Nick Smith

Mr. SMITH of Michigan

Mr. SMITH of Michigan. I yield to the gentleman from Maryland (Mr. Hoyer) if the Speaker will let me.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Madam Speaker, I would like to address certainly different issues that I think are possibly more serious than a lot of challenges this Congress has faced, this Nation has faced in fact. This is the 195th birthday of Abraham Lincoln, and in my district Republicans are celebrating Abraham Lincoln's birthday with their annual dinners. And I think of what Abraham Lincoln said in his Gettysburg Address when he indicated that, Can a country of the people, by the people and for the people long endure? And now I am concerned about the system that we have in the United States where we have so many lobbying groups pushing for more money and a political system where Members of the House and the Senate often are better off and increase their probabilities of getting reelected if they start promising more programs, if they take home pork barrel projects that might allow them to be on the front page of the newspaper or on television and it ends up that they have more publicity if they spend more money down here. And that has led us into a dilemma of overspending and overpromising. And I have put this pie chart up simply to review how the Federal Government now spends approximately $2.4 trillion in the year that we are budgeting for right now. We see the largest portion of our total spending pie that represents 21 percent of the total spending of the Federal Government is Social Security. But Medicare, which is now 12 percent, is going to overtake Social Security in terms of the percentage of total spending, total Federal Government spending that it consumes, and that is going to happen within the next 25 years. Part of it is because we have dramatically expanded the Medicare program to now cover more benefits, including prescription drugs. And there is a problem with prescription drugs because if you are on Medicare and you do not have the proper drugs and you go into the hospital, then Medicare pays for all those prescription drugs while you are in the hospital. So to the extent that some of the new prescription drugs can keep you out of the hospital, it is reasonable to have some help from Medicare to furnish those drugs to keep you out of the hospitals. But what we have done now is we have expanded the entitlement program in Medicare for prescription drugs without making strong changes to the programs that are going to keep the program solvent. So the actuaries in Medicare are estimating that the unfunded liabilities for Medicare now is approaching almost over $60 trillion. In other words, over $60 trillion would have to be put in a savings account today with returning the amount of interest that would represent inflation plus the time value of money to come up with enough money to continue to pay benefits and to have enough money over and above the FICA tax, the payroll tax that is contributing to the Medicare fund. As we go around this pie chart, we see that defense is 20 percent, 2 years ago it was about 18.5 percent. Going into Afghanistan and going into Iraq has increased about 1.5 percent of the budget now dedicated to defense. But still Social Security compared to defense, you see Social Security is much larger. Domestic discretionary is 16 percent. Other entitlements are 10 percent. Medicaid is now 6 percent. We were growing very quickly, and part of that is long-term health care. So even if you are fairly diligent in saving during your working life and your early retirement years, if you have to go into a nursing home that is now costing between 40 and $70,000 a year, it very quickly uses up those savings, and you have gone from a self-payer to a system of Medicaid. Medicaid is the health care system for the low income, and Medicare is the health care system once you reach 65 for seniors, and I want to make a point over here at about four o'clock. You see about 14 percent of that pie in that purple section; that is interest on the debt. Today's debt that is subject to the debt limit in the United States, the 14 percent, is now over $7 trillion. In a few months, we are going to have to again vote in this Chamber and in the Senate, and the President is going to have to sign it, a bill that increases the debt limit of this country. What does that mean? It means that somehow, we are pretending that our problems today are so great that it justifies us borrowing money from the earnings that our kids and our grandkids have not even received yet. We are borrowing money and passing this increased debt on to them to let them worry about servicing the debt; and right now, interest rates are at record lows. When interest rates go up, and Alan Greenspan chairman of the Fed has suggested that is going to happen, we know it is going to happen. The 14 percent of the total Federal spending that is now used to pay the servicing of that debt, paying interest, could dramatically increase from two fronts. One is the increased rate that government is going to have to pay to entice people to loan money and buy Treasury bills; and of course, the second is that we are dramatically increasing the debt. This country from 1776 till now, what, that adds up to about 228 years, it took the first 200 years of this country to amass a debt of $500 billion, and now we are increasing our debt every year by an additional $500 billion. So we are mounting the debt load that we are passing on to the next generation for the next several generations, and it is going to be intolerable if we do not control how much we are overspending, and even more significant is unfunded liabilities. Unfunded liabilities, Madam Speaker, is what politicians promise that they are going to do in the future, for example, Social Security. We are promising to pay Social Security benefits, and I would like everyone to know that there is no entitlement to Social Security. There is no account with your name on it. So you can work all of your 40, 50 years, you can pay into Social Security, but you are not automatically deserving of Social Security benefits based on the fact that you paid into it. It has gone to the Supreme Court twice, and twice the Supreme Court has ruled that Social Security taxes are simply another tax that is charged by legislation passed by the House and the Senate and signed by the President; and Social Security benefits are a benefit program that is not directly related to the fact that you have made payments in all of your life. So that is one reason we should consider private savings accounts that are owned by the worker, that government cannot mess around with, for lack of a better description, and this is the messing around. Government has been taking all of the surplus from the Social Security trust fund and spending it for other purposes; and so we have continued over the years to expand the benefits of Social Security to the extent that today we have a $12 trillion unfunded liability; and, again, that means that we are going to have to put $12 trillion in a bank account today that is going to, over the next 75 years, earn about $120 trillion, and this is what we are going to need for the next 75 years in future years' dollars, $120 trillion in addition to the payroll tax that is coming in from existing workers to accommodate and to meet promised benefits that we have promised in the current Social Security legislation. Medicare part A. Medicare part A is mostly hospitals, and the unfunded liability for Medicare part A is $21.8 trillion. Medicare part B, mostly doctors, is $23.2 trillion, and Medicare part D, the drug program that we passed last November, is $16.6 trillion. This is the unfunded liability, what is going to be needed in addition to the money coming in for those programs; and on the Medicare drug program, it is interesting that Tom Savings, an actuary in Medicare, estimated last November that the unfunded liability for Medicare would be about $7.5 trillion. The new estimate that came out last month is $16.6 trillion, a huge liability to leave to our kids and our grandkids. The unfunded liabilities, the generosity of this body, saying we are going to make all these kinds of promises and let our kids and our grandkids pay for it and we are going to continue to increase overspending in addition to these promises on Medicare and Medicaid and Social Security, in addition to that we are going to overspend. Last year, it was $530 billion overexpenditure. This year it could very well get up to $620 billion overexpenditure. Next year, another 520 to $530 billion overexpenditure. Overexpenditure means deficit spending; and the deficit spending every year you add that up, and it comes to the total debt, and somebody's going to deal with if not paying back the debt, at least paying the interest on that increased debt, a huge challenge that is going to make life much tougher for our kids and our grandkids. I am going to talk about Social Security and the Social Security bill that I have introduced. I was chairman of the bipartisan Social Security Task Force; and when Democrats and Republicans met and had witnesses, we brought in witnesses every week for close to a year, it was unanimous: Republicans and Democrats, everybody agreed, we have got to do something with Social Security; and the longer we wait to solve this program, the more drastic the solution is going to have to be. And yet we do not do anything. We do not mention it, we do not mention the huge entitlement programs in our budget. We simply pass a budget every year, and now what is called the Gephardt amendment in our rules says that when we pass a budget, this is sort of a footnote, when we pass a budget, instead of bringing it up for a separate bill and debate, we will automatically consider a separate bill that increases the debt limit. It will be assumed to be passed when we pass a budget, so sort of hidden in that budget bill. So we really do not talk about the significance of increasing the debt on our kids and our grandkids and the tremendous challenge it is going to be to pay the interest on that debt, as well as trying to sometime, somehow, somewhere trying to pay some of that debt down. This is sort of a quick tutorial on how Social Security works, and then I will go into what I have done in my Social Security bill to keep it solvent forever as scored by the Social Security Administration. Benefits are highly progressive and based on earnings. That means the lower income you are through your working lifetime, as you pay in your Social Security tax a higher percentage, you will get back a lot more relative to what you earn than if you are higher income; and this is how this is going to work down here. At retirement, all of a worker's wages up to the tax ceiling are indexed to present value using wage inflation. What we do is for your 35 best years, so if you are working 40 years you take your best 35 years of earnings, if you work 30 years, that means 5 years are scored as zero, as you add those 35 best years together and divide by 35, but in terms of indexing to present value, on wage inflation, wages double about every 11 years, and so that means if 11 years ago you were making $20,000 and you score it 11 or 12 years later, you are scored as making $20,000. So it is the kind of job that you had in earlier years and what the wages would be for that job today is what is credited, adding up your 35 best years on Social