tv Social Security Solvency CSPAN June 7, 2018 11:04am-12:17pm EDT
good morning. and welcome to today's hearing on the status of social security's trust fund. today we will hear from social security's chief actuary about the findings of this year's trusty report. i first became chairman of social security in 2011 and i have held that hearing many times. at every one i have said that social security is in trouble and its problems will only get
worse. back in 2011 the trustees told us that the social security trust fund would be exhausted in 2036. this year's report says the date is now 2034. two years earlier. if congress doesn't act by 2034 social security will only be able to pay 79% of promised benefits. also back in 2011 the trustees also told us that it would take $6.5 trillion to make social security solvent over the next 75 years. this year the trustees tell us that it would take $13.2 trilli trillion, more than double that amount. and as you all know, social security has been paying out more in benefits than it receives in tax revenue. to make up the difference social
security would use the interest earned by the trust funds from the assets that they hold. however, those days are now over. according to the trustees, social security is now paying out more than -- more than 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 principle itself to pay benefits. colleagues, this is a big deal and an important and signal that time is not on our side. thetruses' report is critical to providing congress the information it needs to address social security's challenges, however, in 12 of the last 15 years it has been late. further, this subcommittee has
looked into how the report is developed at past hearings. in addition i know it may -- many were surprised to see the report not reflect the benefits of pro growth tax reform that we see every day. more jobs, higher wages and a booming economy. while historically the trustees have been more rosy than others in their outlook on these areas, it's important to understand now and when -- how and when the trustees make economic projections that are the key to the findings in the report. it is clear that the public trustees play an important role in the development of the report and these positions were created to make sure there weren't any
concerns with the objectivity and integrity of the report, yet we haven't had the benefit of the public trustees' insights since july 2015 when their positions became vacant. that's why i along with my good friend peter roscum chairman of the health subcommittee have asked gao to look at how these reports are developed and why they are almost always late. since we do not have public trustees, gaos work and bring much needed transparency and insights into what changes need to be made to improve the process. congress must be able to count on these reports and have them available so it can do what it
takes to fix social security. previously i introduced my plan to fix social security permanently. my good friend from connecticut, mr. larson, also has a plan that would fix social security permanently. our plans are very different, but we both agree that we need to act and act now to fix social security for good. workers and their families deserve the certainty that we have gotten social security on the right track. i know that mixing social security will require more tough choices that will affect the lives of millions of americans. congressas responsibility to the american people to make these choices and the longer we wait the harder it gets. if we wait until the trust funds are exhausted, some options
won't even be available anymore. we must take this responsibility seriously. americans want, need and deserve nothing less. i will now recognize mr. larson for his opening statement. >> thank you, mr. chairman. indeed we do both agree that we need to act now and both have put forward solutions that i think the american public needs to hear. let me start with something that i think every member on the committee and every member of congress if they don't know should know. 10,000 -- 10,000 baby boomers a day become eligible for social security. if you look across this country and you understand that issue in and of itself demands that we act now and responsibly.
social security is america's insurance program. it's something the public understands eminently. why? because every week, bi-week or monthly they look at their pay stub and see under fica the federal insurance contribution -- let me repeat that again -- federal insurance contribution, that there is a deduction that's been made. we often are here in the course of dialogue that government should run more like a business. in this case it should run like an insurance business and be actuarial sound. yet the last time that we actually addressed this issue actuarially was in 1983. ronald reagan was president, tip o'neal was speaker of the house and they made the adjustments that were necessary that would extend the life of social security, but they didn't do it
completely and they did an index. i ask anyone on the committee or in the audience, have any of your insurance policies gone up since 1983? there is no wonder why the system is in trouble, because it hasn't been actuarially adjusted since 1983. had we -- or had they back then made those adjustments, we wouldn't be having this conversation, because indeed america's most outstanding insurance program and something, as i said earlier, that everybody knows about because no one has ever missed a payment. the social security system has never missed a payment and both on the disability side which is
in more of a predicament than we are on the pension side, but nonetheless, both have to be addressed. so how do we address them? well, we can do two things, we can either tell those 10,000 people a day that what they've got to do is face cuts, or we can say to them, do you know what we have to do, we have to make a premium adjustment. we have to do what should have been done in 1983 and index this program. so what we're proposing is that we do just that. and for somebody making $50,000 a year, it would cost you 50 cents a week not only to extend the life of social security beyond its 75-year requirement, but provide the enhancements and benefits that people deserve, especially women in this country and especially women of color who more often than not find themselves retiring into
poverty. all of these problems are fixable. usually at this point i have a starbucks latte that i hold us anywhere that i go and i ask the elderly if they know how much that is and they will go $4.50. or if you were making $50,000 a year that's nine weeks of social security payments that would more than amply, as mr. goss says -- pointed out, pay for social security to make sure that we have enhancements in place for the 10,000 people a day that become eligible and for future generations into and beyond the 75 year requirement while still making the programs both on the disability side and the pension and survivors benefits solid. this should be as it was back in 1983 a bipartisan effort, and i think when you think about the
