Addressing Greenspan's Challenge on Social Security and Savings
Views from an Emerging Generation of Political Leaders
With Senator Lindsey Graham and Representative Harold Ford, Jr.
Moderated by Morton Kondracke, Executive Editor Roll Call
March 25, 2004
(transcript originally posted April 1, 2004; minor formatting changes made April 2, 2004)
Transcript of a discussion sponsored by Centrists.Org, The Concord Coalition, The Committee for a Responsible Federal Budget at the New America Foundation, and The Alliance for Worker Retirement Security.
JEFF LEMIEUX. Good afternoon. My name is Jeff Lemieux, executive director of Centrists.Org. On behalf of the event co-sponsors -- The Concord Coalition and Bob Bixby, Maya MacGuineas from the Committee for a Responsible Federal Budget at the New America Foundation, and Derrick Max from The Alliance for Worker Retirement Security -- welcome and thank you for joining us.
The sponsors’ goal was to try to spark some bipartisanship on the very difficult issue of Social Security reform. In light of the new Trustees reports and Chairman Greenspan’s comment that Social Security benefits should be trimmed, we thought it would be helpful to have a bipartisan discussion, and try to break the gridlock.
In my case it’s personal too. I have a very sweet, sensitive high school senior at home who hasn’t applied for college and doesn’t have any particular job prospects.
I say: “Paul, when are you going to get a job or apply for college?”
He says: “I don’t know Dad, when are you going to save Social Security?”
Unfortunately, I don’t have a comeback for that. And what’s worse, he has a ‘zinger’ to follow-up.
He says: “And by the way, if you work any harder on Medicare reform, by the time I’m your age, taxes will be so high there won’t be any point in working.”
That’s a bit of teenage exaggeration, but there’s an element of truth to it too.
To lead our discussion today, we’re delighted to have Mort Kondracke from Roll Call. One of the most thoughtful and provocative commentators on the national scene, Mort is executive editor and columnist at Roll Call and is co-host of Beltway Boys on Fox. He’s been a regular on Fox News Channel’s Special Report with Brit Hume and the McLaughlin Group. Mort is a former Washington bureau chief for Newsweek and his credentials go on and on. One of the finest journalists in Washington, please take it away Mort.
MORT KONDRACKE. I’m delighted to be here. Any of you who watch the McLaughlin Group will know I’m glad to be anywhere where I can finish a sentence without being interrupted.
But I really am pleased to pay back some of my favorite sources -- Centrists.Org, Jeff, and the New America Foundation’s Committee for a Responsible Federal Budget, the Concord Coalition, and the Alliance for Worker Retirement Security -- all of which have been generous with their time and very useful to me over the years.
One of the sad things about this Presidential campaign is that both camps have neglected to address what everyone knows is the largest long-term domestic problem that the country faces, namely the cost of the retirement of the baby boom generation.
When Alan Greenspan, who lent his name to this event today -- without being asked I’m sure -- said a month or so ago that current benefit levels in Social Security are unsustainable, and that we either have to raise the retirement age or change the inflation adjustment of benefits, or both, the political parties responded as they usually do. John Kerry said cutting benefits is the wrong way to go; the President said we’re not going to cut benefits for current retirees. But since then there has been a vast silence.
So it’s what we’re going to talk about today. Senator Lindsey Graham and Representative Harold Ford are both reform-minded young legislators.
Lindsey Graham was elected to the Senate in 2002, after 6 years in the House of Representatives. He is a long-term thinker, and he’s going to tell us about his Social Security reform plan. Senator Graham.
SENATOR LINDSEY GRAHAM. Thank you. If you’re Strom Thurmond’s replacement, you can afford to take the long view of a problem. Senator Thurmond was elected in 1954, I was born in 1955.
To all of you who have participated in this debate, and lent your credibility and hard work to find ideas and talk about them honestly, I thank you. Thank you to Mort, and thank you for talking about issues that really matter, today and tomorrow.