Security. Here is the progressivity. The annual benefit for those retiring in 2004 equals 90 percent of earnings up to $7,344. So if you are making $7,344 or less a year, you would get 90 percent of that back in Social Security payments if that was your average for the 35 years. For that amount over the $7,000 up to the $44,000, it is 32 percent of the earnings between the $7,300 and the $44,200, and then 15 percent of the earnings above $44,268. It might be good to just mention here that one of the ways that I keep Social Security solvent is slowing down the increased benefits for high-income retirees, and what I do, these are called ben points. What I do is add an additional ben point of 5 percent and say that higher- income earners over $38,000 would get a return of 5 percent of those higher wages. So a low income would get 90 percent, and then it would go to 32 percent, 15 percent. Then I add another ben point of 5 percent. I put this blip in because I think that a lot of people do not understand or have not figured out, should they retire at 62 and start earning benefits or should they wait till age 65. Based on average life expectancy, early retirees would get less. So at the average age of death, which is now 86 years old for a male and 88 years old for a female, the average earnings for those years, whether you retire at 62 or 65, would still amount to the same amount of payments back to you. In fact, if you wait 2 years to retire after 65, you can have an additional 4 percent added to your benefits for each one of those years. In terms of waiting until you are 66 or 67, you can have additional benefits if you wait an extra 2 years. When I give speeches around Michigan and around the country, a lot of people say, well, I know people that are getting SSI, supplemental security income, payments on welfare, and they really do not deserve it; and I should not have to have that come out of my Social Security. Actually, the Social Security Administration runs the program, but it comes out of the general fund. It does not come out of the FICA tax. It does not come out of the Social Security trust fund. This picture sort of represents the demographic problems. The birth rate is going down, and the age of death is going up, and since Social Security is a pay-as-you-go program, with existing workers paying in their tax, and within days that withholding from your paycheck is sent out to current retirees; and the problem is there are fewer workers working per retiree. In 1940 we had about 36 workers working, paying in their Social Security tax to accommodate the needs of every one retiree. By 2000, the taxes had to go up, of course, because there were only three workers working to pay in their taxes to accommodate every retiree; and by 2025, there will be just two workers in the United States working to pay the benefits of every retiree. The United States is heading towards a ratio of workers to senior citizens that is going to continue to result in a pay-as-you-go program, like our Social Security System, to have it continue to be insolvent. So now we can play around the edges a little bit and say, well, let us increase taxes or let us reduce benefits. But even those kinds of decisions are going to eventually again keep the Social Security System from, in the long range, being solvent. The birthrate. Well, of course, we have 78 million baby boomers, those born right after World War II, from about 1946 to 1965. We have 78 million of them that are going to start retiring in 5 years, and these are the people that are high-income now. So the 12.4 percent of their payroll brings a lot of money into the Social Security System. Again, as they retire, we lose those high-paying individuals, and they go out as recipients collecting the high payments as retirees, since there is a direct relationship, even though it is progressive, between what you pay in and what you take out. I think it is important to sort of reflect historically on what we have done. Some people suggest, well, maybe the economy can help us. If the economy can come back stronger, we are going to have money. But that is not true, of course, because of the direct relationship of benefits to earnings. So if the economy increases even more rapidly than it is now and jobs expand, then we have more people paying into the system now, which means that there will be more money in the short run; but when they retire, because they are paying in more money now, they are going to take more benefits out when they retire to leave a deeper hole then. So it is going to take some structural changes to the program. What this body in the House and what the Senate and what the President have done over the years when they needed a little more money for Social Security, they said, well, let us just increase taxes again. There is sort of a historical picture of taxes going from 1 percent to, in 1940, increasing it to 2 percent of the first 3,000, which meant a maximum tax of $60 a year. In 1960, when we needed money, we increased the rate threefold to 6 percent, upped the base to $4,800, for a total of $288 a year. In 1980, we increased it again to 10.16 percent of the first $26,000, roughly; and that amounted to $2,631. In 2000, we increased it again to 12.4 percent, and that was of the first $76,200 then. But since that is indexed, we have now upped that. By 2004, it has gotten up to 12.4 percent of the first $87,900. Next year it is going to be 12.4 percent of $89,000. And that will continue to be indexed to increase. The point I am trying to make is that by delaying, by not paying attention to some of these very serious problems that are going to confront this country, I think, is in effect passing on a legacy to our kids and our grandkids that is going to mean that their life-style is going to be much less than the opportunities that we have had in this country. We are saying to them, look, you are going to have to pay off our debts that we are borrowing today. So it is important to have a program that does not increase taxes, the FICA taxes, on payroll. Madam Speaker, I would ask everybody that is listening to guess what the payroll taxes are right now in France. The payroll taxes in France, to accommodate their retired population, their senior population, is over 50 percent. That is one of the reasons why France is having such a problem competing. Because if a company has to pay a 50 percent payroll tax, that means they have two choices. To stay in business they either reduce wages to their workers, or they increase the price of their product to accommodate the extra taxes that they are paying. If they are increasing the price of their product, then of course they are less competitive to trade with other countries of the world. Germany just surpassed 40 percent. I just think it is so important that we act on this huge challenge of correcting Social Security and that we not end up having another tax increase that is going to make our businesses at even a greater disadvantage. Let me just put a footnote on that. We are concerned about losing jobs. A lot of it is because of our increased productivity to try to stay competitive. But our taxes on our businesses in the United States are about 18 percent higher than the taxes of our competitors in the G- 7, in the other industrialized countries. So when we hear from this Chamber, quite often from this side of the aisle over here, let us increase taxes to accommodate some of the great needs that we have in our districts back home, and there are needs, there are unlimited problems, the question is how many of those problems should be the responsibility of the Federal Government and how many of those problems should be accommodated by borrowing more money or increasing taxes to put our businesses at a greater competitive disadvantage, and, of course, taking the money out of the pockets of the people that have earned, telling all the American citizens that they have to give more to the government to make the government stronger, making them less able to do the things that they want to do with their money. We have had a system, and maybe I am philosophizing here a little bit, but our forefathers came up with a system in our Constitution in this country that in effect said that those that work hard and save and that try and invest and that go to school and use that education are going to be better off than those that do not. But now we have sort of come with a philosophy for the last 25 years in this country where we are sort of dividing the wealth up. So we have got a tax system that is very progressive, where we take from the people that are successful and give to the people that are not successful. So we are ending up with a situation where roughly 50 percent of the adult population in the United States pays less than 1 percent of the income tax. Fifty percent of the adult population in the United States, the lower-income earning 50 percent of the adult population in the United States, pays less than 1 percent of the Federal income tax. So with a lot of people, they say, well, let us have a few more government services, because when there is more government services, we gain, because we are not paying in tax in the first place. So it is maybe a whole new discussion on Special Orders, but how do we change our tax system so that everybody has a stake in how big this government gets? There are a lot of Members in the Chamber that react to that kind of pressure and say, well, I am going to take home more pork barrel projects, I am going to start more social programs, I am going to make more promises, even though we do not know where the money is going to come from to keep those promises. Let me conclude by going over the provisions of the Social Security bill that I have introduced, and this is a bipartisan bill. I have both Republicans and Democrats on the bill. These are the six principles that I went by in designing my bill: Number one. Protect current and future beneficiaries. Number two. Allow freedom of choice, so that if you do not want to go in the program and want to stay with what we have now, you have that option. Three. It preserves the safety net, and so the Social Security TRUST FUND, where now we have IOUs of $1.4 trillion, that is the $1.4 trillion where the Congress, the House and the Senate, and the President have taken the surpluses coming in from Social Security and spent it for other government programs. So I do not spend all of that trust fund money. I save half of it and only use half, obviously, to make the transition to start getting some real returns on some of the money that is paid into Social Security. Four. Make Americans better off and not worse off. Five. Create a fully funded system. And Six. No tax increases. Madam Speaker, it is interesting that in looking in the archives, that in 1934, Franklin Delano Roosevelt thought it was very important to stop the number of hardship seniors that were, if you will, as Will Carlton says, going over the hill to the poor house. So instead of having so many people depending on going over to a poor house and having very meager, very difficult retirement years, he said, well, let us have a program, a system where we require savings of some of your earnings while you are working and set that aside so that you cannot use it until you retire so you have a little more social security when you retire. So the House passed a bill following FDR's recommendation; and it said government will keep all the