fact for 50 cents a week if you're making $50,000 a year we can solve this problem, i'd love to have the american people welcome that debate with them so that we can arrive at a conclusion that i think is in the best interest of everyone. social security is neither democrat or republican, it's american. >> thank you. thank you. you know, as is customary, any member is welcome to submit a statement for the record. before we move on to our testimony today i want to remind our witness to please limit your oral statement to five minutes. however, without objection, all of the written testimony will be made a part of the hearing record. we have one witness today seated at the table is stephen c. goss, chief actuary, social security administration. mr. goss, welcome back. please proceed with your testimony. >> thank you very much, chairman johnson, ranking member larson
and all members of the committee. it's a pleasure to be here with you today to talk to you about the 2018 trustees' report and congress, by the way, has received from the trustees every single year starting 1941 this annual report as you have required in the law. i just want to first of all thank both of you in your oral statements for talking about the nature of the coming shortfalls that we have for social security which we have so many years now discussed are really largely about the demographics, about the fact that our each distribution in our population is changing because of the drop in the birth rates back in the 1960s. it's like the tide, inevitable. but let me speak to you briefly about three major items that really are the changes in the trustees report compared to the last. first, based primarily on continuing lower than expected disability application and incidence rates through 2017, to levels that are now below the levels that we achieved at the peak of the last economic cycle
in 2007, rejected reserve depletion date for the di trust fund is extended once again by an additional four years from 2028 in the last year's trustees report out to 2032 which is close to our reserve deflation date. the depletion date is extended despite the fact that incidence rates are now assumed to be rising more rapidly to the same ultimate rate as assumed in last year's trustees report. in addition a bit of a technical point, average benefit levels for new disabled worker benefits are now in this trustees report projected to be somewhat lower due to changes in the mix of new benefit awards resulting from the prog gr he is that ssa has made in bringing down the administrative law judge backlog. second, reserve depletion date for the oesi trust fund is projected to be late in 204.
this is a few months earlier than the last year's report which is to be very early, i believe, january in 2035. the change is largely due to lower projected revenue for the oeis, di and hi trust funds in the form of the payroll tax rates. this is due to the lower than expected earnings as a share of gross domestic product in 2016 and 2017 based on the data we receive for actual receipts and department of commerce registers and their national income and product accounts. also from assuming that a slightly larger share of the great shortfall we have had over the last ten years in labor productivity that is output gdp per hour work by american workers slightly smaller portion of that will be written off as a permanent loss into the future. even with this change, however, i would note that projected economic growth over the next
ten years is still faster over this next decade than most other forecasters. third, the actuarial status over the long range 75 year period is very similar to last year with usadi actual deficit that is the percent of payroll shortfall less than expected and annual deficit in the later years lower than expected in the last year's report. this is due largely to projected higher death rates, recent legislation and improvements in projection methods. the actual deficit was expected to ride from 2.83% of payroll last year to 2.88% of payroll over the next 75 years, however, the combined effects of all new data changes and assumptions in methods reduced the expected actual deficit to only 2.84% of payroll. if congress were not to act full scheduled benefits would not be payable at the point of trust fund reserve depletion because
the program has no borrowing authority, however, continuing revenue to the oasdi program at reserve depletion in 2034 would still be 79% of the cost of scheduled benefits. this is up from the percentage projected in last years trustees' report. for the da program alone continuing revenue would cover 96% of scheduled benefits at reserve depletion in 2032 if corporation were not to act. not something we want to see but just to give you a sense of what the magnitude of the shortfall would actually be. these projections indicate that the shortfall that needs to be corrected with your help, thank you, is slightly smaller actually than indicated in last year's report. i look forward very much to any and all questions that you will put forth and, again, appreciate very much the opportunity to come and talk to you again this year. >> thank you for your testimony. we will now turn to questions
and as is customary for each round of questions i will limit my time to five minutes and ask my colleagues to also do the same. mr. goss, you reported that social security is now paying out more in benefits than it receives in revenue, including interest from the social security trust fund. for the first time since 1982 previously you estimated this wouldn't happen until 2022. what changed? >> thank you very much. excellent question. what changed principally on this is not on the benefit side, the benefit sides are very much as we projected last year but it's on the revenue side. the actual revenue as i indicated in the oral testimony that we have gotten in 2016 and in 2017, these are in the books now, they turned out to be less than we anticipated last year, largely because of the shear of
employee compensation and earnings as a share of gross domestic product in the country has turned out to be less than the early estimates from the bureau of economic analysis last year. we have seen the same in our own numbers coming in for the amount of payroll taxes coming in indicative of the amount of earnings that are subject to tax. they are just a smaller share by 2 or 3 percent of gross domestic product than had been estimated in last year's trustees' report. while we've seen that dropoff in 2016 and 2017, we are assuming this is a temporary effect and over the course of the next years -- ten years we have our projections rising back up to the same share employee compensation of gdp that we have had in prior trustees reports. we are going to watch this carefully but this is one of the principal effects that has caused our payroll taxes to be lower over the next several years which causes us to have less total income starting in
2018 rather than 2022. the other effect is that the trustees have been very reluctant as you know to make changes in long-term assumptions and for many, many years now even in the light of having labor productivity, amount of output per hour worked fall much below the growth rate expected. we expect it had to be 1.7%. it's been well below 1% over the past year. the trustees have been reluctant to write off any of that in hopes that it will be coming back. with the economy moving ahead so well as it is and we have still not seen the labor productivity rising as much the trustees as most of their forecasters have done before them have taken one small portion of that lack of productivity growth out of our long-term expectation. out of our long-term expectation for gdp that means from where we are right now the growth has to be a little bit slower going into the future. as i mentioned before our growth in gdp is, in fact, faster than