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If you’re only interested in the next election, this is not your issue. Because you can easily get attacked politically. In my campaign, $3 million dollars was spent saying that my personal investment account approach to Social Security meant Lindsey Graham wanted seniors to put all their money in Enron and would raise their taxes by $1 trillion dollars.
It’s so easy to demagogue this issue. Of course, Alan Greenspan could talk frankly about it because he wasn’t running for anything.
What I’m trying to do in my time here in Washington -- whether it’s 50 years like Strom Thurmond, or this term, or next week -- is to leave behind something a little bigger than just politics. My hope is that the Senate and the House one day soon, along with this President, can actually bring solutions to the table to solve big problems. I can’t remember the last time we have solved a big domestic problem.
The good news about Social Security is that there is a solution. I don’t know how to solve Medicare. There are more problems with Medicare than I can get my hands around.
But Social Security is doable. Harold Ford and I are among the few politicians who talk about Social Security. We talk a lot about trying to do big things on our watch.
And being a Democrat, it is harder to talk about this than it is if you’re a Republican.
The first thing about Social Security is that it’s no one’s fault. We’re going to argue about what happened on 9/11 until the cows come home. But on Social Security, it’s no one’s fault, yet it’s everyone’s fault. Republicans and Democrats in the 1980s had a chance to look at this, and bought some time. But nobody looked at the real problem.
As I see it, the real problem is that when I was born in 1955, there were 16 workers for every retiree. Today there are three, and 20 years from now there’s going to be two. My parents came from large families -- 7 children and 8 children -- by my sister has just one child, and I’m not married. That’s the demographic problem.
The demands on Social Security financially are not close to being met from the revenues that are flowing in. Two workers per retiree is not going to be able to keep this thing afloat.
Here’s my proposal. If you have a way to fix this program or make it solvent, and it’s different from my proposal, I will be your biggest cheerleader.
And if anyone attacks a Democrat, from my side of the aisle, who’s got a way of saving Social Security -- whether it’s by raising taxes or reducing benefits or whatever -- call me, and I will come and at least set the record straight from one Republican’s point of view.
We should build up and honor those who are trying to find a solution. The only way we’re going to be able to fix this problem is to declare a cease-fire. If the parties continue to run 30 second sound bites in every election cycle, we’re never going to get there.
Let me tell you quickly about my proposal, and then I’ll turn it over to Harold.
My proposal doesn’t affect people over 55. For people under age 55, there are three options. First, if you don’t want to pay any more in taxes, you would get lower benefits that what we’re promising today, because we can’t afford what we’re promising today at the current tax rate.
Number two, if you want to get the same benefits promised today, you have to start paying more now, because there’s not enough money coming in to pay you what you’ve been promised.
Now these two options are very easy to demagogue. You could say Lindsey Graham has got a proposal that raises your taxes, because if you take that option, it does. You could say Lindsey Graham has got a proposal to cut your benefits, because if you choose that option, it does.
But there’s a third option. It is a hybrid system, with a personal investment account. The first thing I do is change the way we calculate initial benefits. Several years ago, we indexed Social Security’s benefits to wage growth. That was a huge, costly mistake.
I’m proposing that we go back and index Social Security’s initial benefits to price growth. Alan Greenspan told me that’s a good idea. (But he won’t be on TV telling people to ignore all those commercials.) It is a better, more accurate way to compute future growth. Of course, it will reduce benefits compared with what’s been promised, but it will save billions of dollars. Benefits would still grow with inflation.
Reducing the growth of benefits is a hard choice. But in addition to that hard decision we add a hopeful decision. Under our bill, you can take a percentage of your FICA taxes, and put it in an investment account under your name, similar to the federal employees’ Thrift Savings Plan. There are good funds in the Thrift plan -- which Harold and I use -- that don’t have any risk at all.
The government will match voluntary contributions up to $500 for people who make under $30,000 a year, and there is a minimum benefit to make sure nobody who worked a full career retires in poverty.
You can take that pot of money from your account and add it to your Social Security benefit. Most people will be better off, unless we have a major economic depression. (And if we have a major depression, we’re all hosed anyway.)
