Nick Smith

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, our Congressional Budget Office today made an announcement that they now predict that we will have a $8 billion surplus this fiscal year ending October 1. It gives me a great deal of concern that we are hoodwinking the American people on what a surplus really is. If one looks at this chart, it shows what has happened between 1960 and 2000. You notice even in spite of the Washington claims that there will be a surplus, the national debt keeps going up and up and up. That is because the way Washington defines a surplus is all money in, and all money out. The Trust Fund surpluses are spent in Social Security. In fact all our Trust Fund surpluses are spent on other items, and they are used, in effect, to pretend that we have a balanced budget, when we really do not. So while we are professing great accomplishments, that we are having a surplus of $8 billion this year, this is how much we are borrowing from Social Security. The Social Security Trust Fund in 1998, total revenues in, $480 billion; total expenses, $382 billion. We are borrowing from the Social Security Trust Fund, the bottom line, $98 billion. So when they say we have a surplus of $8 billion, it says maybe we are only borrowing $90 billion from the Social Security Trust Fund. This is the historical tables that the President sent over last month with his 5-year budget. If you would turn to page 111 on these historical tables, you would see that the President's budget, every year for the next 5 years, the national debt increases between $130 billion and $175 billion. That is because we are borrowing from the Social Security Trust Fund. So on the one hand, we say that the money borrowed from the Social Security Trust Fund is part of the national debt. In fact, it is part of the debt subject to the debt limit that is set by Congress. But creatively, on the other hand, we say, well, this is a unified budget. Therefore, we are going to call what we borrow from the Social Security Trust Fund revenues, and, therefore, the budget is balanced. I would suggest that the true test of a balanced budget is when the national debt stops going up. Look at this next chart. Here is the problem that we are having now in Social Security. The little blue area on the top that goes from 1997 until the year 2011 is the surplus that is coming into the Social Security Trust Fund. That blue is the positive side that means that there is more Social Security taxes coming in than is required at the moment to pay out benefits, because Social Security is a pay-as-you-go program. That temporary surplus is what we are using to currently balance the budget. But that goes away in 2011. It goes away because the cash revenues coming in to fund Social Security benefits are going to be run out, and the benefits are going to be greater than the dollars coming in from the Social Security taxes. So you see what happens in the other year, and this really gets to the heart of the serious problem of Social Security. If you go way to the bottom right-hand side of the chart, you see we are going to have to borrow $400 billion or come up with $400 billion additional dollars every year to satisfy what we have now made promises to the retirees that are going to be getting Social Security benefits. A huge problem on Social Security. I think we have to face up to it. The number one thing that the American people have got to start looking at, though, is the fact that Social Security has serious problems. Part of the reason, part of the reason they are having the problems for the future is that we are borrowing the surpluses today to spend for other programs, and we are borrowing those surpluses to pretend that we have a balanced budget, in fact a potential surplus this year and next year. The surplus projected by CBO next year is $9 billion. Next year we are going to be borrowing $100 billion from the Social Security Trust Fund. The following year, in the year 2000, I think the estimate is that the surplus is going down to $1 billion. The fact is we need to acknowledge the fact that we are borrowing from the Social Security Trust Fund to balance the budget, to so-called balance the budget. This next chart I think is interesting, because it starts looking at what the problems of Social Security are in this country. This chart shows the numbers. It is the demographics of what is going to be happening to us over the next several years. The number of seniors, the number of retirees is increasing dramatically, a 73 percent increase; 64 million seniors in this country, a 73 percent increase between now and the year 2025, where the working population is only going to be increasing 14 percent between now and that time. So you have an increasing number of seniors and a decreasing number of taxpayers that are paying into Social Security. Let me just rego into history a little bit on how Social Security was started. Social Security was started in 1935. It was started as a pay- as-you-go program where existing workers pay in their taxes to cover the benefits of existing retirees. So no savings, no investment. It worked very well in those early years, because in those early years, the average life span of an individual was 61 years. So most people never even lived long enough to collect any Social Security. So a system, a Ponzi game, a pay-as-you-go chain-letter-type structure like this, worked very well if people did not collect that Social Security. But today, let me tell you what the average life span is today. Today the average life span, at birth, for a male, is 74 years old; for a female is 76 years old. But if you live long enough to start collecting Social Security, if you live to be 65, then on the average, you are going to live another 20 years. That is part of the problem. That is why the increase in seniors is going up so dramatically, and the increase in the people working and paying their taxes is going up modestly. After World War II we had a high birth rate, those individuals called the baby-boomers, who are going to be retiring just about starting in about 2010, 2011, 2012. So these high-income people go out of the pay- in category and start collecting from Social Security and Medicare and other benefits. So they stop paying their taxes in. That is part of the reason that we really fall off in the year 2011, not having enough tax revenues as the senior population starts increasing. By 1942, there were 40 people working, paying in their Social Security tax, for every single one retiree. Now, this chart shows that by 1950, that got down to 17 people working, paying in their taxes, for every retiree. Today it is three people working, paying in their taxes. The estimate is by 2027, there is just going to be two people working, paying in their taxes for each retiree. That is why it is so important, so critical, that we start facing up to this problem today, that we do not bury our heads in the stand, but we start acknowledging Social Security. I compliment the President for at least saying, look, Social Security is a problem. We need to give it a priority. Let us make Social Security first. I say, yes, let us do it. Let us move ahead. I talked to Ned Gramlich, who is from the University of Michigan. I am from Michigan. He headed the President's Task Force on Social Security. He spent 2 years. They could not agree on any single solution. They came up with three different solutions. However, what is interesting, every solution said that individual opportunity to invest some of that money as their own money is part of the solution. So you start changing it from a fixed benefit program to partially being a fixed contribution program. And here is why every one of the three propositions that were put before us from that group included private investment as part of the solution. It is because over the last 90 years, the average return on index stocks has been 9 percent, 9 percent return. What do you think the average return for everybody that is under 55 years old is going to be today in Social Security? The Tax Foundation estimates that anybody that retires after the year 2000 is going to have between a negative 0.5 percent return and a negative 1.5 percent return. So Social Security as an investment is a very, very bad investment. So if part of that money could go and be invested, you are still going to have to pay it, it is still going to go into the Social Security Administration, but like a 401K or like a Thrift Savings Plan, it will be an investment that is going to be the property of the individual worker. Would it not be great for a change, we heard earlier this evening about the dilemma of people moving up and seeing and experiencing the creation of wealth. Part of the reason is this government and other governments are taking so much away from individuals in taxes. On the average now, 40 cents out of every dollar you earn goes in taxes. If you could reduce that a little bit, if we could allow workers the opportunity to invest some of that money into investments that are going to create wealth, where they could see the magic of compound interest, where their money is doubling every so many years, and, believe me, about the eighth doubling, the quadratic really increases, and you end up with really saying, gosh, this is a good idea, saving and investing. That is why part of the solution has to be, in Social Security, an individual having that opportunity to take part of that Social Security tax and saving it and investing it and having the opportunity to see the creation of wealth. The next chart represents what I think is what we have been trying to say in terms of what is happening to the number of seniors that will be increasing at 79 percent, and on the age 20 to 64, they only increase 20.6 percent, and then under age 20 goes up 4.7 percent. It is another way of describing the serious demographics that is really putting a challenge before the United States Congress and the President in terms of both Social Security and Medicare. Since we created Social Security in 1935, every time we had a little extra money, we expanded the program and expanded benefits. In 1965, for example, we amended the Social Security Act to start the Medicare program in this country. Every time we were short of money, guess what we did? We increased taxes. This chart shows how we have increased taxes. What I would like to point out is since 1971, Social Security taxes have gone up 36 times. I am going to say that again. Since 1971, we have increased Social Security taxes, the rate or the base, 36 times. More often than once a year we are increasing the taxes on working families in this country. It is not a good way to go. We have got to make some changes, and I think the sooner we do it, the better. Since we have increased taxes so much, if you look at the working population in this country, today 78 percent, this chart shows that 78 percent of working families now pay more in the FICA tax than they do in the income tax. So we are faced with a situation where taxes have been increased so often that 78 percent of all workers pay more in the FICA tax than they do in the income tax. How are we are going to change it? What are we going to do? This, I think, is hopefully a heads-up, an awakening, to the young people in this country that should start demanding that this Congress and this White House do something to save Social Security for them. We are making them pay these huge amounts of taxes out of their pockets, and if we do not do something, they are never going to see any return from those taxes. That is the danger we are facing. If we look at what happens in terms of the number of years that you are going to have to live after retirement to simply break even on what you and your employer put into Social Security, this chart shows, because it is a Ponzi game, shows that if you retire early, you can get all of your money back that you and your employer put into it in the first 2 years or 4 years; 16 years if you retired in 1995, and it goes up to 23 years that you are going to have to live after retirement if you retire in 2005. If you retire in 2015 you are going to have to live 26 years after you retire. Another way of saying this is the statistics from the Tax Foundation that say you are going to get a negative \1/2\ to a negative 1\1/2\ percent return on the amount of money you and your employer put in Social Security. Let us be perfectly clear whose money that is when the employer puts in half of that 12.4 percent. It is coming out of the employee's pocket. I mean, if the employer