virtually all other forecasters even with this small mark off. >> it seems to me that you've got a lot of accusations. i'd like to hear what you think we can do about it. due to the tax cuts and jobs acts and all the good news that we are seeing with the economy, cbo and jct have rently increased their projections of payroll tax revenue. can you help us understand why the trustees' report is different from theirs and when do you finalize the economic assumptions for each report? was it before tax reform? >> in fact, it actually was. let me share with you what happened in this year's trustees' report is that because of the rather lengthy process of developing a report we
actually -- the tax bill happened very late in the last calendar year. we had already have agreement amongst the trustees of what our short range economic assumptions were at that time. we did, however, make adjustments to the projections for the specific what we would call first order effects from various items in the tax bill. i would note, however, that the trustees were well aware of the possible what they would call macro effects, changes on economic growth, on the trustees plan on looking deeper into that for the purpose of the upcoming 2019 trustees' report. part of the reason that there was a level of comfort in doing that is that, in fact, the trustees projected growth in the economy and gdp is in fact much in excess of many others. just, for example, even with the latest numbers from cbo with them putting in effects from the tax bill, their average annual rate of growth in gdp between 2017 and 2027 over that ten-year
period in real terms is less than 2%. it's 1.95%. the trustees even with the changes made this year the rate of growth in real gdp is at 2.43%. about one half percent faster a year per cbo. even though cbo added something for the tax bill there is still one half of 1% slower on the rate of growth in gdp over the next ten years than the trustees are. with slower gdp growth you will have slower growth in the amount of tax revenue not only for social security but all other tax revenues. >> you know, mr. goss, last year's report showed a major change with respect to when the disability insurance trust fund would be exhausted. that report showed that the trust fund would be exhausted in 2028. five years later than the trustees' previous estimate.
now that date is just 2032. that's a big change. you told us last year that you were looking at what is causing the decrease in disability applications. what have you learned? >> i wish we could report we have a full understanding of what's going on. it has been quite remarkable. we reached a peak in applications in 2010 at the height of the recession effect and it's been dropping ever since. we've been projecting for the last six or seven trustees reports in a row that we would reach a bottom on the application and it would start coming back up at a point. that simply has not happened. our applications have dropped from 2010 where there were over 2 million a year for social security disability applications to well below 1.5 million a year now in the year 2017. i would share with you something not even reflected in this trustees' report, so far in 2018 we are seeing further declines in disability applications.
so there's actually even more good news to come. the level we are at now for our disability applications is actually even below the number of applications we had in 2007 which was the peak year of the last economic recovery. when the economy is operating at the level it was in 2007 we expect to have very -- a big drop in the number of disability applications and we did, but at this point in 2017 we are even lower and we are continuing to drop in 2018. we've looked very carefully at characteristics that might be affecting this. we've looked gee traffic clee, we've looked rural versus urban, age and sex and the disability incidence rates are down across the board. it's a little bit surprise, it's a wonderful surprise and i would share particularly for ranking member larson's comments we have done our best to get in touch with people in private industry where there is private long-term disability insurance sold in this country and we have heard
because of proprietary information they haven't been able to give us very specific but they have indicated the last four years they've been seeing drops in their disability claims rates as well. so maybe it's just something is in the water and our society is feeling healthier these days. we're hopeful. >> well, have you learned anything? have you figured out anything or are you just babbling at us? >> well, what we veearned is that all of the things that we thought would perhaps be the explanation for this, the most obvious ones do not appear to be that. there are a number of issues and we seek your advice and counsel and those of your staff about what your thoughts are. one thing that occurred so us, there was a company binder and binder which had a lot of attorneys representing individuals for disability. they went out of business a few years ago and some people opined while there is a lack of national advertising.
maybe fewer people know about applying for disability benefits possibly. we have come to understand that most of the taerns working in that realm are perhaps doing advertising. another possibility is that our administrative law judges have, in fact, been allowing a smaller percentage of cases that they see in their hearings. as you will recall probably five, six, seven years ago it was close to two/thirds of all the cases that they saw were allowed benefits, now we are down to nearly one half. that's a pretty big drop. we are not sure that that information has fully gotten out of the public and that that in effect would cause people not to file for benefits if they felt they were really severely impaired and could not work. we sort of suspect not. so we are -- i will have to be very honest with you, we are still looking very carefully and studying on this. we are expecting, i'm happy to tell you, for our social
security advisory board to be putting forth a technical panel of actuaries, economists and dem grafrs to look at all of the assumptions that we work on and certainly disability will be high on that list because of the surprising continued clients that we have been seeing. our big question is where will it turn? we project the turning point of applications going back up, what happened in each of the last four or five years and it simply hasn't happened yet. now, part of it is clearly the economy. the economy has been strong and there have been jobs available and a lot of people are working. unemployment rates are very, very low. actually, the employment rate, the percentage of our population on an adjusted basis that's employed is now back almost to the level it was at the peak of the last economic cycle. not quite but it's very close. we are close to full employment now and approaching it. so certainly that has an effect.