money and then pay the benefits when the time comes, when the individuals turn 65 years old. The Senate passed a bill, however, that said, well, we are going to do the same thing, but instead of government keeping all the money, we are going to have the accounts in individuals' names, where the individuals own that account. But if they die before age 65, it is still money that will be passed on to their heirs. But there will be a rule that they cannot take that money out of that special account until they turn 65 years old. What is interesting is that the average age of death, up until about 1940, the average age of death was 62 years old. But the program says you cannot have Social Security benefits until you are 65. When the House and the Senate went to conference committee, we went with the House version that said government is going to handle all the money. And it worked very well for many years. We only had to start increasing the tax in 1940, because the average age of death was 62. So most people died before they became eligible for Social Security. So the pay-as-you-go program worked very well. Here is my bill. It has been scored by the Social Security Administration actuaries to restore the long-term solvency of Social Security. There is no increase in the retirement age. No changes in the COLA, the annual cost of living index that we increase payments to COLA. And there is no change in the benefits for seniors or near-term seniors. Solvency is achieved through higher returns from worker accounts and slowing the increase in benefits for the highest-earning retirees. Right now, Social Security is not a good investment. The average return for retirees in Social Security is 1.7 percent. And what we do in our legislation is we guarantee that if you decide on a personal retirement account that you own, and that is going to be optional, but we will guarantee that you will get as much payments in your retirement years from having an account as you will if you did not have an account, but the option is still up to the individual. The Social Security trust fund continues. Voluntary accounts would start at 2.5 percent of your income and would reach 8 percent of income by the year 2075. A long time. My first bill that I introduced, and this is the fifth Social Security bill I have introduced that has been scored by the actuaries to keep Social Security solvent, but in 1993 and 1994, the legislation did not have to borrow any extra money from the general fund of government. It did not have to wait until 2075, until we upped the amount that you are going to be allowed in your own savings account. But now it is a little more drastic. If we wait another 4 years, it is going to even be more drastic. If we wait more than 4 years to solve Social Security, then plan on a higher Social Security tax. Increased taxes will be on somebody someplace because there is no other way to accommodate it. Investments would be safe, widely diversified and investment providers would be subject to government oversight. It is sort of a copy of what Federal Government employees have now in their thrift savings account. They have several options, indexed bonds, indexed stocks, indexed cap funds. So very low risk, but it starts growing up in your account and the magic of compound interest means that you can be a modest earning worker but you can retire as a millionaire. Part of my persuasion I hope today, Mr. Speaker, is to encourage everybody to start saving, to let these savings grow and not live sort of the satisfying our needs of today and hoping that somebody else will take care of us in the future. You are going to need something probably in your retirement years in addition to Social Security if you are under 45 years old now. The next blip is the government would supplement the accounts of workers earning less than $35,000 to ensure they build up significant savings. Actually I sort of copied this from our former President, President Clinton, from his U.S. savings accounts. So that even low- income workers can have a little more in their savings account to result in the magic of compounding to give them more money in these accounts. These accounts belong to the workers. All worker accounts would be owned by the worker and invested through pools supervised by the government. Regulations would be instituted to prevent people from taking undue risks, so you would have limited investment opportunity. Workers have a choice of three safe indexed funds with more options after their balance reaches $2,500. So it is very limited until you have at least a balance of $2,500, then in my legislation additional safe investments as determined by the Secretary of Treasury would be allowed for individuals once they hit the plateau of having $2,500 in their own retirement savings account. This, of course, is what you get from the savings account. Right now as I mentioned, Social Security has a return of 1.7 percent. So in effect anything you can earn from that savings account in excess of that 1.7 percent would add over and above what you would otherwise get from Social Security. Worker accounts. Accounts are voluntary and participants would receive benefits directly from the government along with their account balance. There is a provision that I do not have on the board but at such time over age 55 that you buy an annuity to, in effect, guarantee that your retirement income is going to be at least what Social Security would pay you and that you are not going to ask other taxpayers to help you later on, then you would have the option of investing your personal retirement savings account in anything you want to invest it in, or if you want to start using it. The government benefit would be offset based on the money deposited in their accounts, not on the money earned. And workers could expect to earn more from their accounts than from traditional Social Security. That is why we can guarantee that the 1.7 percent that you get from Social Security, that is why we can guarantee that you will get at least as much earnings as you would have from Social Security. Here is a provision that I put in. My politically astute colleagues tell me that it is not politically correct to say fairness for women. I should say fairness for lower earning spouses that might be staying home with children. But these three changes for married couples, account contributions would be pooled and then divided equally between the husband and wife. So for your personal savings account, if one spouse is earning twice as much as the other spouse and so, therefore, is eligible to put more money into the personal savings account, you add what each spouse can put into the personal savings account, you divide by two, and so each spouse owns an identical amount that goes into their personal savings account every pay period, every month, every year. It would increase surviving spouse benefits to 110 percent of the higher earning spouse's benefit. Right now the surviving spouse is entitled to 100 percent of the higher benefit. But even that amount often requires that these individuals move out of their home into more expensive nursing home care as they shift from Medicare to Medicaid. And so what kind of provisions can we have to encourage people to stay in their own homes, which is so much lower cost than if they go to a nursing home? Stay-at-home mothers with kids under 5. Maybe this is just a personal opinion of mine, but I put it in the legislation that stay-at-home moms, staying home with kids under 5, would receive a credit as if they were working years at the higher earning salary when their Social Security benefits are calculated. These are some other areas, simply to try to increase and stimulate more people to think about their retirement. Number one, increase contribution limits for IRAs and 401(k)s and pension plans; two, a 33 percent tax credit for the purchase of long-term care insurance, up to $1,000, $2,000 for a couple per year; and low-income seniors would be eligible for a $1,000 tax credit for expenses related to living in their own homes, or if they are living with their kids or somebody else, whoever they are living with could receive that $1,000 tax credit, reimbursable tax credit on their income tax. Let me conclude, Mr. Speaker, by just urging my colleagues to face up to this challenge. More than that, this is an election year for both Members of the House and roughly a third of the Members of the Senate. So every time you have an opportunity to go and hear a candidate or talk to a candidate, ask them what they are going to do about the problem of Social Security running out of money. Ask them what they are going to do about the huge unfunded liabilities of Medicare and Medicaid. Ask them what they intend to do about increasing the debt of this country to the extent that we are asking foreign countries now to help pay for our debt. We have about a $500 billion trade deficit. What that means is that we send out $500 billion to other countries more than they send to us when they are buying our goods. What happens to that $500 billion? It is American dollars. They are not good anyplace unless they end up in America. What other countries are doing now with that $500 billion is buying our Treasury bills, they are buying our companies through stocks and equities, and that additionally leaves us in a very precarious situation to be that vulnerable to some of these countries. China, for example. I just returned from China. I am concerned about some of their what I perceive to be violations of the WTO agreements, their trade agreements. We have a deficit with China of about $100 billion. China right now sometimes puts some of that money, in effect, under the mattress to hold it out there. Sometimes it buys Treasury bills. This country has accumulated enough that if they pulled their money out of Treasury bills or out of our stock market, it could dramatically affect the economy of the United States. So as we cavalierly overspend, as we increase promises to increase the unfunded liabilities, we are not only making our children more vulnerable in the kind of taxes they are going to pay but we make the future of America more vulnerable to what other countries might do. If, for example, other countries decide that there is a better place to invest their money than the United States because the United States is less dependable and starts paying a lower return and they decide to invest it someplace else or they decide for political purposes that they want to negotiate trade deals by saying, Look, we're going to pull our trillions of dollars out, that is going to disrupt your economy because we just don't want to do business with you unless you agree to our trade deal or to our other political deal or to our whatever deal. Let us not allow ourselves to continue down this road of leaving our kids and our grandkids a bigger debt. I am a farmer from southern Michigan. Traditionally what we have always figured on the farm, what my grandfather taught my dad, what my dad taught me is you try to pay off some of the mortgage on the farm to let your kids have a little better life than you have had. But in this Chamber and over in the Senate and in the White House, we are doing just the opposite. We are mounting up that mortgage. We are mounting up that debt and making the future of our kids and our grandkids more vulnerable.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, on that I demand the yeas and nays.