Social Security taxes are the largest taxes most families pay. My proposal would give people a chance to direct where some of that money goes.
When you divert taxes into personal accounts there is a transition cost. It’s over $1 trillion dollars under our bill. (That’s another great ad.)
But if we do nothing, the cost is much higher. The unfunded liability of Social Security if we do nothing is over $5 trillion. And it keeps getting worse. By 2060, the unfunded liability would be $15 trillion, in today’s dollars. So we can pay a trillion now to start solving the problem, or face a much higher cost if we don’t.
My plan benefits people who can’t vote for me. To me, that is a highlight of being a public servant. Working on our watch to benefit people who can’t immediately reward us at the polls. That’s being lost in politics.
One more thing. For an African-American male born after 1980, the rate of return on your FICA taxes today is negative 0.9 percent. Why? Demographics. Black men have a shorter life expectancy. Under my plan at least some of the money from the account can stay in your family, and you’re guaranteed a floor in terms of benefits that the government has to honor.
I think it’s a well thought-out plan. But if you’ve got a better idea; if you’ve got a hybrid of this idea, if you’ve got a totally different idea, bring it on. I’ll meet you halfway. I’ll get up late at night and drive to the two-thirds point.
I’m here to solve this problem. I’m here to work with anybody from any party, or any political philosophy, to make sure we don’t sit on the sidelines while Social Security goes broke.
The debate is not whether we want to fix it -- it’s got to be fixed. Too many people are dependent on it -- there are too many stakeholders to ignore the problem.
And if we do fix it, it will be because of people like Harold Ford.
MORT KONDRACKE. And now for the aforementioned Representative Harold Ford, serving his 4th term in the house and reportedly on his way to joining Lindsey Graham in the Senate, right?
REPRESENTATIVE HAROLD FORD. That’s right. Mr. Kondracke, thank you. And to my friend and colleague Lindsey Graham I thank you. We traveled to Iraq together, along with Senator McCain and Senator Kay Bailey Hutchinson, Senator Inhofe. It was an honor to be with so many young men and women serving this country. It was a very valuable experience and I enjoyed our time together.
I want to thank all of the organizations outside of Congress who play such a key role
in helping us think about this important issue, and helping us think about it in ways that remove some of the politics from it: particularly my friends at the New America Foundation, the Concord Coalition, Jeff Lemieux and Centrists.Org, the Alliance for Worker Retirement Security, Maya MacGuineas from New America. I want to thank all of you for helping us think about these issues.
Lindsey touched on many of the reasons why this is important, and laid out the challenge we face and the reality that we’re running out of money.
I’m 33 years old, and many in my generation will tell you they’re not expecting to be able to rely on Social Security.
We had Chairman Greenspan before the Budget Committee not too long ago. He indicated that the “pay-go” system for taxes and spending is something Congress should take a serious look at. We’re voting now on a Budget Resolution in the House. He said we need to take some strong steps, some smart steps to reduce the deficit.
We have different ideas on how to spark growth in the economy. I’m a believer that there are three kinds of people in the economy: people who have jobs, people who need jobs, and people who create jobs. We have to find ways to encourage people to create more jobs.
But the reality is it’s just not happening. We’ve done all these things in the last three years, and it’s not working.
In fact, I’ve listened to my colleagues -- many in my party, a lot more in the other party
-- who said that there would be an explosion of jobs and growth, but this has not happened.
This isn’t an indictment of any individual, but the reality is the economy isn’t improving as it should.
We’re going to have to make some smarter choices on how much we tax and how much we spend.
Some of my colleagues say that if we could cut spending, it would solve a lot of our problems.
The reality is even if we cut all of discretionary spending -- leaving off defense spending -- we still couldn’t balance the budget.
So we have to make some tough choices on the budget right now, before we can get to this issue that we care so deeply about, and others in the Congress care so deeply about.
