Rod Grams

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that the resolution be agreed to, the preamble be agreed to, the motion to reconsider be laid upon the table, and any statements relating to the resolution be printed in the Record.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that the Senate new proceed to the consideration of Calendar No. 440, S. 1653.

Mr. GRAMS. Mr. President, I ask unanimous consent that the bill be read a third time and passed, the motion to reconsider be laid upon the table, and any statements relating to the bill be printed in the Record.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that Senate Resolution 270 be indefinitely postponed.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that the Judiciary Committee be discharged from further consideration of Senate Resolution 60 and the Senate then proceed to its immediate consideration.

Mr. GRAMS. Mr. President, I ask unanimous consent that an amendment at the desk to the resolution be agreed to, the resolution, as amended, be agreed to, the amendment to the preamble be agreed to, and the preamble, as amended, be agreed to, the title amendment be agreed to, and the motion to reconsider be laid upon the table, and, finally, any statements be printed in the Record.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that the Senate now proceed to the immediate consideration of Calendar No. 447, Senate Resolution No. 258.

Mr. GRAMS. Mr. President, I ask unanimous consent that the resolution be agreed to, the preamble be agreed to, the motion to reconsider be laid upon the table, and any statements relating to this resolution be printed in the Record.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that the Senate now proceed to the immediate consideration of S. Con. Res. 95, submitted earlier by Senator Lott for himself and others.

Mr. GRAMS. I ask unanimous consent that the concurrent resolution be agreed to, the preamble be agreed to, the motion to reconsider be laid upon the table, and any statements relating to the resolution be printed in the Record.

Mr. GRAMS

Mr. GRAMS. Mr. President, I also ask unanimous consent that notwithstanding the adjournment of the Senate, committees have from 12 noon until 2 p.m. on Wednesday, March 15, 2000, in order to file legislative matters.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent when the Senate completes its business today, it stand in adjournment under the provisions of S. Con. Res. 94 until the hour of 12 noon on Monday, March 20. I further ask consent that on Monday, immediately following the prayer, the Journal of proceedings be approved to date, the morning hour be deemed expired, the time for the two leaders be reserved for their use later in the day, and the Senate then begin a period of morning business with Senators permitted to speak for up to 5 minutes each, with the following exceptions: Senator Durbin or his designee, from 12 to 2 p.m.; Senator Thomas or his designee from 2 p.m. until 4 p.m.

Mr. GRAMS

Mr. GRAMS. For the information of all Senators, the Senate will convene at noon on Monday, March 20, and will be in a period of morning business throughout the day. As a reminder, there will be no votes on Monday. On Tuesday, March 21, the Senate will begin consideration of H.R. 5, the Social Security earnings legislation. Under a previous agreement, there will be approximately 4 hours of debate with three amendments in order to the bill. Therefore, Senators can expect votes throughout the afternoon on Tuesday. During the remainder of the week of March 20, the Senate could consider any of the following items: Crop insurance, budget resolution, agricultural sanctions, satellite bill, or the Export Administration Act, and therefore votes can be expected to occur.

Mr. GRAMS

Mr. GRAMS. If there is no further business to come before the Senate, I now ask unanimous consent that the Senate stand in adjournment under the provisions of S. Con. Res. 94.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent the Senate now proceed to the immediate consideration of Calendar No. 446, Senate Joint Resolution 39.

Mr. GRAMS. I ask unanimous consent that the joint resolution be read the third time and passed, the preamble be agreed to, the motion to reconsider be laid upon the table, and any statements relating to the resolution be printed in the Record.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent to be allowed to proceed in morning business for up to 10 minutes and that my remarks be followed by the Senator from California, Mrs. Boxer.

Mr. GRAMS. Thank you very much.