was not willing to acknowledge that he was willing to pay this much to the employee and this much in taxes, that is what the employee is worth. So far as I am concerned, it is coming out of the pocket of the employee, that 6.2 percent that the employer pays in, for a total out of that employee's pocket now of 12.4 percent, just for Social Security. Then you add Medicare on top of that. Then you add your other income taxes and your excise taxes on top of that. I think we need to start deciding just how much government we want in the United States, how much government are we willing to pay for, when 40 percent of the time you work, you work just to pay your taxes? Let us think of the possibility of getting all taxes down to 25 percent, at least, of what you make. Let us start looking at a more frugal Federal Government. Of course, the Federal Government is the government that takes most of the tax money out of your pocket. This last chart that I have, that I think is optimistic in terms of what you can make if you are going to have an investment in the stock market, it is optimistic as far as the Social Security return. The Social Security Administration, on the bottom right-hand side, estimates that you can have had about a 1.7 percent return if you are lucky enough to be a white female that is going to have a longer period of years, so you are going to live over the 26 years after retirement, and you are going to make a return on the investment of approximately 1.7 percent. However, if that same investment were put in the indexed stock market, you would be earning a return of approximately 8.5 percent. The middle blue line is the average real bond return, so even if you are investing in bonds, I am proposing in my bill, and I have introduced the only bill in the House that has been scored by the Social Security Administration that will have been scored to keep Social Security solvent. In my proposal I am suggesting that we do not increase taxes, that we do not effect any reduction in benefits for those that are retired or those that are close to retirement, but we start taking some of that surplus money, and instead of spending it for other programs we take some of that surplus money that is now coming into Social Security and we start solving the problem by letting workers invest 2.5 percent of their taxable income. What would everybody do if they had the opportunity to invest 2.5 percent of their taxable income in safe investments? They would see the creation of wealth. I think by taking this so-called surplus and investing it back into Social Security, by allowing workers to own some of that money so if they happened to die before they reached retirement age, it would be part of their estate; unlike Social Security, it would be what they own. I am suggesting that with the opportunity to invest part of the money, and every year I increase the amount of money that would be allowed for personal investment, because as the trust fund expands, then what we are dealing with is more money available to increase the percentage of your Social Security tax that you can privately invest, so it takes 50 years under my proposal, but you finally get to 10.4 percent out of the 12.4 percent that you could invest as your own investment. I am suggesting that you can retire as early as you want to to have that kind of fixed contribution returns on your investment. You can take it out at 59\1/2\ years old, or whenever you have enough money to buy an annuity, just to guarantee that you are not going to be spending it all and depend on other taxpayers to help you out later. You can retire as early as you want to. I am suggesting that as you have personal investments, a good way to divide that personal investment between man and wife, between spouses, is to add what each spouse is allowed to invest, and you add both spouses' investment opportunity together and you divide by 2. So both the man and the wife, whether the wife is working or staying at home, would have the exact same amount that they are investing in their own personal retirement savings account. Some people have asked me, what do you mean by ``safe investments''? What I have done in my legislation is limiting it to either indexed stocks or indexed bonds or indexed global funds or indexed cap funds and other safe investments, as determined by the Secretary. It is the direction that we have to go. The quicker we move ahead on these kinds of solutions, the better off our future is going to be, not only for existing retirees, but for future retirees. I have been asked the question in my town hall meetings, why do you not just take the $65,000 cap off what individuals are now required to pay that 12.4 percent of? When we started this program we started at 1\1/2\ percent of the I think first $3,500. Now, over the years, we are now up to 12.4 percent of the first $65,000 that you earn. But if you were to take the the cap off, because Social Security benefits are calculated based on what you put in, if you took the cap off, the more you put in, the more your benefits would be. So I think that brings us to a decision: Do we want Social Security to turn into a welfare program that has no relationship to the contributions that go in? I suggest that we do not want to turn Social Security into a program that says, well, if you saved and invested and did it on your own and were lucky, then you do not get anything back; but if you did not save and you did not invest and you did not take two jobs along the way, then we are going to have a Social Security program. I think there is some danger in turning Social Security into a welfare program. However, I do think that we need to slow down the increase in benefits for the higher wage-earners. That is what I do in my proposal. I wonder, Mr. Speaker, if everybody understands how we calculate Social Security today. Let me just give sort of the rough version. You take your 35 best years of income or wages that you are making, and out of those 35 years you get an average monthly earning. Then you take the average monthly earning and you take the first roughly $450 and you say you are going to get 90 percent of that lower amount and then 15 percent of a higher amount. So what it does is add some degree of, if you will, progressivity to the way we calculate Social Security benefits. So we go from 90 percent to 30 percent to 15 percent of your wages, and 15 percent of the high wage. That means that the high-wage person that is contributing up to the maximum is going to get a lower percentage back in terms of benefit than the lower wage-earner. What I do in my proposal is I slow down the increase in benefits for that high-wage earner. I increase the retirement age by an additional 2 years. But to offset that 2-year increase in retirement age, I say that an individual can retire and use their returns for their investments as early as age 59\1/2\. So within 30 years, it could very well be that what they are getting from their personal investments would be greater than what they get from their fixed benefits under the traditional Social Security. Yet one only needs to look at several examples of what States are doing to see the advantages of investment, real investment, and the returns that that can create as far as pension benefits compared to the Social Security fixed benefit program, where, in effect, we spend all of the money immediately when it comes in in taxes. If we were to look at, for example, some counties in Texas that had the option of not signing into Social Security but invested that money in the kind of investments in stocks and bonds and mutual funds, whatever, those people recently now are getting up to 8 times more than they would have if they had been in the traditional Social Security system. Mr. Speaker, private investment has to be one of the considerations of how we solve Social Security. I say, and this is what I said when I spoke to the National Association of State Treasurers this afternoon, going over this problem, is let us look at all the options. Let us say here are all of the ways that we can help stabilize and keep Social Security solvent. Let us start talking about those options, pick out the best options, and let us, by the year 1999, next year, let us come up with a Social Security bill and start moving it forward as far as solving this problem, because the longer we wait, the more drastic the changes are going to have to be. So let us face up to it, let us talk about it, and the gentleman from Texas (Mr. Charlie Stenholm) and the gentleman from Arizona (Mr. Jim Kolbe) have a bill that says let us have a joint committee of the House and the Senate. Other individuals say let us appoint a commission. Personally, I question appointing a commission if we are going to simply have a commission that is going to spend a couple of years, like the President's Commission did, coming up with alternative solutions. I think it is Congress' responsibility, it is the President's responsibility. Let us look at the best possible solutions with the goals of not interfering or reducing the benefits of existing retirees or those that have already planned their retirement based on the promises kept, with the goals of making sure that Social Security is going to be a good investment for working families in this country, and with the goal of making sure that Social Security is going to be available for our grandchildren.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I rise today to pay tribute to R. Graydon Briggs of Grand Ledge, Michigan for his outstanding service to public safety. Fire controlled is one of the man's greatest friends; unchecked, it is our deadly enemy. Each year, millions of fires kill thousands of Americans and destroy billions of dollars of property. Daily, across this nation, fire fighters risk their lives to protect us, our homes, our businesses, and our belongings. Graydon Briggs is one such man. After serving his country bravely during the Korean conflict, Mr. Briggs returned home to Michigan and began a career of service that spanned four decades. For 37-years, Mr. Briggs served his community as a firefighter protecting lives and property of Grand Ledge residents and the neighboring townships of Eagle, Oneida, and Watertown. His leadership abilities and organizational skills caused him to be appointed to the rank of Fire Chief. He discharged this office with integrity for 31 consecutive years. Chief Briggs had the unique ability to cohesively unite both paid and volunteer firefighters under his command. Under his dedicated leadership Grand Ledge saw many improvements in their fire department. They received their first aerial ladder truck, something uncommon to smaller rural communities. A new rescue truck with the ``jaws of life'' tool was added. The city's first water rescue boat was placed in service. New pumper and tankers were added. These improvements helped lower fire insurance rates for Grand Ledge. Chief Briggs was honored in 1971 when he performed rescue breathing on a young girl rescued from an apartment fire in which she was trapped. Her life was saved by this compassionate effort by Chief Briggs. In addition to firefighting skills and administrative capabilities, Chief Briggs became a superlative instructor. He organized and conducted numerous fire training schools and taught his art to hundreds of new firefighters. He has committed his life to the service of others. As a Member of the Congress of the United States of America, I am pleased to rise today to recognize his accomplishments and join with his many friends and admirers in extending my highest praise and warmest wishes for many happy years to come as he enters his retirement.