q,8 percent
+4.5 pereeot
KEy ISSUE #2: BE1\'EFIT GUARANTEES
Because individual accounts expose individuals to more risk, it m{ght be desirable to shift
some Clfthat risk to society as a whole,
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Providing a Safe-Investme-nt Option. One way to do this would be to offer a safe
investment option ~- for example. Treasury Inflation Protected Securities - and to
design a refonn package to ensure that workers who chose this safe investment option
have a reasonable Jevel of benefits.
The downside of this approach is that it might encourage individuals ~~
particularly low-income individuals -~ to take too little risk.
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.Gu8r;mt«b.u~ Current·law Benefits. Another option would be to let people invest
however they choose. but to guarantee that the combined benefit from traditional
Social Security and the individual account would at least equal the current-law
traditional Social Security benefit (Sen. Gramm's plan adopts this approach).
A guaranteed benefit might encourage workers to take too much risk, since they
would receive the upside gains. while the government would protect them on .
the downslde, However, some argue that ma."lY investors do not take on enough
risk. Moreover. if the portfolio choices were limited to basic index funds! the
extent of this "moral hazard" problem would probably be minimal.
A guarantee shifts risk away from individuals and onto the unified budget. We
are currently trying to quantify the extent of this risk,
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KEy ISSUE #3: FISCAL SUSTAINABILITY
For How Lon~ Cart We Afford to Fund Individual Accounts Out ofthe Surplus?
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If remaining surpluses are spent, 2 percent individual accoun!s can be afforded until
around 2023.
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Once the surpluses have run out we could continue to fund the individual accounts out
of general revenues (this would cost around 0.8 percent of GDP). or we could trigger in
traditional reforms to pay for the individual accounts.
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It might also be possible to set aside some of the extra surpluses in the early years to
prefund individual account contributions in later years. We present a plan like this
later in the packet.
. KEy ISSL'E #4: DESIGNING A PACKAGE WITH "WINS" FOR BOTH P ANTlES
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In~Uvidual
aCCQunts can be
current defined
prQvid~d
in a waY (bans more progressive than the
b~tSQdal
Security system. We could propose a negotiating
principle that the traditional benefit must remain as progressive as it currently is, a.,d
that any individual accounts must be more progressive.
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Our ref2tID package eQuId incJud.t initiati\'esJQ reduce elderly pOl'erty,
particplarJy amQ1!1: widows. ".lid tg beJp !l~ber needy P2puJations. We are
developing a list of policy options in this area, For example, if progressive individual
accounts were at least partially bequeathable, low-income families with short life
expectancies could potc:1tially benefit more frOr.1 the progrcssivity of the individual
accounts than (tley do from the progressivity of the current system.
�KEy ISSUE #5: FEASmILITY AND COST OF INDIVIDUAL ACCOUNTS
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Individual ac£.ounts in foreign countri;:5 hin ,,(m'en very costJ:£t In both the U,K
and Chile, administrative costs absorb 20 percent or more of account accumulations
under their systems of individual accounts.
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Lower costs mie;ht be .3chievable by limitjne cboic£. At the cost of severeiy limiting
choices, it may be possible to keep costs down significantly. Our benefit numbers
assume a very low administrative cost of 10 basis points per year. This would
correspond to a reduction in account accUC'lulation of only 2 percent.
•
I~ow-cQst
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Contributions would Jag ~.!'Irning~, For individual account fundi!1g approaches that
plans would also be Jow..ser\'ice plans. The level ofservices associated
with a plan this cheap would be very low. and in particular would compare
unfavorably with the level of services offe:-cd through most 401 (k) plans. Specifically,
a bare~bones plan might offer annual reporting rather than monthly or even daily
reportir..g. a much narrower range of asset choice, and a far lesser ability to switch
among avaiJable assets.
are tied to past earnings, the delays in making contributions'into accounts could be
perceived to be very long. Under current procedures. workers' ea.'111ngs for the prior
year a:e not verified until November in the cl.!:rent year, Thus, if a system ofthis type
were in force currently. workers' last recorded contribution as of today might be for
1996; or workers might iu.s1 have received their contributions for 1997.
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Eunding ..Qut of the surplus migbt alleviate the perceptipn prQb.km.. It might be
argued that since the funding of these accounts was coming from the surplus.
individuals would not perceive the contributions to be tied to their earnings. and .
therefore not see it as arriving late.
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Q.ther approacbes might be possible. It is also possible. though not yet [uHy
verified, that some acceleration of contributions could be achieved through a change in
procedures.
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�FLAT-DoLLAR ADD-ON INDIVIDUAL ACCOUNT
WITH ACROSS THE BOARD BE:\EFIT CUTS TO
RESTORE SOLVENCY
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Fund $580 per worker individual accounts out of general revenue. Assume these fUl1.Gs
a:e invested 50~50 in stocks and bonds.
•
Make common set of reforms (cover state and local workers, raise maximum taxable
earnings limit, and increase number of years in computation base from 35 to 38).
•
Make additional across the board benefit cuts by revising the benefit formula, but keep
disability benefits at current-law levels.
KEy ATTRACTIONS OF THIS ApPROACH
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Gives individuals control over their retirement savings. Could be described as building
wealth.
•
Achieves higher returns while avoiding government owne:-ship ofpriv3te securities.
KEy DISADVAl'oTAGES oFTmsAPPROACH
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Surpluses arc not sufficient to fund individual accounts forever.
IMPACT ON 75-YEAR ACTUARIAL BALANCE (current balance is -2.19)
Common set of tefonus
+0.97
Across the board cuts 10 achieve sQlvency
±L.ll
Remaining Actuaria1 Balance
+0.01
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IMPACT ON
BENEFITS 1:-1 2030
PERCENT OF CURRENT LAW BENEFITS
Low Earner
(SI2,OOO)
Average Earner
($27,000)
High Earner
($43,000)
Common Set ofRefonns
-3.0%
-3.0%
-3.0%
Across·the-Board CUIS Implied by
Remaining Shortfall
-13.3
-13.3
-13.3
Annuity provided by Individual
+34.4
+20.8
+15.8
+18.1
+4.5
Account
Total
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-0.5
�PARTIALLY VOLtJNTARY INDIVIDUAL ACCOUNTS
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Fund $290 per worker individua1 accounts out of general revenue, Assume these funes
m'e invested 50~50 in stocks and bonds. Allow workers to l'l,/untarii), contribute an
t.rdditioltall percent ofearnings to their accounts.
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Make conunon set of reforms,
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Make additional across the board benefit cuts by revising the benefit fonnul., but keep
disability benefits at current· law levels.
KEy A ITRACTIONS OF THIS APPROACH
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Cuts in halfthe long-term fiscal obligation of the government to finance individual
accounts.
Preserves benefit levels for low-income workers even if they do not make volunta.ry
contributions.
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KEy DISADVANTAGES OF TUIS ApPROACH
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Some may feel they are being asked to add an additional one percent of payroll taxes
simply to maintain their existing Social Security benefit level,
IMPACT ON BENEFITS IN 2030
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PERCENT OF CURRENT LAW BENEFITS
•
•
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, Low Earner
Avtrage Earner
High Earner
• ($)2,000)
($27,000)
($43,000)
.3.0%
~3.0%
·3,0%
-13.3
-t3.3
·13.3
Annuity provided by Individual Account
+11,2
+lOA
Total wlt~OUf ~olunt.ry contribution, .