as i mentioned before, the applications now are substantially below where they were at the peak of the last economic cycle. so clearly something very different is going on here and we will look much more closely at it because when the applications will turn back up assuming they will is critical to this. as i mentioned before, at the reserve depletion date in 2032, with the projection we could pay 96% of projections under our current projections if things get much better di may not deplete until much later than 2032. >> do you have another question to ask him? >> yeah. >> go ahead. >> thank you, mr. chairman. first of all, mr. goss, thank you for your service. my grandfather used to quite peter finley dunn and say trust everyone but cut the cards. we like to say trust everyone
but read the actuarial report. and i thank you for your reports and i thank you for the analysis that you've done on various bills. i know you've looked at our bill social security 2100 and i would ask you does that bill strengthen the social security trust fund so that it is financially sound throughout the 75-year projection period? >> indeed it does. >> thank you. we also i noted in my opening comments that with 10,000 baby boomers becoming eligible a day this is going to put additional stress on a system that hasn't been actuarially adjusted since 1983. forgiven all the assumptions that you have to go through for a program to not be adjusted since 1983 i think any rational
person listening to this anywhere says, well, wait a minute, have any of my other insurances gone up since 1983? and the obviously answer is yes, they have. of course. to adjust to the times, the changes, the economy at all. and so that's why we included in this the opportunity to first correct the cost of living so it actually reflects what people who are, you know, 65 and older are experiencing. with that provision, does that better reflect the cost for seniors if we were to go to a cpie? >> it would appear that we certainly could say that. the basic cpi that we use now looks at all urban wage earners of all ages. it's actually based on the purchases that are made by people 62 and older, essentially
our clientele. and looks at their patterns of what they buy. >> and do you have the data for the number of people primarily women i would add who retire into poverty meaning that even though they've paid into the estimate because they, a, can give birth to children and are absent from the workplace and because for every dollar their male counterparts are earning then earning on average 77 cents, we correct that program and create a new floor for social security that's 125% above the poverty level. can you tell the panel here how many people currently receive social security and remain i'm move rishd? >> i think i will have to get
back to you on that. i don't recall the precise numbers off the top of my head. i do know that what's often mentioned is the degree to which we would have people eld yearly in poverty in the absence of receipt of social security benefits, but it's absolutely clear that given the level of social security benefits that are tied to your earnings levels throughout your career, if they were low your benefit will be slow. so we do have many people who are still working with total income under the poverty level. >> we do and it's tragic that so many of them are women and even more tragic that so many of them are women of color. what our proposal seeks to do is to address that, to make sure we enhance payments to people, the 10,000 a day that are becoming eligible, so that it helps them in their retirement, so that we actually have a system that reflects the actual cost that the elderly incur, so that we also provide an opportunity
for -- especially for those who retire into poverty that the new floor becomes 125% of poverty, and that also so tt we can give seniors a tax break because many of them continue to work after they have retired, and in doing so as you are aware we tax people who are single, to make over $24,000 and a married couple over $32,000 by indexing the fund and addressing that to $50,000 per individual and $100,000 per couple. 11 million americans get a tax break. so by providing a tax break, by making sure that their cola reflects what their actual costs are, making sure nobody can retire into poverty and still for the first time making social security solvent beyond the 75-year requirement, does this bill that we have asked you to review do that? >> it does. both your and chairman johnson's bills would do that.
i'm happy to tell you with the nature of the changes we have in this year's trustees' report we expect that your bills will be similarly successful under the assumptions of the 2018 trustees' report. >> i see my time is up, but i will be back for a second round if we have it. thank you, mr. chairman. >> thank you. >> thank you, mr. chairman, thank you, mr. goss for your testimony today. mr. chairman, i applaud you for holding this important hearing, i'm pleased to have recently joined this committee and i look forward to working with you and ranking member larson as well as the rest of my colleagues who want social security for all americans. we have a responsibility to preserve social security for retirees, those who are approaching retirement and for our children and grandchildren so they can count on social security. millions of americans rely on this important program to recover -- to cover their expenses in retirement.
seniors and retirees have worked very hard for decades so that they can enjoy their retirement and receive the benefits they have earned. we must honor the promises we have made to those who have done so much to build our economy and who have earned a peaceful retirement. i have read the report, mr. goss. i find it as troubling as the rest of the committee does and i'm sure the rest of the folks that we represent. i'm wondering there's good news this this report as well and i know you covered it already, but in tuesday's report which showed that the disability insurance trust fund had gained four additional years of solvency when compared to the last year's projections, it's nice to see some good news, positive news in the trustees report. i'd like to get your perspective on this, particularly as our economy is growing in unemployment is at a record low.
