tv Social Security Solvency CSPAN June 8, 2018 12:09am-1:23am EDT
her book, stories from trail releasing women lawyers. wash the networks this weekend. >> next week, live coverage from the u.s. north korea summit between president donald trump and north korean leader, kim jong-un. then join "washington journal" on tuesday and wednesday for analysis and comments. watch live on c-span and c-span.org. >> today, stephen gross the chief actuary testified about the solvency a retirement program at a house hearing. this year they'll pay more in benefits than it receives your payroll taxes. a recently released report says the social security trust fund
will run out in 2034 without changes. texas congressman chairs the subcommittee hearing. >> good morning. welcome to the hearing on the status of social security trust fund. today, we'll hear from social security's chief actuary about the findings of issues trustee report. first, became chairman of social security in 2011. at every meeting i've said that social security is in trouble
and its problems will only get worse. in 2011 they said that the trust fund would be exhausted in 2036, now they say is 2034. if congress doesn't act by then social security will only pay 79% of promised benefits. also in 2011, the trustees told us it would take six to half trillion dollars to make social security solvent over the next 75 years. this year the trustees tell us it would take $13.2 trillion, more than double that amount. as you know, social security has
been paying out more in benefits than it receives in tax revenue. to make up the difference, they want to use the interest earned by the trust funds from the assets that they'll. however, those days are over according to the trustee. social security is paying out more in benefits than it receives from all of its income for the first time since 1982. this means we must now tap into the trust fund to pay benefits. colleagues, this is a big deal, it's an important signal that time is [inaudible] our side. the trustees report is critical to providing congress the information it needs to address
social security's challenges. twelve of the last 15 years, the subcommittee has looked into how the report is developed. in addition, many were surprised to see the report not reflect the benefit of progrowth tax reform that we see every day. more jobs, higher wages, booming economy. historically, the trustees have been more rosy than others in their outlook on these areas. it is important to understand now how and when the trustees make economic projections that are key to the findings in the report.
positions were created to make sure there were not concerns with the objectivity of the report. yet we haven't had the site since july 2015, when their positions became vacant. that is why i, along with my good friend peter chairman of the health subcommittee has asked gao to look at how the reports have developed either almost always late. since we don't have public trustees, the work can bring much-needed transparency and insight into what changes need to be made to improve the process. congress must count on these
reports and have them available so they can do what it takes to fix social security. previously honored use my plan to fix social security permanently. my friend from connecticut also has a plan that would fix social security permanently. our plans are different, but we both agree we need to act and act now to fix social security for good. workers and their families deserve the certainty we have had from social security and put it on the right track. i know fixing social security will require tough choices that will affect the lives of millions of americans. congress has a responsibility to the american people to make the choices. the longer we wait, the harder
it gets. if we wait until the trust funds are exhausted, several options won't be available anymore. we must take this seriously. americans want, need, and deserve nothing less. and now recognize mr. larson for his opening statement. >> thank you mr. chairman. we do both agree that we need to act now. both have put forward solutions but i think the american public needs to hear. let me start was something i think every member of the committee for every member of congress should know. 10000 baby boomers per day become eligible for social security. look across the country and you can understand that issue
demands that we act now and responsibly. social security is america's insurance program. it is something the public understands eminently. why? because every week, by weaker monthly that they look at their pace stuff they see enter fica, the federal insurance contribution. the federal insurance contribution, there's a deduction that has been made. we're often here in the course of dialogue that government should run more like a business. in this case, it should run like an insurance business of the action warily sound. the last time we address this issue action warily was in 1983. ronald reagan was president and to put it was speaker of the house.
they made adjustments necessary that would extend the life of social security, but they did not to a completely. they did not index. have any of your insurance policies gone up since 1983? there is no wonder why the system is in trouble. it has not been actuarially adjusted 1983. had we come or have they back then made those adjustments, we would not be having this conversation. indeed, america's most outstanding insurance program is something that everybody knows about because no one has ever missed a payment. the social security system has never missed a payment.