+{).9
Common Set of Rcfof'nt$
Acr()$$~the·Board
Cuts Implied by Remaining
Shortfall
.
Maximum annuity provided by volun~ary
Individual Account
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1.:nder current law, annual benefit levels are $6010 for the iow earner, .$9925 for l1.e average earner, and $13,112
for the high eamer,
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III. PLANS THAT USE THE
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SURPLUS BOTH TO SHORE
UP THE TRUST FUND AND
TO FUND INDIVIDUAL
ACCOUNTS
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HYBRID PLANS:
~>IVIDUAL ACCOUNTS AND TRUST FUND EQUITY Th'VESTMENTS
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Create $290 per worker individual accounts funded out of genera] revenue.
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Invest Trust Fund assets worth 1 percent of payroll in stocks. Limit the share ofthe Trust
Fund invested in stocks to 25 percent.
•
Make common set of reforms.
•
Make additional across the board cut in benefits to achieve SOLvency.
. KEy ATfRACTIO!'IS OFTHIS ApPROACH
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Provides wins for both sides. Shores up traditional Social Security and establishes
individual accounts.
•
Because individual accounts a.""e small. sustaining them in the out years wilJ not create
much pressure on other programs.
•
Because transfers to the trust fund are modest, '.he peak share of the stock market
owned by the trust fund will be between 3.7 and 5.7 percent.
KEy D1SADVANTi\GES orTHIS APPROACH
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Has the downsides of both individual accounts and tmst fund bvestments: the high
administrative costs of small individual accounts and the problems of government
ownership of private securities.
IMPACT ON
7S-YEAR ACTUARIAL BALANCE (curren! balance is -2.19)
Common set of reforms
Tax indiv. accounts like OASDI
Redeem TF assets to buy stocks
Across: the board cutsJQJlchieve solvency;,
Remaining Actuarial Balance
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+0.97
+0.06
+0.58
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iMPACT ON BENEFtTS IN 2030
.. PERCENT OF CUR'R:El'n LAW BENEFITs
Low Earner
($12,000)
Common Set of Reforms
Across- the· Board Cuts Implied by Remaining
.
,
,
Average Earner
(S27,OOO)
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High Earner
($43,000)
~3.0%
·3.0%
-3.0%
·8.0
-8.0
-8.0
+10.4
+7.9
·0.6
-3.1
Shonfall
Annuity prcvidec by Individual Account
+;7.2
Total
+6.2
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�ARE Til ERE WAYS TO REDUCE GOVERNMENT OWNERSJIIP CONCERNS?
•
Trust Fund investments could be allocated according to iDYestment chokes of
individuals in their individual accounts. In plans that combine Trust Fund
invesnnents with individual accounts, it might be possible to have the Trust Fund ~,
a1Jocat~ its investments according to the aggregate investment behavior of individuals
in their individual accounts. This idea - and other ideas like it _. could allow
defenders of government investment to say that it was mmions of individual choices
and not a government board that was allocating funds.
•
Many of th.~.fundamental issues of cQrporate ggr~rn.ance continue to arise in this
approach. Because the individual accounts being umirrored" by the trust fund
lnvestrnents are presumed to be invested TSP-style. in government-authorized funds.
issues of political influence over investment choices and of corporate governance could
still be large.
18
�.'
: ADD-ON INDIVIDUAL ACCOilllT WITH ESCROW ACCOllNT TO
SUSTAIN INDIVIDUAL ACCOUNTS
I'
•
Fund $580 per worker individual aCCOU:1ts out of general revenue. Assume these funds
.l.re invested SO~SO in slocks and bonds.
•
After funding individual accounts, place 70 percent of remaining surpluses in an escrow
account invested 50-50 in stocks and bonds, Use the escrow account to fund i,ndividual
-.
account contributions after the unified budget surplus runs out
•
Make common set ofreforrns (cover state and local workers, raise maximum taxable
earnings limit, and increase number of years in computation base from 35 to 38),
•
Make additional across the board benefH cuts by revising the benefit fonnula, but keep
disability benefits at ctl1T~nt-law levels.
I
KEy AITRACTIONS OF THIS APPROACH
•
Sustains individual accounts even after surpluses run out, thereby avoiding pressure to
cut oilier programs to fund the new individual account "entitlement."
,
KEy DISADVANTAGES OF THIS APPROACII
•
Has saIne disadvantages as other plans that combine indivldual accounts and
government investment in private securities,
•
Some may find this proposal unusual and therefore not sound because it uses the
escrow account to prefund individual account contributions rather than retirement
benefits. People are used to the idea of prefunding pension benefits. but it would be
novel to prefund pension contributions.
,I
,.
IMPACT ON 75-YEARACTlJARIALBALANCE (current balance is -2.19)
Common set of reforms
+0,97
~ lhe
±U2.
hQard ~J.ns. 12 achiev~ ~QlY§jD£y
+0.01
Remaining Actuarial Balance
: ,. ~. '~ . .
'.
I
"
- -,
,
·
,',
.
'
.
.
., ..
'
I
, . . MPACT ON BENEFITS iN 2030 .
. ,,"'"," PERCENT OF CURREl\'T LAW BENEFITS
,
"
,
Low Earner
(5J2,000)
I
,
,
I .
Common Set of Reforms
,
Acro~.thc~Board Cuts Implied by Remaining
·13,)
Shortfall
,
Anr.uity providt:d by lndividual Account
,
To..J
I
.
+J4A
Average Earner
,
.
(527,000)
High Earner
($43,000)
·3.0%
i
,
,
·3,0%
I
,
~3.0%
·13.3
.)3,)
+20.B
+15.8
,
+18J
19
+4.5
-0.5
�..
IFLAT-DoLLAR ADD-ON IA WITH 50 PERCENT INTEGRATION
•
Fund $;80 per worker individual accounts out of gencral:-evenue, Assume these funds are
invested 50·50 stocks and bonds.
•
Use 50 percent of individual accoun:s to fU:ld traditional Social Security benefit. Tax other half
of retirement income from individual ac-counts like Social Security
•
Make common set ofrefonns and additional adjustments to traditional Social Security program to
_.
n:store solvency.
-.
I
KEVATTRACTIONS OF Tills ApPROACH
•
Traditional benefits (after six percent reduction) are guaranteed regardless of how the market
•
Achieves nearly the same outcome as a trust fund investment in equities plan without creating
perception of government ownership of private securities, bdeed, some prominent
Republicans have embraced this approach,
•
Integration of the benefit may make people more likely to perceive that their individual
account is added together to their traditional benefit in providing their overall benefit
performs.
-'~-----------------------------------.
KEY DISADVANTAGES oFTms ApPROACH
•
When the gm'e:nment uSeS 50 percent of the mdividual account to fund the trad:tional benefii,
people may feel that they are losing half of their account rather than understanding all along
that the account has two parts ~~ one part which funds the traditional benefit and another part
that provides additionat retirement income.
•
May be perceived as complicated,
IMPACT ON 75·YEAR ACTUAlUAL BALANCE (current balance is ·2.19)
Common set of reforms
Tax individual accounts like OASDI
SO percent clawback of indiv. accounts
Across the hoard cuts to achieve sQlvency
Remaining Actuarial Balance
..
I
.. ..
.
.
+0.97
+0.06
+0.90
±Q2li
+0.00
.