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I suspect some of my colleagues might be disappointed in the message I am going to convey in the next 5 minutes. Mr. Speaker, this is one of the several books that the President sent over on the budget that we will start in 1999. The budget books, however, go for the next 5 years. There has been a lot of maybe bragging done that we have a balanced budget or we now may have a balanced budget by the end of this year, definitely by the end of next year. The President suggested in his budget that we have a balanced budget next year. Well, I would like to suggest that it is not a balanced budget; that we are borrowing $100 billion every year, more than $100 billion from the Social Security Trust Fund. And like the saying goes, ``You can't fool Mother Nature,'' neither can you fool the economists and bookkeepers that decide what is happening to the national debt. Now, it would seem reasonable to me, Mr. Speaker, that if we had a balanced budget, the national debt would not continue to go up every year for the next 5 years under the President's budget. And I suggest anybody that might want to look at the historical tables that the President sent over, on page 111, it shows actually what is happening to the national debt for the next 5 years. In 1998, the national debt is $5.5 trillion. In 1999, it goes to $5.7 trillion. In the year 2000, it goes to $5.9 trillion. In the year 2001, it goes up to $6 trillion. In the year 2002, $6.6 trillion. In 2003, 6.33 trillion dollars. Every year the national debt increases between $122 billion and $176 billion every year for the next 5 years. So what is wrong? How come we say it is a balanced budget? Well, that is because we creatively figure good ways to say things that maybe meets the end that we have accomplished more than we really have accomplished. I would like to suggest the real test of a balanced budget is when the national debt stops going up. When I go back to my district, I hear some people ask what is the difference between a deficit and a debt? Well, the deficit is how much we overspend every year. The national debt is if we add up all of those years' borrowings, that is the national debt. Right now the national debt is $5.5 trillion. It takes 15 percent of our total Federal budget to pay off the interest on that national debt. That is why I think it is very important to be very clear and very honest with all of the American people that we need to do a little better job than we have done. As good as the job has been for the last 3 years in cutting down spending, in trying to get rid of some of the waste in government, we have still got a distance to go if we are going to have a true Federal balanced budget that does not borrow from the trust funds. Look, borrowing from the Social Security Trust Fund is one of the most dangerous things we can do. We heard the President say Social Security should be first. A lot of my colleagues are now suggesting Social Security should be first. I suggest that if we are serious about starting to help solve the problem of Social Security, we are going to take some of that surplus money and give the option to a group of working Americans to say, look, we are going to invest part of that money in our own personal retirement savings account that becomes our property. If we die before retirement age, it goes into our estate. Unlike Social Security and those benefits today, if we die early, we do not get anything. I think it is important that we look at the long-range solutions for Social Security and simply that we be honest with the American people when we really have achieved a balanced budget.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I rise today to say a few words about one of my constituents, whose tireless efforts on behalf of senior citizens deserves respect and recognition. Selma Larson is a columnist for the Adrian Daily Telegram in Adrian, Michigan. Her focus for a number of years has been on issues impacting senior citizens. Along with her column, she hosts forums to give voice to the concerns of seniors. Selma doesn't expect you to agree with her on every issue. And, as it should be, she does not hesitate to take public servants to task when she holds a different view. But her commitment to improving the quality of life of our senior citizens is unquestionable. I always take note of her opinions and value her insights very much. In a very unique and important way, Selma Larson ably conveys to me the views of like-minded seniors in Lenawee County. She does this without expecting recognition or reward for her efforts. For these reasons, when I was asked to nominate a candidate for the Blue Cross/Blue Shield Ageless Heroes Award, Selma's name was the first to come to mind. I know her colleagues and her friends in Lenawee County would agree that she is worthy of this honor. Mr. Speaker, Selma Larson, through her vigor, hard work, and dedication, serves as a role model to us all. She proves every day that in America a person with commitment and drive can have a lasting impact on issues affecting all of us.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I am going to talk for a few minutes about putting Social Security first. The challenge is, what the President can do and what Congress might do to give a higher priority for saving Social Security. For review, this is a pie chart of Federal Government spending for this year. As we see, one of the largest pieces of the pie is Social Security that takes 22 percent of the total Federal budget. Social Security right now, sends out $660,000 a minute in Social Security benefit payments. But by 2030, we are going to be spending almost $6 million a minute for Social Security benefit payments. An 866% increase. That represents part of the problem. The fact that there are relatively fewer workers paying their Social Security taxes to finance these increasing benefits represents the other part of the problem. It is probably one of the most challenging problems facing Congress and the White House. Yet politicians in Washington have avoided dealing with this very important issue because of the potential political demagoguery. We have to deal with the hard facts of how we are going to make Social Security continue for those that are now retired, for those that are going to retire in the near future, as well as our kids and our grandkids. Let me just give my colleagues a quick review. In 1935, the Social Security system was devised and passed into law. It has always been a pay-as-you-go program. In other words, existing workers pay in their taxes and those taxes are immediately sent out in benefit payments to existing retirees. So it is sort of a Ponzi game, sort of like a chain letter. Early retirees made out very well. Taxes started out as 1.5 percent of the first $3500 of payroll. Now it is 12.4 percent for the employee and the employer's share for the first $65,000. Over the year we have continued to increase taxes on workers. In fact these taxes have been increased 36 times since 1971. This next chart shows the dilemma for Social Security. The red part represents how much in debt Social Security is going to be in the future. If nothing is done, eventually Congress must provide an additional $400 billion a year to cover promised benefit payments. This little blue blob on the top left is the short-term surplus that is in the Social Security trust fund. Congress supposedly fixed Social Security in 1983. What they did is substantially increase taxes on workers. But this fix was short-lived. By 2011 there will again be a cash shortage. Dorcas Hardy, a former Social Security Administrator, is estimating that we are going to run short of money as early as 2005. But even in the scenario of 2011, what does Congress do to come up with the money to meet their obligations of paying back the $600 billion borrowed from the trust fund. Well, Congress can cut spending someplace else, they can increase taxes like they have been doing for the last 40 years every time Social Security was a little shy. They can borrow more money from the public and disrupt some of the downward pressures on interest rates that we have achieved so far. I think it is important, and just for a minute, allow me to say that we do not have a balanced budget. We are not going to have a balanced budget this year, next year, any year for the next 5 years of the President's budget, because every year all the surplus coming into the Social Security trust fund is used to balance the budget. So every year, the national debt increases between $120 billion and $170 billion. Every year. That is how much more the national debt is going to increase. I think it is interesting to note that one of the dilemmas of this Congress is the fact that now 15 percent of the budget is required to pay interest on the debt. So if we can pay some of that debt back and start paying down that debt, we reduce interest cost. Let me just briefly run through these charts. Because we have increased taxes so often on workers, this chart shows how many years you are going to have to live after you retire in order to get the money back you and your employer put in. If you retire after the year 2006, you have to live 26 years after you retire just to break even. It is a serious problem. We need to deal with it.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I would ask everybody to hold onto their hats. I am going to spend the next 30 minutes talking about Social Security. And maybe the question should be, why should anybody be interested in what the situation is in this country with Social Security? I suggest seniors that are now retired should be very concerned, because Social Security is going to have less money coming in in payroll taxes than is going to be required to meet the benefits as early as 2002. I would suggest that young people should be very interested in Congress and the President facing up to the real issue of starting to solve the Social Security problem, because when they retire, their retirement is going to be at risk unless we do something. I would certainly suggest that my grandkids, and Bonnie and I have seven grandkids, should be very concerned, because if we do nothing, they are going to be asked to pay huge amounts of their taxes, up to 85 percent of what they earn, just to cover the Social Security benefits. So something has to be done. I wanted to start tonight with the President's budget. I think we start by getting rid of some misconceptions, if you will, hoodwinking of the American people, on the balanced budget. I think the American people know this. What we are doing is borrowing from Social Security to balance the budget. If you take a look at the historical tables on the President's budget, and you were to turn to page 111, you would see that the national debt increases every year for the next 5 years. If the national debt increases, how can the budget be balanced? It is not. We are borrowing from Social Security. I put this chart together very quickly, so please excuse the patchwork quilt here. As you go down the fiscal years, starting in 1998, the national debt is $5.5 trillion. That is an increase, by the way, of $174 billion over the previous year. In 1999, the national debt increases to $5.7 trillion. In the year 2000, it increases to $5.9 trillion. In the year 2001, the national debt increases to $6 trillion. In the year 2002, the national debt increases to $6.2 trillion, an increase of between $175 billion and $174 billion a year. How can this be, you say, if the President of the United States and Congress is saying, well, we are reaching a balanced budget? Here is why. We are borrowing from the Social Security trust fund. That is the major borrowing that is allowing us to pretend that the budget is balanced. But what it is doing in the process is depriving Social Security of being solvent in the future years. I have introduced the only bill in the United States Congress that is scored by the Social Security Administration to keep Social Security solvent for the next 75 years. I introduced my first bill when I first came to Congress in 1993. I introduced my second bill last session, and I introduced a bill this session. That legislation says, for part of the solution, let individual workers have the option of taking part of their Social Security tax, and it would still be sent in to the government and still be deducted at the rate of 12.4 percent of taxable payroll, but they would have the option of investing that in certain safe investments. Safe investments in my bill are indexed stocks, indexed bonds, indexed global funds, indexed cap funds, and any other safe investment as determined by the Secretary of Treasury. Okay. So here is the situation. We have got a system that was devised in 1935 to allow senior citizens money to make sure that they were socially stable, socially secure. It was a system in 1935 that was designed to use existing taxpayers' money to pay for existing benefits, sort of a pay-as-you-go program. As we look at this bleak future for Social Security, what I was discussing on how much the Federal Government is borrowing from the Social Security trust fund to pretend that we have a balanced budget is the little amount in blue that goes from this year, 1997, over to about 2011. So every year because we raised taxes so high on workers in 1983, there is more tax revenues coming in than is required to pay out existing benefits. Remember, this