both on a disability side which is a morbid predicament than we are on the pension side. but both have to be addressed. we can do two things. we can either tell the 10000 people per day that what they have to do is face cuts, or, we can say we have to make a premium adjustment. we have to do what should've been done in 1983, and index this. were proposing to do that. for someone making $50000 per year, it would cost 50 cents a week to extend social security beyond 75 years and provide the enhancements and benefits that people deserve, especially women in the country, and especially women of color more often than
not find themselves retiring into poverty. all of these are fixable. i usually then have a starbucks latte and ask him much that is and i'll say $4.50. or if you are making $50000 a year that's nine weeks of social security payments that would pay for social security to make sure we have enhancements in place of her future generations into and beyond the 75 year requirement while still making the programs both on the disability side in the pension and survivor benefits all of them.
it should be as it was in 1983, bipartisan effort. for 50 cents a week, if you are making $50000 per year, we can solve this problem. i would love to have the american people welcome that debate so we can arrive at a conclusion that i think is in the best interest of everyone. social security is neither democrat or republican, it is american. >> thank you. members are welcome to submit a statement for the record. before we move on to the testimony, reminder witness to please limit your oral statement to five minutes. however, without objection the written testimony will be made part of the hearing record. we have one witness. seated at the table is stephen
goss, mr. goss, welcome back. please proceed with your testimony. >> thank you. it's a pleasure to be here today. i will talk about the trustees report. congress has received from the trustees every year the annual report as required in the law. i think both of you and your oral statements for talking about the nature of the shortfalls of social security. there really largely about the demographics. the age demographics are changing because of the drop. the tide is inevitable. let me speak briefly about three major items that are the changes. first, based on continuing lower-than-expected application and incidence rate to levels
below what we achieved at the peak of the last economic cycle in 2007, the completion date is extended by an additional four years it is a very close. the di completion date is extended despite of the fact that incidence rate are soon to be rising more rampantly to the same rate is assumed last year. bit of a technical point, average benefit levels projected to be lower due to changes and mix of new benefit awards resulting from the progress that has been made in the last year on bringing down the administrative law judge. second, the reserve depletion
date is projected to be late in 2034. this is a few months earlier than last year's report. will be january 2035. this is due to lower projected revenue from the trust funds in the forms of payroll tax rates. this is due to lower-than-expected earnings in 2016 and 2017 based on the date we receive for receipts in the department of congress. from assuming a slightly larger share of the great shortfall we had labor productivity a smaller portion will be written off as a loss for the future.
even with the change the projected economic growth is faster over the next decade than other forecasters. the other status is similar to last year with the actual deficit less than expected in annual deficits. this is due largely to projected higher death rates, recent legislation and improvements in projection records. it is expected to rise last year up to 2.88 for the next 75 years. however, the combined effects and methods reduce the expected debt to 2.84% of payroll. if congress were not to act, a
full schedule of benefits would not be payable. the program has no borrowing authority. continuing revenue would still be 79% of the cost of benefits. that's up from last years trustees report. continuing revenue would cover 96% of benefits if congress were not to act. not something we want to see, but that gives you a sense of what the magnitude would be. the shortfall that needs to be corrected with your help is slightly smaller than indicated. i look forward to any and all questions. i look forward to the opportunity to speak with you.
>> thank you for your testimony. we will turn to questions. for each round of questions i will limit my time to five minutes less my colleagues to do the same. mr. goss, you reported that social security is now paying the more in benefits than it received in revenue, including interest from social security trust fund. for the first time since 1982, previously you estimated this would not happen until 2022, what changed? >> excellent question. what changed principally as [inaudible] the benefits side, so the revenue side. the revenue that we have gotten in 2016 and 17 turned out to be
less than anticipated last year largely because of the share of employee compensation and earnings and that has turned out to be less than the early estimates. we've seen the same in our own numbers coming in for the amount of payroll taxes coming in indicative to those subject to tax. the good news, that while we have seen that drop off in 2016 and 17, were assuming it's a temporary effect. and over the next ten years will have our projection rising back up to the same share that we've had in prior reports. this is one of the principal effects that causes our taxes to
be lower over the next several years. that causes us to have less total income. the other fact is trustees are reluctant to make changes in long-term assumptions. evident the light of labor activity falls below the growth rate. as well below 1%. trustees are reluctant but with the economy moving ahead so well as it is, i'm not seeing this rising so much the trustees have done well before them and take one small portion of that lack of productivity growth out of long-term expectations for gbp.