IMPACT ON BENEFITS IN 2030 . '. ,
,
.PERCENT OF CURRE~" LAW BENEFITS:
I
Acros~-the.Board Cuts Implied by Remaining
·3.2
,
Total;
,
,
High EArner
($43,000)
·3,0%
,
,
·3.2
I
,
Shortfall
,
ArulU!fY provided by Individual Account
,
~3.0%
·3.2
Cornriton Set of Reforms
,
Avtrage Earner
(527,000)
-3,0%
i
,
,
Low Earner
(512,000)
,
,
+17.2
+10A
+11.0
+4.2
+7.9
•
•
+1.7
�..
."..
......
.
,
>.,. ' PLANS
.;
THAT FUND
INDIVIDUAL ACCOUNTS OUT
.
.
'
,",
OF THE EXISTING
12.4
. PERCENT SOCIAL SECURITY
.
.
,
;
.
'
.
PAYROLL TAX
�BRE!UX-GREGG-KOLBE-STENHOLM PLAN
•
Use 2 percent of the existing :2,4 percent Social Security payrQIl tux to fund 2 percent of payroll
individual accounts,
•
Make refo-nns to traditional Social Security program:
Reduce second and third bend points by 2 percent per year for 20 years,
Reduce COLA by 0.5 percentage points.
Increase normal retirement age by 2 months per year until it reaches 70. then inde>;,.
Cover nc"" state and local workers.
.
Reduce spouse benefits from SO to 33 percent o[PIA.
Increase computation period to 40 years, but count all earnings.
EHminate earnings test
Credit aU taxation of Social Security benefits to OASDL
Create new minimum benefit.
I.
.
.,
.
KEy ATIRACTIO"S Ot'THIS APPROACH
• I Plan is fiscally responsible.
KEy DISADVANTAGES OF Tills APPROACH
•
Reduces benefits compared to prescnt law (though not compared to the 72 percent of
benefits that a."'e affordable in 2032 ifno Changes are made).
IMPACT ON 7S-YEAR ACTUARIAL BAI_ANCE
(current bnlance is -2.19)
+0.00
Remaining Actuarial Balance
IMPACT ON BENEFITS IN 2030
PERCENT OF CURRENT LAW BE"EFITS
--
Low Earner : Average Earner
($12,000) ,
($27,000)
Almtity provided by
Indi~idual Account
,
Total" .'
.
Higb Earner
($43,000)
.
-
-25.1 %
I
-395%
-42.2%
16.2
Change in Traditional Benefits
,
,
!
,
,
21.6
26.2
-8.9
,
,
,
,
-17.9
.
-16,0
�..
,
2 PERCENT CARVE-OUT FOR 2 PERCENT INDIVIDUAL ACCOVNTS
I
•
WITH TRANSFER OF REMAL"iING SURPLUS FOR BONDS
Redirect 2 percent ofOASDl payroll tax beginning in 2000 to fund 2 percent of payroll
individual aCCQU!1ts. Ass!;me these funds are invested 50~50 in stocks and bonds. Transfer
remaining currently projected surpluses to the trust fund and invest them in bonds.
•
Make common set ofrcforms (cover state alid local workers, raise maximum taxable earnings
limit, and increase number of years in computation base from 35 to 3B).
•
Make additional across the board cuts by revising the benefit fonnula,
KEy ATIRACTIONS OF Tms ApPROACH
I
r-'~------------------------------------~
•
PIau is fiscally responsible and would reduce lortg~tcnn budget ceficits and increase national
savings even compared with the baseline that uses the surplus to payoff debt.
•
The corr.bined retirement incorr.e from individual accounts and traditional benefit would be
close to currently promised benefit levels,
,
I
KEy DISADVANTAGES OF THiS ApPROACH
•
In the long run> the individual account would be providing roughly 40 percent of the to!o:l
benefit. Benefit levels would depend heavily on stock market performance.
•
Because it us.es sorr.e of the current payroll tax to fund individual accounts,
perceived as the first step toward total priYalization.
l~is
plan could be
IIMPACT ON 75-YEAR ACTUARIAL BALANCE (current balance is -2.19)
Common set of refonns
Two percent carve-out
Transfer of remaining surpluses to OASDI
Across the board cuts to achieve solyency
Remaining Actuarial Balance
,
I
,
,
,
I
+0.97
·1.92
+1.45
±LZl
+0.03
IMPACT ON BENEfITS IN 2030
PERCENT OF CURRENT LAW BENEFITS
,
,
I Low Earner , A\'cragc Earner
, (112,000)
($27,000)
,
I
Common Set of Reforms:
,
Acros*~the-BDard Cuts Implied by Remnining
-3.~;'
,
,
I
~18.7
High Enrner
(14),000)
-3.0",(,
·J8:.7
-3.0%
,
,
- 18,7
ShQrtfall
,
,
Annuity provided by Individual Account
i
+16.2
,
+216
+26.2
-0.1
+4.5
Total
·5.5
. .
.
.
Note, l,f tndlVldual accounts were funded more progressIVely. the toial benefits for low earners
could exceed c:.mcntly promised levels.
I
�,
STRATEGIC DISCUSSION OF A PLAN THAT
"
I1'<VESTS EQUITIES IN THE TRUST FUND
Man)Ofthe fundamental decisions related to Social Security reform can be framed by examining
_.
a plan that relies exclusively on prefunding and equity investment.
_.
I
•
BASEPLAl'l
Transfer 60 percent of the currently projected unified budget surpluses to the Trust
Fund for 1999..2032 to purchase equities. Limit the share of the Trust Fund invested in
equities to 33 percent.
•
Spend one quarter ofthe remaining surpluses on discretionary spending and three
quarters on Medicare or debt reduction, RoughlY $500 billion would be available over
10 years.
This plan would command substantia] support because it preserves the current struct~re of the
systerrl., ;md it avoids making any cuts in benefits. However there are three key critiques of this
I
approach:
..
•
•
Fiscal responsibility
Raises corporate governance concerns
Lacks individual accounts
------------------------------------------,
I ALTERNATIVE A: DO SOME TRADITIONAL REFORMS AS WELL
•
Include 3 basic provisions (increase computation years, cover state and local workers,
increase taxable maximum). Do additional 3 percent across the board cut in benefits.
•
Transfer 50 percent of the currently projected surpluses to trust fund to purchase
equities for only ten years (1999-2008). Limit trust fund to 25 percent equities.
Alternatively. could transfer 35 perce"t ofthe surplus for as long as it lasts .
.
ALT~RNATIVE
B: SOCIAL SECURITY PLUS ACCOUNT
Spend three-quarters of remaining surpluses on individual account and one quarter on
discretionary spending. Account could be flat doIlar or it could provide matches for
vollfntary contributions. Could afford approximately $200 per worker contributions
.
for about 20 years (there would be shortfalls in ea:ly years).
1
�•
FISCAL DISCIPLINE
Critiqles a/tltis approach:
Allocates additional resoyrces to tbe elderlY, For those who feel that society is
spending too much on the elderly already, this approach directs additional resources to
•
the elderly in order to maintain all of currently promised benefits.
•
l)ependine 00_ surpluses and stock returns is risky. This plan relies completely on 30
years ofbudget surpluses and on equity returns. Both components are uncertain, If'
budget surp!~ses 'do not materialize, then continuing general fund transfers to OASDI
may result in pressure to cut otiler spending programs, Ifequity returns are lower than
projectei4 then we wm need to do Social Security refonn again at a later date.
