Grassley's Committee Studies Reform Options for Social Security
"The sooner we act to save this important program, the better. The vast majority of resources for people in retirement come from the Social Security program. Without it, many retirees simply could not survive. In 1997 alone, 417,000 Iowans received Social Security benefits," said Grassley, who serves as Chairman of the Senate Special Committee on Aging.
Grassley said that dramatic demographic changes that will come with retirement beginning in 2008 of the largest group of Americans -- the baby boomers -- make reform of Social Security inevitable. He said some reform proposals assume no major restructuring of Social Security and aim simply to make sure the program continues providing adequate income to older Americans.
Others reform proposals would take the program in entirely new directions. For example, providing a reasonable rate of return on contributions is a fairly new objective. It is based on a trend that shows future generations would receive unfavorable returns and, in turn, leads to the belief that Social Security is not a good investment when looked at strictly from a retirement perspective.
Grassley said the purpose of his hearing today was to sort through these options and work to establish what role Social Security should play. In fact, the country the Social Security program was designed to serve in the 1930s looks very different today. In 1998, there are far more two-earner families and many more individuals covered by private pensions. Beyond that, the greatest change society is undergoing is the shift in the number of Americans who are over age 65.
In 1940, eight percent of the United States was 65 years of age or older. By 2030, that number is projected to be 20 percent. In 1940, life expectancy for men who reached age 65 was 12 years. By 2000, it is expected to be 15 and one-half years. For women, life expectancy at age 65 in 1940 was 13 years. By 2000, it is projected to be 19 years. As medical advances continue, life expectancies are projected to continue increasing in the future.
Grassley said he was encouraged to see President Clinton recently focus on Social Security. "The fact that he elevated the public dialogue and put a timetable in place, is good news to all of us in Congress who already have been talking about the crucial need to reform Social Security. Tackling this issue requires presidential leadership. I welcome President Clinton to the debate," Grassley said.
The Chairman of the Committee on Aging also said he would seek the budget discipline required to keep Social Security viable for the baby boomers. "My message to the President and Congress has been: seize the windfall opportunity before us and pay down the national debt with the projected budget surplus. Paying down the debt would restore the American dream for our children and grandchildren. And it's the best way to meet the commitments made to retirees who count on Social Security until we have enacted comprehensive reform," Grassley said.
Today, the Social Security Trust Fund is full of special government securities. The government has borrowed the money generated by payroll taxes to fund current spending. Social Security now takes in more money than it pays out. Starting in 2012, the cash flow will reverse. At that time, the Social Security Trust Fund will bring those I.O.U.s back to the Treasury for payment.
In 1997, Grassley held hearings of the Committee on Aging in Washington, D.C., Sioux City and Omaha, to examine the long-term viability of Social Security and Medicare. He also conducted town meetings on these issues in 69 communities throughout Iowa. Grassley also urged policy makers in Washington to focus on long-term financial security for retirees in keynote speeches during the last year.