that means where we are right now is forecast to be slower. our growth in gdp is factor than any other forecasters. >> this seems to me that you have a lot of accusations, like to hear what you think we could do about it. . . are seen with the economy, cbo has recently increased their projections of payroll tax revenue. can you help us understand why the trustees report is different from theirs and when you finalize the economic assumptions for each report? was it before tax reform? >> >> in fact it actually was. but what happened was because
the process to develop the report, the long -- it happened late last calendar year with economic assumptions at that time but however we did make adjustments to the projections call the first order of fact. the trustees were well aware of the macro effects changes on economic growth. the purpose for the upcoming 2019 trustees report. there was a level of comfort that the trustees projected growth in the economy and gdp and even with the latest to put effects of the tax bill the average rate of growth in
gdp with 2017 through 2027 in real seven in real terms is less than 2%.f with the rate of growth is 2.4%. so there is still one half of 1% slower on the rate of growth over the next ten years. and then the tax revenue. >> and to show a major change in the trust fund will be exhausted. so that the trust fund will be exhausted in 2028.
and five years later from the trustee's previous estimate it is 3032. so looking at what is causing the decrease and disability applications. what have you learned? the make-a-wish i could report we have a full understanding reaching a peak in applications in 2010. and has been dropping ever since we have been projecting and reach to start coming back up at that point. and then stopping just dropping steadily with 1.25 million in the year 2017 surely i would do something to
keep that far and the level that we are at now is even below those applications from the last economic recovery as it operates at the level we expect to have a drop or any 2017. to look very carefully that might be affecting this geographically rural versus urban. and that is down across the board. and then or the ranking member's comments we have to do our best to get with
private industry.te because of proprietary information and they have seen drops and we are hopeful. >> have you learned anything or you figuring out anything or are you just babbling at us? we make what we have learned all the things that we thought perhaps worthy explanations the most obvious that there are a number of additions seeking advice and counsel and s staff that what had occurred to us that had a lot of attorneys representing individuals as they went out
and if there is a lack of national advertising possibly we have come to understand say it might be more effective but the other possibility that that the ministry of law judges allow a small percentage of thet cases as you will recall about seven years ago close to two thirds were allowed benefits now it is about one half. we are not sure that information has gotten out to the public causing people not to file for benefits. so i have to be honest we are
still looking very carefully to study on this. ihi am happy to tell you the social security advisory board to put together a technical panel of actuaries and economist toward all of the assumptions that we work on and it will be high on that list because of the climes we have been seeing. so we have been projecting the turning point going back up but in each of the last four or five years it simply has not happened yet. the economy has been strong and the unemployment rate is very low. the percentage of the population from the peak of the last economic cycle.
now we are close to full employment so that has in effect but those applications are substantially below from the peak from the last cycle. and she looks more closely at it because when the applications turned back, assuming they will is critical.li and that that ability to pay 96% of benefits for current projections and if things get much better it may be much late later. >> first of all, thank you for your service used to quote the
father to say trust everyone but cut the cards and now we say trust everyone but read the actuarial report. thank you for your reports and analysis youne have done on various bills. and i would ask says that bill strengthen the social security trust fund so it is sound through the projection. and also noted in my opening comments with 10000 baby boomers becoming eligible per day this will put additional stress on a system that hasn't been actuarially adjusted since 1983 and given thosehe assumptions for the program to not be adjusted with any
rational person listening to this that says wait a minute have any other insurances gone up? the obvious answer is yes. of course the economy the changes, that is why we included in this the opportunity to first correct the cost of living so it actually reflects people who are 65 and older are experiencing is that a better cost so the basic form we use now are wagers of all agers -- ages.
and it is based on the purchases made 62 and older. with our client. >> do you have the data for the number of people primarily women who retire into poverty? that even though they pay into the system to give birth to children and are absent from the workplace and because for every dollar their meal counterpart earns they earn 77 cents, we correct that program and create a new floor for social security 125% above the poverty level. how many people currently receive social security and remain impoverished?
>> i don't know the precise numbers off the top of my head but what is often mentioned is the degree to which we have people absent of benefits but it is absolutely clear given those level throughout your career than the benefit will be low so we have many people that are still looking for total income under the property level. m >> it is tragic so many are women and even more tragic so many are women of color. what we seek to address that and that we enhance payments to people who are becoming eligible so that it helps them in their retirement so we actually have a system reflecting the actual cost of the elderly to provide an
opportunity a that the new floor is 125% of poverty and to give seniors a tax break because many continueen to work after they retire and then we tax people then adjusting that to 50000 for the individual. so by providing a tax break to make sure the kohler reflects their actual cost nobody can retire into poverty in the first sign to make social security solvent beyond the 75 year requirement is the bill that we ask you to do do that?