•
J)oes not directly iJddress luDg-run (undine gap. This plan does not close any of the
gap between current year tax revenue and benefit payme:1ts. and it has a trust fund that is
declining at the end of the 75.year window.
.
•
Uses ~eneral fund transfers. Because the plan relies on substantial general revenue
transfers, it precludes the use of lhese funds for other purposes (including Medicare
financing, education spending, etc,). and it exposes the plan to criticism for crediting the
trust fund with the Social Security surplus a second time,
!
Rejoinders:
•
",Vhv do pain if there are surpluses available? Those who argue that \ve should rely
tess 0:1 surpluses and higher returns and that we should rely more on traditional benefit
cuts and revenue increases must explain why we should make painful adjustments to
Social Security when the surpluses are otherwise Ukely to go for defense spending and
tax cuts for the rich.
•
Plan allows for additional spending: The surpluses remaining after this plan is enacted
could be used for a combination of individual accounts, tax cuts. and discretionary
spending.
•
Uses Social Security surpluses fur Social Security. Sine:e most of the surpluses are due
to Socia! Security. it makes sense to use them to strengthen Social Security. If the
surpluses are used for otiler things, we could be attacked for using Social Security tax
revenue for non-Social Security purposes.
•
Tax cuts WQuld make 10m: run Osgal situation
Cl'eR
worse, Ifwe fail to achieve Social
Security refonn and the surpluses are used for permanent tax cuts, the long run fiscal
situation will be even worse when we finally do get around to fixing Social Security,
2
o
--------------------------------------~---------------------------,.
GOVERNMENT O\VNERSHIP OF PRlVATE SECURlTlES
Critiques ofthis approach
•
GQvernment ownership_
Govenunent would own at least 5 percent of the stock market and per~.aps
as much as 11 percent. Critics could potentially use a methodology that.
produced estiniates that are even high~.
If the government owned 10 percent of the market, it would be the largest
shareholder in more than 70 percent of U.S, publicly traded corporations,
People would question why we were encouraging other countries to move
toward private markets when our government was acquiring shares in
private companies.
•
u
pglitical influence on im:~1ment decisions. There might be pressure for the
government to invest in socially desirable activities such as affordable housing thal may
have lower rates of return and to divest from companies in unpopular but profitable
industries.
•
CQrporate Governance. 'Government voting of shares would likely be perceived as
interference, but government abstinence from voting might, give too much influence to
,
remaining shareholders or management. Any structure of Investment, no matter how
independent could be altered by Congress and the President at any time in the future.
.
Rejoimfers
•
lndepcndent structures like the Federal Reserve Svstem have proved resilient.
,Could create an independent organization like the Federal Reserve with trustees who
were appointed to long terms, and who could not be removed until the ~nd of their tenn,
tn addition, funding for the independent body could come out of the system's own
�GOVERNMENT INVESTMENT IN EQUITIES
Critiques 011lli5 approach
•
S.tock market could perform poorlv. In real terms. the Dow Jones did not rebound to
its 1968 peak until 1987. On three occasions during the past 70 years, the S&P 500 index
has declined over two years by more than 35 percent. Japan's Nikkei has fallen by 60".
percent since 1989.
,
Individual dQU.lH)t get sense of control or of accomplishing p~rsonaJ sayin~, Much
of the appeal ofindividual aceounts is the perceived opportunity to build wealth. In the
coIIcctive approach to investments, individuals will not have investment choices. see their
accounts accumulate. or be able to bequeath part of their accounts.
.,
People seem to like IRA!" wbY be paternalistic and enforce cQI)c<:tive inycstment?
Rejoinders
•
~1arket
•
If the e~2nomy perform£ poorh' over long periods of time it doesn't matter wh at
type QfSQciaJ Security system ,\'e have. it will be hard to pay full benefits.
•
,Collective il1\,c;~ting permits risk*[)Ooline ~J~lh witbin and aernss cohorts. During the
20th century in the US. even large stock market declines: have been more than made up
by subsequent rebounds, For example. a ponfoIio of a worker who lived through the
1929 crash would have fully recovered by the end of 1936. By pooling risk, the trust
fund approach removes the sensitivity of worker's retirement income to the particular
year in which they reached retirement.
..
'Conective investing provides high returns with..low administrptive costs. Wall Street
won't receIve 20 percent of people's retirement income as it might in a moderately
expensive individual account plan.
..
Over 40 year periods, risk of stock market may not be so great
risk is accented in private pension
4
phlD~.
wby Dot in Social Security?
�,
.
r
I-
,.
,
I
,
ALTEIU,ATIVE A: DO SOME TRADITIONAL REFORMS AS WELL
Include 3 basic provisions (increase computation years, cover state and local workers,
increase taxable maximum). Do additiona13 percent acros~ the board cut in benefits,
Transfer 50 percent of the currently projected surpluses to trust fund to' purchase
equities for only ten years (1999-200&), Limit trust fund [025 percent equities.
Alternatively, could transfer 35 percent of the surplus for as long as it lasts.
Ad\'anta£es:
•
j\1Qre fiscally responsible. Closes some of the long run imbalance between taxes and
benefits. Potentially relies on only 10 years ofsurpluses.
•
Fr~gs
up mOT(j."Qfthe JQne~run surnlus~s for Medicare and dh;(;r~tiQnary spending,
People might be wiUing to tolerate small cuts in Social Security if the savings were
allocated to Medicare.
l'isadvantagcs:
•
May not be able to prevent surpluses from being spent on tax cuts for the rich.
•
Will have to compete with Republican individual account initiatives that promise no
reductions in benefits_
•
Preserving surpluses for Medicare may not be a viable strategy since there is unlikely to
be a significant Medicare agreement this year.
•
This plan has no individual aCCO'Jnts and 110 tax cuts. It is hard to see how such a plan
results in a bipartisan COnsensus.
5
�ALTERNATIVE B: SOCIAL SECURITY PLUS ACCOUNT
•
Spend three~quarters of remaining surpluses on individual account and one quarter on
discretionary spending. Account could be flat dollar or it could provide matches for
voluntary contributions, Could afford approximately $200 per worker contributions
for about
20 years (there would be shortfaUs in early years).
Advantages;
•
Provides best of both worlds; saves Social
Secu~ity
and also provides jndividual
I1CCQUnts.
•
Because the individual accounts arc strictly in addition to 'be eurrent law Sodal
Security benefit, it is Jess essentigl that tbey be fupded forever. This reduces the
"Stockman risk" of needing to fund them once surpluses run out.
•
Solidifies traditional Spcial Security while offil[jng options for tQrngIornise wilh
irulividual account supPQnea.
•
Individual accounts will be very small and therefore administrative costs wiII absorb a
l,:u:ger 5-action of investment returns.
•
\\'Uile small individual accounts may he a valuable new benefit for low~income workers,
it may be perceived is just one more tax preferred savings vehicle by upper~income
workers.
•
Even though the individual accounts will be small and are not essential to the total Social
Security benefit, there may be some presslrre to continue to fund them even after the
surpiuses run out. thereby creating pressure on other government programs.