Let’s assume for one moment that Congress is able to work some magic, bring the budget back into balance, and jobs start to really expand, and revenues begin to flow back into the Treasury.
That’s a big “if,” but let’s assume we can improve the budget enough that we can begin to address this program. I’m one who believes that there are a couple of tenets that we should follow, which sometimes put me on the opposite side of other folks in my party.
There are 3 or 4 things that guide my thinking: number one, we shouldn’t have any increases in the payroll tax; two, we can enhance the progressive nature of the system; three, we can challenge baby boomers to be more responsible, and target benefit levels to those who actually work longer; and finally -- and this is the approach that meets the most resistance in my party -- I think we can boost the national savings rate with some kind of personal accounts.
I agree with Lindsey’s demographic point that personal accounts could help black men, but I think if we create them correctly -- I’d like to help white men too -- they could be beneficial to everybody.
I have worked with some of my colleagues, including my friend Jim DeMint from South Carolina, on the idea of personal accounts. My feeling is that we also need to very seriously address the fundamental issue of how to “pay for” the accounts. He didn’t find that issue as fundamental as I did, and as a result we couldn’t come to agreement.
It’s clear that for us to convert to any kind of personal accounts, with all our other obligations and responsibilities -- currently and leading into the future -- if we can’t agree on some way to pay for the transition, we’ll find ourselves in a bigger bind later than we find ourselves now.
Lindsey’s already touched on why this is an important issue, and some of the political difficulties. But there are some of my younger colleagues -- who have come to Congress since 1994, who have always been in the minority -- who now think it’s time to work on difficult issues. Our older colleagues say they want to “take Congress back” -- well we don’t remember having it in the first place -- we say we just want to “take it.” We think it’s not enough to oppose things and wait for our turn; we want to work on creative new ideas pro-actively, starting now.
I think there are enough of us who are willing to entertain some other options, as Centrists.Org and the New America folks explain so well -- so that the debate doesn’t boil down to “privatization” or “no privatization,” we won’t just continue this stale and predictable debate.
Hopefully, we can consider some new financing approaches -- such as raising the taxable maximum from $90,000 to $140,000 -- when we put personal accounts on the table.
I think everybody should get a chance to join the ownership society. I’ve been working with some folks at the New America Foundation to develop a way in which more people can own assets. The proposal would provide newborns with a personal account that could be supplemented based on academic success, community service, or other things.
I dream of the day when a little girl living in a public housing community in my district can come home, and flip on the TV, and know when she sees a FedEx commercial, that not only does FedEx employ the most people in her district, but that she also owns stock in companies like FedEx, and she has a financial stake in how well the company’s doing. That she will know the harder she works, the more likely she’ll have something to own -- to be able to point to a part of America that is hers, and not just lean on America to give her something.
So I hope we can debate how to create an ownership society in a variety of creative ways, and move away from “if you’re for privatization, you’re with the Republicans” and “if you’re against it, you’re with the Democrats.”
We have a lot of big assumptions that we can solve the deficit problem and get started on this. But I think if we can identify three or four tenets that we can operate by, there’s a way to galvanize a group of Democrats in the House who have been here for the last three or four terms to work on this. There’s a way to galvanize a group of Republicans who are willing to move away from the predictable, inflammatory rhetoric that we’ve seen over the years.
I’d like to close with an idea we’ve been working on with the folks at Centrists.Org that involves what we call a “bridge benefit.” What this proposal envisions, is that workers aged 60 or 61 would be able to apply for a benefit that amounts to 25 percent of their future regular retirement benefits, which they would pay back with a permanent 3 percent reduction in their regular post-retirement Social Security benefits.
It’s an actuarially sound bill, that’s designed to help workers have taken a pay cut or have lost higher paying jobs. Workers would be required to have at least $10,000 in annual earnings to qualify, and workers earning over $40,000 would not be eligible.
The thinking behind this is that we can help prevent dislocated workers from falling into poverty, particularly those for whom retraining is not really an option. The bridge benefit could be used to help pay for health insurance and other necessities.