historically speaking, i know you have had speculation on as to why this is, but do applications for disability insurance go up when it's more difficult to find a job? >> they do indeed. applications historically when we have a time of high unemployment, of a weak economy, we have an increase in applications, but interestingly not only do we have an increase in applications, but the percentage of the applications that are found to be disabled and begin receiving benefits drops. so the increase in the number of people starting to receive benefits does not rise as much as the number of applications as you would expect. of course, the counterpart of that is true, when the economy gets re strong and jobs become nor plentiful we tend to see fewer applications coming in. we had anticipated that in the recovery that we have had since the great recession, what is so fascinating, though, is that the drop in the applications has been so much more than
anticipated, even given the strength of the economy. >> thank you for that answer. after last year the tax cuts and trobs act was signed into law our economy continues to grow, americans are taking home higher paychec paychecks, new jobs are being creatinged. the cbo has estimated a tax cuts and jobs act will create approximately 900,000 jobs for the next decade. that's certainly great news for our country. in this context it seems to me that getting more americans into the workforce would provide an improvement to social security's finances. can you describe to me the significance of all of the new jobs relative to the social security's solvency and their bottom line. >> new jobs more people employed are absolutely critical because we are a pay as you go system all the systems benefits that
are scheduled to be paid out they are made by the workers of the day the jobs are absolutely critical. i would share with you it's interesting, you are correct c about. o is projecting a higher number of workers through the next ten-year period. the trustees also compared to last year's trustees' report are projecting about 400,000 more people employed in 2027 than had been projected in the last years. but to put that really in a proper frame of reference cbo is projecting between now and 2027 about a 5% increase in total employment where the trustees are projecting a 7% increase in employment. we are glad to see that cbo has upped their expectation for workers, but the trustees actually in this year's trustees' report have a higher growth rate in employment over the next ten years. >> what causes that deviation in conclusions? >> it's really -- and we had a hearing a while back with keith
hall and myself comparing the assumptions and the projections that cbo is making versus ours and the trustees we have simply had dare i say a little bit more optimistic view on the recovery of labor force participation and employment over the next ten years and into the long-term than cbo and some other entities have had. >> thank you, sir. thank you for your testimony. thank you, mr. chairman. i yield back. >> thank you. >> mr. goss, the republican tax bill invent sized -- goss, i'm sorry, i apologize. >> close enough. >> incentivized the growth for pass through businesses and moved the top tax rate on income earned from 39.6 to 15%. what impact will this have on the solvency of the social security it trust fund? mr. goss? >> there were actually a number of factors in the recent tax bill as chairman johnson already
alluded to. the trustees have not at this point taken into account sort of the macro or the dynamic scoring effects and we will be looking at that. the other factors that were built into the tax bill which are the payroll tax changes, the pass through and the removal of the individual mandate have on balance had relatively small yet effects, some of them would create a little bit more revenue, some a little bit less revenue. in fact, we project over the long-term that the sort of direct or first order effects of the tax bill would be essentially negligible for the social security -- >> well, then, mr. goss, you have different information than i have and that's why i asked the question. pass through businesses, the growth of those businesses now with the incentive that i just mentioned would contribute to the erosion of the payroll tax base, would it not? >> i believe that is true and --
>> let me ask you this question, then. >> let me just answer that -- >> i'm sorry? >> the information we built into trustees' report for the fact that we actually got from the joint committee on taxation -- >> the information you built into it. >> yeah. >> very good. let me ask you this question: can you explain why the social security trust fund has reserves? >> thank you. we have reserves largely because in the law the social security trust funds do not have the ability, the capacity, the legal right to borrow. therefore, it is essential in order to be able to pay benefits from one month to the next that we have some reserves to draw on just in case, heaven forbid, we ever have another recession or any other reason by which we began to have more money paid out than we receive. we need to have a cushion, usually the target that is desired is to have at least one year's worth of outgo as a reserve. the reason for that is just in case things turn bad for a while
we will have enough time to come and talk to you all, tell you of this and we will have enough time to work out appropriate legislation to fix those shortfalls. >> mr. goss, has social security ever failed to pay anyone's earned benefits ever? >> no, it has not. >> thank you. let me say this, mr. chairman, i like that brother larson put together in the social security 2100 act for a number of reasons. hr 1902, it would solve the very problem that the trustees approach and which we will be trying to figure out hopefully with some good hearings down the road. it would raise benefits. and i can't support any program that would instead cut benefits in order to solve the problem. so from the get-go that's where i'm coming from. your new report shows that
social security will use all of its current income, tax revenues plus annual interest earnings on its reserves and the reserves themselves to pay benefits for the next 16 years. the report notes that social security will have to start drawing on the accumulated $2.9 trillion in reserves to supplement current income. and to pay benefits this year. i don't think in my own opinion that this is a cause for alarm. knowing the history. rather than this was congress' intent as part of the last major set of changes, financial changes that were made to social security in 1983, drawing on these reserves has occurred periodically throughout social security's history, correct? >> that's absolutely true.
>> so still we should heed the advice of the trustees and look at policy options. that would reduce or eliminate the long-term financing as soon as possible. to that end the threshold at which social security taxes phase out to me is too low. social security is mostly funded by a tax on income from labor, a hard day's work, mr. goss, but not other forms of income, like the passive income from investments, and i intend and many others intend to do something about it and i yield back and i thank you, mr. chairman. >> thank you for your questions. mr. buchanan, you are recognized. >> thank you, mr. chairman. mr. goss, good to see you back. i've seen you over the years. we appreciate your expertise and your leadership on a very critical issue. i represent southwest florida, sarasota, manatee county, part of hillsborough county, tampa
bay region. 229,000 people are in the program. i know how important it is to protect the viability of this long-term. in fact, i heard a statistic that a third of seniors that start drawing their benefits have nothing but their social security and the medicare so it's critically, i can tell you, important. i have done a lot of town halls, that's the realities. let me just ask you from a political standpoint, i don't see -- and i want to complement my friend, mr. larson, we've got to find a way, i think, politically to work together to resolve the viability of the program sooner than later. is that your -- is that your sense of it, too? >> i think we certainly agree with that as do our trustees. enacting something to make changes that will be necessary sooner rather than later would be wonderful. it will give the american people an advanced running of what's happening, it will allow you more options to consider and allow you to phase in the changes more gradually.