Mr. GRAMS

Mr. GRAMS. Mr. President, 87 years ago today, the Federal Government began collecting income tax. I rise not to celebrate the anniversary, but to condemn the occasion. What began as a simple flat tax on the revenue of a few has turned into a Pandora's box that devastates many. And so I take this opportunity today to strongly urge Congress to begin repealing the process of the constitutional amendment granting the Federal Government the power to tax, abolish the income tax, and replace it with a tax that is fairer, simpler, and friendlier to the taxpayers. The reasons for abolishing the Federal income tax are compelling. To begin with, the income tax has clearly violated the fundamental principles upon which this great Nation was founded. Mr. President, our country was born out of a tax revolt--a tax revolt built upon freedom and liberty. To preserve liberty, our Founding Fathers crafted an article in the Constitution unequivocally rejecting all direct income taxes that were not apportioned to each state by its population. During the following 100 years, this provision brought enormous economic opportunities and prosperity for America. Although Congress attempted to enact income taxes in the late 19th century, the Supreme Court repeatedly declared the income tax unconstitutional. As a result, between 1870 and 1913, before the income tax was levied, the U.S. economy expanded by over 435 percent in real terms. This was an average growth rate of more than 10 percent per year, without inflation. Congress has passed many ill-advised laws, but nothing has been more disastrous than the passing of the 16th amendment in 1909, which allowed the Federal Government to begin levying and collecting income tax as of March 8, 1913. This shift in policy represented the efforts of those liberal elements who believes and promoted the ideology that society has a claim on one's capital and labor. They suggested that the redistribution of private income would increase equality among people. Their strategy was simple: they claimed this income tax was to ``soak the rich'' and was not supposed to provide a mechanism for Washington to reach into most Americans' pockets--the argument we still hear again and again on the Senate floor. Initially, less than 1 percent of all Americans paid income tax. Only 5 percent of Americans paid any income tax as late as 1939. But today, nearly every American is subject to the income tax. The Federal tax burden is at an historic high. A median-income family can expect to give up nearly 40 percent of its income in Federal, State, and local taxes--more than it spends on food, clothing, transportation, and housing combined. More Americans are working harder and are earning more today. But a large share of the higher incomes of hard-working Americans aren't being spent on family priorities, but are instead being siphoned off by Washington. They are working harder, but they are taking home less money because the Government is taking a bigger bite out of their paychecks. Then there is ``bracket creep.'' I think everybody knows what that is. It means a large share of revenues goes to taxes as inflation pushes you into another income level, or another tax bracket, so Washington can get a bigger bite out of your paycheck. Mr. President, is this what our Founding Fathers fought for? Even the sponsor of the 16th amendment, Congressman Sereno E. Payne of New York, later realized his mistake and denounced direct taxation as ``a tax upon the income of honest men and an exemption, to a greater or lesser extent, of the income of rascals.'' T. Coleman Andrews, a former commissioner of the Internal Revenue Service said: Congress [in implementing the 16th Amendment] went beyond merely enacting an income tax law and repealed Article IV of the Bill of Rights, by empowering the tax collector to do the very things from which that article says we were to be secure. It opened up our homes, our papers and our effects to the prying eyes of government agents and set the stage for searches of our books and vaults and for inquiries into our private affairs whenever the tax men might decide, even though there might not be any justification beyond mere cynical suspicion. To my colleagues who would brush off that statement as an exaggeration, I remind them of the horror stories we heard from many of our constituents 2 years ago, when the Senate Finance Committee held hearings into abuses carried out by the IRS. Those poor taxpayers whose lives were shattered thanks to the unwarranted excesses of an overeager tax collector were not exaggerating. The income tax must be abolished because it has become so complicated and inefficient. The Federal Tax Code today stretches on for more than 7 million words, and is made up of 4 huge volumes, another 20 volumes of regulations, and thousands of pages of instructions. Not even tax accountants or lawyers fully understand it. What chance does the average taxpayer have of getting it right? The government publishes 480 separate tax forms and mails out 8 billion pages of forms and instruction each year. The IRS employs over 10,000 agents to collect taxes, more agents than the FBI and the CIA combined. The income tax must be abolished because it keeps enlarging the government. In Washington, taxing and spending always go hand in hand. As the income tax rate goes up, government spending explodes. Between 1913 and 1999, inflation-adjusted federal government spending increased by more than 16,000 percent. The income tax must be abolished because even in an era of budget surplus, it allows the government to continue overcharging Americans as we see today with our surpluses. According to the Congressional Budget Office, working Americans' tax overpayments will be as high as $1.9 trillion in the next 10 years. After the biggest tax increase in history, President Clinton has repeatedly denied working Americans a tax refund and refuses to return tax overpayments to the American people. His last budget again increases taxes instead of cutting them. In a time of surplus, this President is out with a proposal to again increase your taxes. How is this possible? We would all agree that if a customer is overcharged for a service he receives, the right thing for the merchant to do is to return the extra money--not keep it because the merchant has other things he'd like to spend it on. The same principle holds true for tax overpayments. I strongly believe we should return tax overpayments to their rightful owners--the taxpayers--rather than spend them on new government programs. Not only does this money belong to them, but the American people will spend it far more intelligently than Washington politicians ever could. Mr. President, on this somber income tax anniversary, I argue that we have no choice but to repeal the income tax and abolish the IRS. I urge my colleagues to join me in a pledge that we will dedicate ourselves to replacing the Tax Code with a better system early next Congress, as we continue to do everything we can to reduce the existing tax burden on the overtaxed American people.