>> not both would do that and i am happy to tell you that with the nature of the changes lin this year's report we expect your bills will be similarly successful under those assumptions. >> ac my time is up. >> you are recognized. >> thank you mr. chairman for your testimony today and i look forward to working with you in the ranking member as well as the rest of my colleagues. we have a responsibility to preserve his social security for retirees for children and grandchildrenn.
many americans rely on this program to cover expenses seniors and retirees or very hard to enjoy their retirement they must honor the promises wes have made to build the economy to earn a peaceful retirement. i find that as troubling as the rest of the committee does and the rest of the folks that we represent. there is good news in this report as well and i know you covereds it but it shows the disability trust fund when compared to last year's projections it is nice to see some good news. and i would like to get your perspective and add a record
low. do applications for disability insurance go up when it is more difficult to find a job? and with high unemployment. but interestingly not only with an increase in applications but thef percentage found to be disabled drops so the increase does not rise as much as the number of applications as you would expect and of course jobs become more plentiful we see fewer applications coming in and we anticipated that in the recovery since the great
recession. what is so fascinating is the drop in the applications is so much more than anticipated. >> after last year the economy continues to grow. in fact the cbo has estimated costing 900,000 jobs for the next decade it is super great news for the country. but it seems to me that getting or merrick is in the workforce can you describe the significance of all the new jobs relative to the social security solvency? those are absently critical
because all the benefits that are scheduled to be paid out with the payroll tax contributions and those are critical and it is interesting and you are correct the vo projects a higher number of workers through the next ten year period and the trustees also with 400,000 more people employed in 2027 and projected in the last year but in the proper frame of reference cbo is projecting between now and 2027 a 5% increase where they are projecting i a 7% increase of employment. that has up their expectation butwe the trustees with a higher growth rates over the next ten years.
and to have a while back assumptions and the projections and the trustees have a more optimistic view. thank you. i yield back. the republican tax bill incentivized i apologize. incentivize the growth of past businesses with the income earned somewhat impact with the solvency of the social security trust fund?
>> there were a number of factors as was already alluded to. it accounts for the macro are dynamic scoring effect. and those changes that passed through the removal of the individual mandate. with that small net effect create a little bit more revenue were little less revenue that we project over the long term for the first order of effects would be negligible. you have different information than i have why i asked the question but pass-through businesses now with the consent would contribute to the erosion of the payroll tax
base, would it not? >> i believe that is true. >> let me answer that. the information that we actually got from that joint committee. >> let me ask you this so can you explain why the social security trust fund as reserves? >> largely because with the law they do not have the ability or the capacity or the legal right to borrow so it is essential to pay benefits from one month to the next that we have some reserves to draw upon just in case heaven for bed we ever have another recession or reason and we need to have a condition and
then to have those reserve just in case things turned bad for a while we have enough time to talk to you and have enough time to work out appropriate legislation. >> has social security ever failed ever? >> no it has not. i like what was put together in the social security act. and it would solve the problem the trustees approach and try to figure out with some good hearings down the road. and to support any program that would cut benefits to solve the problem.
