Nick Smith

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, I say to the gentleman from Virginia, I would like to align myself with his comments. I think some of us have different philosophies of what should be included in the fine points of this agreement. Just think for a minute where we were 3 years ago. Three years ago we had half of this Chamber saying that it is reasonable to borrow more money for ``investment spending.'' It is reasonable to increase taxes to assure Government services. What has happened in the last 3 years is we have totally reframed the debate here in Washington, DC. Almost everybody now is saying, yes, it is reasonable to stop borrowing, to stop spending the money that our kids and our grandkids have not even earned yet. It was only 2 years and four months ago that the President sent us a budget that had a $200 billion deficit, not only for the next year but as far into the future as we could see. I think we all need to remind ourselves what our real goals are--not reelection, not popularity, but what is going to be good for the working men and women and the families of America. But I think when some start suggesting that the tax increase of 1993 is the reason the deficit has gone down, it is misleading the American people and it is going against most economic philosophy. In spite of that tax increase that deters economic expansion, the businesses of this country have forged ahead and, anticipating the Republican effort to balance the budget have driven ahead to expand economic activity and, ultimately, to expand the revenues coming into this country. Just for a moment look at this chart. The blue line represents increased revenues from an expanding economy. The red line represents spending outlays. It is obvious we have not been as frugal as we should have been in cutting down on spending and cutting down on waste in the Federal Government. The blue line is inflation. So, Mr. Chairman, let us rejoice in this step forward of this budget resolution, in doing what is good for the American working family.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, on rollcall No. 133, I was unavoidably detained. Had I been present, I would have voted ``yes.'' personal explanation Ms. Velazquez. Mr. Chairman, I was unavoidably detained during rollcall vote No. 133, the Diaz-Balart/Meek amendment. Had I been present, I would have voted ``yes.'' personal explanation

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, on rollcall No. 126, I had a malfunction of my pager. Had I been present, I would have voted ``no.''

Mr. SMITH of Michigan

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

Mr. SMITH of Michigan. Mr. Chairman, it is not a question that does not seem to me as allowing people to have those pets. What it is is a mandate that every landlord has to allow regardless of the facility, regardless of the conditions, that those tenants have a pet if they want a pet. So the latitude of describing that pet is also broad. I would also like to call to the attention of my colleague, the gentleman from Massachusetts [Mr. Kennedy], that I did not intend to call for a Record rollcall vote on this. I think there is a feeling that if you love a pet, somehow you are going to say there should be a Federal mandate that should require the landlords to allow pets.

Mr. SMITH of Michigan. Mr. Chairman, this is at the very least a sensitive amendment. I think the question is not whether or not we support pets. The question is: Should we pass a new Federal law that mandates an extension and expansion of existing law that pets be allowed in all subsidized housing? Currently the law allows pets for individuals that are senior citizens and individuals that are disabled citizens, and the bill before us expands that to every renter in every subsidized housing. I think the question before us is should the Federal Government pass a law making it less attractive for local landlords to participate in housing programs for low income to the extent that our mandates under Federal law limit the number of people willing to pursue our goal of providing affordable housing for individuals. Again, I would remind my colleagues that the bill before us expands current law tenfold. My proposed amendment, in effect, continues the existing law that pets be allowed for senior citizens and for the disabled. It actually expands the number of seniors and disabled that would be allowed to have pets. I am suggesting to my colleagues that we should not so drastically expand present law with strong arm mandates of Federal Government. Applying so many regulations and so many rules, discourage many local landlords from participating in a program to provide low-income housing. We acknowledge that it is advisable to allow pet ownership in housing projects, but that decision deserves local input. In the private sector, pets are often allowed. It is reasonable to assume that all of those affordable housing facilities that can accommodate pets will accommodate pets because it is reasonable, it is often healthful and it is the desire of those renters to have that kind of freedom. So Mr. Chairman, I would hope that we consider passing legislation that leaves the law substantially as it is and does not so greatly expand that law with more mandates from Washington.

Mr. SMITH of Michigan. Mr. Chairman, I ask unanimous consent that the changes at the desk to that amendment be accepted as the amendment under consideration.

Mr. SMITH of Michigan. Mr. Chairman, I offer an amendment.

Mr. SMITH of Michigan. I thank the gentleman. Amendment No. 54 Offered by Mr. Smith of Michigan

Mr. SMITH of Michigan. If I can reclaim my time for a question, is there a timetable? Does the gentleman plan to bring out a bill dealing with this problem?

Mr. SMITH of Michigan. I yield to the gentleman from New York.

