Statement of the Hon. Richard K. Armey, a Representative in Congress from the State of Texas,
and Majority Leader, U.S. House of Representatives

Before the Subcommittee on Social Security,
 House Committee on Ways and Means

Hearing on Social Security Improvements for Women, Seniors and Working Americans

March 6, 2002

Chairman Shaw, Ranking Member Matsui and other committee members, thank you for this opportunity to testify about Social Security.  America deserves a real, national debate on Social Security reform.  I am eager today to join you.

The Social Security system is going broke.  Last year’s report by the Social Security Trustees – a group of non-partisan government experts – showed that Social Security expenditures will begin outpacing Social Security tax revenues in 2016.  In just over 10 years Social Security will have to redeem its IOUs from the rest of the federal budget.  Congress will be faced with the choice of transferring trillions of dollars from the general fund, or raising taxes and cutting benefits.  In all, $22 trillion will be needed over the next 75 years just to cover the liabilities of the current system.  Every credible actuary, every expert, every independent official has certified these facts.  It’s simply not sustainable.

Aside from the budget and demographic challenges we must face, Social Security is unfair for far too many Americans.  The committee’s bipartisan interest in making some benefit adjustments for women shows that many of you have already acknowledged this problem.  I congratulate both parties for this realization.  However, Social Security will not truly be fair for all Americans until we agree on comprehensive reforms that provide all individuals a greater ability to nurture their own retirement nest egg, and to own it.

Here’s just one of many examples to consider.  First, we often talk about the lack of savings among Americans.  Yet lost in this discussion is the fact that the federal government is taking 12.4% of every worker’s income for Social Security.  Particularly for low-income individuals, that’s a portion of their income that could otherwise be saved in an IRA, 401k or company pension program.  Workers could save more if they were taxed less.

Next, consider a low-income individual who had 12.4% of their income taxed throughout their life instead of being able to save it.  The individual worked hard and finally reached retirement, only to die soon thereafter as low-income individuals disproportionately do.  Their lifetime “savings” that the government has been forcefully taking from them just died with that low-income individual.  The same is true of the individual’s spouse when he or she dies.  Congress has tried to make adjustments for widows and orphans, but there remains no real opportunity for low-income workers to build wealth and pass it own to their loved ones and their community.

A Social Security system based on personal retirement accounts can help correct the problems I just mentioned and much more.  Chairman Shaw has a plan that uses accounts.  Reps. Jim Kolbe, Charlie Stenholm, and Nick Smith have their plans.  Rep. Jim DeMint and I have joined together to introduce our own bill, which he can describe in more detail later.  We have our differences, but we solidly agree on the need for reform and the need to allow individuals a greater ability to provide for their own retirement security.

For those who think I have a secret plan, take a look at the DeMint-Armey plan.  It’s H.R. 3535 and it’s out there in plain day-light for everybody to see.  Here’s a brief review:

• The DeMint-Armey plan does not use benefit cuts or tax increases.

• The plan allows workers to voluntarily put between three and eight percentage points of their Social Security tax    into personal retirement accounts.  It’s based on a progressive scale that allows lower-income workers to put more into their accounts and to build more wealth.

• The investments in the accounts are diversified and made within security requirements set by the government.  While decades of economic history would have to be turned on its head for people to be worse off, Social Security would still act as a safety-net for those individuals who might retire with less in their account than they would with traditional Social Security.

• As described earlier, the individuals own the accounts.

I need to remind you that like all reform plans there are transition costs.  In the case of the DeMint-Armey plan, it would cost about $7 trillion over the next 75 years, but that’s less than one-third of the costs if we do nothing.

I’d like to conclude on this notion of doing nothing.  Say what you will of each of our respective plans and approaches, but under any responsible criteria a “Do Nothing Plan” is worse – much, much worse.  There are those on this committee that say we are not facing an oncoming crisis, that if we make only minor changes, Social Security will be safe.  That’s simply not true.  And, it’s an abdication of responsibility.  The “Do Nothing Plan” is a combination of benefit cuts, more tax increases and borrowing trillions of dollars.

The “Do Nothing Plan” is secretly authored by those who want to needlessly scare grandma and grandpa about supposed benefit cuts while having nothing to offer their grandchildren.  They have no plan to offer to the debate.

So to those authors of the “Do Nothing Plan” who want to debate Social Security, I offer the following challenge.  If you want to debate Social Security, come before this committee and offer your plan to save, strengthen and modernize Social Security.  Until you have a plan of your own, there’s no real debate to have.