Mr. GRAMS

Mr. GRAMS. Mr. President, I want to take time this morning to talk about one of the most important issues I think is facing American society today; that is, the future of the retirement system in this country--not only for those who are on Social Security today or for those who are going to be on Social Security very soon, but basically to look down the road to our children and our grandchildren at what kind of Social Security or a retirement system we are going to leave the next generation. I think that is very important. I am very pleased this morning that President Clinton has finally accepted the Republican Social Security lockbox which would lock in every penny of the Social Security surplus, not for tax relief and not for Government spending but for the retirement program of millions of Americans. However, what most concerns me is that the President appears to be abandoning his ``Save Social Security First'' pledge. It was one thing to lock in Social Security surpluses last year and in the future and to further attempt to devote interest savings on a lower public debt to Social Security, but that alone will not save Social Security because we have spent too many years of the Social Security surplus prior to the year 2000. The President's budget does not address the future solvency of Social Security to ensure retirement benefits will be there for the baby boomers and also future generations. All he has proposed is to credit Social Security with more IOUs that do nothing but increase taxes on future generations. So my point is, the President's Social Security proposal does not push back the date that Social Security will run a deficit by a single year, and the transfer from the general fund to Social Security does not cover a fraction of the shortfall the system is going to face. Without reform, the unfunded liability of Social Security will crowd out all discretionary spending. It will create financial hardship for millions of baby boomers. It will impose a heavy burden for our future generations in the form of higher taxes. We must address this very vitally important issue and do it as quickly as we can. Just another note. Recently, a Social Security advisory panel found that the Social Security economic and demographic assumptions the Government uses to project the program's future economic status underestimate the unfunded liability. What that means is, if the panel's recommendations were adopted, Social Security projections would show a financial imbalance in the system that is much greater than currently forecast. In other words, the system is more likely to be in worse shape today financially than previously even thought. This means Social Security could go broke much sooner than we actually expect today. What I want to do is to look at the system itself and then look at a plan I have introduced called the Personal Security and Wealth in Retirement Act, which is personal retirement accounts, which I believe is the direction in which we should go in order to save Social Security and to have a safe, sound, and good retirement system for the future. In doing this, I have been across the State of Minnesota, holding many town meetings, talking to hundreds and thousands of Minnesotans, trying to explain to them what the problems are. I think everybody agrees there are some problems in Social Security. In fact, more young people today believe Elvis Presley is still alive or believe in aliens than they believe that Social Security is going to be there for them. So there is a problem of perception. What Americans are looking for--and I found this out traveling across Minnesota--what they want is some information on what is happening and what are some of the options we are going to have in order to address this problem. That is why I have traveled across the State of Minnesota doing a number of town meetings, talking to Minnesotans about this. When we look at Social Security over the last 65 years, Social Security has basically done what we have asked the program to do; that is, to provide retirement benefits for millions of Americans over 65 years. It has done the job. In some cases, if one looks at their Social Security check today, they will say it is not very good because it is only $700 a month, $600 a month, $800 a month. That is not the kind of retirement we want to leave to our children. If we look ahead to the next 30 years, the system is facing some real problems. We are going to strain the system to the point it will not be able to meet the benefits that have been promised. In fact, if we look out about 30 years, without any changes in Social Security, we will see a reduction in the benefits of about one-third. We might have to raise taxes; that is another option. We might have to raise the retirement age. If those are the options on the table, I don't think they are what we want to leave our children, that they are going to have a retirement system that is going to cost them more, going to give them less in benefits, and they are going to have to be older to retire. Is that what we are promising or hoping for our kids? I don't think it is. That is why I have gone across Minnesota holding town meetings and talking about this issue. When Franklin Roosevelt created the Social Security program over six decades ago, he wanted it also to feature a private sector component to build retirement income. In other words, he did not think only Social Security alone should do that. Social Security was supposed to be one leg of a three-legged stool: Social Security, pensions, and savings accounts. But Franklin Roosevelt did have some concerns. In fact, there was a Senator--I think from Missouri--who had passed on the floor of the Senate a proposal to include private retirement accounts as well as the public. When it got into conference, it was stripped out. They promised him they would bring it back on the floor again the next year, but they said: We have to pass this bill now. We are right at the height of the Depression, with all the problems the country is facing. They promised him they would bring this aspect back the next year. They never did. I always say that is one of the first big lies dealing with Social Security. Social Security is a system that is stretched to its limits. We have 78 million baby boomers who are going to begin retiring by the year 2008. The average is going to be around 2011 or 2012, but 80-plus percent of Americans retire at the age of 62, not at the age of 65. So we can push back when it is going to hit that limit by a couple of years to 2008. Social Security spending will begin to exceed tax revenues by the year 2014. We have all heard about the Social Security surplus and why we are bringing in these surpluses every year. In 1983, a blue-ribbon panel, chaired by Alan Greenspan, decided the way to extend the life of Social Security was to begin overcharging for the FICA taxes. That excess overcharge would be put into a trust fund or a savings account, and we would then draw on that after the surpluses evaporated so we could meet the shortfall from the savings account which would extend the life of the program to the year 2032. We hear everybody in debates saying: Social Security will be here until the year 2032. Well, it will be here, but it won't be paying benefits to the max after the year 2014 unless we raise taxes somehow to retire some of the debt. To give a quick example: It is as if we were paying out $100 in benefits today. By the way, our Social Security system is a pay-as-you- go system. In other words, the money brought in at the first of February went out at the end of February. There is not one account with your name on it with $1 in it in Washington for your retirement. You have been paying in all these dollars, but you do not have an account in Washington that has $1 for benefits for your retirement. All you can rely on or hope for is that there are people working when you retire so they can pay that benefit at the first of the month that you will collect at the end of the month. That is the way this system works. It is a pay-as-you-go system--no investments, no compound interest, no assets, only the hope that there are going to be enough workers paying into the system when you want to retire. So if we are paying out $100 in benefits, we are bringing in $110 today. We put that $10 in the savings