6
�(
•
THROUGH:
fROM:
SUBJECT:
•
HIGHLIGHTS OF DOMESTIC AND ECONOMIC POLlCY MEMOS
You have been sent several memos from the policy councils, suggesting an array of new
possible policies - some big. some small. The purpose of this memorandum is to identifY what
we believe are the most significant of these new policy proposals, so you can begin to see the
shape of a possible Slate of the Union and budget.
This is not an exclusiyc list. In addition, it does not include many nfthe smaller
proposals ~- many of which were included in the memoranda to you from the policy councils·~
which will undoubtedly be a part of the final speech. It reflects discussion among Broce Reed,
Elena Kagan, Gene Speriing, Sally Katzen. Maria Echavestc. Paul Begala, Jack Lew, Mark Penn,
Lac! Brainard and Doug Sosnik. among others.
Social Security, At this moment we don't have anything further to add to the ongoing
discus:;:i<ms about what to say on Social Security ~~ except to reaffirm that, given the central place
of Social Security in the speech last year, there will be enOnllOUS pressure to show some
specificity in this address,
LOlIg-Term Care Initiative, As you know, this is politically very powerful. nnd speaks
to u real source of deep anxiety for typical families, The most important new proposal would be
for a lJl1. credit of up 10 Sl.OQQ for disabled elderly or their caregivers (at a cost of about $6
billion over 5 years), In addition. the package could include a nursing home quality initiative;
respite ~>ervicl:s, training and cotUlseling for famliies who care for severely impaired elderly
relatives; and nev,' long-tcnn care options for federal employees,
•
In addition to Social Security and long-tenn care, the policy councils arc developing a
full agenda of issues of particular concern 10 elderly Americans - including measures to fight
�'r
•
fraud and other crime that preys on seniors, to provide housing and IranSportation for the elderly,
and to strengthening pension protections and enh8l1de pension portability,
Education - I.acher quality. Th.OPC believes that the most import8l1t and memoreble
riew element to your education agenda should be a focus on teachers ~- teacher training, teacher
/I
quality, teacher recruiunent. This would build on the ,uccess this year of beginning to hire
100,000 new teachers (a proposal, it is worth noting, that gained more political traction than any t I..U"
previous education reform efforts).
'1. ;/~
1
~(I"~%
The proposal being crafted will have several elements, Most noteworthy would be a new
requirement. tied to federal aid, that new secondary teachers pass competency tests in a subject ~'
before they can teach it. In addition, we will mQunt a nationwide crackdown on teacher
'{ft. ~"
education schoois, and move to reform teacher certifica.tion, These steps will be coupled with ~ <f",
increased teacher recruitment scholarships, funds to help teachers go back to college when the~~("
'O\}
teach outside their field, Weoan UBe the opportunity of the reauthorization of the ElSEA to q
",
H
provide both "carrots and "stk:ks" for a teacher quality initiative,
'~
f l{f
'In addition, we win advance an expanded initiative on social promotion - giving communitie ~; t
q"(
that end social promotion more money for after school and summer schooi. tutoring, and other
means to help children live up to high standards. Finally, there would be an array of other education ~,
initiatives, including a focus on f.i1in~ schools and a renewed call ~or school modcmiZlltiQD,
~
•
IIreakillg tbe eyele or vi.lent crime - • Crime Bill II, The 1994 Crime Act will expire
at the end ofFY 2000. We recommend that you challenge Congress to pass a new crime bill that
builds on the core elements of the successfu11994 Act -~ more police, smarter punishment. and
more prevention. We believe that a new Crime Act should include the following elements: FiTSI,
it should hire'more cQfllmw)jty police a.ru1 cQnununitv proSCstutQrs, with an emphasis on
technohlgy and training, It should expanq the use of probatlon supervision and drua teSim: and
l("tmem for prisoners and parolees, It should press your longstanding fire:arms priorities
(juvenile Brady, Brady II, federal CAP legislation and child safety locks), and crack dowo on
gun crimes and gun traffickers, F'inaUyl in addition to other crime bill prevention programs, we
could ilwest in promoting yalues~based crime and violence prevention efforts.
r
•
International economics. Last year, you discussed the international financial crisis
when it was in its relatively early stages, Given the continued financial tunnoil. and its impact
on our ov.n economy, we believe that the speech should have a significant discussion of worid
economy and the need to strengthen the intemational finaneial architeeture. 111C NEC win be
working to flesh out what should be said in this area, as well as an ambitious trade agenda
building on the goals you anticipated at the WTO speech in Geneva, '111is will be the first time a
broad television audience has heard YO!Jf new synthesis on trade.
Tobacco/prescri.ption drugs for Medicare beneficiaries. Our best leverage over the
iobacco industry is the prospect of a fcdend suit to recoup Medicare costs associated with
2
�•
smoking. We could call on Congress to enact Senator Graham's legislation to authorize such a
lawsuit (which would make the Justice Department more likely to bring it). At the same time,
we could ask for fund,!or DOl and HCFA to prepare a lawsuit against the tobacco industry, I~
We could pledge that any proeeeds from such • lawsuit would be used to providc. new- ~
pre,cripuQllllm2 benefit III Medicare beneWwes,
At the same time, you would once again pusb for the £tUients' Bill ofRi2hts, and could
propose an array of eXllMSiODS of ~veral:e (including, possibly, a smpUer ERtsian of the
Medicare huy-in).
.
I.. ~- h~
.#' ."
'1
•
Workforce .kill, initiative - closing tbe 'klll, gap. With the long struggle for the Gl
Bill for Workers now successfully completed, you can more overtly addre~s this remaining piece
Ofyour.lifet.ime-loamlag_nda.-..ll~proPO"1 being developed by the NEC, every
.• aislocated worker would get trn.ini
<W five years, every unemployed person would get
some kind of reemployment services, an every worker would have access to one-stops. You
could also advnncc an adult literacy initiative. You could also eballenge American companies to
train American wOf.kers first. before seeking to import foreign high~tech workers.
,
..
There are, of course, other signifi,."IIJIm;.,"",
•
~
.. Child care and after..school
• Environment - EPA and CEQ are working on • quality-of-life based agenda that would
help communities attain 19reen spaces' such as parks and wilderness, and address uncontrolled
development (the suBject of200 environmental ballot initiative victories this November), and
initiatives to protect coastal and river areas. In addition, you can discuss next steps on climate
hange .
.. Conswner protection - From a financial consumers bill of rights now being developed
by the NEe, to an array of other consumer protections, you can propose a consumer protection
agenda (this would be the first such explicit agenda in one Qfyour State of the Union Addresses),
• StrengtJlening democracy for the Year 2000 - [n additioti to campaign finance rerorm,
we are developing new proposais W increase voting and enhance democratic paticipatioll, such as
making Election Day a holiday,
.. An appeai for One America, including an overt appeal against
{as you did powerfully at Portland State)
.. Medical research tlnd medIcal ethics issues
•
• Y2K
J
anti~immignmt
sentiment
�,
•
~ 111e Millennium Project
Finally, we are working with the National Security Council on its proposals and outline.