three big pluses. >> we've talked to you a little bit earlier, you said last time we made a change we had to have our back against the wall, unfortunately that happens a lot here in washington. where is that time frame where you have where is that time frame where you have your back against the wall? it seems like the sooner we deal with it, get something on a bipartisan basis, the better it's going to be. less onerus it's going to be. is that your thought on that, as well? >> absolutely. and we must look forward to looking forward with any and all of you. we're enjoyed working with chairman johnson and staff and developing plans. if there are more plans to come, we're ready. >> let me -- and i don't know where i read this, but i just want to say, this was put together in the mid '30s or so, social security, it's a great program, probably the best.
let me mention, someone said if you don't die early, so to speak, before 65, if you reach 65, that the average person in america lives to be 85. is that true? what basis are you making that? it seems to me, my mother-in-law was just in town, she's 99, lives on her home. she had a sister 101, 103. but how do you look at this? what is the numbers? >> i think 20 years is very close. it's a little bit longer for women than men. women still have the advantage on life expectancy. for projections of mortality, we do this with great care. we make changes very carefully and only incrementally. many people back just four, five, six years ago were arguing that our changes in death rates that we were projecting were not projecting improvement fast enough. since 2009, mortality rates
overall have been improving very, very slowly. >> let me ask you a couple more quick questions. my time is running out. they're projecting 2.7. do you think there's any sense it could go to 3%? >> it's certainly possible. what we have in the report is we're expecting a 2.4% cola this year. we're going to have to pay attention to prices at the pump. >> and the other thought, as mr. larson mentioned, i hear 10,000 to 12,000 people turning 65 every day. in terms of the funding of it, with the growth, if we had a 4% growth you mentioned the other day, but say we've gone from maybe 1.5 to 3, pick a number, that growth, lower unemployment, what impact, and one of my colleagues asked a question, what impact is that having in terms of making the trust fund
more viable going forward? >> absolutely, as mentioned earlier, the rate of growth and gross domestic product, at nearly 2.5% in real terms over the next decade that the trustees are assuming, faster really than any of the private forecasters that we saw at the time we set the assumptions, definitely contribute towards the ability for our trust funds to retain their ability to pay full benefits. >> that's why i'm surprised to hear they're going to spend more than they take in this year. i would like to think with the growth and the more jobs, it would offset that. >> well, the date at which we would reach that point has varied over time. the reserve depletion date is ywhere from 2029 out to 2042, now looking at 2034. the economic cycles come and go, and so we're at a point, but it's not as -- i think was mentioned before, the fact that we're now at the point of spending more than we're taking
in -- >> thank you, my time's up. i yield back, mr. chairman. >> thank you, mr. larson. >> thank you, mr. chairman. i would like to submit for the record the social security administrator's statistics on women, which is that almost 49% of all elderly, unmarried females receiving social security benefits rely on social security for 90% of their income. thank you, mr. chairman. >> you're become. mr. kelly, you're recognized. >> thank you, mr. chairman. looking through all this, and again, i think sometimes we forget where the revenue for social security comes from, and it is, of course, from wage taxes or federal insurance contributions act, whatever you want to call it. so it does become a math problem, or a consideration. when i was looking at the total of dollars that come in, payroll taxes make up for 87% of the revenue that comes into social security. another 3% comes from taxes on
benefits, and then another 9% on interest on that money. but i'm getting down to when social security was started, if you look at mortality rates, retirement versus the end of benefits being paid to somebody because they past, what was the average mortality rate at that time when we were looking at that window? do we know what that is? >> well, the average mortality rate, especially for people who -- >> we're at 79 years old now, right? >> you're talking about the life expectancy? >> yes. >> at the very beginning of the program, life expectancy at birth was much less than that, i probably believe even less than 65. a big part of that was because infant mortality was so high. what we focused on was life expectancy at 65. >> there's been increases in males actually.