account. But by the year 2014, we will bring in $100 and pay $100. So we are going to be even. By the year 2015, estimates are we are going to bring in $98; we are going to have to pay out the $100. That is when we were going to go to the savings account or the trust fund to draw out $2 to make sure those benefits are paid. Then by the year 2020, for instance, we will only be bringing in $90 and we will pay out $100. We will have to borrow $10. Between 2014 and 2032, we would have evaporated that savings account. Then we will be facing the problem we were hoping to deal with at that time. The problem is, all that is in the trust fund today are IOUs. In other words, every time $1 has been collected from you to go into the trust fund, Washington has borrowed that money, put it into the general fund and spent it for other Government programs. They have spent your future retirement dollars. They have put in notes, IOUs, that say they will pay back. It would be similar to going to your kid's piggy bank, taking out 10 bucks and putting in an IOU. You are going to have to have future revenues to pay back that IOU. So the money you have already put in is gone. To replace it, we will have to go to current taxpayers and raise more taxes to pay it off. All the money has been used to increase Government spending. It hasn't gone for your retirement security at all. The Social Security trust fund goes broke in the year 2033. That is when all the IOUs will be gone. I always like to say, if you think these IOUs are good, go put a million-dollar IOU into your checking account and find out how many checks your banker allows you to write against that IOU. None. You are going to have to find additional revenues. I have $1 million in my checking account. It looks good on paper, but in reality there is nothing there to back it up but the good word and faith of the Federal Government to some day go back and collect more taxes to pay off this debt. So by 2014, we are going to have to begin raising taxes or cut spending in other areas to pay off an IOU. If we need $1 billion in the year 2014 and it is not in the budget, where do we go to get it? We are going to have to go out and get it from the taxpayers. So we are going to have to have a tax increase beginning as early as 2014 to pay the benefits being promised. Why is the system now being stretched to the limit? Back in about 1940, there were 100 workers for every retiree. Today, there are about 2\1/2\ workers for every retiree. In 25 years, there are going to be less than two for every retiree. Why does this put a strain on the system? Say if you were going to have a $1,000-benefit in 1940. One hundred workers would only have to put $10 a month into the system to make sure it was solvent. Today, we are asking that you put nearly $500 a month into the system in order to maintain the benefits for this retiree. In 2025, our grandchildren will have to pay more than $500 apiece in order to maintain those benefits. So $10 compared to over $500 shows the strain that will be put on the Social Security system if we do nothing to improve it. Where are we today with the system? The numbers say the system is probably more in debt than we expected it to be. If we look at this chart, on this line is zero; this line shows the continuing surpluses we will be bringing in until about the years 2012 to 2014. But after that, we see the red line as it goes down. This is the debt the system is going to incur, and it is over $20 trillion of unfunded liabilities. In other words, this is after we have already collected Social Security taxes from your paychecks. This is what we are going to run short if we are to pay the benefits the Government promises. So if we are going to continue paying just today's level of benefits--adjusting this for inflation, of course--in today's dollars, we are going to be $20 trillion short over the next 70 years. Again, others would say: Well, if we can't do that, we will lessen the retirement age, and that will lessen the debt; cut benefits by a third. That will lessen the debt even more, or we are going to raise taxes, which could eliminate it. But that is the plan they have proposed. The biggest risk to our Social Security system today is to do nothing. There are a lot of people who say we can't really touch it, or maybe we should raise taxes a little bit. Right now, proposals are floating around to raise your FICA taxes by another 2.2 percent in order to maintain these benefits. That is like putting a Band-Aid over cancer; you can wait 5 years, but when you pull that Band-Aid off, the cancer is probably going to be much worse than it is today. So that is no cure. In fact, to support Social Security we have raised taxes 52 or 53 different times. People like to say they want to ``tinker'' with Social Security. If you get out the Washington dictionary and you open it up to ``tinker,'' it means a tax increase. They say, if we can only raise it 2.2 percent more, we can solve this problem. Well, if you believe that, why have they done it 52 or 53 times? This would be 54. How many more tax increases would have to be imposed in order to do that? To keep promising Social Security benefits, the payroll tax would have to be increased, some say, a minimum of 50 percent--a minimum of 50 percent--not the 2.2, but a minimum of about 6.5 percent. Others say that could be more than double in order to maintain it. In fact, here are the payroll taxes on this chart. This is where we started in 1950. It was under 3 percent at that time. It started out, by the way, at 1 percent of the first $1,000 of earned income. It has grown now. So it is 12.4 percent on $70,200, or somewhere in that neighborhood. You can see how taxes have continued to increase to where we are today. But this red line shows the intermediate projections. These are the best-guess estimates of what could happen. By 2030, our children could be paying about 23.5 percent just for Social Security--not Medicare, just Social Security. You can add Medicare and then you are at about 28 or 30 percent. Then add in Federal taxes and it is 56 percent because that averages 28 percent. Then add in local taxes, sales taxes, property taxes, excise taxes, and everything else, and in 30 years our children are going to be looking at tax rates as high as 70 percent or maybe even higher because high-cost projections show that this amount probably would not be 25 but it could actually be somewhere closer to 28 or 29 percent. That would put our children well over the 70-percent mark. Is that what we want for our children, where, for every $100 they make, they will take $30 or $35 home and the Federal Government gets the remainder of it? I don't know how many children will vote in the year 2030 for a politician who will keep a system such as this. The diminishing return of Social Security: If you retired in 1960 or 1955, you probably got back everything you had put into Social Security within the first year. It was a good investment for that generation. But today, the average return on Social Security is less than 2 percent. If you are a young person today, by the time you retire, there is actually going to be a negative return. In other words, they would be better off to put their retirement money in a tin can and bury it in the backyard, and they would have more buying power in retirement than if they invested it in Social Security. For many of the minority groups today, they are already in a negative cash-flow for Social Security because of age expectancy. So already it is beginning to hurt that portion of our population. To compare it, what if we invested it in the markets? The markets traditionally, over the last 80 years, including the crash of 1929 and all the ups and downs of the markets over the last 80 years, averaged a little over 7 percent in real rate of return. That is after inflation and all of the adjustments. It averaged over 7 percent in real rate of return. I don't know how many people would line up at the window to invest in an account that said: We are going to pay you less than 1 percent; in fact, it may be a negative percent. Right now, that is the only option you have. You have no choice as to where your money is going. What have we done in Washington? Everybody now agrees--the President, Democrats and Republicans, the Senate and the House--that we need to lock it away