•
•
4
�MATERIAL FOR
SENIOR ADMINISTRATION OFFICIALS
WHITE HOUSE CONFERENCE ON
SOCIAL SECURITY WORKSHOPS
•
SCHEDULE F'01{ SECONI) DAY
•
LIST OF MEMHERS AND ADMINISTRATION
OFFICIALS, By GROUP
•
•
AGENDA FOR KIES/GREENSTEIN WORKSHOP
AGENDA FOR FELDSTEIN/REISCllAlllm
WORKSIIOI'
•
QUESTlOi'i & ANSWERS
/)ecclllber 9, 1998
�SCHEDULE FOR SECOND DAY OF
WHITE HOUSE CONFERENCE ON SOCIAL. SECURITY
See AttachedJor GrollI' Deslgllatioll
GROUP #1: (LOCATION: INDIAN TREATY ROOM)
9:00-10:30
Workshop
011
Social Seeun',y ltnd 7i'aditiom,1 Refin·tJI Optiolts:
Presenters
Bob Greenstein (Center on Budget and Policy Priorities)
Ken Kics (Former Staff DireC!Of of Joint Tax Committee)
10:30·10:45
Break
1O:45~ 12: 15
W(Jrk,~Jwp Oil
Social Security Witt Pl'il'tltc AIuI'ke( ltH'cSlmeuls;
Presenters
Mar!in Feldstein (Harvard Umvcrsity)
Robert Rcischaucr (Brookings 1llSlltution)
GROUP #2: (LOCATION: VICE PI.IESmICNT'S CICREMONIAL OFFICE)
9:00- 10:30
Workshop
011
5;ociai Securi~l' fma Pril'ale Mm'kef !JlI'CStfllCII/S:
Prcscnlcrs
!\inn!!'. F..:::t1s1ein (Harvard UnlvcrsilY)
RobGrt ReisGbaucr tDrook;ngs lnsl:lullm:)
10:30-10:45
Break
10:45-12: 15
Workshop 011 SOcllll Security and TrmlitiOll(J1 Rlforlll OpliollJ:
Presenlers
Bob Grccnslcm (CC:jlCI' on Budget :md Policy Priorities)
I(CI:
Ki\;s (Form.,;r S:;,lTDm:;;;:;;o:" of Joig\ Tax COml:llttcc)
110'1'1-1 GROUPS:
12;)0-1 :30
M£'erin;: h'ilit PI'f'yitlf'1f1 Clinton tit Blair
/f()Il.w~
�WHITE HOUSE CONFERENCE ON SOCIAL SECURITY
PARTICIPANTS FOR WORKSHOPS
GROUP#l:
Location: buihm Treat)' Room
Larry Summers, Deputy Secretary of the Treasury
Ken Apfel, Commissioner ofSSA
Bruce Reed, Domestic Policy Advisor
William Daley, Secretary ofCornmcrce
Maria Echaveste, Deputy Chief of Staff
Sylvia Mathews, Deputy DirectorofOMB
Senator. Edward Kennedy (DMMA)
Senator Mary Landrieu (D-LA)
Senalor Bob Graham (D-I'Ll
Senator Charles Robb {D-VA}
Senator Kcnl Conmd (D-ND)
SCHalo:' Tom Harkin ([)~lA)
Senator Judd Gregg (R~NH)
Senator Phil Gramm (R~TX)
Scn::ttor Rick Santofllm (R~PA)
Senator Susan Collins (R-ME)
Senator Rod Grams (R-MNJ
Seniltor Craig Thomas {R-WY)
Rep. John Spratt (D-Sel
Rep. Charlie ROI1gcl (D· NY)
Rep. Richard Neal (D-MAJ
Rep.
Rep.
Rep.
Rep.
Rep.
Rep.
Rep.
Rep.
Sandy Levin (D-MI)
!len Cwdin (D·MD)
Xavier Becerra (D-CA)
Robert Portman (R-OHl
Jim Kolbe (R-AZl
Mark Sanford (R·SC)
Judy B'ggert (R-IL)
CI"y Shaw (R-FLl
Rep. Chip Pickering (HAviS)
�GROUP #2
Loca/ilm: Vice Presidel~/;s Cerl!lIltwial Office
.
. '
Gcne Sperling, National Economic Advisor
LlIny Stein, ASSistant to the President for Legislatlve Affairs
Ju:)ct Yellcn, Chair of Council O! ECOI1omic Advisors
Alexis Hcmml1, Secretary of Labor
Jolin Podesta, Chief of StalT
David Beier, Domestic Policy Advisor to the Vice President
Senator Jeff8ingaman (D·NM)
Senator Barbara Mikulski (D-MD)
Senator John Chafee (R-Rl)
Senator Joseph Liebemlan (D~CT)
Senator John Breaux (D-LA)
Senator Byron Dorgan (D-NO)
Senator Mike El:zi (R-WY)
SCllotor Spencer Abraham (1<.-Ml)
Senator W;'!),l:C Allard (R-CO)
Senator Sam Browl:back (R-:<'S)
Senalor Pete D0:11e-nici (R-NM)
Rep.
Rep,
Rep,
Rep.
Rosa DcL"uro (D-CT)
Bob Matsui (D-CA)
Earl Pomeroy (D-ND)
Bill Jefferson (D-LA)
Rep. John Tanner (D-TN)
Rep. Ed Markey (D-MA
Rep. Jim McCrery (R-LA)
Rep. Mac Collins (R-GA)
Rep. Nick Smith (R-MI)
Rep, BiB Tb\llr~ns (R-CA)
Rep, BiH Arcl:cr (R-;'X)
Rep. Henry Iloailla (R-TX)
�AGENDA FOR WORKSHOP ON SOCIAL SECURITY AND
TRADITIONAL REFORM OPTIONS
Robert Greellsteill and Ken Kies
I. Ove,'"ic\\' of Social Security challenge and program
II. Traditional reform options
A. Full benefit age (also kno\\'n as the "normal
retirement age")
U. Cost of living adjustments
C. SI.ousal benefits
D. Other benefit adjustments
E. Maximulll tuxable earnings
F, Coverage
G. Taxation of benefits
H. Means testing
Ill.
General discussion
�AGENDA FOR WORKSHOP ON SOCIAL SECURITY
AND PRIVATE MARKET INVESTMENTS
Marti" Felt/steilr ami Robert Reisc/UCller
I.
Pre-funding, budget rules, and the Social Securily Trust
Fund (10 minutes)
II.
Rates of return (5 minutes)
III. Two approaches to private market investments
(10 minutes)
J. Investing the Trust Fund
2. Individual acconnts
IV. Pros and eons of different approaches
iuvestments (35 minutes)
1. National saving
2. Risk
3. Administl"ati"l~ efficiency
4. Corporate governance
5. Pl'ogrcssi\'Hy and fairness
V.
General discussiun (30 minutes)
(0
pl'il'alC ma"kel
�SOCIAL SECURITY
December 8, 1998
futting QUI A SQCi31 Security Plan
Q;
"'hen c!m we expect the AdmhtistntOoll (0 put out a spedfic Sacinl Security plnn'!
A:
•
The President is finnly committed to whatever steps will advance the cause of
comprehensive Social Security rerorm CO:1S!Slcnt wi:h the five.principJcs he laid ou! in
Kansas City last spring.
•
The President continues to evaluate specific steps in tem1$ of whether they would unify or
divide us, The more and quicker members of Congress Qfboth panies engage with us
and each other, the better we wilt be able to dClemlinc which steps the President could
take Ihat would be most helpful in achievillg comprehensive Social Security rcronn.
•
I r the President believes Iha\ putting a plaJ1 fonvard will help achieve refom1, he will do
so. If Olher forms of leadership arc more cffectivc, :lC will take ihem.