Mr. SMITH of Michigan. Mr. Chairman, I move to strike the last word to join in a colloquy with the gentleman from New York [Mr. Lazio], the chairman. Mr. Chairman, I am very concerned about where we go on section 8 project housing. As we have reviewed this issue in the Committee on the Budget over the last several years, it probably presents one of the toughest issues facing Congress. Left unchecked, section 8 contracts will deplete significantly our HUD funds. I did take to the desk an amendment that would have limited subsidies to section 8 housing contracts that were in excess of 120 percent of the fair market rental rates. The fact is that we need legislation that will end excessive taxpayer subsidies to landlords and bring back into line these excessive subsidies of rents. We have made many contractors and landlords millionaires while shortchanging low income renters and the American taxpayer. We need legislation that will end excessive taxpayer subsidies to landlords and bring back into line excessive subsidized rents. Out-of-wack rents that Uncle Sam pays must be brought into line with what everyone else pays. These out-of-wack rents for section 8 assisted housing, often are more than twice as high as fair market rents. In Las Vegas, the average federally assisted apartment is $820, while the private market rate is $380. Section 8 project owners have hit the jackpot here. In Pittsburgh, the comparison is $773 to $397. In Detroit, it's $751 to $479. Expiring subsidy contracts on FHA insured section 8 project-based properties is one of the toughest issues facing Congress. Let unchecked section 8 contracts will deplete all HUD funds for affordable housing and community development in a few years. Equally important is the portfolio restructuring--thousands of families are at risk of losing affordable housing. This year a record number of project-based and tenant-based section 8 contracts will expire. And between 1998 and 2002 section 8 budget authority will need to almost double from $9.2 billion to $18.1 billion. By 2002, approximately 2.7 million units or over 5 million low-income individuals will be affected. portfolio restructuring The Congress and the administration are working together to reform section 8 FHA insured housing units. Unfortunately, the value of many properties in the insured section 8 portfolio is lower than the actual mortgages on the properties. Four objectives should be paramount-- First, reducing the Federal Government's exposure to default, waste, and other expenses; Second, restructuring should be fair to the taxpayer; Third, insuring peace of mind and security for current residents of section 8 housing; and Fourth, ending rent subsidies that are higher than fair market value. legislative action needed I have suggested limiting Federal payments to 120 percent of fair market rents and giving HUD authority to renegotiate section 8 mortgages. We need to provide tax provisions that allow section 8 owners to not be penalized, and insure that owners agree in exchange to preserve affordable units for low-income families. I would just like to inquire of the chairman of what he sees as the progress of legislation dealing with this issue, since the bill before us today does not deal with that issue.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, the budget agreement that has been pretty much accomplished is nobody's gift to the conservatives or the liberals. It has good news and bad news. We now have a Federal Government that has become very big, very large, very intrusive--taxing too much and borrowing too much. This budget agreement moves us in the right direction of reducing some of those huge tax increases of 1990 and 1991 and reducing spending over the long run. I questioned the analysis of the Congressional Budget Office in coming up with a last-minute $225 billion. But in talking to CBO, they have predicted ups and downs, some recession in the economy, but the average estimated increase in the GDP over the next 5 years is 2.1 percent. Probably not overoptimistic. I see some of the bad news as provisions in the agreement that only allows for a net tax reduction of $85 billion over the next five years. However for the good news, there will be a tax decrease, a tax cut, over the next 10 years of $250 billion. Cut wasteful Government spending and we'll be moving in the right direction.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. If the gentleman will continue to yield, Mr. Chairman, if the gentleman is not comfortable, I would suggest maybe we move to exclude it, but let me try once more at the explanation. This is under ``Definitions,'' and it starts on page 15, line 18, of what resident programs are. It is a definition of ``resident program.'' The only other area that ``resident programs'' is referenced is in a funding provision that says ``Included in funding may be these different functions.''

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

Mr. SMITH of Michigan. Mr. Chairman, I thank my colleagues for supporting and passing my amendment No. 38 in yesterday's Journal that promotes home ownership. Conventional wisdom in Washington is that low-income families can't afford to own their own homes. Habitat for Humanity and other programs have shown that even families earning $10,000, $15,000, or $20,000 per year can own their own homes. America's families, including those with low incomes, should have the chance to achieve the American Dream. My amendment encourages public housing agencies to provide assistance for low-income families desiring homeownership. It also directs agencies to establish annual goals for additional homeownership units. This is not a government giveaway program. Each new homeowner would have to save a downpayment, demonstrate the responsibility to be a homeowner, and make timely payments. Housing agencies would work with the community--banks, mortgage originators, realtors, religious institutions, charities, and government agencies--to provide these opportunities. Owning property and accumulating net worth empowers and motivates the poor. It is a possibility that should be held out to low-income workers who are disciplined and industrious. For the specific language of the amendment, see the Congressional Record of April 30 or contact my office at 225-6276.