to make sure all money collected for Social Security goes to pay for Social Security. We have introduced the lockbox. That means all the additional surpluses now are going to be set aside for Social Security retirement. That is very important. We need to continue to do that. Stop raiding the trust fund. The Social Security Protection Act, which I introduced, would automatically reduce nonentitlement spending of Social Security dollars. Our spending and revenues now are based on the best estimates we can put together. The question is, Are we really serious about making sure we don't spend Social Security surplus money, even by accident? We should have a protective mechanism in place. So if we estimate we are going to spend $1.8 trillion and we bring in a billion dollars less than that, right now, the only option is to go to the trust funds to make up the difference in spending. My bill would say we don't do that. We would reduce spending across the board evenly by that amount to make sure we did not take any money from the Social Security trust fund. Again, if that is our promise, if we are serious about doing that, we should not say ``except to'' or make an exception. If we made an exception for $1 billion, you know there would be exceptions for $50 billion. So we have to be honest in what we are doing. It might only be .0003 percent; it might be .01 percent. If instead of getting $100 we would get $99, if that is what we need to do to protect Social Security funds, I think we should do that. If that is our top priority, we should live up to that priority. When I was putting together the six principles of saving Social Security, I asked, what do we need to do if we are going to at reforming our securing retirement benefits for the future? First and foremost, we have to protect current and future beneficiaries. That means if you are on Social Security today, or plan to retire in the near future, you should be assured that the Government is not going to reduce the promises it has made. In other words, you can retire at the same age the Government says now, and your benefits will be there and protected, and we are not going to raid your taxes between now and then in order to do this. You basically made a contract with the Government when you started working and you said, all right, I am going to put money into the system, and I expect to get the benefits when I retire. It is a contract. You said you were going to do this, and the Government said you are going to have the benefits. Late in the game, when you sit down and plan for retirement, in Washington they say: We don't have enough money in the budget anymore. We are going to have to make changes here and raise your retirement age, or cut your benefits, or maybe we need to raise your taxes a little more. That is not the fair way to do that. Allow freedom of choice. If you want to stay with the current system of Social Security, you have the option to do that. But also if you want to move into a personal retirement account, be in control of your retirement and your investments and maximize those dollars, you should have the freedom of choice to do that. Today, the Government gives you no choice. Washington knows better. Washington tells you what you have to do with your retirement. Somehow Washington doesn't believe you are smart enough to plan for retirement. You might be smart enough to make the money but not smart enough to put it away for yourself. Preserve the safety net. That means you have to have a net there for disability and survivor's benefits. Let's make Americans better off, not worse off. So when you retire, you are going to have at least the benefits promised, but even better if we can. My plan does that. Create a fully funded system. We have proposed personal retirement accounts in the Private Security and Wealth in Retirement Act. Bottom line: No tax increases in order to do this. The easiest way is always to raise taxes. The hardest way is to make real reforms. The Personal Security and Wealth in Retirement Act provides for personal retirement accounts. I introduced it in the 105th Congress and last May 24. It is S. 1103; the Personal Security and Wealth in Retirement Act allows for personal retirement accounts. The plan provides for retirement security. I think it offers better options for you. In other words, right now you have no options. The Government tells you what you are going to do. They tell you what you are going to pay in from your check. They tell you what your benefits are going to be when you retire. You don't have an option on that. They also tell you at what age you can retire. They give you more options. Workers under my plan would pay 10 percent of their income. Right now they are paying 12.4. That goes to Social Security. My plan would take 10 percent of your income and put it into personal retirement accounts. The other 2.4 percent we still have to collect. That is part of the funding mechanism for those who wish to remain on Social Security. That 2.4 percent, plus other means of financing, is going to have to go into the current Social Security Administration in order to fund that. We are going to talk about taking 10 percent of your money and putting it into a retirement account, or a PRA, that will be managed by a government-approved private investment company. Firms will set up these retirement accounts--whether it is U.S. banks, whether it is Citibank, Travelers, whether it is Lutheran Brotherhood, whether it is Norwest Bank, or whatever. They would set up these retirement accounts based on safety and soundness--such as the FDIC account in which you put your savings accounts in a bank. There would be very rigid safety and soundness measures to make sure the money put into this account is going to be there when you retire. So safety and soundness is first and utmost. A couple of examples: On $30,000 of income, you are putting $3,720 a year in to support Social Security. Under my plan you would put $3,000 of that into your personal retirement account, and the rest of it would then go to the Government. Just to show you the difference on this, they would be taking $3,720 and putting it into Social Security and then being allowed to take $3,000 and put it into a personal retirement account based on the market and what you could then hope to receive at retirement. Under this example, this is what you would do. If you made $30,000 a year for a lifetime and went to draw your benefits from Social Security, you would get about $10,668 a month. But if you could take that $3,000 and put it into a personal retirement account and get the average market return, you would have about $54,500 per year in benefits. Compare 10.6 to 54.5. That is a big difference in what retirement accounts invested in the market could do compared to pay as you go. Let's take a couple of other income examples. This would be for an average income family which has $42,000 or $43,000 a year in average income. This is one spouse earning the average income in a household, one spouse not employed outside the home, a one-worker family. If you paid in a lifetime the average earnings into Social Security, you could expect to get about $29,000 a year in benefits. If you would have invested these same dollars from the personal retirement account into a private mixed stock and bond market--in other words, more conservatively and maybe not the highest returns but more conservative investments--you would get at least $66,000 in return. If you had invested in the market, you would have a return of nearly $140,000 per year compared to $30,000 a year in return. Let's take the same for a two-income, low-income family with both spouses working with an average low income over their lifetime. They would get about $18,400 in benefits. But if they could put the dollars into the personal retirement account and invest it in, say, the market, they could get over $100,000 a year in benefits, or about $45,000--if they put it into a mixed type and more conservative investment account. But, either way, they are still much better off. The reason Albert Einstein was labeled as ``the man of the century'' by Time magazine was because Albert Einstein at one time said the most powerful force on Earth is compounded interest. That is what we are trying to show, because if you are working and doing a pay-as-you-go system, you are getting $18,500. But if you use this most powerful force on Earth--compounding interest--you can see how it would compound. So your benefits would increase fivefold over your lifetime in order to draw better Social Security benefits. Is this a pipe dream or is this just speculation or whatever? No. This is actual. Galveston County, TX, has a personal retirement account, as does the entire country of Chile, as does about 120 other countries in the world. Thirty other countries are doing this. If you had a little history on our Social Security system, it is all based or duplicated off of one that was started in Germany in 1880. Bismarck at that time designed the system we have adopted as the model that Chile had, and many other countries. In fact, in 1880, Bismarck set the retirement age at 65 years. The average worker in Germany in 1880 was 49.5 years. When we adopted the Social Security system in this country, we set the retirement age at 65. The average life of a worker in this country was 59.5 years. You can see what happened because as we have extended the life line, as people now enjoy 20-plus years of healthy retirement. The system was never designed to do that. That is why so many limits are being placed on it. Let's look at Galveston County, TX, and how the employees there are reaping the benefits of a private retirement account instead of Social Security. In about 1980, one of the administrators in Galveston County saw the loophole in the law. At that time, if you were a public employee and you already had a retirement system, you did not have to join Social Security. You could remain with your own private retirement account. By the way, the President's plan to reform Social Security is to make sure that all those accounts are closed, and everybody would be drawing from Social Security. But in Galveston County, they saw this loophole and opted out of Social Security, although the Government quickly closed that door so nobody else could. But that is what happened in Galveston County over the last 20 years. According to today's schedules, under Social Security a death benefit is $253. My father died at the age of 61. For all of the money he paid in over his lifetime, when he passed away his heirs received $253. That was all. In Galveston County the minimum death benefit is $75,000. Disability benefits per month, if you are disabled under Social Security, total about $1,280. In Galveston County, the disability benefits are $2,750 a month. Retirement benefits per month: Social Security--again, currently we are basing this on average income--$1,280 a month would be about the best you could get out of Social Security. In Galveston County, you are at nearly $4,800 a month--nearly four times greater in benefits in Galveston County than if you are on Social Security today. There was a young woman who wrote an editorial to the Wall Street Journal about 2 years ago. Her husband passed away suddenly of a heart attack at 44. She was 42. They had three children. She received the death benefit, plus the benefits she receives from Social Security and from her private retirement account, which allows her to maintain her home. If she had been on Social Security, her family would have been in poverty with the payments she would have gotten. Today, she can maintain the home as she did before. In the article, all she could say was: Thank God for Galveston County and the system they have. What about moving to this new retirement account? If we move to the personal retirement account, somebody 45 years old would say: I have worked now for 40 years. What happened to all that money I paid into Social Security? What am I going to do? I can't afford to lose that-- although you hear some people say: You can keep everything I have paid in; let me out of the system. We have said those are dollars the Government has collected with the promise of paying you benefits. We know exactly how much we have collected in Washington from you for Social Security. If it is $20,000, we would give you a $20,000 recognition bond. That would be deposited into your private account. Adjusted for inflation and interest over the years, you could then cash this bond when you are 65, because that is the way everything is based right now. If it is $30,000, you get a $30,000 bond. If it is $44,220, we would give you that as a recognition bond. But it would be one of your options to say: I am going to have this credited to my account, and then I am going to begin my personal retirement system. Again, taking care of today's Social Security recipients means that if an individual chooses to remain within the current system, the Government should and will guarantee the benefits--no age increase, no reduction in benefits, no tax increase, no ifs, ands, or buts. If one decides to stay within the current system, this is what to expect your government to do at the minimum, to guarantee your benefits, and not hear 5 or 20 years from now: I am sorry, we don't have the funds; we will have to reduce your benefits. We need to rely on this in order to make sure the system is well. Preserving the safety net is my plan. The Personal Security and Wealth in Retirement Act preserves the safety net for disadvantaged Americans, so that no covered person is forced to live in poverty. Today, poverty is recognized at about $8,240. My plan says workers cannot retire with less than 150 percent of poverty. They have to have income of at least $12,400--that is what workers receive in retirement. We don't want anybody retiring in poverty. In fact, today about 18 to 20 percent of Americans who retire--mostly women--retire into poverty. We think we should have at least a safety net. Retirees have to have at least 150 percent in order to retire so they don't go into poverty. Funds that manage PRAs are required to buy life and disability insurance to cover those minimum benefits. As with Social Security today, they are the safety nets for survivor and disability benefits, as I showed earlier with Galveston benefits. The Federal Government will make up the difference for those who fall short of the minimum benefits. Perhaps someone has been in and out of the workforce or doesn't have enough money in that account, or they have had a minimum-wage job all their life and they cannot come up with the money to buy an annuity to pay the $12,400 a year. For those individuals, which we believe is a very small percentage, the Government will, in the only part that is any kind of entitlement or involvement by the Government at all, fill that glass full so benefits are paid. Perhaps a worker only had the dollars to buy an $11,000 benefit plan. The Government would put in the additional dollars to make sure when they retire their minimum benefit would be $12,400 a year. Providing a safety net and soundness: The rules are similar to those who apply to today's IRAs or 401(k)s and would apply to personal retirement accounts, as well. As banks operate under very strict rules of safety and soundness, the same type of rules are applied to the personal retirement accounts to make sure the money in their account is going to be there at retirement, don't worry about it. By the way, workers can't invest their money into a gold mine that evaporates and then be left with no retirement benefits. Again, this is the safety net, the Government-sponsored plan, to guarantee retirement benefits so you are not a ward of the State, you have the wherewithal to pay your way in retirement. Now, workers can still have other IRAs, other savings accounts, they can still have a stock portfolio. Only this narrow area will have the safety net or the Government set-aside to make sure individuals have a retirement. Investment companies that manage PRAs are required to have an insurance plan to ensure at least a minimum of a 2\1/2\ percent return on each account. That is not much, but compare that to today's less than 2 percent and a growing number of less than zero in 20 or 30 years. This maintains at least a floor for the return on your investment. That also would be written into the law. Workers decide when to retire and when to withdraw their retirement. As I said earlier, today workers don't have the choice or the options; they have to do what the Federal Government says. They cannot retire until they reach a certain age. Benefits are determined by the Federal Government. The