Mr. SMITH of Michigan. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4030) to establish the Congressional Medal for Outstanding Contributions in Math and Science Education program to recognize private entities for their outstanding contributions to elementary and secondary science, technology, engineering, and mathematics education, as amended.

Mr. SMITH of Michigan. Mr. Speaker, I yield back the balance of my time.

Mr. SMITH of Michigan. Mr. Speaker, I yield myself such time as I may consume. First, I would like to commend the chairman and the ranking member and certainly the gentlewoman from Texas (Ms. Eddie Bernice Johnson) for her help in moving ahead, trying to get more involvement from the business community in helping with K-through-12 education, especially in the areas of math and science. This legislation establishes a national recognition program at the National Science Foundation to honor those in the private sector who work with K-through-12 schools to improve science and math education. In addition, the bill makes information about award winners publicly available so that the examples that they are using across the country that are effective, that are making a difference in our math and science performance can be considered by other school systems around the Nation. The way to maintain and increase our standard of living certainly is through innovation, technological advances and hard work. Unfortunately, our schools, Mr. Speaker, are currently not producing enough young people with the math and science interest or the skills necessary to meet the emerging demand. We need to do a better job of encouraging student interest and achievements in fields like science, technology, engineering, and mathematics so that today's students will not only be successful in their own lives, but will contribute to the economy that we are going to need in future years. The challenge of competition for our kids and our grandkids are going to be probably so much greater than they are for us today, and having the kind of technology that can result in new innovation, the kind of research that can develop new products and the ways to produce those products at a cost and a quality level that is competitive with products that are produced across the world is going to be much more important for our kids and grandkids than maybe it was for us. In this legislation we recognize the industry leaders and companies and businesses that make a special outstanding effort in working with their schools. We included in the legislation work that these companies might do to encourage parents to be more involved with their students and schools because we think the interest and encouragement of parents is probably just as important as the quality of teachers that we have in math and science. Mr. Speaker, I reserve the balance of my time.