drug overdoses, suicide, alzheimer's, et cetera. i think a lot of that comes from the fact when we had an economy that was so slow, there's just something about the roles we may in life, for men and women, and you look at it, and men have this idea that you know what? i'm the husband, i'm the father, i'm the provider. when that's not available, i think it puts stress on men. is it that the real revenue comes from participation in the labor force, with the tax cuts and jobs bill, we're seeing more people get back to work, more people with income and more people contributing at 6.2% by the person getting paid, than the 6.2% matched by the person paying, 12.4% out of every paycheck, up to 128,4, i think it is. the more revenue we get, and so
theoretically, i'm just trying to match it, so if we have people, and i don't want this to happen. if people are dying at an earlier age,o that equation starts to bounce bac a forth. i like to -- i kno you can't tell me right now, but i would like to see going forward where we're going with that. i think social security is a wonderful program, but i know where the revenue comes from. unfortunately, people thinks it comes from the government. not one penny comes from the government. it comes from people who are working. if you're self-employed as i am, or have been, you pay both sides of that. you pay 12.4% of everything. so i'm just looking at the raw numbers and going forward, how do we continue these marvelous benefits to people when they reach retirement age and they have put in all their working lives, and for some people, and for some people this is the sole source of their income, because they don't have much in savings. that's just the way it works. so i would appreciate it, if you can, i watch this stuff and
there's an article that i would like to submit for the record. >> without objection. >> this is in the trustee's predicted social security will be insolvent in 16 years. this is a marvelous read for people. just to look at so they get a more realistic understanding of what social security is. how social security works. who funds social security, and going forward, how does that model work? because i think it's incredibly important pour us right now, and we all agree, this is something we need to make sure stays sol vent. i want to thank you and your staff and the work you do. i know so much of our fellow citizening rely on social security. net revenue is going to continue to come in and that will help to pay out these benefits. thank you so much. and i yield back. >> thank you. i appreciate your comments. >> thank you, mr. chairman. mr. goss, i've looked at your
report and i look at it as kind of good news. the part about the survivor benefit is really not unexpected. it's the same thing as it was last year, just adjusted by a year, right? >> yeah. >> and the disability is far better than we thought. we thought it was going to expire in what were the dates? >> 2028. in fact, just a few years ago, we were expecting 2016, until you enacted a payroll tax reallocation. >> but the recent change, the recent extension this year of four more years of life in the disability portion, wasn't the result of legislation, was it? it was just the factors were wrong, correct? >> it's just the experience we're seeing in the program -- >> i'm looking at here at a graph of the disability applications and then the number of people in payment status. it looks like the number of people, the application has
peaked about 2010. but the number -- the number of payments have been dropping since 2014. so you had 9 million people in 2014, and now you're down around 8.5 million. if that continues to drop, this disability program is going to be able to continue on out further and further, correct? >> exactly. >> and a lot of this is driven by the labor participation rate, and it looks like to me, the labor participation rate actually peaked at about the year 2002. it dropped a little bit, but obviously precipitously in 2008, until about 2014, it leveled off. it's starting to get better now, suspect it? >> it is. in fact, the employment levels started rising before the labor participation reports did. >> so that would get people off
of disability and provide additional revenue to pay the claims, but it also helps the survivor portion as well, doesn't it? >> and the retirement portion and medicare. helps them all. >> you said you assumed a 2.4% growth in gdp over ten years. >> 2.43, yes. that's in real terms. >> and cbo is assuming 3.2% this year, i think. >> but on average, over the next ten years, 1.95%. about a half percent slower than the trustees. >> so i know that the time i got to congress, i think they were -- cbo was projecting about 2.9%, but every year it went down in its projections to the point it got down to about 1.9% about two years ago. and since mr. trump was elected,
which ways are those projections going now? >> they've been coming up. >> and increasing, not just in the near term, there are projections over ten years have been increasing as well, right? >> they have. >> and had the economic numbers -- those are projections. but let's talk about experience. the economic numbers in the last two years, have they been better or worse in experience than was projected? >> i can't really speak to how they have done relative to cbo. but i think our projections have been on target for the amount of growth we've been seeing in the economy. >> i think cbo continues to rise dramatically. now, this projection that you did didn't really take the tax reform bill into account, did it? >> well, it took it into account in terms of direct effects. it doesn't have any boosting the
economic growth projected. >> i understand, but you didn't really take into account any increase in growth from the -- >> we did not put any additional growth on what we have for the macro effects of the tax bill. >> do you think the macro effects of the tax bill are stimulative? >> indeed. >> so if that's not taken into account, then your projections could actually be on the low side, and if they are, that will extend the life of both the disability and the retirement programs, is that correct? >> that could well be. and we'll see in the next trustee's report. the one further thing we have to look at is the great slowdown we've had in labor productivity in the past ten years. >> and if we can make further progress on our economic growth agenda in terms of merit based immigration, infrastructure, trade agreements, all those
things matter, don't they? >> immigration is a huge factor for economic growth, no question. >> thank you, sir. i yield back. >> thank you. mr. hood, you're recognized. >> thank you, mr. chairman. i'm honored to be part of this subcommittee. this is my first subcommittee hearing. thank you for being here today. i was hoping you could walk me through your process of creating the report, and the average time it takes to do that. >> well, in working with our trustees and their teams, we will start working in the next two weeks towards the next trustee's report. we actually formulate our recommended assumptions to the trustees in october through december of this year. they will be looked at and ultimately agreed upon. it then takes a fair amount of time for us to work through with all the assumptions we have. the complete population
projections, complete economic projections for country, and all aspects of the social security beneficiaries and benefit levels. our target date is always april 1, which we are required to target by statute for the trustee's report to come out by that time. and we will do everything we can to get there, as we have in some years in the past. but as chairman johnson indicated, we have not met that every year. and not recently. >> this data we get each year is extremely important. and from the oversight perspective, building off the chairman's request to gao to bring more transparency to the process, i'm interested in your thoughts as to why -- why this delay in submitting the report persists and how we can change that? >> well, i guess one thing that i would point to is that we do have a board of trustees, which includes four members of the cabinet. in addition to public trustees.