Government says what each person is going to receive as a benefit. They have decided over the years what your contributions to this package has been. With our retirement plan, when one can buy an annuity to provide income of 150 percent of poverty, anyone can retire anytime once that obligation is met. Once you have met the obligation to be able to buy an annuity that pays at least 150 percent of poverty, anyone can retire, or stop paying into the system and use that 10 percent of income to do what you want, use it for other investments, or spend it. Once an individual has met the threshold, they do not become a ward of a State. Anyone can arrange regular, periodic withdrawals of money in the account. An individual 21 today making an average income--about $42,000 a year today--their whole life, tucking away those dollars, would have about $1.5 million in a bank account when they decided to retire. Annuities cost about $100,000 per $1,000 a month of annuity. If one buys an annuity to pay $1,300, one needs $130,000 in order to buy that annuity today. That leaves $1.27 million left in the bank account, in the savings account. You can do whatever you want with that. You can take out periodic withdrawals; you can take a trip to Europe, and write a check to do it. This is your money, not the Government's money. An individual can withdraw the portion of the PRA that is above the minimum retirement benefits, free of income taxes and earning tests. All of these dollars placed into the retirement accounts are taxed before we put them in, as they are today. I don't know if many realize this, but the Government taxes everyone on the Social Security moneys that taxpayers put into the Social Security system today. It is taxed before the Government takes it out of their check. We do the same. The Government today, when an individual withdraws Social Security, much of that is exposed to additional Federal taxes, and it could be exposed to even more taxes as part of an estate. We are saying, once you have it in the account, it is your money tax free. More choices for families with PRAs. In divorce cases, they are treated as community property. Upon death, PRA benefits go to the heirs, without estate taxes. There are no taxes. If you pass away with $1.2 million in your account, that goes to your heirs when you die, not like when my father passed away. There was nothing after a lifetime of investment into Social Security except a $253 death benefit. Under this plan, all the money remaining in the account goes to heirs--your children, your spouse, your church, wherever desired. That is what happens: Build up an estate that can be passed on to the next generation. Workers may arrange PRAs for nonworking children, with workers able to put up to 20 percent of their income. We say now a minimum of 10 percent, with an option of up to 20 percent can be put into their own account. If one wants to retire at 55, put more money in to make sure you have enough to buy this minimum retirement benefit. Do it quicker and retire earlier. Do what you want, or put it into the account for nonworking children. A parent with five children could put 10 percent aside for himself and 2 percent in each child's account. This gives your children a headstart on retirement benefits. To demonstrate how this money mounts up, by placing $1,000 into an average account when a child is born, by the time that child reaches 65, that $1,000 would be worth nearly $250,000 with just that one investment into the retirement account. For grandparents, that is a good gift for grandchildren. That shows how it can grow. Additional accounts for children give a real leg up on their retirement benefits in the future. No new taxes. Bottom line, we say we do not want to raise taxes. There are things we need to do to finance this transition. As I said, there is $20 trillion in unfunded liabilities out there. Somebody has to pay that. We have made the commitment to them. The question is, How do we do that over the next 70 years so we do not put a tremendous strain on any one generation? As I said, in the next 25 or 30 years alone, we could put a strain on our children or grandchildren of up to a 70-percent tax rate in order to support the system if we don't make some changes now. Again, what this all means, the bottom line, is retirement income will be there for all, whether one decides to stay within the current Social Security system--that is a choice, if that is what you want to do--or whether one chooses to build a personal retirement account. Again, there is a choice. Individuals don't have to do what Washington says; you can have a choice in what you want to do. Citizens can decide which retirement options work for them. How do you want to do this? When the dollars are taken from your check, as they are today, deducted from Social Security, when the dollars are taken from you, you dedicate where you want the dollars to be sent, which retirement fund is going to handle your dollars--whether it be Citibank, Lutheran Brotherhood, Norwest, or whatever it might be. You decide where the dollars go. It goes into your account. Also, you can tell that account holder: I want 65 percent in the market; I want 35 percent in Government bonds and securities. You can do that. Each individual has control over how the investments are handled. Any person visiting the country of Chile, just ride in a taxicab and ask the cabdriver: How much do you have in your retirement account? He will pull out a retirement account passbook and state to the penny how much he has in the retirement account. That is his money. They do not have their hands on it anymore. This takes Social Security out of the control of Washington and it puts it into the people's control. They make the decisions of what to do and how to build their retirement. Everybody is different. Families are different. Everybody's hopes and expectations are different. Right now, Washington gives us that cookie- cutter, one system, and that is it. Our plan gives all the options so the American people can provide and create a retirement system they want. With a PRA, an average Minnesotan could receive at least three times their current projected Social Security income, at least, and some of the projections go as high as 5, 6, maybe even 10 percent. The bottom line is, the system is under tremendous strain and we are going to have to do something to protect retirement benefits in this country. The question is, What type of retirement system do we want to leave our children and our grandchildren? Again, there are going to be those out there and some on the campaign trail today for President who are going to be talking about maintaining the status quo. In other words, let's put a Band-Aid over this cancer, let's raise taxes a little bit, and we will get by for a while. When that Band-Aid is pulled off, that cancer is going to be even worse than it is today. We have an opportunity today to make a decision that is going to be better for retirement; in other words, it is going to cost less and there will be less pain in the transition. The longer we wait, it is going to be harder and more costly to make any kind of decision. We need to do this soon. Are we going to get it done this year? No, there is not enough time this year to do it. It should be on the front burner when we come back in the 107th Congress in 2001, with a new President and the next Congress. It should be one of the first items we should look at: How are we going to save and support future retirement for our kids and grandchildren in the future. I am 52 years old today, but I have very few options. I might be stuck with the plan we have today because by the time we implement it, I will be 55, 56 years old. At that time, will I have the option to move into personal retirement accounts? Maybe not. We have to give our children and grandchildren at least the option to provide a better retirement for themselves than what we have today. For many people on retirement, if they are getting $800 a month and they think that is great, maybe that is what they want their grandchildren to have. But if they have retirement benefits three or four times that, I think that is an option to give our children and grandchildren. I hope to talk about this again in the near future. I yield back the remainder of my time and suggest the absence of a quorum.