Mr. SMITH of Michigan. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on H.R. 4030, as amended.

Mr. SMITH of Michigan. Mr. Speaker, I yield 3 minutes to the gentleman from Michigan (Mr. Ehlers).

Mr. SMITH of Michigan. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, the ranking member makes a good point, and maybe it is an opportune time to explain some of what goes into developing legislation. A lot of work from staff, Democrat staff and Republican staff on our committee. Kara Haas, certainly David Finger, spent many hours, sending out inquiries to the business community around the United States for their suggestions on how this award program should evolve and develop to really accomplish our goals of encouraging the business community to be more active and take a greater part in improving math and science education. I would like to tell a very short story in trying to improve math and science education. I was talking to an individual who is the director of international studies at one of our Michigan colleges. I asked him his ideas. He is from India. He grew up in India. He told me the story when he came home in about the 8th grade with a report card that showed a B in math, and he showed that to his father and tears welled up in his dad's eyes. And his dad went out and hired a tutor to try to improve his son's math skills. He suggested that almost all students in India concentrate on being successful in fundamental math and science before they continue their career maybe in some other field. That lesson should be especially acknowledged by us today when we are doing a lot of outsourcing of math and science to engineers in other countries such as India. We need to do a better job at home. Parents need to do a better job. Often when I ask witnesses before our committee how do we motivate and excite students in math and science. To the extent that education in kindergarten through twelfth grade is more like a lighting of a fire, lighting that interest and enthusiasm, rather than simply filling a container with information, when is that fire lit for these students. Their suggestion was maybe at home when they are 3 and 4 and 5 years old, maybe in kindergarten, first and second grade. So if we lose that individual with their interest in math and science at that stage of their lives, it is hard to rekindle that fire. Improving math and science education is important for the sake of business and industry because they have a special economic interest in having enough qualified students in math and sciences to make sure they are going to be able to stay in this country and compete. Mr. Speaker, I reserve the balance of my time.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, we are now in the process of deciding how much money we are going to spend. The budget is being finally decided, and then the appropriations process makes the decision, where money is spent and how big should government be. Tom Savings, an actuary with both Medicare and Social Security, came to my office a couple of weeks ago. This is what he said where our promises exceed our ability to pay for it, unfunded liabilities: Medicare part A, $21 trillion; Medicare part B, $23 trillion; Medicare part D, the new drug bill, $16.6 trillion; Social Security, $12 trillion. At this time, I just call on all my colleagues to be tight-fisted. Let us start prioritizing spending and reduce the tremendous burden we are placing on our kids and our grandkids.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I commend the gentleman from Georgia (Mr. Gingrey), and I certainly commend the gentleman from Tennessee (Mr. Gordon), the gentlewoman from Texas (Ms. Eddie Bernice Johnson), the chairman of the committee, (Mr. Boehlert). As we expand in population in this home that we call Earth, being more sensitive to the environment is continually a greater challenge and a greater need. So I commend the legislation. The legislation is going to be good for the economy. It is going to be good for improving worker safety. It is going to be good for improving public safety, for national security, and certainly it is going to be better for our environmental needs. We need to expand our thinking not only for chemistry, but maybe for all of the research that we do to be more sensitive to make sure that this Earth continues to be as safe and beautiful for future generations as it has been for us. So I urge my colleagues to support Dr. Gingrey's bill.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, our forefathers thought they were putting a little safeguard on it when they said if you ever increase the debt limit of this country, you have to vote in the House and the Senate, and it has to be signed by the President. They thought that might protect us a little bit in not dramatically increasing the debt the way we have. I think what the gentleman is saying is the fact that the total debt has never gone down.