I think these kinds of ideas -- which might not be perfect of course -- but these sorts of creative ideas can help bring people into the debate. I applaud Senators like Lindsey Graham who are interested in this kind of creative thinking, and know there are those of us in the House who are willing to think along these lines and support these innovative -- and we hope effective -- approaches to solving these problems.
With that I thank you, and we’ll try to take your questions.
[Editor’s note -- The following transcript has been edited for clarity and brevity.]
MORT KONDRACKE. Thank you very much. We’ll ask questions first for Mr. Ford, since he will have to leave shortly to vote.
First, would you be supportive of a bill like Senator Graham’s, with personal accounts in Social Security?
REPRESENTATIVE FORD. Yes, I would, provided we could pay for the transition costs without running up bigger deficits. I’m not an expert on all the details, but I think his bill has good anti-poverty protections, and matching funds for lower-income workers. The personal accounts are progressive, which is good. And in the long run, it keeps Social Security costs down to about where they are now, which we can afford. In this budget environment, however, it will be very hard to pay for the transition costs of the accounts.
MORT KONDRACKE. Is there a caucus for entitlement reform among Democrats in the House? Realistically, how many House Democrats do you think would be interested in discussing Social Security reform and personal accounts?
REPRESENTATIVE FORD. I think there is a group who would be willing to work constructively. Maybe 50 or 60 members. Certainly, Charlie Stenholm has been an extraordinary leader on this. Charlie has been explaining this issue to voters for many years, and he is a very influential leader on budgets and entitlements.
MORT KONDRACKE. A question from the audience?
QUESTION. Mr. Ford, I think these claims that Social Security personal accounts will greatly expand savings are exaggerated. One problem I have when people say they want to increase the savings of low-income people is that if they increase their savings, that means they have less left over to consume. How do you address that?
REPRESENTATIVE FORD. Well, we can debate whether or not overall national savings will increase. For high-income people, the accounts might not make any difference in their savings.
But for lower-income people, they might make a big difference, especially helping people get starting on savings and asset accumulation. It might be the sort of thing that helps get young people interested in savings and planning for their future.
QUESTION. Mr. Ford, are you opposed to incremental approaches to solving Social Security’s budget problems? Why not fix it for 20 years? Why try to fix it all at once?
REPRESENTATIVE FORD. I’m not necessarily opposed to short-term things to help improve Social Security, or make its finances better. The demographic predictions for Social Security are pretty solid -- there isn’t much uncertainty that we’ll have to do something. The sooner we start, the changes will be less noticeable.
But I think it would be a better thing, if we could, to set out the expectations for Social Security in advance, so people can plan. It would be better to set the finances in order for good, rather than having to come back in 20 years and change things again. We don’t want to tell somebody in their twenties that this is the deal, but then come back and tell them in their forties that things will be different.
QUESTION. United Seniors has done a recent poll showing that most seniors don’t want benefit cuts, and most taxpayers don’t want tax increases to pay for personal accounts. Aren’t you just trying to do what voters don’t want?
SENATOR GRAHAM. We aren’t going to be able to save Social Security without everyone doing a little bit. If you ask the question “would you choose personal accounts,” the “yes” response is about 60 percent. That’s the good news. The younger the person, the more likely the “yes” response. My bill applies to people under age 55. As you go down the road, this issue has more and more people buying into the idea of change.
Young people think their likelihood of being picked up by a Martian is about the same as getting their money back. I’m here to build upon that, and put ideas on the table to fix that perception.
As for the $1 trillion dollar transition cost, I would be willing to raise the amount of money that we pay Social Security taxes on. I would be willing to close corporate tax loopholes -- I’d be willing to do a combination of things.
Payroll taxes are the source of revenue for Social Security. So it’s important to understand the tax cuts we’ve passed in terms of how Social Security works.
But if I thought we could get a big crowd of my Democratic colleagues to support a transition system and the tax cut money would go instead into the transition system -- not back to the government to be spent in general -- I’d support that.