Mr. GRAMS

Mr. GRAMS. Mr. President, I rise to speak about a very important bill I introduced yesterday. My Save Our Surplus, or S.O.S. legislation would lock in every penny of the $23 billion non-Social Security surplus which materialized in FY 2000 and return it to working Americans in the form of debt reduction, tax relief and structural Social Security and Medicare reform. The reason for this legislation is simple: Last year the Congress adopted my amendment in the budget resolution to set up a reserve fund for any non-Social Security surplus for tax relief. Unfortunately, this provision in the budget resolution was completely ignored in the appropriation process. As a result, we ended up spending every penny of the project $14 billion on-budget surplus. The Congressional Budget Office estimated early this year that, Thanks to our strong economy, we would have an even higher $23 billion on-budget surplus in the current fiscal year despite that spending spree. Mr. President, this $23 billion non-Social Security surplus does not fall from the sky. It is working Americans who generated the surplus-- not Congress, not the President, but Americans' hard work. In fact, hard working Americans have created a strong economy that has turned the ink in Washington's accounting book black for the first time in 40 years. The budget surplus above and beyond Social Security will top $1.9 trillion over the next 10 years. Clearly, the reason we have a surplus is the result of the hard work of working men and women of this country. Washington should not be the first in the line to spend this surplus. Mr. President, the budget surplus above and beyond the Social Security surplus is tax overpayments and should be returned to taxpayers in the form of tax relief, debt reduction and Social Security reform. If we don't return the tax overcharges to the taxpayers in these ways, Washington will spend it all, leaving nothing for tax relief, debt reduction or the vitally important task of preserving Social Security. Last year's appropriations spending has proven my fears are well founded. President Clinton has already proposed spending nearly all of this surplus, and both Chambers of the Congress are preparing to add even more to the President's request in this year's supplemental spending bill. This is not right. Last year's discretionary spending was already increased by over 5 percent, twice the rate of inflation. If Congress spends this additional $23 billion surplus, discretionary spending will increase by over 9 percent. If there is a Supplemental, it should be fully offset by spending reduction. President Clinton also proposes to ``correct the gimmicks'' in the FY 2000 Appropriations bills by shifting payment dates from FY 2001 back to FY 2000, lifting restrictions on obligations, and reversing advance funding. Mr. President, I was the one that spoke repeatedly on the Senate floor last year in strong opposition to budget gimmickry. However, changing the gimmicks now would have the effect of increasing discretionary and mandatory spending in FY 2000 by $10 billion while also allowing for spending to increase in FY 2001 by a corresponding amount. Mr. President, two wrongs don't make a right. Let's leave FY 2000 spending the way it is and pledge to stop the gimmicks this year. The last thing we should do is to spend tax overpayments to enlarge the government. If we cannot give working Americans a tax refund this year due to President Clinton's veto of our tax relief bill, we at least should dedicate this on-budget surplus to reduction of the national debt. It is true that our short-term fiscal situation has improved greatly due to the continued growth of our economy. However, our long-term financial imbalance still poses a major threat to the health of our future economic security. We must also recall that Americans have long been overtaxed, and millions of middle-class families cannot even make ends meet due to the growing tax burden. They still call for major relief. That's why we passed nearly $800 billion in tax relief for them. But President Clinton denied them the tax refund they deserve. FY 2000's spending is the worst example of fiscal irresponsibility. Washington spent far more than it should have. But what concerns me is that if we continue this dangerous trend by spending this $23 billion additional surplus for FY 2000, we will push the spending baseline even higher, leaving an even smaller on-budget surplus for our 5-year or 10- years tax relief or for debt reduction. I understand that we do have emergency spending needs each year. I support true emergency spending, such as disaster relief or agricultural crisis relief. But I believe we should, and can, meet these challenges by prioritizing and streamlining government programs to offset this new spending while maintaining fiscal discipline. Again, my point is, Mr. President, that this non-Social Security surplus is nothing but tax over-payments. It is the American taxpayers' money and it should be returned in the form of debt reduction, tax relief or Social Security reform. If we don't give the non-Social Security surplus back to the taxpayers in these ways, Washington will soon spend it all. Such spending will only expand the government, making it even more expensive to support in the future, creating an even higher tax burden than working Americans bear today and a higher federal budget. I join Chairman Alan Greenspan who has been advocating using surplus for debt reduction and tax relief rather than increasing government spending. My S.O.S. legislation would achieve this goal by creating a new point of order against any legislation reducing the FY 2000 non-Social Security surplus if it is not used for debt reduction, tax relief or structural Social Security and Medicare reform. The S.O.S. legislation is a fiscally responsible bill. I urge my colleagues to support it.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRAMS

Mr. GRAMS. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRAMS

Mr. GRAMS. Four or five minutes.

Mr. GRAMS

Mr. GRAMS. Mr. President, I come to the floor today in support of S. 1134. I would like to make a couple of brief remarks as we consider this very important piece of legislation, the Affordable Education Act. This is a bill that would expand the right for parents to save money for their children's education without incurring a tax liability. Very simply, allowing parents to put some money aside to help their children's education, and do it without incurring tax liability, is a win-win situation. The proposed new education savings account would allow families to contribute up to $2,000 per year in a savings account for a variety of public or private education-related expenses. Current law allows parents to save up to $500 per year for their children's college education without penalty. However, the expanded education savings accounts would allow parents to save more tax-free, and the money could also be used for children's kindergarten through 12th grade education expenses as well as college. These education savings accounts help working families, and deserve the support of this body. I would like to provide a Minnesota perspective on this debate, because we can learn from what has happened in my home state with a similar education initiative. S. 1134 is similar to a tax break for working families instituted in Minnesota by former Governor Arne Carlson. Governor Carlson and grassroots organizations in Minnesota fought for and won an education tax credit, enacted in 1997, which, like Mr. Coverdell's bill, can be used by parents to offset the cost of certain expenses made in the education of K-12 students in public, private or home schools. Thanks to Governor Carlson's initiative, low and moderate income families in Minnesota can receive up to a $1,000 per child tax credit for qualifying expenses such as tutoring, after-school or summer academic programs, music lessons, textbooks, and instructional materials--to allow the children these educational opportunities. Families with higher incomes are not eligible for the tax credit, but can still claim a tax deduction for similar education expenses. When the legislation was proposed, various polls rated support for the tax credit and tax deduction package between 58 percent and 72 percent of the population of Minnesota. They supported this concept. Support for the tax credit and deduction has remained. In 1999, the law was expanded to raise the income threshold for eligibility for the tax credit to permit even more families to participate. The 1999 bill to expand the tax credit eligibility was passed with bipartisan support-- in fact, you could even call it ``tripartisan'' support, since Governor Ventura signed it into law. About 150,000 families are expected to take advantage of the tax credit and deduction this year. So in Minnesota, families have simultaneously been provided real tax relief and real opportunities to expand the education opportunities for children. And 3 years after the initiative was passed into law, the sky has not fallen in Minnesota, it is not a mortal wound to public education--in fact it helps students in public schools as well as private schools--and again, it became popular enough that the legislative subsequently expanded eligibility for the tax credit. Today in the Senate, we have the opportunity to enact similar legislation that helps parents help save money to ensure that their children will get a quality education. Parents should always be in the driver's seat when it comes to education decisions, and this bill simply empowers them to do more to help their kids get ahead. S. 1134 deserves our support. I yield the floor.