Mr. SMITH of Michigan. Mr. Speaker, today I am going to discuss what Congress is doing in the last several weeks and the next several months, and that is appropriating money. A week or so ago, most of the people in the United States were completing their tax bills. This is sort of a tutorial on what happens to the tax dollars of American taxpayers and what happens to the FICA tax, the payroll deduction tax, taken out of American workers. I start with a pie chart, if you will, Mr. Speaker, and this pie chart represents how we are spending the $2.4 trillion that we are budgeting for this coming year. We see the biggest piece of pie is Social Security at 21 percent. The previous speakers were talking about defense. Defense and national security, they are probably the prime objectives of the Federal Government compared to what State governments do, and yet we have diminished the share of total Federal spending of defense since World War II down to 20 percent of the total expenditures of Federal Government. I want to especially pay attention to the 14 percent that says interest. The interest of the Federal Government now is $240 billion a year. That is the interest that we are paying on the national debt. It is an interest rate that is almost at record lows. Alan Greenspan, the Chairman of the Fed, said today in testimony that interest rates probably are going to increase. We know what interest rates are today, a little over 4 percent for the prime. Compare that to the early 1980s where interest rates were approaching 12 and 13 percent. Now, if we have a 14 percent of the budget, a cost of $240 billion on the interest we pay out for this increased debt of overspending, that that side of the aisle and this side of the aisle and the Senate and the White House have been overspending, spending more money than has been coming in, if interest rates were to double, and we continue increasing the size of the debt, it is easy to see that servicing that debt is going to be a huge challenge, even for a Nation as rich and as prosperous as the United States of America. What happens to empires that do not pay attention to serious problems are empires that diminish and cannot survive. So I suggest, Mr. Speaker, it is so important that we start looking at our overspending and our overpromising. Briefly, to go around the piece of pie, discretionary spending uses up 16 percent of the budget. Discretionary spending is what we spend most of the year doing with our appropriation bills. Other entitlement spending, the food stamp program, the WIC program, the welfare program, the other entitlement programs, if you reach a certain age or a certain level of poverty, you are automatically entitled to some of those payments. That is what entitlement programs are. Then we have Medicaid, now at 6 percent of the budget, Medicare at 12 percent of the budget. The projections are that Medicare will overtake Social Security as far as cost within the next 20 years, and that leads me to the overpromising. Two bad things that Congress does and the administrations for the last 25 years have done, and that is make a promise when they do not know where the money is coming from, and I call that unfunded liabilities. The unfunded liability report that came out 3 weeks ago, when the actuaries of Social Security and Medicare met, were enormous, and their estimate is that the unfunded liabilities, to pay for programs that we promised but do not have the money to pay for, and so we need extra money on top of the payroll tax and the FICA tax and the other revenues coming in for those programs, amounts now to $73.5 trillion. And remember, what is our budget? Our budget is now $2.3 trillion this year, about $2.4 trillion we are anticipating for next year. In breaking it down, there are two parts to Medicare. Medicare Part A is mostly the hospitals. Medicare Part A is projected by Tom Savings, one of the actuaries of Social Security, and he is also an actuary of Medicare, he is estimating $20.8 trillion; Medicare Part B, mostly doctors, $23.2 trillion. Medicare Part D, drugs, the drug program that we passed last November, is now estimated to be $16.6 trillion. Last November when we passed that bill, Tom Savings, the same person, estimated the unfunded liability to be about $7.5 trillion, and now with the new report that has just come out for Medicare and Social Security, the estimate has dramatically gone up, and that is based on the increased cost and the increased number of people that are expected to use the program. Then we come to Social Security, Social Security, a program that was started in 1934 by Franklin Delano Roosevelt. We have made promises in excess of the money coming in from the Social Security tax that amounts to about $12 trillion. The estimate is between $11.9 trillion and $12.3 trillion that we would have to put into a savings account today that is going to have a return to cover inflation and the time value of money to accommodate the money that is going to have to be paid out in future years. So if you want to be really dramatic, you can say what we are going to need in the next 75 years is $120 trillion more than is coming in to Social Security to pay promised benefits. So what are we going to do? Are we going to reduce benefits? Are we going to increase taxes? Is it going to be a combination? What we have done historically in this country is the combination. We have increased taxes and reduced benefits, and I think the danger might be demonstrated by the predicament that some other countries of the world now find themselves in. France, for example, the percentage of the payroll that is used to finance the senior citizen population in France is now over 50 percent. So you can imagine a company or a business trying to compete in world trade that has one of two choices with that kind of cost coming out of the payroll tax. They either have to increase the price of their product to pay for it, or they reduce what they are paying to workers. Either way, let us not allow that to happen in the United States. The country of Germany just went over 40 percent in terms of the amount of payroll tax that is required for their senior population. I just think it is very important that when we talk about this unfunded liability, you compare it. That is about seven times the total production of the United States, the GDP. So it is about seven times GDP. At a little over $2 trillion a year, that means that we would have to come up with the equivalent of about 35 years of government spending to accommodate what would need to be put in a savings account now. So why do not we pay attention to some of these huge challenges that are facing this country? Let me give you my best guess. Politicians have discovered that they are more apt to get reelected or elected if they promise more and more benefits, and, look, there are a lot of problems out there. There are a lot of things that need to be doing. So the question is, how much should government do? But we now have evolved into, if you will, dividing the wealth with our tax system where we have 50 percent of the adult population that now pay less than 1 percent of the income taxes in this country. So 50 percent pay less than 1 percent of the income taxes. What is the natural reaction of some of those 50 percent? The natural reaction is to elect Members to Congress that bring home more pork, that bring home more benefits, that start more social programs, and that is what we are evolving into. I am a Republican, a farmer from Michigan, and we are now doing our Lincoln Day banquets, the Republican fund-raising dinners, celebration dinners of Lincoln's birthday. It is the 165th birthday of Abraham Lincoln. In his famous Gettysburg Address, he sort of expressed a wonder whether a Nation of the people, by the people and for the people can long endure. And I think that challenge is now before us. We hear other Members talking about the conflict of this war. Certainly we have had huge challenges, such as the Civil War. But I would respectfully suggest that the challenges of overspending and overpromising are probably greater in terms of the survival of this great Nation than any of those wars. So somehow, how do we get the discipline to try to make changes? I chaired the bipartisan Congressional Task Force on Social Security and served on the Committee on the Budget for 8 years and have sort of been on my soapbox, pulling my hair and complaining about the fact that we are not dealing with the increased cost of Social Security and Medicare and our reduced ability to pay for that dramatic increase in cost. This is another demonstration of the unfunded liabilities. It just says that if we do not make some changes by 2020, 16 years from now, we are going to have to take out 28 percent of that pie chart that we started out with. We are going to have to use 28 percent of the general fund budget to accommodate the shortage of money that is needed to cover those three programs: Medicaid, Medicare and Social Security. By 2030 it is going to be over 50 percent that is required of that budget. This body and the Senate quite often do not deal with problems until the disaster is almost on us. But the problem with solving Medicare and Social Security is the longer you wait, the more drastic the solution is going to have to be. The Social Security bills that I introduced when I first came to Congress in 1993, 1994, and 1995 were much simpler then because we had surplus money coming in from Social Security. Right now, this year, coming in from the Social Security FICA tax will be $645 billion. What we are using to pay benefits out of that money coming in is $490 billion. So there is a little surplus there that we could do something with. But what we do is we spend it for other government programs. My caution is that this money is going to be running out in the next 8 or 10 or 12 years, and at that time we will have less money coming in from the Social Security FICA tax. That is 6.2 percent on workers now and 6.2 percent on the employer. But, really, if you are going to be fair, it all comes out of the employee's pocket when an employer has to pay part of it, even though it is not a deduction on the check of the employee. So here is a time that we have more money coming in that offers us the opportunity to make changes to the program and use that surplus money coming in. In my Social Security bill that I introduced 10 years ago, I did not require any extra funds. The Social Security bill that I have introduced this session requires that we borrow almost $1 trillion from outside borrowing to accommodate a transition to keep Social Security solvent for the long run. I thought it would be good just to give sort of a thumbnail impression on a chart of the predicament we face in Social Security in the future. What happened with the Greenspan Commission in 1983, they decided the way to solve the Social Security problem and the increased number of seniors in relation to the people and workers paying in that money was to raise taxes and reduce benefits. So they said, starting in 2001, we would start increasing the retirement age for maximum benefits from 65 to 67, and they said we are going to dramatically increase the taxes that are charged to American workers by a 20-plus increased