Statement of the Hon. Mike Thompson, a Representative in Congress from the State of California

I would like to begin by thanking Chairman Shaw and my good friend from my home state of California, Ranking Member Matsui, for the opportunity to speak before their subcommittee.  This is a unique and important opportunity for me to share my views on proposals to reform Social Security.

When this program was created by one of our greatest presidents, Franklin Delano Roosevelt, he envisioned a safety-net that would provide every American the opportunity to live with dignity and remain out of poverty following retirement.

This program would also provide essential support for women, minorities, and later the disabled.  He understood that once this commitment was made, seniors would not have to fear their retirement years, and regardless of the economy or state of the world’s affairs, they would not go into poverty.  Roosevelt understood that Social Security is a guarantee.  It is a sacred bond between Americans and their government.

I am proud to support Social Security and all that it accomplishes.  We need to keep Social Security solvent and to ensure its longevity for our children and grandchildren and many generations to come.

Today’s hearing focuses on several ways in which Congress can play a role in preserving and reforming Social Security.  One perspective would provide “guarantee certificates” to every Social Security beneficiary assuring that during their lifetime, they will receive the full-range of benefits promised them. 

I know these promises have been made before.  This promise was renewed when Congress voted for a Social Security lock box five times.  However, a sagging economy, our war against terrorism, and the dissolving budget surplus jeopardize the future of Social Security.  I am committed to working with my colleagues in Congress to bring Social Security on the right track, but I am highly skeptical of legislation which would provide “guarantee certificates” to beneficiaries.

The best guarantee we can provide is to make hard choices, realistically look at our budgetary priorities, and fix Social Security for good.

The legislative proposals that are before the subcommittee today really lead us to reforms to privatize Social Security.  I firmly oppose any attempt to create individual accounts, to invest all Social Security funds in the stock market, or any other plan that would jeopardize the long-term solvency of this program.

Americans have worked too hard to see their retirement funds squandered on a plan that is dependent upon the whims of stock market.  Instead we should continue to invest in treasury bonds and invest a small portion of the trust fund—and not individual accounts, in a stock fund controlled by an independent body, like the Public Employees Retirement System in my home state of California.

I know from personal experience.   After carefully researching the stock in a company called MPIX, I purchased a number of shares.  I read how this technology packaging company had contracts around the world and had agreements with companies like IBM.  My research and educated investment turned sour.  The agreements were broken and MPIX is no longer listed on the NASDAQ.  If I had counted on this investment to provide me with retirement security, I would need to work after I was already dead.  I will not let this type of investing mishap keep millions of Americans from financial security.

Plans to privatize Social Security would drain needed resources from the Trust Fund, threatening benefit payments to retirees, the disabled, and survivors.  The leading plan proposed by the President’s commission would drain $1.5 trillion for the Trust Funds in just the next 10 years.

Privatization requires cuts in guaranteed Social Security benefits.  The President’s Social Security commission recommended a privatization plan that cuts benefits for future retirees by up to 46 percent. 

Women rely heavily on Social Security as a source of income during their elder years.  27 percent of women over age 65 count on Social Security for 90 percent of their income.  Plans to privatize Social Security would risk the stability that currently exists: guaranteed, lifetime, recession-proof benefits, the progressive benefit structure, and protections to spouses and elderly widows.

Privatization also threatens disability and survivor protections.  Nearly one-third of beneficiaries receive income from its disability and survivor components.  Privatization plans, like those recommended by the President’s Social Security commission, would cut disability benefits to help pay for the cost of the private accounts.

These recommendations also bar access to the accounts prior to retirement age.  This action greatly harms the disabled and survivors by reducing benefits and providing no money from the accounts to cushion the loss.

This is not the way Congress should approach Social Security reform.  It violates every promise we have made to the American people, and would certainly not stay true to any “guarantee certificates.”  We need to look very carefully at the financial future of Social Security and keep our promises.

Thank you.