Mr. SMITH of Michigan. Mr. Chairman, the language currently does not require the housing authority to perform these functions. However, a lot of my housing authorities feel that the existing language does require them to provide these kinds of services and counseling, so as we talked to the gentleman's counsel and our counsel, they were comfortable with making that more specific, that the PHA's do not have to provide that function.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Chairman, I thank the gentleman for yielding me this time. Michigan has been aggressively pursuing better rules and regulations and laws under the guidance of our Lt. Gov. Connie Binsfeld, to work in this area of making adoption laws more practical, more realistic, and more helpful for those children that need it. I would like to commend my colleague from Michigan, Mr. Camp, for working and passing this exceptional legislation that is going to help not only the State of Michigan but all of our States and all of our children in this country.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, today the trustees of Medicare issued their report and also the trustees of Social Security issued their report. I think this is another indication that this country, has got to do something, if we are going to keep Social Security solvent, if we are going to keep Social Security available to not only existing retirees, but future retirees. In the report, the trustees estimated that the time that the Social Security Trust Fund was going to run out of money, the time that there was going to be less money coming in in taxes than was required for benefit payout would be 2012. And they also calculated a slight increase in their estimate of the tax increases necessary to keep Social Security solvent. One year ago, they estimated that it would take a tax increase of 2.19 percent of payroll. This year they are estimating that it is going to take a tax increase of 2.23 percent of payroll, slightly a worse condition. However, there is a couple of assumptions that the Social Security trustees used to come up with this estimate. One is they calculated that CPI would be one-half of 1 percent less than their estimates of a year ago. The second assumption was that real interest rates would increase and therefore, the interest paid from the general fund to the Social Security Trust Fund on the Government securities in the fund would actually increase. What we have to face up to, Mr. Speaker, is the fact that when there is less money coming in than is required for payout, somehow Congress and the U.S. Government is going to have to come up with the money to pay back the money borrowed from the trust fund. How do they do it? How would they come up with these billions of dollars. They have several options. One is to cut spending in other programs. One is to increase taxes on existing workers and say, in effect, look, what we borrowed from you we are going to pay back by increasing your taxes and make you pay this additional sum in. Let me just give my colleagues a couple examples of how much the general fund is going to have to come up with to continue to pay the benefits that are now promised under Social Security. In the year 2020, for example, the general fund is going to have to pay to Social Security $219 billion in order to come up with the money necessary for promised benefits. Mr. Speaker, Members of Congress, the President, politicians are going to have to take their heads out of the sand. They are going to have to face up to the problem that this Ponzi game of Social Security cannot maintain itself, and we need to take immediate action. The suggestion of the gentleman from Wisconsin [Mr. Neumann] that has the support of a lot of us that say at the very least, let us stop Government from reaching into the Social Security Trust Fund and then using that money for other program payments. The long-range solution will be, I hope, similar to the bill that I have introduced that is now scored by the Social Security Administration to keep Social Security solvent for the next 75 years. The bottom line is we have to pay attention to it. The longer we put it off, the more drastic the solutions will have to be.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, today, I would like to recognize the Coldwater Chapter of the Order of the Eastern Star [OES]. This group has contributed to the Branch County community in countless ways. Just one of their notable contributions was hosting a welcome home reception for returning gulf war soldiers, including parades around the county and providing food for all of the veterans and their families. OES also provides generous scholarships to area students every year. These are just a few of the shining examples of the organization's dedication to the betterment of south central Michigan. While it's difficult to surmise all of OES's contributions because of their belief in anonymous charity, the group's existence has been an enormous benefit to the community. Today, I would like to take the opportunity to do more than just recognize the Coldwater Chapter of the OES for their philanthropic works, I would also like to congratulate them as they celebrate 130 years of existence. It was in 1867 that the first members of the Order of the Eastern Star, Coldwater Chapter No. 1, began official meetings in Branch County. It is now the oldest surviving chapter in the United States, having maintained its traditions since its birth. The Coldwater Chapter of OES has given years of priceless assistance to Branch County, MI, and it deserves our laurels. Their dedication and selflessness is truly an honor to the State of Michigan and the national Order of the Eastern Star.