is a pay-as-you-go program, where existing taxes pay for existing benefits. So as government borrows this money and spends it for other uses, as government borrows this money and uses it for other purposes, what we do is further jeopardize the solvency of Social Security. This chart, because we have increased taxes so much on existing workers, this chart represents how many years a person is going to have to live after they retire simply to break even and get back what they and their employers paid into Social Security. So because it is sort of a chain letter, a Ponzi game, a pay-as-you-go system, if you retired early, then you were very, very well off and Social Security was very, very solvent. If you happened to retire in 1940 it took 2 months to get everything back that you and your employer put in plus compounded interest. If you retired in 1960, it took 2 years. Going across the chart you see anybody that retires after the year 2005 is going to have to live 24 to 26 years after they retire simply to break even and get back what they and their employer put into Social Security. Not a good investment. Not a good savings. The National Tax Foundation estimates that the average person retiring after the year 2000 will get a negative return on the amount of money that the employer and the employee put into Social Security. The employee now puts 6.2 percent. The employer puts 6.2 percent. Really what we are talking about is a situation where it all comes out of the employee's pocket, because the employer would give that money to the employee. Obviously they are willing to pay that much. So it is really a tax on the employee, the whole 12.4 percent. The National Tax Foundation says that you are going to get a negative one-half to a negative one and a half percent return on your money. So that is why everybody is suggesting let us use a little bit of private investment to allow workers to take some of this money and invest it in the stock market or the bond market so that they can realize the increase in wealth. A lot of people suggest that there is a danger in allowing people to invest their own money because they might lose it all. Number one, it is optional. Number two, we are suggesting in our pilot program that you would only have a reduction in Social Security benefits if you make money on your private investment. In other words, for every $2 you make on the private investment, you would lose $1. $1 would be offset in the traditional Social Security benefits. And that is going to help solve the whole Social Security problem. Because if your index stocks are average of what has happened over the last 90 years in this country, there is a 9 percent per year return on those index stocks, 9 percent per year. Remember, this compares to a negative one-half, to a negative one and a half return on your Social Security money. Social Security is a bad investment. Stocks are continually going up. Even the economists suggest that even the 10 years surrounding one of our worst depressions around 1928, 1929, if you take any 10-year period around that depression, you still have a positive return that is going to be much better than what Social Security is going to give you. So the point is we need to make some changes in Social Security. It is a bad investment. Let us look at other ways. Let us at least start a pilot program. I am introducing a bill that is going to be a pilot program that will allow 18-year-olds to 30-year-olds to invest 2.5 percent of their payroll. This money will be sent in. That individual will have the option of saying I want this much in index stocks, this much in index bonds. There will be an offset; for every $2 you make, a $1 offset in your fixed benefits. Then you have the option at 10 years to say, look, I have decided I want to go back to the old fixed benefit plan. I think it is so important that we allow American working families to experience the creation of wealth. We have taxed everybody so much in this country. You now pay 40 cents out of every dollar you make in taxes at the local, state, and national level. We have taxed so many people so much that it has taken away the ability to start saving and creating wealth. Part of the wealth creation is the fact that, at 9 percent interest, I think your money doubles something like every 7 years. So that means, if you start with a dollar, 7 years from now, you will have two. And 14 years, you will have four. That compounding, that magic of compounding interest is why the economists suggest that you are going to be so much better off if you have some private investment rather than a fixed benefit plan that is now going broke. Look at this next chart. The number of seniors is increasing very dramatically. We see over the next 28 years, 29 years, there is going to be an increase of 4.7 percent for those people under 20 years old. For those people in the age of 20 to 64 years, there is going to be an increase in numbers of 20.6 percent. But look what happens to seniors. The senior population, over 65 population, is increasing at 79.5 percent, almost 80 percent. When we started Social Security, the average life-span for an individual was 61 years old. That means most people never lived long enough to collect any Social Security. So the Social Security system worked very well then. It went spinning along very nicely. We got into the late 1940s. We ran a little short of money. We increased taxes. In the 1950s, we increased taxes again. We kept increasing taxes on workers to keep the program solvent. And that is why it is going to be impossible for most workers in the future, unless we make some changes, to ever get back even what they and their employer put into Social Security. Before I get to this next chart, if we were to look at the number of people working paying in their taxes to fund every single beneficiary, in 1942, there were 40 workers paying in their Social Security tax for every retiree. By 1950, that got down to 17 people working for each retiree. Today, there are three people working, three people working for every retiree paying in that large increased number of tax. This chart shows how we have increased taxes over the years on those workers. In fact, we have increased taxes 36 times since 1971. More often than once a year we have increased taxes on the American workers and there are people now suggesting the way to fix Social Security is to increase taxes again on those workers. Look at this pie chart right now: 78 percent of Americans pay more in the FICA tax than they do in the income tax. That is because of Social Security taxes that have kept going up. Okay. That is the problem. Like I mentioned, in 1961, the average life span was 61 years old. In 1936, the average life span was 61 years old. Today, the average life span for a female is 76 years old; for a male it is 74 years old. But if we live to 65, ready for retirement, then on the average we are going to live another 20 years. That is why the senior population is going up so dramatically. And after the baby boomers, after World War II, the birth rate went way down. So our birth rate is slow in relation to the number of seniors that need to be supported by those existing taxes. There has got to be a way, there has got to be a system that will help us save Social Security. I want to suggest that I have got one proposal. I want to run it up the flag pole. But instead of burying our heads in the sand, let us face up to the fact that there is a problem. Let us face up to the fact that we do not want to cut benefits for any existing retirees or any of those individuals close to retiring and we want to have a system that is available for working families today and for our grandkids tomorrow. Mr. Speaker, every proposal that the President's Advisory Commission came up with included as part of the solution private investment, and that is what I am suggesting. But I am suggesting we start very gradually. That we start taking some of this surplus, this blue area, some of the $100 billion that the general fund is borrowing from the Social Security trust fund in the 1999 budget that we have just started working on, $100 billion that we are borrowing from the Social Security trust fund to balance this budget. Let us start taking some of that money and allowing some personal investment for some of these young people. Of course, with the magic of compound interest, that means the doubling of that money is going to happen more often. If we can wait until one more doubling, then we are going to have benefits that are far in excess of what we ever can expect to get out of Social Security. This blue portion means that we are going to continue to have more tax revenues coming in than is required for Social Security benefits. So in my proposal, in the pilot program proposal, we are suggesting that we allow that certain group of individuals to have the option to start seeing the creation of wealth, the magic of compounding interest, and to prove to the world that the American people are pretty smart. We have now had the experience of going out and shopping for a car or a home; the experience of investing our own 401(k) plans or our Thrift Savings Plans or the IRAs that we are allowed to invest. People are going to invest that money and they are going to talk, they are going to study. It is going to mean increased investments that is going to help our economy. It means that we are going to have a Social Security system that can last forever, because we are starting to wisely have a fixed investment portion rather than a fixed revenue portion. Now, where do we go from here? Number one, I invite all of my colleagues to join me in sponsoring a bill to use some of those surpluses, quote-unquote surpluses that we are going to have this year, for personal investment for some of these young workers in our country. And then we are hopefully going to expand that to more and more workers. Mr. Speaker, we always have the option of saying well, I want to stay with the old system. I do not want to privately invest. Let me give a couple of examples of what has happened in some counties in Texas. County government has the option that their employees can have other pension investment plans rather than Social Security. In Texas, some of those counties took that option and now the retirees of those counties are receiving many times more than their counterparts that are receiving Social Security benefits. The Social Security system, the way it is designed now, shortchanges everybody. Let me tell particularly who it shortchanges. Those people who have a life span that is less than some other individuals' life span. What was called to my attention is that the average life span at birth for a black male is go 63 years old. That means that they paid all of their lives into Social Security, subsidizing those individuals that might live a longer time. If a person dies before they start collecting Social Security, then other than for some burial funds that might be available, they lose all of that money that they and their employer have ever put into Social Security. It is gone. Whereas on the private investment, if they die at 30 years old, or 40 years old, or 50 years old, it becomes part of their estate. It is their property. It is their private retirement savings plan. I think there should be a ground swell of support from working men and women around this country that says: Look, quit gypping us, United States Congress and Mr. President, on what you are doing for Social Security. Quit saying that Social Security is first and let us really make Social Security first. Let us use some of these surpluses to start saving the Social Security system.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I move that the House do now adjourn.