FOLLOW: [s it possible that the Pt'csidcnt wiU
C\'1.~r
put fon"m'd a plan'?
A:
•
Ycs. ifthc Prcsidenl belicves that pulting a plan fo:-ward \,,.'ill help <1chi..::vc rc:om:, he
will do so. I f other forms of leadership arc more cffective, he will take them.
Al>OITIOKAL FOLLO''': Rep•.Archer says the Pre::;idcnt must go first. IIow do you
re~IHHld'!
A:
•
The best wny 10 move forward is llQ1 to playa gmnc or··who goes first" bHl rather:o
work together to strengthen Social Scr:;!rity for :u\urc gCllcrmions.
IlAC"GIWlJN)}:
Al the Kansas Cill' Social Sec\;rity conference, 1;1<..: 1'n..:sidUI:: cllllmcr;:tcd five gC;lcral prillciple;>
10 guide St,c:::i SeCtll ity Xforlll. The priclcip;cs an..:.
I
2,
J.
-+.
5.
St;'cllgli1L::n and Protect Social Security ror the 21" Ccnwry.
Maintain Universality ana Fairness.
Pwvidc a 13cll...:fi! P('oplc C<ll: COUll! O:J.
Preserve Financial Sccurity for Low~lllcomc and Oisabled Bcneliciarics.
Maintain Fiscal Discil11inc.
�Stale of the Union
Q:
Will the
Presid~nt
present a pJan in his State of the Union address this year'!
A:
•
The State of the Union speecb is clearly an iI!lportant vehicle ror addressing cruciul issues
focing the country.
.
•
The Prcsidel1t will use the opportunity provided by the State of the Union in wh;l\cver is
(he most effective way for advancing the deb'lte on Social Security,
FOLLO\V: So will he usc the speech to put forw~lI'd n pl1\n or not?
A:
•
The State of tile Union speech is the President's Opportllfilty to address the nalion. :md:1
,vollid be inappropriate for me 10 reveal the possible detmls of that speech in any way. So
I am simply not allibcI1y 10 discllss what is and what is not likely to be in it
Will Thc President Lead';'
Q:
An influential hip~rlisall groUIJ (Stcnhulfil-Kolbc t nrcanx-Grcgg) hus written tn the
Prcsident asking him to be more specific ahout his "priorities uud ohjectives" n1 the
conference. They also want the President ti) agree (0 a timetllhle for cun~rcssioltal
ncgotiations. WiIllhc President lead on Sodal Security'!
A:
•
Over the past yenr, the President has led ~~ by cha:lging the dcbmc on Socia! Security in
Iwo i111POr-!<lnt ways: first, by reserving the surplus until Soci:d Security is rcfonned and
second, by striVIng 10 create a climate conducive to bipdrtlSan SOCIal Sec:l)'ity reform by
not nt:acking specific plans to reform the system.
•
';'l1c \Vllitc I'louse Conrerence provides a unique oPPOrlanily to bring tQgether DcmocralS
and Republicans ~~ prior to tbe beginning of the legislative year
for working together on achieving Social Security reform.
~~
to lay the
fOU:ld~Hion
•
To build a bip,misan conscnslis for rcform, Wt will need to consull vcry broaJly. We
bave already begun thal and wl!! continue 10 do so o\'cr the coming weeks ;md nlOl'nhs,
•
We wanl this co!:fcrcll;;:c 10 be balm~c;::d alld produclivt.: ~~ 10 lay !he gmul1dwcrk for
bipanis:tll work with Congress over the comil~g l11onth::\,
2
�Individual Accounts
Q:
Would the President support a plan that includes individual accounts?
.
'
A:
•
The President will examine any proposal in the context of comprehensive reform that is
consistent with his five principles. The President believes that rather than ruling in or out
specific elcments, wc should consider whether a comprehensive package meets his
principles.
•
[IF NEEDED: There are difficult issues with individual accounts that would need to be
worked out -- for example, what are the administrative costs, what are the risks to people,
and \vould they would provide beneficiaries a solid progressive benefit that they could
count on.]
Livingston Proposal To Change Budget Accounting ror Social Security
Q:
Congressman Livingston, the ncw Speaker, Iws said that hc wants to ch:lIIge the way
we treat Social Security ill our budget accounting" \\'ould you SUPPOI"' that change"?
A:
•
Clearly many people have different views on the complicated budget accounting. Our
simple mcssage is that when so much of surplus is from Social Security it makes sense to
reserve it until we have addressed comprehensive Social Security reform.
BACKGROUl"IJ:
•
We have not seen any details of that proposal, so we arc reluctant to respond in detail. As
a general matter, the budget rules work effectively, and we now have the first budget
surplus in a generation. Tradilionally, we l11easure the unified budget which relleets the
redeml government's eonlribuliollto national saving. By eliminating the budget deficit,
we have more than doubled ollr nallonal saving rate. That higher savings rate helps us
raise investment and productivity, which helps us prepare for future fiscal challenges-
like lhe retirement oflhe baby boomers.
3
�Vice frejidlmt Gore and the 2000
Q;
ta••tion
Does Vice Presi,dent Gore want Social Security resolved this year or does he 'Want to
save the issue for the Presidential election in 2000? Is it to the Vice President's
advantage or disadvantage to see the Social Security issue nddressed in 1999?
A:
•
The President .and Vice PresIdent both believe 11m! we must act <lOW to save Social
Security and we should not play politics with this crucial program. Next year provides ar:
extra'Jrdinary opportun:ty to act early to adcress this long-term challenge, The
President's and Vice President's primary concern is or.suring tilm <iny ref0f111 is consistent
with
~he
principles that they have outlined.
•
The Vice President has pm1icipated actively in this year of national discus~ion about
Sacllll Security reforr:1 -- he has participated in the national forums, given speeches and
aUended rallies in support ofstrenglhcl:ing Socia! Security [01' future gcncrations.
•
BClh the President u:)d Vice President have indic:tted that ;;1$ this year cf nation.a: d;aloguc
cernes to a c:os~. they want to begin a bipartisan process to ilChicvc reform car:y D('xt
year.
\
WjndQ\'j' Qf OpportuuHy for Reform
Q:
\Vhcn do you think the window of opportunity for achieving Sodal Security
solvency wHi close'! B)l July, September'! \Vhal do you think the chances nrc that
me.mingful n~fonn paekl.lge will be passed in 19997
~I
A:
•
•
No c'-,c can make any p:'(,}(:k::iO:Hi abocll the future, but we know we haw:m histortc
opportunity (0 strengthc:l So~i;11 S,"clIriiY for future generation!:;,
Wc'\'e apprwcbed the tusk of Social Security r~fo;'Jl1_ WIth a praclic:!l eye fro:1I. 1he
Clt:arly WI.,) fclt in 1998 that it would be bclt!.)"r to try to educate the imbl);: ami
build b:partis:;n support for geUin:; reform done next )'tJar, nllhcr than rush mlO an
bc;;;in~li:lg.
decl1011
•
yC:!f
\Ve do not have;i dcadline, but ccrtmn!:; \VC fecl tha: gcning II qmck S!nrl ~Il 1999 \\'111
increase tbe chanci;s of reform. But we tlo not !wvc tim,:;; to \\lJslc -- we slloi:id \vork
together 10 1:1CV(; forward on bip.1l11s:m Socml SCCUf,liY (dorm.