so we have a little bit more complicated process in developing our projections than does the congressional budget office, which works under themselves without guidance. so we have to work with the secretary of treasury, hhs, and the commissioner of social security to work through the methodologiy methodologies. with you -- but thanks to congress, i will just promise you one thing, if we are instructed to put something in the report that is inappropriate, we will tell you in that opinion. >> beyond what you said there, are there think other barriers that you see that relate to this delay? >> you know, from time to time, as you all can imagine, getting a group of people together at a dollar point in time and a particular place, can be
challenging by way of scheduling. one thing that has contributed has been getting all of the members of the board together. we have requirements and we have always, for the year in which we have a report and we're assigning it, we have all the members of the board of trustees there. sometimes there are some delays due to get in the folks at main treasury on the particular day to have everybody sign. >> thank you. i yield back the balance of my time. >> thank you. >> this is actually one of those moments i find joyful, because i found many of the conversations we've had fascinating. just also for our own conversation, making sure i have it right in my head and understanding of everyone else, the report, as i look at the last few years and skim through it, you are very disciplined. and when i say you, it's the report, in almost -- i don't
want to use the term slow walk, but you create a very, you know, it's a perpetual horizon. we'll explain the difference later, so okay, we're in this goldilocks economy right now, but some of that isn't in the report because do we do something here to screw it up, but also demographically, you seem to smooth out some of the charts. is my explanation of what you're doing correct? >> absolutely. our sense is that for you all who are going to make the decisions, the policymakers, if we were to react to every up and down in the economy and give you dramatically different numbers, that would not be a good basis. what we try to do is hit the midline on everything. >> in that same framework, as we're working on policy, there's things happening in our society
that do have long-term cascade effects almost immediately. you've seen our recent birthrate calculations. if we as a nation are down to 1.76, what's fascinating is that number seems to have fallen even during times of economic expansion. so we have to sort of believe that's our new normal. can you give me about 30 seconds of birthrates? because my little 2 1/2-year-old is functionally an annuity to pay my social security. we were thinking of calling her annuity, but olivia is what we went with. attempted humor, but am i being fair? >> you absolutely are, especially because we are a pay as you go system. it's the workers of the day that will pay the benefits for the beneficiaries of the day. as we shift from the baby boom period, where people on average had three kids and now they're having more like two kids, maybe fewer in the future, then where
we used to have three kids in the economy paying in for every pair of elders, in the future, we'll have two, maybe less. >> i was coming up with we were like 11 years or so from two workers for every one retiree. sound plausible? >> by about 2035, we will be there. and that's simply the outgrowth of the drop in the birthrates that occurred in the 1960s. so this has been totally foreseen. >> so for a lot of us, we get giddy, we're in this economic spike, but we have to deal with other realities. our birthrates have effects. immigration, as we were all having discussions, has effects. the nature of that immigration is a talent base, does it lean younger or older? apparently the demographics has huge effects on the stability of social security and medicare. >> our ability to, as those of
us on the committee, to bring you a series of these things saying, what if -- as we're working on a stabilization legislation for the future, you know, the chairman, the ranking member all have bills, i've had a fix asian of taking parts of their bills and saying can i design triggers. hey, 15 years from now, birthrates go up, you can do certain adjustments. birthrates go down. we have a blended payroll tax rev noosenue revenues. some things in the economy can expand, but salaries and wages, the number of workers, labor force participation numbers are sometimes getting decoupled because of technology and other things. is there a rational way for policymakers, if we wanted a design that future stability that cures alzheimer's tomorrow and we live six years longer,
that's a huge stress on the system. should we have a discussion of if we're going to build that legislation that makes it so we never see that cliff again, how do you design slow on-ramps the same way you do your smoothing on your calculation, saying we're going to have to move the retirement age up? you might have to adjust those things. do we have the capacity for us to bring you those types of ideas? >> absolutely. we would welcome all of your ideas. we have about 150 up on the web now, different provisions that we scored for people in this room today and for people over on the other side of the capital. so we have lots of possibilities in terms of raising the retirement age. there is explicitly, at least one, there's several different mechanisms for indexing, but thank you for mentioning birthrates, which is really the much stronger driver on t cost of the program.
and we don't really have a direct mechanism for changing the program to reflect that. >> that could give you a much longer onramp, because my little girl suspect-- isn't going to be in the labor force for years. mr. chairman, thank you. the last question was for all of us to think about using their good offices to help us in the design. thank you, mr. chairman. >> thank you, sir. you know, the news from the trustee's report is clear -- time is not on our side when it comes to mixing social security. as i've said before, i believe that any social security solvency plan should meet the following principles. first, it ought to fix social security permanently, not just push out the trust fund's exhaustion date by a few years. second, it ought to modernize social security to reflect today's workers and families.
third, it ought to reward hard work. and fourth, it should protect the most vulnerable. and finally, it should improve retirement security. and with those things in mind, i think we can fix it. it's up to the congress to make tough choices needed to ensure that social security is here for our children and our grandchildren. just like it is for seniors and individuals with disabilities today. the american people expect and deserve nothing less. thank you to our witness for your system and thank you also to our members for being here. with that, the subcommittee stands adjourned.
japanese prime minister shinzo abe is here in d.c. for meetings at the white house. he and president trump will hold a joint news conference this afternoon scheduled for 2:00 p.m. eastern. we'll have it live on c-span3. right after that, we'll go to the house foreign affairs committee for a hearing on u.s. investments in latin america and the future of trade between north and south america. >> c-span, where history unfolds daily. in 1979, c-span was created as a
public service by america's cable television companies. and today, we continue to bring you unfiltered coverage of congress, the white house, the supreme court, and public policy events in washington, d.c. and around the country. c-span is brought to you by your cable or satellite provider. >> the assistant attorney general for the anti-trust division spoke at the council on foreign relations last week about the justice department's proposal for international cooperation on anti-trust issues. this is about an hour. >> so good morning, everybody. i'm sure the council's senior fellow and international and national security law, great to see a full room, so i think that te