percentage on the increase in taxes. Here is how Social Security works. Benefits are highly progressive. Everybody pays the 12.4 percent tax. If you are self-employed, you pay it all yourself. If you have an employer, then, theoretically, the employer does not pay you quite so much and the employer pays 6.2 percent and 6.2 percent is deducted from the employee's wages. At retirement, all of a worker's wages, up to the tax ceiling, which is now $89,000, are indexed to the present value using wage inflation. In other words, it is not complicated, but if wages for a particular job double every 12 years, and you were making $20,000 12 years ago, then that would be indexed in the computation of your Social Security benefits up to $20,000. So it is what that particular job would pay today is how they calculate the kind of benefits you are going to get. And here is how it is calculated. The progressivity of the program says if you are a low-wage earner, earning less than $7,344, you get 90 percent back in Social Security checks of what you were making while you were working. Then the difference between the $7,300 and the $44,000 is 32 percent. So 32 percent of the earnings between the $7,300 and the $44,200 you get 32 percent of that back, and you only get 15 percent back over the $44,000. Now, what I do in my Social Security bill to come up with some of this extra money, I add what are called ben points, but I add another ben point of 5 percent. What that means is that if you are a high-wage earner retiree, the increase in your benefits are slowed down. So we make it a little more progressive and we save some of the money to make the transition to really investing some of this money that is coming in and getting a better return than the 1.7 percent that the average retiree gets in Social Security. Let me just mention that early retirees receive adjusted benefits. So the actuaries make the best guess of how long the average person is going to live. So on average, the person that retires at 62, with a slightly lower benefit, is going to receive the same total benefits by the time they die as the individual that waits to 65 or 66 to start drawing benefits. And, by the way, if you wait until you are age 66 or 67, there will be a 4 percent increase for each one of those years to increase your Social Security benefits. So if you are jogging, if you are really healthy, it might be in your best interest not only to wait from 62 to 65, but to maybe wait and retire at 66 or 67. SSI, by the way, does not come out of Social Security. There is a lot of concern amongst my constituents in lower central Michigan who complain about those who are receiving Supplemental Security Income payments who do not deserve it. But SSI comes out of the general fund. Even though the Social Security Administration administers and handles that program, it does not come out of the Social Security trust fund. Well, insolvency is certain. We know how many people there are, we know when they are going to retire, we know that people will live longer in retirement, we know how much they will pay in, and we know how much they will take out. Also, the payroll taxes will not cover benefits starting in 2017. The shortfalls will add up to $120 trillion between 2017 and 2075. The $120 trillion is what we are going to need in future years. What we need right now is to put $12 trillion in a savings account with compounded interest that will grow at least at the rate of inflation. The demographics are what is bringing this pay-as-you-go program to a crisis situation. There are 78 million baby boomers beginning to retire in 2008. The baby boomers are what we call those babies that were born right after World War II, roughly from 1946 to 1966, that age group, that are now in their maximum earning. So they are paying in maximum social security taxes, but also, when they retire, number one they stop paying those taxes in and they start taking out maximum benefits. The baby boomers that are retiring probably will be the most well-off generation that we probably have ever had in this country, possibly the best well-off generation that we will ever have in this country, considering the fact that we are putting a huge burden on future workers and future retirees by making more promises than we can afford and going deeper into debt. Social Security spending exceeds tax revenues in 2017, and so Social Security trust funds go broke. Technically, if we pay back the $1.4 trillion that we now owe the Social Security trust fund, then that will allow Social Security to continue. But the problem is that the trust fund contains nothing but IOUs. And here is a worse situation, or a more dangerous situation. The Supreme Court, on two occasions now, has said that no one is entitled to Social Security benefits, and it does not make any difference whether you paid in social security taxes. Social security taxes are simply another tax, is what the Supreme Court said; and benefits from Social Security are simply a new benefit passed by Congress and signed into law by the President. This chart sort of pictorially represents the demographics of living longer, of seniors living longer and the birthrate going down. So back in 1940, there were about 36 workers paying in their Social Security tax for every one retiree. By the year 2000, it came down to three workers. So we dramatically increased taxes. The estimate by 2025 is that there is going to be two workers paying in their Social Security tax for that growing number of seniors. There is going to be two workers paying in their tax to accommodate the Social Security benefits of every one retiree. This is a huge challenge in terms of putting this kind of pressure on our workers, and we talked about what has happened to the tax rate in countries like France and Germany and the predicament that now Japan is facing with their senior population. I did this picture of FDR just to start a discussion of should we have privately owned accounts. When Franklin Delano Roosevelt in 1933 started advocating a Social Security System of mandated savings while you are working, to help assure that you will have a little Social Security instead of going over the hill to the poor house when you retire, he started out saying that individuals should own their own savings account, but it should be a law that they had to put so much money in it, and that it should be a law that they could not take it out until they reached the retirement age of 65. By the way, when we started Social Security, the retirement age was 65; but the average age of death was 62. That meant most people paid in their Social Security tax but did not live long enough to take out Social Security benefits. And, of course, the program stayed funded very well. But today, the deduction is made on your payroll check; and immediately, within 3 or 4 days, that money is sent out to beneficiaries. So we are going deeper in the hole even as we increase taxes and reduce benefits. Social Security benefits are indexed to wage growth. And I say that because I hear so often many of my colleagues saying that when the economy gets better, then everything will be okay. But because benefits are indexed to the wages you make, and even if there are more people that have a job and more money coming in to Social Security in the form of taxes, and maybe some are making higher wages so they pay in a higher amount, that 12.4 percent times the higher amount of earnings, because eventually when they retire they are going to take out more from Social Security, in the long run economic growth does not solve the problem that we are facing with Social Security running out of money. Growth makes the numbers look better now, but leaves a larger hole to fill in the future. I think what has happened with a lot of Members of Congress is that it is easy to put off the solution. When I give speeches in Michigan and around the country, a lot of people say if Congress would just keep their hands off the Social Security trust fund and that surplus money, everything would be okay. Well, I did this bar chart to represent what the Federal Government now owes the Social Security trust fund. We borrowed $600 to $700 billion; but because we will write another IOU for interest, the total debt that government owes the Social Security trust fund is now $1.4 trillion; but the total problem needs $12.2 trillion. So we owe $1.4 trillion that is in the trust fund, but to solve the problem we need between $11.9 trillion and $12.3 trillion to solve the problem. Government should stop taking that money and spending it for other government purposes. We also need to start investing some of the short- term surplus we have had. Like I mentioned, coming in from the Social Security trust fund today, there is about $645 billion, and what we are paying out in benefits is $490 billion. I will jump to the second blip. The Social Security trust fund contains nothing but IOUs; and to keep paying promised benefits, payroll tax will have to increase by nearly 50 percent, or we will have to cut benefits by a third. I have a chart that I will be coming to on how Washington has increased benefits over the years. But I wanted to show this chart to try to demonstrate that Social Security is not a good investment. It is nice to have that guarantee. Nobody is suggesting any Social Security reform. Certainly not in the five or six bills that I have introduced, nobody touches the disability portion, so getting hurt on the job continues to be a Federal Government insurance policy and nobody is touching that. All we are dealing with is the old age and survivor benefit portion of Social Security. By the way, in only 5 years, the disability insurance is going to have less money coming in from that particular trust fund than is needed to accommodate disability payments. This chart shows that the average return for the average retiree is 1.7 percent of what they and their employer sent in to Social Security. I put down what has happened in the last 10 years in the Wilshire 5,000 stock market. The Wilshire 5,000 earned, even with the 3 bad years we have been experiencing on stock markets and equities, the average over the last 10 years has been 11.86 percent. If we take the last 100 years in this country where we have kept track to what has happened to stock and equities, the average is 7.4 percent. So in some way, we can guarantee that you can have a better return on your private accounts. And so what I do in my proposal in my bill, I allow 3.5 percent of your wages to be put into your own personal retirement account and then we limit where you can invest it. Simply to try to get Democrats on board, and my bill is a bipartisan bill, we have added provisions where any investment is going to be limited to index stocks and index bonds. But I think one of the challenges that needs a lot of explaining is the fact that we hear Members of Congress brag sometimes that we are paying down the debt, and that is not true. One of the strong advocates of explaining the fact that the debt is never really reduced is the gentleman from Maryland (Mr. Bartlett). Mr. Speaker, I yield to the gentleman for his comments and maybe a couple of his solutions on Social Security, Medicare, going deeper into debt, and unfunded liabilities.