so the new report shows and to have all of the tax revenues plus annual interest earnings after the next 16 years. and then to start drawing on the accumulated $2.9 trillion in9 reserves. to supplement current income. in my own opinion this was a cause for alarm. rather than this was intent as part of the financial changes in drawing on these reserves
as occurred periodically so we should heed the advice of the trustees looking at policy options to reduce or eliminate the long-term financing and the threshold social security taxes bases out is too long. it is mostly funded by the tax on income from labor of a hard days work. but not other forms of income like the passive income from investments that we intend to do something about it. thank you mr. chairman. >> mr. buchanan you are recognized. >> good to see you back. and with that critical issue. i represent southwest florida
part of hills borough county i don't how important it is to protect that viability. and then to job the benefit and with a lot of town halls that is the reality but from a political standpoint to complement my friend mr. larson politically to work together to resolve the viability of the programitf sooner than later. >> we certainly agree and enact something to make changes necessary so that would be wonderful to give the american people the advanced window of what is happening
and allow your options and phase-in the changes more gradually. y we talked earlier we said last time to have our back against the wall what is that timeframe? it seems like the sooner we deal with it on a bipartisan basis, the better it will be and the less onerous it will be so those tweaks and adjustments made a big difference to the viability long-term. >> we look forward to working with chairman johnson and ranking member larson and if there are more plans to come we are ready. >> this is in the mid- 30s social security but let me
mention before 65 the average person lives to be 85 is that true? what basis do you make that decision? and actuarial standpoint what are the numbers? >> it is a little bit longer for women than men and for the projections of mortality we do this with great care and make changes very carefully and i incrementally many people you would recall that the changes of the death rates were not
fast enough but as it turns out to 2009, mortality rates overall. >> i have a couple morely quick questions. and do you think there is any sense it could go to 3%? >> that is possible that in the trustees report expecting 2.4% cola and that is likely to be good to pay attention. >> so then between your ten and 12000 who turned 65 every day, in terms of funding, with the growth 4% growth the other day but the growth lower unemployment so what impact does that have in making the
trust fund more viable? and as mentioned the rate of growth with the gdp is 2.5% in real terms over the next decade that they are assuming faster and with that trust fund to retain. >> fifth they spend more than they take in we would like to think thehe t growth and it has enjoyed overtime with a completion date. anywhere from 2029 really because those economic cycles come and go.o.
and as was mentioned before. >> my time is up i yield back. >> and with those women on which 49% of all elderly unmarried females and to have 90% of the income. >> mr. kelly you are recognized. >> looking through all of this wee forget where the revenue for social security comes from whether we call it federal contributions act it is a math problem. it is open for consideration. looking at the total dollars payroll taxes make up 87% of
revenue coming into social security and another 3% from taxes on benefits and another 9% on interest. so when social security was started, looking at mortality rates, what was the average mortality rate at that time? do we know? >> oh the life expectancy? >> at the very beginning of the program it was even less than 65. and mortality was so high but usually's life expectancy without 65.
and the increase in the death rate that was due to drug overdose but a lot of that comes from the fact there is just something those roles we play in life if you look at it than men have this idea that i am the husband and father and provider. that isn't available the betterer tremendous weight on who they are and they become fragile because they don't seem to have any hope. but i bring that up because the revenue was from participation and the labor force we see more people get back to work with more income and contributing of the person getting paid with that match
but the more people we get the more revenue we get when we don't want this to happen people die and an earlier age i know you cannot tell me right now but going forward where we going with that? unfortunately people think it comes from the government.me the people who are working and employ them. and just looking at those numbers and with those benefits. and for some people this is the full source of their income because they don't have
much in savings so i would appreciate it and there is an article i like to submit for the record and the trustees prediction solvent in 16 years it is a marvelous read for people to look at to get a more realistic understanding of what social security is, how it works who funds it and going forward how the model works because it is incredibly important right now and we all agreed tuesday's solvents. but so many of the citizens reply -- rely on social security. and happening at a fast pace. and then i yield back.
i appreciate your comments. >> thank you mr. chairman. in the survivor benefit is not unexpected. just adjusted by a year and the disability we thought that would expire then expecting 2016 until you enacted that allocation. >> the race on -- the recent changeof in just that actuarial factors. >> that experience we see in the program and looking at a graph of those that stability appellations and by those that
have been dropping since 2014. >> into have 9 million people p in 2014 now around 8,000,005. and for them to continue out further and further. >> and a lot of this is driven by the labor participation rate and it looksks like to me it actually peaks in the year 2002 and drops a little bit precipitously in 2008 through 2014 at leveled off. it is now starting to get a little bit better.
>> even before the labor participation rates. matt gets them off of disability. and then to help that survivor portion and medicare portion. >> with 2.4% growth of gdp over ten years. and that is in real terms. but then this year 1.9% half a percent slower than the trustees. >> so by the time they gotot to congress the cbo was projecting 2.9. and then two years ago since
elected which way those projections are going b now? >> they are going up in the near term. not just on the near term but and with those economic numbers so have they been better or worse experience of what is projected? >> i cannot speak relative to cbo but our projections have been right on target for the amount of growth. >> the cbo continues to rise dramatically. but now this projection that you did did not take that bill into account?