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, just frustrated for the last several days, when I have heard Members from the other side of the aisle, the Democrats, suggest to the Republicans, why are you not doing this, why are you not passing campaign finance reform? Why are you not helping this group, or why are you not doing this for those people? I would like to remind everybody, Mr. Speaker, that the Democrats have controlled this Chamber for the last 40 years, ample opportunity, ample time to deal with some of the problems that they are so ready now to stand up and criticize Republicans for not moving faster. I cannot help but think of the welfare reform so long overdue, where the U.S. Government has in effect said to young women in this country, if you get pregnant, we are going to do these things for you. Can you imagine, Mr. Speaker, anybody going to their own young daughter and saying, I want to talk about the possibility of you getting pregnant and, if you get pregnant, we are going to increase your allowance by $500? We are going to give you a food allowance. We would never say something like that to our own kids. Yet as a society, we have been saying that. Nothing happened to change welfare until the last 2 years when Republicans, for the first time in 40 years, gained a majority in this House, in this chamber, and decided, look, enough is enough. We are sending the wrong signals. If we want to get back to an America that rewards those people that work hard, that save, that try, then we are going to have to make some changes of where we have been going for the last 40 years. That means changing a complicated tax system. We now have a Tax Code where special interest lobbyists have been coming in over these past 40 years and getting favoritism for their particular clients. So now we have a Tax Code that is so complicated, that is so unfair that everybody agrees that it needs changing. Yet it has not been changed. And now what we are saying on this side of the aisle, and we are gaining support from the Democrats, is that we need to make some basic changes in our tax code to make it flatter, to make it fairer. I would like everybody to guess how many people now work for the IRS, snooping around our different tax filings to see what they can find out. Luckily this week we passed a bill to say, no more snooping for IRS agents. Sometimes we question what is happening with immigration. If you compare the number of people hired for immigration, something around 14 or 16,000, I think, with the 115,000 IRS agents that we employ to go over taxes, to do our auditing, saying that they have to have this kind of power because they are afraid the American people might cheat if they are not threatened with an audit, it has got to be our goal to get rid of the IRS as we know it. Mr. Speaker, I would urge all Members of this Chamber to look at what has been accomplished over the last 40 years and what has not been accomplished. And even though Republicans might not be passing as many bills right now as we did 2 years ago, I think it needs to be clear that we are for changing this Tax Code. We are for doing away with as much of the death tax penalty as we can, to do away with that estate tax or at least increase the exemption, to do away with our Tax Code that discourages savings and investment. We have the greatest penalty, Mr. Speaker, we have the greatest penalty against businesses that decide to buy new tools and machinery. So we penalize savings and we penalize investment. We need to change that. We are moving steadily ahead to do some of the things that should have been done much earlier than this session or last session.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I think since tax filing date to pay our income taxes in the United States is next Tuesday, April 15, it is an appropriate time to talk about how big do the American people and the American workers think Government should be and how much of their money that they have earned do they think should go to pay for government. In the last several years, I have been concerned about Republican candidates and Democrat candidates running for Congress, running for the Presidency, that suggest somehow that Government can do great things for us; that Government can increase our standard of living; that Government can give us better jobs. I would suggest, Mr. Speaker, that Government and what it can do to increase our wages and increase our standard of living is much overbloated from the mouths of politicians. If Government could actually pass laws or do something to increase wages, increase the standard of living, would not every Government in the world pass those kind of laws? The fact is that what we have and what we can get, and the amount we earn and the kind of community we live in, is pretty much up to our individual selves and collectively within that community, and it is dependent on whether or not we can produce a product that other people want to buy around the world and we can produce it at a competitive price. So we are looking to produce a quality product at a competitive price that other people in the world and in this country want to purchase. Let me suggest two mistakes I think we have been making to accomplish that kind of goal in order to increase our take-home pay and have more time to spend with our families and do a better job in our competitive relation with other countries around the world. Let me give what I consider bad news over the last 10 years. The productivity; that is, the efficiency of the way we produce products, the productivity in the United States has been increasing at a slower rate than other industrialized countries around the world. Part of the reason is that we discourage savings and investment. So at this tax time of year, I would humbly suggest that one thing we want to do is change our Tax Code not only to make it simpler and more fair, but we have to do that because the special interest lobbyists have really ruined our current Tax Code and given too much favoritism to their clients. What we want to do is encourage investment, encourage savings, reward the people that are trying, that are working instead of what we do now. Let me give a couple of examples. Our penalty on a business that buys a new piece of equipment or new machinery to increase the efficiency and productivity in that particular job site, we penalize it in our Tax Code more than any of the other G-7 countries. I think a lot of people do not think about it, but what we do to a business is we say, look, if you are going to buy the more efficient equipment and the more efficient machinery to increase the productivity of your workers, to increase their pay, this is how we penalize you. We say that you have to put it on a depreciation schedule and we make them depreciate it over the next 3, 5, 10, 15 years. What happens when they buy that equipment and have to wait that long to deduct it as a business expense on their taxes is inflation eats up the value of that deduction. So