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, thank you very much. As you well know, Mr. Speaker, the Committee on the Budget for the last 3 hours has been meeting, talking to Mr. Raines, the Director of the Office of Management and Budget. My concern and what I noted to Mr. Raines was the fact that Social Security is in jeopardy. I have introduced the only bill in this U.S. House of Representatives that has now been scored by the Social Security Administration to keep Social Security solvent, so I applauded the President when he suggested that we put Social Security first. However, as I said to Mr. Raines, in examining the budget that was delivered yesterday, Social Security was not put first. Social Security was put ninth, not first. And I explained the problem of the expanded spending in this budget, where ahead of Social Security was an expanded Medicare program; ahead of Social Security was the high cost of this global warming agreement; ahead of Social Security was $37 billion expanded role for government in education, where Washington is going to decide more of the decisions and pass more regulations as they pass through that money back to local communities; ahead of Social Security was new penalties for moms who stay at home to take care of their kids with a $21 billion program of government getting into the baby-sitting business; expanded welfare programs were there; infusing $18 billion into the International Monetary Fund, the IMF; the budget created or expanded $39 billion worth of new or expanded entitlement programs. Social Security was definitely not put first. In the budget was roughly $102 billion of increased taxes, another $23 billion of increased fees, which one could almost consider taxes because eventually they are going to be passed on to the consumer. My question to Mr. Raines was, would he consider taking whatever increased revenues was projected and not spending it on these new expanded ``make government bigger and more powerful'' programs and put all that surplus into Social Security? And he reacted that, no, they thought they had the correct balance. I think, Mr. Speaker, that we should change the definition of what a balanced budget is. We are hoodwinking the American people in pretending there is a balanced budget, because there is not. If you look in this book of part of the budget, the historical tables, on page 111, we talk about what happens to the national debt of this country, the Federal debt of this country. The Federal debt in this budget is going up between $100 billion and $200 billion every year for the next 5 years. I personally think that a reasonable definition for a balanced budget is when we stop increasing the national debt. And the justification is, and it is not just the President, it has been Congress, too, that says, look, we are defining a balanced budget as everything that comes into budget. But everybody should understand what government is doing is overtaxing workers today because there is more money coming in in the Social Security tax than is needed to pay out immediately for benefits. And the Federal Government is taking that money, not only spending it for other social programs but they are taking that money and considering it is balancing the budget. That should not be the way, Mr. Speaker. We need to start being more honest with the American people. In this budget we should be looking at how we reduce the overall size of government and not, as suggested in this government, in this budget, that we have another $102 billion of taxes, or a total of $129 billion of taxes if you include the fee increases that are going to be put on the American people. We should not increase those taxes to expand government. We should put Social Security first. I agree with the President. Let us not expand government at a time that we have these huge challenges of saving Social Security and saving Medicare.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, a few months ago, I received a letter from one of my constituents, Betty Dowdling of Marshall, MI, urging me to continue working on preserving Social Security for future generations. ``It is most certainly not fair to leave big debts for our children and grandchildren,'' she wrote. She's exactly right. The good news is that more and more people are coming around to Betty's point of view. There has been a lot of talk in the last year about the future of Social Security. It is an issue that, in some way or another, affects every American, young and old. If you're currently working, you pay tax into Social Security--listed as FICA on your paycheck stub. And if you're retired, you probably regularly received a Social Security check. When President Franklin Roosevelt enacted Social Security in 1935, it was meant to provide modest assistance to the Nation's most elderly-- those over 65--paid for by the current work force. At that time, the system worked wonderfully. Most people never made it past the age of 61, and, as it worked out, about 42 workers contributed to the system for each retiree. Today, Social Security is the Nation's largest budget expenditure. Thanks to advancing technology and improved health care, the average life expectancy for Americans is no longer 61, but a record 74. Instead of 42 workers paying taxes to support each retiree, there are now just three workers for each retiree. Instead of the old 1 percent payroll tax enacted in 1935, the tax is now 12.4 percent. In just the past 26 years, in fact, the payroll taxes all workers pay has been hiked 36 times--that is on average more than once a year. As the so-called baby boom generation starts to retire at the turn of the century, the ratio between workers and retirees will continue to get smaller and the propensity to increase taxes will continue to be greater. As early as 2005--less than 8 years from now--the Social Security trust fund will start spending more than it takes in. That is unless we take some action now to change the system. Shortly, and with support from Democrats and Republicans, I intend to introduce a bill that would allow workers to use a portion of their current Social Security payroll tax for private investment. This bill would give you the option of investing your own earnings in stocks or bonds and with the guidance of a professional money manager, with potentially far greater returns that you would ever get in the current system. The average annual rate of return for stocks and bonds in the last 70 years has been 9 percent. That is almost five times the rate of return from Social Security. By allowing you to invest more of your money as you like--and your Social Security payroll tax after all is still your money--you could amass substantial savings. Senator Bob Kerrey, a Democrat from Nebraska who is also working on this problem, likes to tell the story about Gladys Holm. Ms. Holm was a secretary who in her whole life never earned more than $15,000 a year. When she died last year at 86, she was worth over $18 million. Her secret? She just put aside a little bit of money each month throughout her working life and put it in private investment. Through compound interest--and unusually wise investments--Gladys Holm had become a millionaire. Though that example is probably atypical, we could do similar things with our Social Security system. By allowing private investment--as England does with great success--every American could actually have a strong safety net when they reach old age. Even better, the money you would invest and save would be your own--not the Government's. It is yours to invest, yours to spend, yours to pass on to your kids and grandkids or charities or whatever else you like. Private investment means more power to you. If we enact these needed reforms, Social Security may finally create the retirement security President Franklin Roosevelt envisioned in 1935. This year, a Federal memorial opened in Washington honoring FDR. I think the better tribute to Roosevelt would be if we worked this year to preserve his most important legacy for his great-grandchildren, our great-grandchildren, and many generations to come.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, once in a while, a speech is made that really makes sense for America. Recently Jim Martin, president, 60 Plus Association, made one of these speeches. On Social Security's 62d anniversary, Jim talked about the importance of personalizing Social Security. Jim notes that the likely alternative to personalizing Social Security is a tax increase. Since 1971, there have been 36 Social Security tax increases. A Social Security tax increase does not make economic sense and more importantly it is not fair to working Americans. Jim Martin, representing seniors all over America, supports the introduction of my Social Security Solvency Act, personalizing Social Security by offering each worker his or her own personal retirement savings account. Thank you, Jim, for your thoughtful remarks. Personalizing Social Security: Unplugging the Third Rail (By James L. Martin) When I came to Washington as a newspaper reporter in 1962, John F. Kennedy was in the White House, Neal Armstrong had not yet walked on the moon, Strom Thurmond was a Democrat and the problems with Social Security were perceived by few, other than Barry Goldwater. So, today, August 14, 1997, on the 62d anniversary of Social Security, the 60 Plus Association becomes the first seniors group to publicly go on record to overhaul the system, releasing a paper it commissioned by economist Richard A. Hart, entitled ``Personalizing Social Security: Unplugging the Third Rail.'' Why did a senior citizens group decide to tackle the issue of Social Security reform? Let me answer by citing a question I'm asked often about the program signed into law by President Franklin Delano Roosevelt on August 14, 1935. The question is always the same, ``Jim, why get involved?'' After all, the theory goes, even if the current system is going bankrupt, ``your seniors are protected, so why bother with the uncertain future of this politically volatile issue?'' Believe me, it would be easy to take a head-in-the-sand approach as so many do, including, I'm sorry to say, other senior citizens groups. Unfortunately, this attitude leads to a false impression that seniors are ``greedy old geezers,'' a `gimme, gimme, gimme'' mentality which I hope to dispel. Seniors who built this country, in Depression and war time, through their blood, sweat and tears, deserve better. To help dispel that erroneous image, I harken back to some of the advice one particular senior citizen has given me, and still does--my favorite senior--my mom, my sainted mother, if you will, Mary L. Martin, who, in her eighties, still works part-time! Her advice is that seniors' most valued assets are not their social security, their retirement income or their pensions--although these are certainly near the top of their list--but in her opinion, seniors' most valuable assets are their children, their grandchildren and their great grandchildren. So that's why I decided to involve 60 Plus, seniors group responsibly trying to find a solution to the problem, for the sake of our children and our grandchildren. To put it bluntly, Heritage Foundation economist Dan Mitchell said, or perhaps it was another often quoted economist, Americans for Tax Reform's Peter Ferrara, who said: ``Security was a Ponzi scheme then. It's a Ponzi scheme now.'' But even a Ponzi scheme--borrowing from Peter to pay Paul--worked well in the beginning, not only for Carols Ponzi but for others, just as the so-called Social Security Ponzi scheme worked well for seniors. But there looms now a ``run on the Ponzi bank'' as the Baby Boomers prepare to retire. As Mr. Hart states in his paper, ``the Social Security retirement train is a collision course with demographics. Social Security's pay-as-you-go system, where the taxes of today's workers are transferred to today's retirees, leaves it particularly vulnerable to demographic trends. As Baby Boomers age, life expectancy is rising and birth rates are falling. As the Social Security train heads straight into a demographic wall,'' Mr. Hart continues, ``more and more Americans anticipate the oncoming wreck.'' Mr. Hart is right. More and more of us recognize the looming crisis. A recant poll said that a majority of Democrats, for the first time, acknowledged not only that there is a problem with the system, but a majority of Democrats now even favor privatization as a solution. Everybody universally agrees there's a problem. But a solution remains elusive. For example, President Clinton's Social Security Advisory Council has issued its long awaited report. This 13-member panel of experts readily agreed there is a problem but did they agree on a solution? Well, yes and no. They offered three solutions. It's not an exaggeration to say they split three ways from Sunday, six endorsing one solution, five another and two yet a third. Significantly, all three directly, or indirectly, advocated privatization. In 1983, President Reagan's Social Security Reform Commission came forth with its solution to keep the system solvent for, it said, at least another 75 years, well into the next century. That begs the question, why another Commission so soon in the 1990's, after the 1983 Commission? The answer is that the system is in more trouble than previously thought. The problem is twofold. One: The good news is that we seniors are living longer, due to medical advances and our own better health habits. Two: The bad news is that you younger generations have to pay. Of course, that's the way the system has always worked. But before there were more than 20 workers, not three, paying into the system for each beneficiary. One other fact that bears noting is that when first enacted, according to the actuarial tables, seniors died at about age 64, or as Mr. Hart so delicately phrases it, most workers were conveniently dead and buried before they could collect their benefits at age 65. As 60 Plus Honorary Chairman, former Indiana Congressman Roger Zion puts it, at a vigorous and robust 75, he has been ``statistically dead'' for 11 years. Now that seniors are living longer, that places further financial strains on the system. Clearly, a day of reckoning has come. The old fix of just raising taxes, some 51 times in 62 years, cannot continue. There's a limit. There have been half-hearted attempts in the past to address the problem, half-hearted because not many politicians want to be accused of touching the so-called third rail. You know the old song--Social Security is the third rail of politics, touch it and you die. Politicians have gotten away with this third rail scare tactic for too long, scaring seniors for political gain. Some of us recall the 1964 Barry Goldwater-Lyndon Johnson Presidential campaign when there was a TV commercial showing a giant pair of scissors cutting a Social Security card with a voice-over solemnly intoning that this would be the result if you voted for Goldwater. Another 1964 TV commercial also stated that a vote for Goldwater could result in U.S. soldiers being sent to fight and die in southeast Asia. Well, as one political wag put it, he ``voted for Barry and sure enough, U.S. soldiers were soon sent to fight and die in Vietnam.'' So, I would like to put politicians, regardless of party, on notice that seniors are tired of falsely being told their Social Security is going to be taken away. It's more likely that a meteorite will fall on the Social Security Administration building in Baltimore before a politician, of either party, would propose taking away Social Security. Let me point out how 60 Plus became engaged on this issue. A few years ago the Third Millennium, Generation X'ers in the 18-34 age group, announced the startling news that most X'ers believed more in UFOs (unidentified flying objects) than that the system would be around when they retired. I responded on a radio talk show that seniors are also aware that the system is headed for bankruptcy. Then I added, somewhat flippantly, perhaps, that seniors believe more in the second coming (has it been 20 years this week?) of Elvis Presley than in the system's future solvency and that seniors might also prefer changes. After a few call-ins and further discussion of UFOs and Elvis, I decided to poll senior citizens. Our poll to approximately 100,000 seniors found that, by a surprising 3- to-1 margin, seniors preferred a privatized system. We then commissioned a survey by pollster Frank Luntz, an excerpt of which is in the study we've released. The Luntz poll confirmed our 3-to-1 ratio. We were called by Insight Magazine, and we debated, in print, our counterpart at the American Association of Retired Persons, Horace Deets, in dueling 2000-word essays. If I could sum up each essay in one word, it would be: AARP-- taxation, 60 Plus--privatization. AARP favors the same old solution, tax increases, while 60 Plus looks for new solutions. Will privatization work? The privatization role model is the Chilean system. During the 1983 Social Security study, when Chile was mentioned as a solution, the status quo seekers dismissed their system as a new and unproven experiment. But, fast forward 15 years later and Chile now has an amazing track record of success. Now the status quo seekers try to demonize the word ``privatize,'' implying that you have to be a stock market expert or the big boys on Wall Street will fleece you. Nothing could be further from the truth. There are a lot of workers in Chile who can't play the stock market but who proudly walk around with a passport- sized book with their name on it, keeping track of their investments. That is one of the reasons we use the word ``personalize'' because the system would allow each and every individual to take personal control of his or her own financial destiny. Since 60 Plus is nonpartisan, we credit legislators from both parties for coming up with innovative ideas. One is Democratic Sen. Bob Kerrey of Nebraska, from whom we borrowed the word ``personalize.'' Another suggestion, by one of the Generation-X'ers, is to ``modernize'' the system. Many others on Capitol Hill deserve credit, including Republican Congressman Jim Kolbe of Arizona and Democratic Congressman Charlie Stenholm of Texas, co-chairs of a public pension reform caucus which now numbers more than 70 members of Congress, equally represented by both parties. Michigan Congressman Nick Smith has introduced legislation to address the problem, as have Reps. Mark Sanford of South Carolina, David McIntosh of Indiana, Mark Neumann of Wisconsin and John Porter of Illinois. Others safeguarding Social Security include House Ways and Means Committee Chairman Bill Archer of Texas and Subcommittee Chairmen, Reps. Bill Thomas of California, Dennis Hastert of Illinois and Jim Bunning of Kentucky. Surely, the latter, Jim Bunning, the big, burly Hall of Fame baseball pitcher--known as a fierce competitor in his playing days and now the father of nine and grandfather of 31 (at last count)--would be a formidable opponent for those who try to demagogue Social Security as they did in the 1980s when some Members of Congress courageously talked about reform in order to save it. More than two dozen countries in South America, Europe and Asia, have adopted, or are in the process of adopting, a Chilean-style system. Even socialist Sweden is going that route. And here, workers in three Texas counties, before a loophole in the law was closed, opted for privatization and their rate of return is making for a lot of serious discussion as they prepare for retirement. Moreover, a resolution recently passed both the House and Senate in Oregon asking the state to opt out of the Social Security system and create a separate retirement system for state workers. So the slight spark across the sky of the Chilean experiment has become a bright constellation. It's a success story that I believe, with all my heart and soul, can be a guide for our own troubled system. Incidentally, in the old days, the father of the Chilean plan, Dr. Jose Pinera, literally visited Washington in the dead of night because his untested plan was so controversial. But a few years ago, the Cato Institute gave a dinner in his honor and a number of Members of Congress allowed their names to be placed on the host committee. What a change in attitude. Of course, it was not lost on them that this former minister of labor was elected to office himself, with a major plank in his platform, his plan to privatize social security. Having read an article years ago by Ed Crane, President of the Cato Institute, about the social security problem, we started searching for solutions. We kept being referred back to the Cato Institute itself, which has taken a pioneering road on this issue for more than a dozen years. One name kept coming up, time and again. That name was Michael Tanner, Cato's Director of Health and Welfare Studies, and the author of several books on health and welfare reform. Mr. Tanner has worked on the Social Security issue extensively, to say the least. Spoken on it. Written on it. Debated on it, around the world often with Dr. Pinera at his side. That's why 60 Plus, particularly Roger Zion and I, are so pleased that Mr. Tanner has not only eloquently embraced this new plan Mr. Hart proposes, but has joined us at today's official release of the proposal, along with an equally strong endorsement by today's other featured speaker, Fund for a New Generation's Adam Dubitsky. Richard A. Hart takes up the challenge to find a solution in an insightful paper showing how Personal Retirement Accounts (PRAs) can assure both dignity and comfort for future generations of senior citizens. This paper, a variation on a theme advanced by others, should continue the dialogue on a system which urgently needs reform. To those who fear Social Security's ruin, wise seniors know that there is no Social Security Trust Fund. 60 Plus calls it the Social Security Bust Fund as surpluses are used for other government programs. As Democratic Senator Ernest Hollings of South Carolina has said, ``There is no trust. There is no fund.'' We need to alert people to keep at arm's length those politicians who spread fear among seniors, as we stand at a cross-roads to which direction Social Security reform should go. In the 60 Plus Association's opinion, some form of ``personalization'' remains the best and most feasible option. We must guarantee present retirees their benefits as part of a government promise to them, but we must also safeguard current generations paying into Social Security system so that the benefits will be there when they retire. On August 14, 1935, President Roosevelt signed into law the Social Security Act. On May 2, 1997, the FDR Memorial was opened here in Washington, D.C. The Social Security system helped seniors escape poverty, but we now know there are major problems facing future generations. What more lasting commemoration to FDR can we embrace than the adoption of a system which will save it for a new age, a new era, and a new population.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. I thank the gentleman for yielding me this time. Mr. Chairman, I think it would be good for all of us to face up to the fact that today we are dealing with a solution of disposing of one of the wastes of an industrialized society. In 1971, during the beginning of the Arab oil embargo, the Secretary of Agriculture asked me to be Director of Energy for USDA. Almost every morning at 6:30 a.m., we went over to the White House with Bill Simon and we talked about the problem. At that time we were importing about 50 percent of our energy needs. We came up with what we thought were wise ideas to deal with the problems. We started to subsidize the development of alternative fuels. We decided to start subsidizing such things as mass transportation to increase efficiency of energy in this country. And we started talking about the wisdom of expanding the production of nuclear energy. We also discussed what do we do with the waste generated by the production of energy by nuclear power. We talked about the possibility of burying it in the ocean. We actually talked about the possibility of putting it into outer space and keeping it in orbit. But instead there seemed to be no good solution, and nothing was accomplished. Over the years nuclear waste has continued to be stored outside the generating facilities where it occurs. None of the ways that we generate energy is benign. They all have serious problems. Most of our energy is generated by coal (56 percent). If the administration has their way at the Kyoto Conference, what we are going to do is imply that we should expand the generation of nuclear energy in order to decrease coal generated power. It is interesting to note that after our discussions in 1971 and 1972 of where to go on expanding nuclear energy production to be more self- sufficient in the United States, the following year, in 1973, a request by a utility company to build the last nuclear energy plant to be built was received. I would suggest that this country is never going to again develop another nuclear energy generating plant. The government promised the people of this country in 1982 that government would take the responsibility to get rid of the existing generated nuclear waste. In return utilities using nuclear power, through their customers would pay additional ``taxes'' and send it to Washington. Over the years those ratepayers have paid in an additional $13 billion. Now we are dealing with what the government promised to do. I compliment the gentleman from Michigan [Mr. Upton] for bringing this legislation to us. We are moving ahead. Eventually we are going to find other sources of energy in this country. But until then we have got to be responsible to make sure Washington keeps their promise. We have got to be responsible to develop the best possible ways to deal with nuclear waste disposal. It is much more logical at this time to put this waste in a centralized location rather than spread it over 38 States. Delays and cost overruns have created a national nuclear waste policy of stop-gap measures and ad hoc solutions instead of centralized, streamlined results. Today, highly radioactive waste sits scattered at over 80 different locations in 38 states. Fred Upton's bill will help establish an interim storage facility while work continues on the permanent solution--that way we can get nuclear waste away from vulnerable areas like the shores of Lake Michigan and the Chesapeake Bay.