Mr. SMITH of Michigan. The debt is $7 trillion divided by about 290 million. It comes out to almost $25,000 for every man, woman and child in terms of their share of the debt.

Mr. SMITH of Michigan. Mr. Speaker, I hope Members are watching this just as a reminder of what we have done to try to not embarrass ourselves as we sort of secretly increase the debt.

Mr. SMITH of Michigan. Members are pretending that our problems today are so important that it justifies taking the money that our kids and grandkids have not even earned yet. It is sort of like breaking into their piggy bank and saying I will try and pay you back some time, but for now let us go out and buy some candy bars and ice cream. There might be a better word, but ``unconscionable'' comes to my mind to consider the burden of debt, to consider the burden of promises that exceed our ability to pay for them in terms of unfunded liabilities that we are placing on future generations.

Mr. SMITH of Michigan. Mr. Speaker, this pie chart shows that currently the interest that we are paying on the debt, servicing the debt, the interest is $240 billion a year. This represents 14 percent of the budget. Yet interest rates are almost at record low levels, and so what happens as we increase the debt by $500 billion to $700 billion a year, and interest rates go up, and Alan Greenspan said today that is going to eventually happen, it is going to eat up a bigger piece of that pie. One of these days it has got to come to our obvious attention that something needs to be done to control spending.

Mr. SMITH of Michigan. Right now interest is 14 percent of the budget. Defense is 20 percent of the budget. It is easy to at least assume there is a good possibility that the very low interest rates today could double. That would mean $440 billion a year, or 28 percent of the budget. It would mean our borrowing and servicing that debt is more important than what government should be paying attention to, and that is security and defense.

Mr. SMITH of Michigan. And, Mr. Speaker, of course the lobbyists that come in, they would prefer that it be mandatory spending; so some of these programs, if they can write it in law that if they meet certain qualifications, they automatically get it and it does not go through the appropriation process, it is not subject to prioritizing. So we have ended up with more and more of our budget being spent in this mandatory spending, and really even though technically defense is discretionary, most of the defense budget becomes the kind of obligation, because that is what we are here for, defense and security, becomes almost untouchable.

Mr. SMITH of Michigan. Mr. Speaker, how do we change? How do we develop the kind of discipline, intestinal fortitude to start slowing down this huge growth of government to the extent that we have decided we will simply borrow more and more money to take home to our districts or to start new social programs? Does the gentleman have any thoughts on how we can discipline ourselves better than we have been?

Mr. SMITH of Michigan. Mr. Speaker, so there we come to the popular criticism that it is a tax cut for the rich, but because of the fact that that 50 percent of the population pay essentially very little of the income tax, when we have any kind of a tax cut, it tends to go to the 50 percent that do pay taxes. So here again it is a balance. But as we talk about jobs and economic expansion, when we have a system that taxes our companies and our businesses 18 percent more than what their competitors in other countries are taxing their businesses, we are putting our business at a competitive disadvantage, and our overzealousness to pass on new regulations and more taxes so that this body and the Chamber across the Capitol can have more money to spend I think is one of the negatives and something we have to correct if we are going to expand business and jobs and the economy in this country.

Mr. SMITH of Michigan. Mr. Speaker, I think it is good to remind ourselves that our Founding Fathers in the original Constitution did not want to penalize individuals that were going to school and working and saving. So the original Constitution says we cannot have a tax based on how much we earn, and that is what we were founded on. That is part of the incentive. But this body and Congress and the White House over the last 50 years have decided trying to equalize that wealth, dividing the wealth, taxing the people that have made it a little more and giving that back in some forms of government service to the individuals than have not. And there is a balance there. There is a golden mean. We want to help people that really need help, but we need to try to develop programs that help lift them up because we have got now a tax system that the young couple that decides to go get a second job ends up not only being taxed more for working harder to try to earn enough money to do well for their family, but they get taxed at a higher rate. So we have sort of evolved into taking away from the people that work hard and try and are successful, and dividing that wealth in a system of government where now 50 percent of the adult population of the United States now pay less than 1 percent of the total income tax.

Mr. SMITH of Michigan. Mr. Speaker, I happen to be the prime sponsor of the flat tax. But whether it is a flat tax or a value-added tax or a type of sales tax, we need to change our Tax Code if we are not going to continue to put a lot of people at a disadvantage and a lot of businesses at a disadvantage. Most of our businesses pay the same 1040 personal income tax that the gentleman and I do. As we increase the tax on those businesses, it hurts the chances of the survival of that business. How do we get the discipline? How do we get the discipline to police ourselves? We are talking about a PAYGO bill. Maybe that will help. It sort of helped during the 1980s and some of the 1990s, but convincing the American people, I think, might be the best way in terms of getting that voice heard in this Chamber and in the Senate Chamber and at the White House.

Mr. SMITH of Michigan. Mr. Speaker, the gentleman from Maryland (Mr. Bartlett) carries the Constitution in his pocket.

Mr. SMITH of Michigan. Mr. Speaker, I want to show this chart of what government has done historically every time Social Security has less money than what is needed to pay benefits, and it is a pay-as-you-go program. It is deducted from the paycheck at the end of the 1 week or the 2 weeks or the month, and within days it is sent out to beneficiaries. So there is no savings account with one's name on it. So we have run into problems of not having enough money in Social Security to pay benefits on several occasions, but what we have done historically, and I use this because I think it is a danger of what can happen in the future, is simply that we have increased taxes and reduced benefits. This is a chart that shows the increase in taxes. In 1940, we had 2 percent of the first 3,000. By 1960, it went up to 6 percent of the first 4,800. By 1980, 10 percent-plus of the first 26,000. In 2000, 12.4 percent of the first 76,200. And currently it is not a rate increase, but it is a base increase; so it is the same 12.4 percent on the new base of $89,000 a year. So continually we have continued to increase taxes on working Americans to the extent that most working Americans now pay more in the Social Security tax than they do in the income tax.