a lot of us have been trying to change that. And it seems to me on the Neutral Cost Recovery bill that I have introduced is that we simply should say to a business, look, if you are willing to go out on the limb and put better tools, better equipment, put a better facility there for the people that work in your company and you make that purchase, you can deduct it as a business expense or, at the very least, what you do not deduct as an expense in the year of purchase you can add an inflation factor to it so when you do depreciate it on that depreciation schedule it is adjusted for inflation in the time value of money. If I were to take a vote in this auditorium, Mr. Speaker, of how much individuals thought they should pay in taxes, how many cents out of every dollar they earn they believe is reasonable to pay in taxes, my guess is most people would come up with around 25 percent of what I earn is reasonable. Well, the average in the United States is a little over 41 cents. On the average, the average worker in the United States now pays 41 cents out of every dollar they earn in taxes at the local, State, and national level. I would just suggest that during this time of year, when we are concerned about how much taxes we are paying, everybody should look at their end of the week or end of every 2-week check and look at the deductions on that check. When you fill out your 1040 and your tax forms, look at that bottom line. We do not pay much attention to it because most of us have it automatically withheld from our paychecks, and so we never see it. And so there are a lot of people that have said, ``Jeez, I got a tax refund.'' But I think we need to remind ourselves that we are paying thousands and thousands of dollars in to run government. When you pay that money in, how do you make sure you are getting your buck's worth? How do we make sure we are getting our bang for the buck? Let me tell you a dangerous situation that I have seen happening in my last 16 years in politics, this is my 5th year in the U.S. Congress, and I am concerned because I see Members of Congress tend to increase their chances to get reelected if they promise more pork-barrel projects, if they go home and promise more social programs, if they promise to do more things for the American people and the people in their particular congressional district, or U.S. Senate district in their State. They get on television if they take home those pork-barrel projects, cutting the yellow ribbon and people say, ``Boy, this guy is really good, he's bringing me something.'' Let me tell you something about pork-barrel projects. If you take home as a Member of Congress pork to your district, you can bet your life that you are also voting for everybody else's pork. That is one of the problems of us running deeper and deeper into debt and taxing more and spending more. Those individuals that promise to do more social programs for people. The problem is, is that you are paying for it. Jefferson said that it is one of the greatest dangers of a democracy to have people that can vote themselves more benefits. But the problem is, Government has no money. The only way we come up with money is to tax the American people and reach into their pockets, reach into what their hard-earned dollar is, to take it and to decide down here in Washington what we want to spend. Right now, the annual deficit is what we overspend, the amount that we overspend in any 1 year above and beyond the revenue coming into the Federal Government is called the deficit. If you add all those deficits up year to year, then you end up with the Federal debt. The Federal debt is now about $5.2 trillion. A lot of money. Let me tell you, though, what overpromising has done. Overpromising on Medicare, the economists, the actuaries, now estimate that the unfunded liability, the actuarial debt of Medicare is approximately $9 trillion. That means you would have to take $9 trillion and put it into the Medicare pot right now if it was going to support that program and keep it solvent for the next 75 years. Let me talk about Social Security, and I am going to talk about Social Security a little more with the rest of my time, Mr. Speaker, because I think that is something that is really coming down very quickly, is becoming insolvent. Social Security now has an unfunded liability of approximately $7 trillion. In other words, we have promised more than we can deliver in Social Security. Let me run through some charts. This first chart shows the pie of the expenditures of the United States. The piece of pie up in front of that chart represents Social Security. That takes 22 percent of the Federal budget. Social Security, Medicare, other entitlement programs, the welfare program, the food stamp program, the 15 percent of the budget that goes to pay the interest on the public debt and the other entitlements use up essentially all of the Federal spending budget except for the discretionary programs. The only pursestrings that Congress now controls are those discretionary spending. If you take defense out, defense uses 17 percent of the total budget. What is interesting, the hawks and the doves, the Republicans and Democrats, conservatives and liberals, almost never disagree more than a plus or minus 8 percent on what should go into defense spending. So that leaves 12 appropriation bills that this body, the U.S. House of Representatives, has control of, along with the U.S. Senate and those are the 12 appropriation bills that use up the other 17 percent of this total budget pie. That is all we have control of. What Republicans did 2 years ago is said, look, as leverage to try to reduce the rest of this spending pie, we are going to add language on to these appropriation bills that essentially run Government, language that says, look, if we are going to ever achieve a balanced budget and live within our means and to stop spending the money that our kids have not even earned yet, that is what I call borrowing is, when the Federal Government borrows, what we are doing is spending the money that our kids and our grandkids have not even earned yet, we have no idea how we are ever going to pay it back. There is no plan by anybody on how to start paying this back so we just keep borrowing and say, ``Well, let the young people worry about it in the future. Maybe their problems will be less.'' No. 