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, today in Budget Committee, we heard testimony about what we might do if there were more revenues coming into the Federal government than required under the existing caps for expenditures; in other words, if we reached a surplus sometime next year. That looks like it might be a possibility. We heard testimony that some of that money should go for infrastructure and more money for roads. We heard testimony that some of that money should go for tax cuts. We heard testimony that maybe it should simply go towards reducing the debt of this country that is now at $5.3 trillion. I would like to put in a suggestion, Mr. Speaker, that we use some of this money to start paying back the Social Security trust fund and start dealing with the huge unfunded liability that we are now faced with with this program of Social Security. The red chart that I have over here, the blue part shows the short- term blip where we will have more money coming in than is required to pay out existing benefits. The red portion of this chart that goes as much as taking $400 billion a year out of the general fund because there will not be enough in the Social Security taxes coming in shows the length of time of the seriousness of this unfunded liability. I think it deserves just a brief review of the program that started in 1935. In 1935, we started the Social Security program. It was started as a ``pay as you go'' program with existing workers paying in their taxes to pay for the benefits of existing retirees. At that time when we started, there were 47 workers paying in their taxes, at that time it was 2 percent on $3500, paying in their taxes to support each retiree. 47 of them. By 1950 that got down to about 16. Today there are only 3 workers working paying their Social Security taxes, 12.4 percent with the employee and the employer's share, supporting each retiree, a tremendous burden on those individuals that are working and paying in this huge tax. Let me just show Members, for example, something that should be very startling to everybody under 50 years old. This chart shows how long you are going to have to live after retirement in order to get back just the money that you and your employer put into the Social Security taxes. Not a good investment. If you happened to retire here in 1960, you could get back everything you and the employer had put in in 2 years. In 1995 it took 16 years if you retired in 1995. But if you are going to retire in 2005, 23 years, or 2015, you are going to have to live 26 years after retirement just to get back what you and your employer put into Social Security. It is time we took our heads out of the sand and started dealing with this huge problem. This shows the projected growth of the senior population in relation to the workers. The senior population goes up 73 percent between now and 2025. The working population only goes up 14 percent. Here is the chart that shows in 1950 we had 17 workers working to pay their taxes for each retiree, 3 today, 2 by 2029. I think this should be the startling chart that should make us be a wakeup call for all Members of Congress, because if we put this off, that means that the solutions are going to be more drastic later on, either in increasing taxes or reducing benefits. What we have done in the past is simply increased taxes every time there was a shortage of funds. Since 1971, we have increased the Social Security tax 36 times. We cannot do that. I have got a proposal that I will be introducing next week that solves the Social Security problem without any tax increase, without taking away any benefits for anybody 57 years old or older, and it starts dealing with this huge problem by allowing some private investment. What we do is slow down the increase in benefits for higher income recipients and the amount of money coming into the trust fund, we use some of that for private investment. So the worker has the ownership of some of that investment that they can invest in the stock market, the equity stocks, equity bonds, equity mutual funds to allow them to gain some of the magic of compounding interest, and they will actually retire with much more benefits than if they stayed on the existing Social Security system. Another call to arms I think is the fact that the workers today, 78 percent of those workers today pay more in Social Security tax than they do in the income tax. It is unfair, it is going to be generational warfare if we do not do something about it. I say, let us start immediately as we look towards this short-term blip of balancing the budget and start dealing with this huge problem of Social Security to make sure that the existing retirees in future generations have the kind of benefits that we promised them.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I wanted to talk about the IRS, our Tax Code, where we go from here, and some of the abuses. In my Somerset congressional church in Somerset, MI, a member gave me his dun notice from the IRS and I would like to share it with my colleagues and, Mr. Speaker, with the American people. It says, ``According to our records, you owe $49 on your income tax. Please pay the full amount, et cetera, by this date. If you have not paid, mail your check or money order. Tax withheld, zero; estimated tax payments, $6,347; total payments or credits, $7,379.83; total tax on return, $7,380.'' That is all complicated. Here is the line that makes the difference. ``Your underpaid tax, 17 cents. You owe a penalty of $49.35.'' The postage stamp to send out this dun notice is more than the 17 cents that IRS said he owed on his taxes. I think it is another example of why we have to reform the IRS and get rid of it as we know it. Mr. Speaker, I include for the Record the following: Request for Tax Payment According to our records, you owe $49.35 on your income tax. Please pay the full amount by Sep. 15, 1997. If you've already paid your tax in full or arranged for an installment agreement, please disregard this notice. If you haven't paid, mail your check or money order and tear-off stub from the last page of this notice. Make your check payable to Internal Revenue Service and write your Social Security number on it. If you can't pay in full, please call us to discuss payment. Tax Statement Payments and credits: Tax withheld.....................................................$.00 Estimated tax payments.......................................6,347.83 Other credits......................................................00 Other payments...............................................1,032.00

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I object to the vote on the ground that a quorum is not present and make the point of order that a quorum is not present.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, just according to the Heritage Foundation, phasing out subsidies will save $2.3 billion over 5 years.

Mr. SMITH of Michigan. Mr. Chairman, I rise to address the issue of corporate welfare. The Export-Import Bank subsidizes loans and loan guarantees to American exporters and it has cost hundreds of millions of dollars. The experts agree Ex-Im Bank should be abolished. The Congressional Budget Office makes the following observation: Ex- Im Bank has lost $8 billion on its operation, practically all in the last 15 years. ``Little evidence exists that the bank's credit assistance creates jobs.'' ``Providing subsidies to promote exports is contrary to the free market. It subsidizes big companies at the loss of small companies.'' The Heritage Foundation recommends that Congress close down the Export-Import Bank. Heritage further states, ``Subsidized exports promote the business interests of certain American businesses at the expense of other Americans.'' Mr. Chairman, I think it needs to be closed down. I do not think we can close it down all at once. It needs to be phased out, but let us alert ourselves to what is happening. We are subsidizing huge corporations at the expense of small business. Mr. Chairman, I rise to address the issue of corporate welfare. As we eliminate the fat from the Federal budget, we should recommit ourselves to making sure all projects and programs are closely examined--not just the politically easy ones. The Export-Import Bank [Eximbank] subsidizes loans and loan guarantees to American exporters. These corporate welfare subsidies have been appropriated $787 million for 1996. The experts agree; Eximbank should be abolished. The Congressional Budget Office makes the following observations: Eximbank ``has lost $8 billion on its operations, practically all in the last 15 years''; Little evidence exists that the bank's credit assistance creates jobs; Providing subsidies to promote exports is contrary to the free-market policies the United States advocates. The Congressional Research Service writes that: Most economists doubt that a nation can improve its welfare over the long run by subsidizing exports; At the national level, subsidized exports financing merely shifts production among sectors within the economy, rather than adding to the overall level of economic activity; Export financing ``subsidizes foreign consumption at the expense of the domestic economy''; Subsidizing financing ``will not raise permanently the level of employment in the economy . . . The Heritage Foundation recommends Congress close down the Export- Import Bank. Heritage further states: Subsidized exports promote the business interests of certain American businesses at the expense of other Americans; Little evidence exists to demonstrate that subsidized export promotion creates jobs--at least net of the jobs lost due to taxpayer financing and the diversion of U.S. resources in to government-favored export activities at the expense of non-subsidized business. According to Heritage, phasing out subsidies will save 2.3 billion over 5 years. The director of regulatory studies at the Cato Institute calls the subsidy activity of Eximbank ``corporate pork.'' He stated, ``Even in the face of unfair international competition, the U.S. government doesn't have a right to use tax dollars to match equally stupid subsidies.'' Eximbank's financial statements show that the Bank has paid $3.8 billion in claims from 1980-94. These dollars paid off commercial banks who couldn't collect from foreign borrowers. American taxpayers took the hit. Exports financed by Eximbank actually hurt competitive U.S. exporters not selected for subsidies. The Bank chooses winners and losers in the economy. The only winners are selected foreign consumers and selected U.S. corporations. The Eximbank is a prime example of corporate welfare. The majority of Eximbank subsidies go to Fortune 500 companies that could easily afford financing from commercial banks: Boeing--over $2 billion worth of loan guarantees; McDonnell Douglas--$647 million; Westinghouse Electric-- $492 million; General Electric--$381 million; and At&T--$371 million. To raise funds for its lending and guarantee programs, Eximbank puts additional pressure on Treasury borrowing, driving up interest rates for private borrowers. That's all of us. From a corner barbershop wanting to expand to a young family trying to finance their first home. We all pay the price. Sadly, there's more. Eximbank appears to have wasted money on frivolous items as well. After 50 years with the same agency logo, Eximbank decided it needed a new one. Designing a new logo--including creation, copyright search, and the redesign of Bank brochures and literature--cost nearly $100,000 last year. And in 1993, Eximbank spent $30,000 to train 20 employees how to speak in public--including chairman Kenneth Brody. An outside consultant was paid $3,000 a day for this task. Mr. Chairman, I believe Government shouldn't choose winners in the economy. With Eximbank, the big winners are foreign consumers, large corporations, and professional speech coaches. The losers are American taxpayers. Mr. Chairman, it's time to derail this gravy train.