>> in terms of direct effects is not boosting those effects but as b i mentioned it is substantially faster. >> but you really didn't take into account an increase. >> we had no additional growth from the macro effects of the tax bill. >> are those stimulative? >> indeed. >> if that is not taken into account then your projections could be on the low side? and if they are you extend the light the life? >> and we will see in the next report and the great slowdown forat productivity if they feel that they should take more out of future growth. >> if we can make progress
based on immigration or infrastructure or trade agreements all of those matter.s, >> immigration if there was a subcommittee hearing what is the process to create the report? and what it takes tove do that. >> working with the trustees we will start working in the next two weeks in october through december of this year
that takes a fair amount of time. with the population projections for the country and all aspects of social security beneficiaries and the target date is always april 1 which we are required to target by statute and we will do everything we can to get there as chairman johnson indicated we have not had that every year. >> this data is extremely important and from the oversight perspective to have more process and how that persisted now we can change that. >> i guess one thing that i
point to the board of trustees with the cabinet we have a little bit more complicated process and with the cbo to work with the secretary of treasury labor and hhs those methodologies to get there and thanks to you in congress you have acquired now for many years the actuarial opinion at the end of the trustees report. and that they think is an appropriate we will tell you. >> beyond what you said are there any other barriers? and what relates to the delay? >> from time to time getting a
group of people together it can be challenging a way of scheduling and then contribute in the past to some delays to get all of the members of the board together we have those core requirements and with those board of trustees. and then to have everybody sign. >> i yield back. >> this is one of those moments i find joyful because of the conversations we have that are fascinating. but also to understand the report is over the last few years you actually are very
disciplined i don't want to use the term the slow walk that you create the perpetual horizon. i always know we say 75 years but we are in the goldilocks economy because do we do something here to screw that up? you seem to actually smooth out some of the charts so is that correct? >> absolutely our sense is that for you all to make those decisions as policymakers if we would react to every up and down to give dramatically different numbers that is not a good basis. the maximum in that same
framework things happen in society that do have long-term cascade effects like the calculations we are down 1.76. what is fascinating falling even f in times of economic expansion so can you give me 32? because my two and a half year old has an annuity to pay my security we thought about calling her annuity. [laughter] that is a sense of humor but am iy being fair? >> absolutely. it is the workers of the day pay the benefits of the beneficiaries we shift from the baby boom.
where people on average have three kids now there are two kids or fewer. we step three kids aignan for every pair of elders now we have two or less. >> i was coming up with 11 years to workers for every one retire retiree. >> it is possible by 2035 we will be there that is just a drop of the birthrates that happened in the 60s so this has been foreseen. >> he gets giddy and to deal with other realities and immigration has the effect that the talent base doesn't mean younger or older? apparently those demographics on the stability of social
security and medicare. >> the ability to bring you a series, as we work on the stabilization for the future the chairman and the ranking member all have bills to say could i o ever designed trigger? for 15 years from now birthrates go up to do certain adjustments. and we have a blended payroll tax revenue because gdp is notev linked to payroll tax but salaries and wages and the number of workers labor force participation numbers are decoupled. >> is there a rational way to
design that future stability? that is a huge stress on the system. should we have a discussion we build that legislation it makes it so we never see that again? how do you design the slow on-ramp to say remove the retirement age up x do you have the capacity? >> yes we have many up on the web now with those different provisions for people in this room today and on the other side of the capital with a lot of possibilities with raising the retirement age explicitly there are several different mechanisms based on increasing
longevity in the future thank you for mentioning birthrates which is a much stronger driver and we don't have a direct mechanism for changing the program. >> there is a much longer on-ramp. >> not for another ten years maybe. >> and the last question was for all of those for the design. >> the news from the trustee report is clear and as i said before any solvency plan should meet the following principles and first should fix social security permanently not just push out the exhaustion date by a few years.s.
second to modernize social securitycu to reflect today's workers and their families. it ought to reward hard work and protect the most foldable and finally improve retirement security.cu and with those things in mind it is up to the congress to make those tough choices just like it is for seniors and individuals today. the american people expect and deserve nothing less. thank you to our witness for your testimony in our members for being here and with that we are german. speefive. [inaudible conversations]