1, I know I am getting on a long footnote here, but is it not terribly egotistical for this generation to think that the problems today are so great that it justifies borrowing this money from our kids and our grandkids, driving their debt even deeper, making their chances of success even greater by simply going in and overspending? That is why I think it is so terribly important that every American, Mr. Speaker, when Members run for Congress, when Members run for the U.S. Senate, when people run for the Presidency, they say, ``Look, candidate, what are you going to do about this overspending?'' And so the candidates say, ``Well, we're going to deal with it. That's important.'' I think it is coming to a very serious point where we cannot allow Members of Congress to be elected that are going to continue the tax and spend and borrowing as usual. Let me just take a few minutes looking at the problems on Social Security. The average retired couple now on Social Security has already gotten back 4 times what they and their employer put into Social Security taxes. They have gotten back 4 times what they ever put into it, plus compounded interest. This chart shows that if you happened to retire in 1980, it took 2 years of retirement to get everything back that you put into Social Security in taxes plus what the employer put in. If you retired in 1980, it took 4 years to get everything back that you and your employer contributed in taxes to Social Security plus compounded interest from day one. However, if you retire 10, 15 years from now, it is going to take 26 years of living after you retire just to break even and get back what you and your employer put in, in taxes, in the Social Security taxes. Social Security started out with a tax of 2 percent on the first $3,500. Every time we have gotten into problems with Social Security and having less money than was needed to pay existing benefits, we have simply raised taxes. The system today is sort of a Ponzi game. It is a pay-as-you-go program, Social Security is. We take the existing taxes and we immediately send out those taxes to the existing current retirees. That is the way it is today. That is the way it always has been since 1935. And so when you end up with a problem of fewer and fewer workers supporting a larger number of retirees, then you run into problems. The problem so far has been solved by the age-old tradition in this country of simply saying, ``Let's just raise taxes again.'' So this chart shows how much taxes have been raised. I am sure if you were guessing how many times we have increased taxes since 1971 on Social Security, very few people would guess 36 times. But we have increased the Social Security tax on young working families, the working men and women of this country 36 times since 1971. That is why I am suggesting that the Social Security problem, to make it solvent, does not have any tax increase. This next chart shows what is happening in the demographics of the increased population. The increased senior population is going to grow 108 percent between now and 2040 where the working people population is only going to increase about 24 percent, is the new estimate between now and 2040. So we have more and more retirees and fewer and fewer workers. One reason for that situation is people are living longer. When Social Security started in 1935, the average age of death was 61 years old. On the average, people lived to 61 years old. And the retirement age then was still 65. That is what it was. So that meant most people never collected Social Security. They died first. And so it was easy to keep a program solvent when we said pay taxes all your life and then you are unlikely to ever collect anything. And so what happened is as people live longer, there are more senior citizens. Right now the average age of death at birth is 74 years old. However, if you reach age 65, then the experts predict for those people that reach 65 years old, the age that you can start collecting Social Security today, that on the average you are going to live to be 84 years old. Some are guessing that by the year 2040, half of the people in the United States could even live to be 100 years old. And so as you increase the number that are receiving the benefits from existing workers, it makes it tougher on those existing workers, especially if there are fewer of those existing workers. Let me get to these workers charts here. In 1947, there were 42 people working paying in their Social Security tax for every retiree. By 1950 it got down to 17 people working paying in their Social Security tax for every retiree. Today 3 people are working paying in their Social Security tax supporting the Social Security benefits for every Social Security recipient that is now collecting benefits. The guess is that by 2029 we are going to be down to 2 workers. It is a serious problem. There are no good fixes. But I think the solution pretty much boils down to one of two things or a combination. You have either got to increase revenues or you decrease outgo, or it is a combination. That is all there is. And so I have come up with a suggestion that says, at least for everybody over 57 years old, that you are going to continue to get the same benefits that you have expected all your life and these politicians have promised you. But for people younger than that age, we do a couple of things. We slow down the increase in benefits for the higher wage earners. In other words, if you are making lots of money, your benefit increase over the years is going to go up slower than it otherwise would. The benefits for those very lower wage people will actually go up faster than it would under existing law. I am suggesting we add a year to the retirement age. People are living longer, so I have suggested we add 1 more year to that retirement age before you are eligible for full retirement. Here is the other exciting thing that is in my bill, though. I am suggesting that part of the money be allowed to be used for private investment. Do you know why the President's advisory commission, Mr. Speaker, every one of the three suggestions from that commission included private investment? Here is why. The Department of Treasury only pays a real interest rate return of 2.3 percent. So anybody that can invest that money anyplace else for a greater real return is going to end up being better