Mr. SMITH of Michigan. Mr. Chairman, will the gentleman yield?

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, on rollcall No. 431. I was detained presiding over a Budget Committee meeting on Social Security. Had I been present, I would have voted ``yes.'' personal explanation

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, I move to strike the requisite number of words. I would submit a couple of thoughts, Mr. Chairman. One is that we already have national tests. We have the Assessment of Education Progress test, the National Assessment of Education Progress test, the SAT, the ACT, the Ohio Test of Basic Skills, the California Achievement Test, the Metropolitan Achievement Test, to name some of those national tests. In addition, we have many State and District tests. The danger is the President's suggestion that the Department of Education design the test. It has been said before, those that design the test, design the curriculum. Allow me to cite one example. One area where some of us disagree for 4th graders might be that they all should be computer literate. So imagine that a test measures computer literacy among 4th graders in their reading test. Naturally, if a school wants to perform well, they are going to be forced to develop that curriculum that is mandated by a national test. So imagine many other areas that Washington thinks is important for testing but local school communities disagree. Those that design the test, design the curriculum and that decision should be left up to parents and school boards and teachers in the local community. I would suggest that in this bill, section 306 on page 97, the language simplys say that the National Academy of Science is going to evaluate and submit a report. They are going to evaluate: One, technical quality; two, adequacy of administration; three, reliability; four, validity of contractor's design; and five, degree to which the test can be expected to provide valid and useful information. And then the language on page 76, line 21, implies that after that is submitted, the Department of Education shall proceed to administer final version of that test. Again, I submit that we do not need bureaucrats in Washington designing the curriculum that can be best judged and decided by local communities and local parents and local school boards.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, on rollcall No. 387, I was unavoidably detained at a Social Security meeting away from the Capitol. Had I been present, I would have voted ``nay.'' The CHAIRMAN pro tempore [Mr. LaHood]. The gentleman from Illinois [Mr. Hastert] has 18\1/2\ minutes remaining, and the gentlewoman from California [Ms. Pelosi] has 25 minutes remaining. Following debate on this amendment, we will vote on the amendment of the gentleman from Illinois [Mr. Hastert], followed by votes on two other amendments that were postponed.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. I thank the gentleman for yielding to me, Mr. Speaker. I want to talk straightforwardly about what I think is one of the greatest problems facing this country, and that is the fact that Social Security is going broke. Mr. Speaker, we are now looking at a situation where there is going to be less money coming in from the taxes charged to workers than the amount of the dollars going out in benefit payments. When we started this program in 1935, it was started as a pay-as-you- go program that cannot be sustained. It was started as a program charging workers a 1-percent tax, and then paying a very meager, a very small benefit to retirees once they reached the age of 65. However, most retirees at that time did not reach the age of 65. The average age of death in 1935 was 61 years old. That meant that most people never got any Social Security benefits, but simply paid into it. We have now developed, with this pay-as-you-go problem, where we have constantly solved the shortage of funds to pay benefits by increasing taxes. So what we have done, since 1971, we have increased the taxes, Social Security taxes, on workers 36 times, more often than once a year. We are going to end up with generational warfare. We cannot continue to make workers today pay more and more money in to pay for the benefits of existing retirees. When I go to my town hall meetings in Jackson and Battle Creek and in Hillsdale and Adrian, people say, look, if you would keep the Government's cotton-picking hands out of the money in the trust fund, we would be all right. But let me tell the Members how much money is in that trust fund, and how long it would last. The trust fund only uses the surpluses coming in in Social Security taxes. In other words, when there is money left over after benefits are paid out, then it goes into the trust fund. Now the trust fund has roughly $600 billion of IOU's. Even if the Government came up with the money to pay back that $600 billion, it would not last 2 years. It would last less than 2 years. So that is not the solution, but it is part of the solution. I think what we have to face up to is that this is a tremendous political challenge. There are only two ways, or a combination of the two, to save Social Security and keep it solvent. That is to increase the revenues coming in, or reduce the benefits going out. The longer we delay, the longer we put off coming up with a solution, the more drastic that solution is going to be. Dorcas Hardy, a former Commissioner for Social Security, estimates that we are going to have less money than is needed to pay benefits, as early as 2005. The official date according to the actuary at the Social Security Administration is probably going to be closer to 2011 or 2012, but it is still a huge problem. When we started back in the 1940's, what we had is 42 people working, paying in their Social Security taxes, to come up with the money for each retiree. By 1950, we got down to 17 workers working and paying in their taxes to support each retiree. Today, Mr. Speaker, guess how many people are working today, paying in their taxes, to support each retiree? Three. The estimate now is that by 2027 there will only be two workers working and paying in their taxes to support each retiree. There need to be some changes. We need to face up to it. It should not be a commission. We have had many commissions. Ned Gramlich, who I have known for years, from the University of Michigan, of course led the President's effort 2 years ago with his commission, looking at what we should do with Social Security. They could not agree. A majority of that commission could not agree on any one solution, so what they brought back was three different solutions. I asked Ned when we were in a Social Security forum together if he thought it was reasonable to appoint yet another commission, and he rolled his eyes back and said, absolutely not. We have had that. We have had Ned's commission, we have had the Kerrey commission, we have had White House studies, we have had congressional studies. What we need to do is have a Congress that is willing to face up to a very serious problem, and come up with some solutions that are going to keep Social Security solvent. When I first came to Congress 4\1/2\ years ago I introduced legislation, a Social Security bill, to help keep Social Security solvent. Last year after working for a couple of years trying to refine a long-lasting solution, I introduced another bill. That bill and the bill that we will be introducing in the next several weeks did not affect existing retirees. In fact, it did not affect anybody over 58 years old. But it made a lot of modest changes, plus what we are doing in that legislation is allowing workers of this country to start their own personal retirement savings accounts, and gain from that personal ownership. Unlike today's fixed pay-outs for Social Security, if you happen to die before you reach the retirement age, you do not get anything. Under the personal retirement savings concept, that is your money. It is your account. It becomes part of your estate. It is what we need to move ahead on. One reason that all three proposals produced by Ned Gramlich's and the Social Security commission said that privatization and private investment has to be part of the solution is because Social Security is not even hardly breaking even today. The money that is actually paid on these IOU's in the Social Security trust fund only brings in a real return of 2.3 percent. And when you look at index bonds or index stocks for a long time, for the last 50 years, they have averaged 8.5 percent or the potential of bringing in much more money. Opening the doors to private investment as part of the solution is reasonable and we have to proceed with it. Countries around the world are leading the United States. Mr. Speaker, in conclusion, I think there are many legislators that are very nervous about the fact that senior groups are very strong politically, and many senior groups are very nervous that some of their benefits are going to be taken away. But more and more senior groups today realize that something needs to be done with Social Security if we are going to keep it solvent. My bill is the only bill that has been introduced in the House that keeps Social Security solvent for the next 75 years. Mr. Speaker, I ask my colleagues to join me in studying this and trying to perfect it. But it is an idea. We need to move ahead. We need to figure out improvements for this kind of legislation so that we can solve one of the huge problems facing this country. Mr. Speaker, I thank the gentleman from California [Mr. Rohrabacher] very much for yielding.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I would like to talk about what I consider one mistake in our balanced budget agreement. I would start by asking the question: What tax has this Government increased 36 times since 1971? The answer is the Social Security tax. More often than once a year we have been increasing the Social Security tax on American workers. It needs explanation. When Congress enacted the Social Security law in 1935, it was financed by a pay-as- you-go program, where existing workers pay in their tax to support the benefits of existing retirees. It has always been so. As there are fewer and fewer workers contributing their taxes to more and more retirees, Social Security keeps running short of money, and the tax is increased. It is not a sustainable program. That is why it is a mistake for this Congress, for this Government, for this President not to start working on long-term solutions for Social Security. Dorcas Hardy, a former Commissioner, says we are going to be short again of enough money coming in from those workers as early as 2005. Last year I introduced the Social Security Solvency Act that holds seniors harmless and does not increase taxes on workers. The Social Security Administration predicts that the legislation would keep the System solvent for at least the next 75 years. Let us do something about it Social Security.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, I move to strike the last word. Mr. Chairman, the parliamentarian has informed me that my amendment No. 45 to the Labor-HHS appropriation bill that addresses the substance abuse and mental health funding formula in all the States is not in order but, Mr. Chairman, this issue needs to be addressed. The Substance Abuse and Mental Health Service Administration is currently obligated under law to revise the formula that allocates money under the Substance Abuse Prevention and Treatment Program as well as the Community Mental Health Services block grants. My own State of Michigan will lose over 19 percent in one year of its funding for this 1998 program. Many other States will lose large amounts as well next year. The department has suggested that an alternative to a 1-year drastic change is that Congress provide for a phasein.

Mr. SMITH of Michigan. I thank the gentleman. I call to my colleagues' attention that the Department of Health and Human Services agrees that States should not have major disruption. The National Association of State Alcohol and Drug Abuse Directors have just passed a resolution saying that we should use the current funding base. I thank the chairman of the committee and ranking member and hope it will be an issue of discussion in conference. Amendment Offered by Mr. Norwood

Mr. SMITH of Michigan. I yield to the gentleman from Wisconsin.