More From the Congressional Record: April 2005

After dissecting Kline's interminable March, 2005 presentation on Social Security, I was anticipating a quick jaunt through his usual light and infrequent contributions to the Congressional Record for the rest of 2005.

So, I submitted my search query for April, 2005, and discovered that Kline's name appears on exactly three days. On April 12, he did another stint as Speaker Pro Tem. On April 20th, he introduced a resolution in memory of those killed in the school shootings at Red Lake, Minnesota on March 21, 2005 (a bit odd since Red Lake is not in Kline's district), and . . . .

On April 19, he once again teamed up with Jim Kolbe to talk about Social Security some more.

Most of this is ground that has already been covered, so I'll edit it rather harshly and add little of my own comment. My points can easily be summarized as follows:

1. Although skeptics like Kline and Kolbe may well be correct that Social Security is headed for problems in about 35 years, there are good reasons to believe they're wrong.
2. Even if they are correct, the private accounts Kline and Kolbe are promoting are more likely to exacerbate the problem than solve it.
3. The logic which claims private accounts can solve the problem is inherently flawed.

Mr. KLINE: . . . Mr. Speaker, my 84-year-old mother has been drawing Social Security, and she is at that point where it is her sole source of income. She relies on it very heavily as do millions of senior citizens, and we certainly want to make sure that all of those senior citizens get every dime that they are expecting to come their way. But we also need to make sure that our children, and my children are in their thirties, it seems every day they age another year, an indication of how old I am getting and how rapidly, my children are in their thirties and their children, my four wonderful grandchildren, are 6, 5, 3 and 3. We need to make sure that as we look forward to the future of Social Security that it is there for our grandchildren as well.

I think most Americans, but not all, and most of my colleagues know that Social Security does much more than provide for a retirement, for assistance in retirement. It provides spousal benefits, survivor benefits, dependent benefits, and disability benefits. I believe that my colleagues on both sides of the aisle would like to make sure that those benefits, that that security, that that safety net continues into the future for our children and our grandchildren.

. . .

It has changed in another fundamental way that I think that all of us, Mr. Speaker, need to be aware of. As late as 1950, and I will refer to the chart here beside me, there were 16 American workers paying for every one beneficiary. Today, we are down to 3.3 Americans working and paying taxes for every beneficiary. Again, what a demographic change in America, a demographic change in the United States, for many reasons, life expectancies are longer, and that is a good thing, we are living longer, healthier lives, families are smaller, and that trend continues. So by 2035, 2040, when younger workers retire, we will have only two Americans working for every retiree. That is a pretty tough load for younger workers to shoulder.

(((This is the only argument Kline and Kolbe make which wasn't part of their March presentation. It is a startling statistic, but also a misleading one, mostly because it ignores the fact that worker productivity has increased many-fold since 1950, and continues to grow at a brisk pace. Doug Orr has more details.)))

. . .

Let us take a look at another chart here. There are, I suppose, many ways to do this. I have been holding some town hall meetings back in my home district, the Second District of Minnesota. (((This is truly puzzling. As I noted in my earlier post, as of March 16, 2005, Kline had held no town halls on Social Security, at least according to USAToday. And I've searched the archives of the Star Tribune and Pioneer Press, the two major Twin Cities papers, for all of 2005, and neither of them mentions anything about Kline holding a town hall. And I specifically checked his web sites in March 2005 after I saw the USAToday piece, and no town hall meetings were advertised. This doesn't mean Kline didn't hold the town halls, like he claims, but at a minimum it means he did a lousy job publicizing them.)))

. . .

The Social Security Administration also pointed out in that report that the Social Security trust fund, those special-issue Treasury bonds, will run out of those bonds in the year 2041. (((Doug Orr has more on that, too. Roughly speaking, every five years, the trust fund gains another six years of solvency, which is evidence that there really isn't a problem.))) So at least on paper for a few years, we will be able to pay those benefits out of the Social Security trust fund by redeeming those special-issue Treasury bonds.

. . .

(Kline notes that many plans have been proposed for Social Security, mostly by Republicans, and . . .) In these plans, many of them, most of the ones that I have on this chart because it has been my colleagues from this side of the aisle who have come forward with the proposals for the most part, and the gentleman mentioned he has a bipartisan bill that they are looking at, but these proposals include personal accounts as part of the solution for the long-term solvency of Social Security. And there are differences in all of these, and I know the gentleman was earlier this evening in a roundtable discussion with some other authors of bills as the pros and cons of the different measures were discussed, but I think there are some things that are common that we all need to keep in mind.

. . .

But we need to reassure all of the seniors in our districts and our family that they will not be hurt; their program will not be changed. Their Social Security check will not be affected by the issues that we are debating here in the House today.

. . .

Mr. KOLBE: . . . A person who is retiring today has less than a 1 percent return on all the taxes they have paid over the years up to retirement in terms of what they are going to get out of it between now and their expected death. A person who is coming into the workforce today at the age of 21 will have a negative rate of return. In other words, they will lose money based on what they are going to pay in taxes versus what they are going to get in benefits. So it is a bleak system for young people, and we need to do something to strengthen it for them. (((I'm not sure where Kolbe is getting "negative rate of return", but there are two things to keep in mind. First, as Kline and Kolbe acknowledge, Social Security was designed to be an insurance policy, not a retirement account. If you're unfortunate enough to die the day before you retire, then you certainly got a negative return on your payroll taxes. On the other hand, if you become critically disabled at the age of 45 and live to age 95, you come out way ahead on your "investment". Insurance policies and investments are separate things which one partakes in for different reasons, but you probably want to have both for your retirement. In other words, you wouldn't want to disconnect your house from the city water supply just because you live in a climate which alternates between torrential downpours and droughts.

Second, remember that it's virtually impossible for the economy to provide large returns in the stock market without roughly equal wage growth, to which Social Security benefits are indexed. Which means there is almost zero chance that the typical American comes out ahead with private accounts versus traditional Social Security.)))

. . .

Mr. KLINE: It also takes money off the table, money that is in a personal account that cannot be used to fund other programs. I found in many town hall meetings people would say, well, you, Members of Congress, you spent the money on other things. If it is in a personal account, it cannot be used to fund other things; and as I mentioned in the example of the 57-year-old man or woman who dies early, in a personal account, they can leave that money, the money in the account is inheritable, they can leave it to their children or their grandchildren, so they do get something back for their 40 or more years of paying into the system. (((Yes, if a person dies before all the money in their private account has been spent, then they can certainly bequeath it to their heirs. On the flip side, if a person spends all the money in their private account before they die, then what are they left with? A reduced Social Security benefit. It's very easy to draw rosy scenarios for one position or the other, but overall, private accounts are a net loser.)))

(Much more reiteration of points already made.)