If somebody came up with an idea to repeal part of the tax cuts tomorrow, and put the money into a transition system, I’m there.
QUESTION. Why not consider an alternative proposal? [Questioner outlines a lengthy technical Social Security proposal]
SENATOR GRAHAM. Well, think about what you just said politically. Think of what a political consultant could do with that. Number one, you can’t explain that proposal in thirty seconds. People have to understand you. The problem with explaining this, is that it just doesn’t lend itself to the political way of doing business in the early part of the 21st century.
That’s where leadership counts. We’ve got to find a Presidential candidate, or an office holder at that level, who’s willing to get beat. Until you find that, it’s going to be difficult.
But look what we did with the deficit politics. When I first came here in 1995, we were told a thousand reasons why you couldn’t balance the budget. Now our Democratic friends are beating the crap out of us for going back into debt. That’s good news for Republicans.
The bad news is, we’re spending too much money as Republicans. But there’s been a cultural change about deficits.
There needs to be a cultural change about Social Security. When the President has the one line about Social Security reform and personal accounts in the State of the Union speech, there was a thunderous “sitting on hands.” Half the people in the Republican conference did not stand up and applaud.
Don’t think opposition is only among Democrats. There are people in my Republican conference who would go nuts if I offered my bill as an amendment to another bill to be voted on. People are afraid of this. They’re afraid of getting beat up back home.
You take somebody like my Aunt and Uncle -- who worked in cotton mills all their life. They live on Social Security, plus some money I give them, plus a paper route. They’re in their seventies. It is so easy to scare them. When Alan Greenspan mentioned benefit reductions, they thought it was now. I got a call from my own family within an hour, thinking we were going to cut benefits today.
That is tough politics. But here’s why I’m hopeful. Harold, by coming here today, has put a new way of thinking on the table, for a younger generation of politicians who happen to be Democrats.
Everyone who ran in 2002 on our side embraced the idea of personal investment accounts. There are more and more Democrats who are talking about this, because younger voters are intrigued by the idea.
I think it’s just a matter of time. We need to be able to tell our grandchildren, that we were there when it all started. An honest open debate with the think tanks, and a young Democrat and a middle-aged Republican, and somebody they’ll vaguely remember named Mort Kondracke…
MORT KONDRACKE. Who will go down in journalism history.
SENATOR GRAHAM. … who were there when it started.
MORT KONDRACKE. Are there more Democrats willing to discuss the issue? Historically, Senators Bob Kerrey, Pat Moynihan, John Breaux have been willing to stick their necks out on this issue. But how many contemporary Democrats are with you on all this?
SENATOR GRAHAM. The buzzword is “privatization.” Everybody’s against privatization. Among younger Democrats in the Senate, I’ve found some acceptance, but the big change has been the lack of embracing this idea by Republicans. There has been a meltdown in our conference, from being really excited to talk about this, to wanting to put it off for another day. That’s what surprises me.
I don’t know what happened. What do you think happened?
MORT KONDRACKE. I think it’s just fright -- short term thinking. Everybody thinks as far ahead as the next election.
SENATOR GRAHAM. I think President Bush put it on the table, and made it real. Before that, people could talk about it more easily because it wasn’t going to happen. Once it’s there in front of you, however, that’s more difficult. People like talking about the concept, but they don’t like talking about how you actually solve the problem.
MORT KONDRACKE. What do you know about what the Bush plan is? There was only one line in the State of the Union message. But you keep hearing that they are preparing the theme of an “ownership society” for the campaign.
SENATOR GRAHAM. Well, I know this: The idea of a commission has run its course. That was the first approach. “I pledge to get smart people together to tell us what to do.”
Well, smart people have looked at this for a very long time. And they keep saying the same thing over and over again, but we seem to want one more smart group who can tell us how to do it in a way that’s politically easy. And therein is the problem.
The President has been very courageous to talk about it. He got beat up in the last campaign. Some Republicans believe that’s why he was so close to losing in Florida. That there were several states with senior populations where Social Security took on a very important meaning right at the end. They’re afraid to go down that road again.
