Statement of the Honorable Fortney Pete Stark, M.C., California

Testimony Before the House Committee on Ways and Means

Hearing on Proposals Certified to Save Social Security

June 9, 1999

This week I introduced legislation, H.R. 2039, to preserve and protect the Social Security system for current and future generations. The Social Security system has been the bedrock of retirement income for millions of Americans. Today's young people want to be able to rely on Social Security the way that their parents and grandparents have.

My plan would accomplish this goal without reducing Social Security benefits or increasing taxes. It has been scored by the actuaries as achieving 75-year long range solvency. It would fully protect the Social Security cost-of-living adjustment and guarantee full benefits for current and future retirees--and for women, children and people with disabilities.

It is a simple plan. It would transfer an amount equal to 2.07% of taxable payroll--the size of the current shortfall in Social Security--from the general revenues into the Social Security Trust Fund.

My plan is identical to the Archer-Shaw plan, except that it strips away the veneer. It gets rid of the phony individual accounts created by that plan and instead gets down to the basics.

· It drops the provisions creating nearly 150 million accounts to invest in the stock market.

· It strips away the ruse of individual accounts. There is no pretense of private accounts for people. My plan does not mislead people into thinking that they own new private accounts. My plan does not create individual accounts only to confiscate them at retirement in order to fund a benefit no larger than the Social Security benefit the individual would have received under the current Social Security program. Furthermore, my plan does not tell the American worker they own their own account, but then mandate that 60% of this "virtual" account be invested in stocks.

· Why bother with creating "virtual" individual accounts? Why set up a federal bureaucracy to create more than 150 million accounts? Why run the money through Wall Street so that brokers can siphon off their share? Why reduce the accounts by excessive administrative costs?

· My plan doesn't dig the Social Security financing hole deeper by adding benefits for high-income people. Although most people, under the Archer-Shaw plan would receive benefits only as much as under current law, some high income people could benefit greatly from the private accounts.

My plan makes the point that designing a Social Security plan to achieve 75-year solvency is easy. One can reach 75-year solvency for Social Security by simply transferring enough funds from the general revenue to meet the shortfall in the Social Security program.

My plan achieves 75-year solvency and has much smaller general fund transfers than the Gramm plan, for example. As the Gramm plan demonstrates if you want more funding for Social Security, all you have to do is transfer money.

Unfortunately, our current budget surpluses don't last forever. After the surpluses have disappeared, it is not clear from where the money will come. Will there be an increase in taxes? Will there be cuts in Medicare? Will there be increased borrowing from the public?

My bill strips away the pretense, complexity and deception in other plans. My plan is a simple, straightforward way of achieving 75-year solvency for the Social Security program.