4
�How \VHU'..QuJ\1ove Forward on Reform
,
Q:
A:
•
The President talks about beginning bipartisan negotiations next mQnth (January).
How docs he propose to begin those negotilltions'! A Commission'! I)rivate meetings
with fhe LC:ldership'?
,
The Presidcnt intends to bcgin a tOllstnlctive bipartisan process at the starl of next year.
He will continue to consul! with the Leadership and Members of Congress as to how bes\
to proceed.
.
.
Can \Ve Solvc thc Social Security I'roblcm 'Vi.h lhe Hudger
Q:
Sur[llu~
Can the surpluses Hun are projeeted solve the long-range solvency problem f.acing
SOci'll Security'?
A:
•
\VhCll President Cli!lton took offLce, tbe b~!dgct deficit was projected to grow to $357
billion in FY1998. BecfmSc of his 1993 defLcil reduction pian, lhe actual budget situation
in 1998 had swung by .1427 billion ~n so that we had :1 surplus of $70 billion. With $ i.5
trillion in surpluses projected over the next 10 years, we have put our fiscal hOllse in
order. Tlint means that we are in better shape 10 fix our generational deficit
•
The projected surpluses provide another possible mechanism to prci'ulld the Social
Security system, Our fiscal discipline has opened up new possibilities ;:md opportun:tics
for Social Security reronn.
•
We mUSi "save Socia! Security iirst" -- preserving the hedgel surpluses until we know
what role they should play in refoml,
5
�Raiding 'he Trust Fund
Q:
Isn't aU ortbe unified budget surplus really just Social Security funds'! Aren't you
just raiding Social Security to pay for the rest of the budget?
A:
The [(let Ihm Illost of the projected budget surplus comes from Sodal Securtty reinforces
the President's view thut we should reserve the surplus unli! we bave addressed SOChll
Security rcfonn,
BACKGROUi\iI):
•
The unified balance is tbe sa:ne measure thai has been used by 1I1IIldministrutiollS going
back to the Johnson AdministratIon. The unified budget IS the simplest rInd clearest
measure of how much the government is taking 10 and how much tbe government is
spending and it allows us to look out ifito the future to sec if the governmcnt will be able
io meet all orour obligations, inchlding Social Security,
.
•
Evcry doHar :cccivcd by Soc:;;.1 Security is either used to pay cum.m: benefits or helps
P;IY thturc bcne;'its by being lEycsted in special-purpose Treasury honds, wbic:l reprcsc:l1
.! lcga~ cOlnmitmclil i/O1\' 10 finagcc Socia! Security. later. Under the law, if Social
SI.!Curlty rcqulres (unds opd ll:c Trust Funds have assets in them, the Trcusury must "maKe
the ft~nds avui !able.
The spccinl~purposc bOlids held by lhe T:"ust Funds have the same legal :H:tnding as regular
Treasury bonds, \vhich tlrC Ihe benchmark orre-liability in the world's capital lliurkcts.
•
•
When the President look omcc, Ihe deficit was $290 bilhon and there were real queslions
abOIl! whether the government would be able to meet its commilments in the future.
Because of the fiscal discipline of the pnst five years -- instead of Ine $357 billion deficit
in 1998 projected when we look office -- we bave a budge! surplus for the first time Sltlce
1969. And over thc next 10 years, we arc projecting S I.S trillion ofsilrplllscs,
Q:
Wlwl is tht' }\timill!slratioll':, f'o:.itioll on I'<lisitlg Ihe n'liremclIl .Ige?
A:
•
Changil';b 1:\(.: ;'o,.;lil":'l1h.'ll' ag,\.! is d:.:ar!y;t col1tnwcrsial option thH! is hlJ~ng ndivdy
(kb:lt;;:d hy m,u:y peo]'l:.: ill ihe Soc:"l Sccmity reform debatc.
•
The P;'csldcnt believes t:nl ra,her thal~ :':I\;ng il: or out spcclfk dcnwnts, we should
com:id.:r whether a com;m';:lcl:S:\,C :nckngc meets his prinCiples.
�BACKGROUND:
•
We need t6 recognize that increased life expectancy and early retirement are one of the
primary causes orthe Social Security problcm-- both here and around the world:
o
o
•
Not only is our senior population doubling in the next 30 years, but life
expectancy among seniors is increasing dramatically. Sixty years ago, life
expectancy for those at age 65 was about 77 for men and 79 for women. Today, it
is 81 for men and 85 for women. And rising for both.
And morc Americans arc retiring earlier: in 1962, only 18 percent.of Americans
chose to receive their Social Security benefits at age 62. By 1996, that percentage
had morc than tripled, to 60 percent. The reasons for the increase in early
retirement arc diverse -- but its occurring across the world.
Howevcr, in examining any proposal to improve Social Security solvency -- including
tbis raising the retiremenLage -- we must balance the goal of solvency with the goal of
fairness. Thus, we must look closely at this proposal's impact on Americans who have
physicnlly demanding jobs.
o
For example, rock qunrry workers have physically demanding jobs and working
late into their 60's is not a real possibility. The same is true with kindergarten
teachers who have to stand on their fee\. Thererore, we must balance the goals or
solvency with raimess.
o
Today, 12 percent of the ncar elderly are already receiving disability benefits.
And another 20-25 percent of those about to retire fecI that they must retire
because of health rcnsons or the fact that thcy no longer can do their physically
demanding jobs.
7
�
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Clinton Administration History Project
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Cinton Administration History Project
Council of Economic Advisers
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Department of Defense
Corporation for National Service
Council on Environmental Quality
Department of Justice
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Department of Education
Department of Energy
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Office of the Vice President
United States Trade Representative
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1993-2001
Description
An account of the resource
<p>The Clinton Administration History Project describes in detail the accomplishments of President Clinton's Administration for the period 1993-2001. The records consist of the histories of 32 agencies or departments within the Executive Branch. In general, each organization associated with the Project submitted a narrative history along with supporting documents. These narrative accounts are primarily overviews of the various missions, special projects, and accomplishments of the agencies. The supplementary records include substantive memos, press releases, briefing papers, and publications illustrated with photos and charts.</p>
<p>Agencies:<br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Council+of+Economic+Advisers&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Council of Economic Advisers</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Central+Intelligence+Agency&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Central Intelligence Agency</a><br /><a 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Is Part Of
A related resource in which the described resource is physically or logically included.
<a href="http://clinton.presidentiallibraries.us/items/show/36051">Collection Finding Aid</a>
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
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Clinton Presidential Library & Museum
Format
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Adobe Acrobat Document
Extent
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1474 folders in 111 boxes
Text
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Paper
Dublin Core
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Title
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NEC – Budget Surplus to Strengthen Social Security & Medicare II [5]
Creator
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History of the National Economic Council
Clinton Administration History Project
Date
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1993-2001
Is Part Of
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Box 41
<a href="http://clintonlibrary.gov/assets/Documents/Finding-Aids/Systematic/Administration-History-finding-aid.pdf">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/id/1497354">National Archives Catalog Description</a>
Provenance
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Clinton Presidential Records: White House Staff and Office Files
Format
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Adobe Acrobat Document
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Clinton Presidential Library & Museum
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Reproduction-Reference
Date Created
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6/24/2011
Source
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1497354-nec-budget-surplus-to-strengthen-social-security-medicare-ii-5
1497354