off. And so I am suggesting that the surpluses now coming into the Social Security trust fund, because after the 1983 huge tax increases, we are ending up with a little surplus coming in every year. In other words, there is a little more tax money coming in than is required for those benefits, that goes into the Social Security trust fund, I am suggesting we keep Government from using that extra money to spend on other programs. I think that is an important first step, is that we keep that Social Security trust fund money from being used and being spent for other programs, because the problem is even though Government, quote-unquote, Government writes an IOU and says we are using this money for other programs and we intend to pay it back, there is no way for Government to pay that back without going out and borrowing more money and going out and increasing taxes to come up with the money to pay it back. So let us keep the Government's hands off that extra trust fund money to start with. What I do in my proposal is I allow the individual workers to use that amount of money for private investments. It starts out at about 2.3 percent. Right now the Social Security tax is 12.4 percent. This says we will start out at 2.3 percent to be allowed for the private investment. That private investment, by the way, even though I increase the retirement age by 1 year, I say you can take out your private investment money as early as age 60, trying to offset the negatives of adding 1 year to the retirement. If individuals were allowed to have private investments back in 1935 and if we simply said in the law, look, you have the option of going into the Government program or you can have your own private investments as long as you invest the same percentage, you cannot take it out until age 65, with those kind of requirements, we would have almost 10 times the return on investment as the so-called investment into Social Security taxes during those years. Here is what is interesting researching the records of the arguments between the House and the Senate. In 1935, when they passed the bill, the Senate insisted on two votes in the Senate, that that personal investment be an option to the Government program, and that is the way the Senate passed the bill. But in conference committee the House talked the Senate out of the provision, and it became a total Government program. Some people say, ``Well, can you trust the American people to invest their own money?'' Is that not a sad state of affairs? I say, yes, we can. I say part of the problem is we have taxed the American people so much that they have very little opportunity to invest because we take it away, all of it away from them, in taxes. But look, the American people that can go out and dicker for a car, the American family that can go out and buy a home and come up with a reasonable price for that home, a family and individuals that can invest IRA money can end up investing their own money. I set certain parameters in my bill on where the money is invested. I start out by saying, look, individuals are going--the firms that take that money to invest it are going to have to give a quarterly report back to those individual workers because I think that is important, I think that is the trend. And if you start out at just 2.3 percent, I think you can learn very quickly to weed out the Wall Street snake oil salesmen. But I set in the parameters also of the 401(k) program, and the thrift savings plan is what we call our sort of 401(k) for all Federal Government employees; I included that language by reference in my bill so if an individual--so Social Security Administration would go out and find reliable investors, and if the individual worker could choose what percentage of their investment they wanted in indexed stocks, how much they wanted in index bonds, how much they wanted in Treasury bills, a certain percentage in mutual funds. Look the American people need to be able to invest their own money, and we need to start reducing taxes today to allow them to invest their own money, and we need to expand IRA's to encourage that investment, with some tax breaks to encourage savings and investment because if we are going to get back to our goals, if we are going to get back to our goals of having an America that is a better place to work and to live and to raise our families, then we are going to have to make some changes. Investments in tool and machinery, that capital investment is one thing. And let me just finish up my comments by saying what I think the importance of the human investment is, the human investment in education. The President this year suggested we spend another $50 billion of Federal Government money on education. But you know what I think is the most important thing we can do for education? It is to have a strong family unit where those parents are encouraging those kids to get a good education. I mean as I talked to teachers and as I talked to youth group leaders, they say the most important thing that can happen is parents that are interested in their kid's education, parents that are interested in their kid's school. So part of the solution to a sound future in this country is going to have to be policies that encourage investment in savings for capital investment on the one hand and policies that encourage the traditional family units so that we can have better educated, better motivated youth on the second hand. Mr. Speaker, I appreciate this opportunity to talk on this subject. I think that Members of Congress, members of the administration need to take their heads out of the sand, need to start dealing with really some of the very tough issues of Medicare, of Social Security, of annual government overspending, and I would just ask an American that pays taxes to spend a few moments thinking about the absurdity of our tax code in this country. You know we talk about immigration, we talk about the problems of illegal immigrants coming in, but you know there is about 12,000 immigration employees that the Federal Government has. I think the number is now up to 120,000 IRS employees, 120,000 checking your taxes. Our Tax Code is unfair, it is complicated, the special interests lobbyists have gotten too much favoritism for their clients. I think it is time that we had a new beginning and I think that is what we are going to do. God bless you all.

