Today during a Ways and Means Social Security Subcommittee hearing on Social Security's Finances, Social Security Administration Chief Actuary Stephen C. Goss testified that a recently introduced Republican plan to privatize Social Security (H.R. 2019), introduced by Rep. Pete Sessions, would dramatically reduce the amount of revenue coming into the Social Security Trust Fund and compromise its ability to pay benefits to current seniors. Below is a video clip, key quotes and a transcript from the hearing:
Key quotes from Stephen C. Goss, Social Security Administration Chief Actuary:
* "the amount of revenue coming into Social Security would be dramatically reduced."
* "the ability to pay benefits to people who are currently receiving, or are now approaching the time of receiving benefits, would be severely compromised"
* "our year of Trust Fund exhaustion would certainly come to be much sooner than 2036."
Rep. Xavier Becerra: "I want to ask a quick question, are any of you familiar with Pete Sessions' legislation that he recently introduced, H.R. 2109? I referenced it in my opening remarks. It is legislation that essentially privatizes Social Security because it allows workers today to not contribute into the system and instead create their own private accounts. And unlike previous privatization proposals in this case, in the Sessions' legislation, there would be no back filling of the lost revenues by having today's workers no longer put money into the system and instead only put money into a private account. Most of the previous privatization proposals at least recognized that Americans who are retired today because they were working and contributing to the system yesterday should not be expected to take the massive loss of benefits as a result of no longer having today's workers contribute into the system. Mr. Goss, I've tried to explain an aspect of the Sessions legislation, obviously it goes well beyond that into other areas as well, but what would happen if you had a system where you created a system -- I would no longer call it Social Security because it would be a privatized system -- where no longer would American workers contribute starting today into the Social Security system and the Trust Fund, what would happen to today's retirees?"
Chief Actuary Stephen C. Goss: "Very good question. We have not been asked to do a formal estimate of the plan but we are familiar with it. My understanding of the plan is that workers today, who are not yet retired and not yet receiving benefits, would have the option to start paying only half of the taxes and after fifteen years not to pay any of the taxes, themselves and their employers. This would, of course, for people who engage - - now, for people who are over forty, especially over fifty, they probably wouldn't want to do this because they have a substantial investment in Social Security already. For people who are under forty they may well decide that the amount of money that they could put into an account would be sufficient that they would be willing to walk away from the benefits that have been scheduled for them. What this would mean though, to the extent that people did this, is that the amount of revenue coming into Social Security would be dramatically reduced. Already, as many on the panel have pointed out, we do not have enough taxes coming in over the future to pay for scheduled benefits as it is. Taxes would be reduced essentially immediately by a substantial degree. We would not have any offsetting reduction in benefits until people who are under forty now got to the point of receiving benefits. So Social Security, the ability to pay benefits to people who are currently receiving, or are now approaching the time of receiving benefits, would be severely compromised. Our year of trust fund exhaustion would certainly come to be much sooner than 2036. And the extent to which we have cash flow shortfalls and the speed with which we would be spending down our trust fund assets would be much much faster.
Rep. Xavier Becerra:
Thank you. Thank you Mr. Chairman.