As long as there’s people like Mort Kondracke around for the Presidential debates, one of the first questions they ask should be “What are you going to do about Social Security?”
I am amazed at how easy the Presidential candidates get off the hook on this issue. They give one or two line answers. And then they move on.
No one asks “Do you agree that by 2018 Social Security taxes and interest won’t cover the benefits?” “Do you agree that by 2042 Social Security will be completely broke?” “Well if you agree, then how are you going to fix it?” “If you don’t agree, why are the predictions wrong?”
It’s going to take that kind of laser-focus, and we’re going to have to push people.
I think President Bush in his heart -- I’ve talked to him a great deal about this -- believes this is a winning issue. He believes he can sell this. That he can overcome the fear by telling people on Social Security today “You’re not going to be affected.”
The question is, will the people around him let him go out and do that? I believe they will. Because I know he believes he can win on this issue.
Senator Kerry. I don’t know where he is on this issue, but he said something to me on the floor that was very promising. That we’ve got to stop the attacks on this issue. Because he heard about what I was trying to do. And I think that is a constructive attitude.
He may have a totally different view on how to solve the problem than myself or the President. But as long as he’s got a serious proposal, then I think he deserves accolades for that.
QUESTION FROM THE AUDIENCE. If young people are so sure they won’t get much from Social Security, why do they spend all their money on cars and other things? Why don’t they save more?
SENATOR GRAHAM. Because they’re young people. Let’s think about this. For a politician to chastise people about disciplining their finances would be a joke up here right now.
But your question goes to an important issue -- what kind of risk are we going to allow people to take? Day trading would not be one of your options. It’s a very legitimate issue to make sure that if you allow people to divert money, they might just waste it all before their time.
Most people have less than $3,000 in their savings accounts. I think one model we should try to duplicate is the record of Chile. Everybody in Chile, every worker, has a passbook account, and they see their savings and their Social Security information growing each year.
It has made people think about investing. This “live for today -- worry about tomorrow later” attitude changes when you have these savings vehicles in front of you. We give a few good vehicles to have, relatively safe funds.
My belief is, the biggest reform out of Social Security would be going from living for today to thinking about tomorrow, because we gave you a vehicle to see the advantage of that. That would be the biggest hope for change in America. Reaching average everyday working people. Getting them to say “Should I go to the beach, or put some of this money into my account, because I can see how it’s growing?”
We’ll never know the answer to that question until we try. We’re not going let people squander their future. You’re not going to be able to take money out of your account until you reach retirement age. You’re not going to be day traders -- you’ll have the same investment options that I have and that Harold has as members of Congress. Backed up by the government in a secure system.
QUESTION. I’ve always been intrigued by the “stakeholder accounts” proposals put together by Senator Bob Kerrey and his colleagues several years ago and now being pushed by Rep. Ford. Might that be a way of getting from here to there, as part of a reform package?
SENATOR GRAHAM. Anything that will get people interested in savings and preparing for the future is a good idea. But remember, the bottom line is to take the pressure off the Social Security trust fund. Any reform measure has to change the demographic train wreck. The trust fund is under immense pressure. And the question we always need to ask is “does the solution being proposed make it solvent?”
QUESTION. You mentioned the experience with personal accounts in Chile. What about the question of whether the government or the workers actually controls the account?
SENATOR GRAHAM. First, Chile’s economy seems to be doing well compared with its neighbors, and people seem to really like the personal accounts system they have there. The accounts may have helped put more capital in the hands of investors in the private sector.
On the question of government-run accounts, I don’t mean to criticize, but I just don’t like the idea of the government picking the “politically correct” investments.
Let me refer back to the Thrift plan. This is a really good deal, and we want to make sure as many workers as possible get a deal like that. I believe that more private investments would be more beneficial in terms of stimulating job growth, compared with government investing.
Thank you so much for the great questions.
MORT KONDRACKE. Thank you Senator, and Mr. Ford, for a very helpful and interesting discussion.
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