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, for everybody's information, I will be taking slightly less than 20 minutes for this presentation. I think this is the time of year when every American, Mr. Speaker, should be looking at their income tax returns and seeing how much they pay in taxes. They should be looking at their payroll check, if they have payroll deductions, to see how much is deducted from that check for taxes for Government. Right now if you are an average working American, Government taxes 41 cents out of every dollar you make. Government, in their thinking that they can make decisions of how to spend the money you earn better than you can, have simply decided to keep increasing the size of Government, doing more things, making more promises. Mr. Speaker, I wanted to talk for a few minutes today on one of those promises, which is Social Security. Now, politicians have promised more than they can deliver on Social Security. The official estimate of the Social Security Administration is that Social Security is going bankrupt. This first chart that I have shows that there is going to be a slight surplus of money coming into Social Security until approximately 2011. After that, the taxes coming in that pay for the benefits going out are going to not be enough to adequately supply the existing benefit grant level. So the red part of this graph shows how much deficits are going to increase if we are going to keep our commitment under the existing Social Security benefit plan. We have a serious problem in Social Security. It was decided in 1935 to have, if you will, a Ponzi game, a pay-as-you-go system where existing workers pay in their taxes and those taxes are immediately paid out to existing retirees, a pay-as-you-go program. That is the way it is today. That is the way it has always been since it was devised in 1935. Not a very good way when we consider the fact that we have a declining number of people working to pay in those taxes and we have an increased number of retirees, because they are living longer, for one thing, to receive those benefits. Mr. Speaker, this chart shows that in 1950 there were 17 people working paying in the Social Security tax for every 1 retiree. Today there are three people working paying in their Social Security tax of 12.4 percent to supply each retiree that is on Social Security. By 2029, the estimate is that there will be only two people working to pay in those taxes. Of course what we have done is simply increased the taxes that the fewer and fewer number of workers pay in, not fair to the young people of today. We need to start having something like generational accounting, how much are we taking away from our young people in terms of the taxes, in terms of the borrowing that we are doing today that we are, in effect, using the money they have not even earned yet because somehow we have decided our problems today are important enough that we are going to take the money that they have not even earned yet and make them pay back the debt that we are now imposing on them. Mr. Speaker, this chart shows what is happening in terms of the cost of Social Security. It is hard to conceive $350 billion. So what I did is I broke this down to how much does Social Security cost per minute. This year Social Security is costing $700,000 a minute. Last year it cost $660,000 a minute. But look what is going to happen by the year 2030. It is going to cost $5,700,000 per minute. That is because more people are living longer, plus we have got the baby boomers that are going to start retiring in the year 2011, 2012, 2013. The baby boomers of course was the huge increase in the birthrate that happened after World War II. Everybody thought the economy is great, we are coming out of this war as national heroes, we are going to have children because we can take care of them. This shows the chart, the graph of the life expectancy of senior citizens. When Social Security started in 1935, the average age of death was 61 years old. The retirement age was 65. Of course what that means is most Americans never lived long enough to earn any of the Social Security benefits, so it was easy to balance the system in those days when most people were dying off before they even became eligible for Social Security. The estimates are now that, when you are born, on the average you are going to live to be 74 years old. But if you reach 65, the current age for total full eligibility for Social Security benefits, if you reach the age 65, now on the average you will continue living until age 84. Some estimates are as high as, by the year 2030, one-third of the population will be living to be 100 years old. Of course what that does is mean more Social Security recipients depending on those workers, if we continue the existing system, to pay in their taxes, to pay for the existing benefits. Here are just two charts. It shows between now and the year 2040 seniors will increase at 108 percent, coming to 71 million, where workers will increase only 23 percent of the population. That means fewer workers like we showed on the chart supporting with their taxes for more and more retirees. So the question is, should we yet again increase taxes on those workers? This chart shows how we have increased taxes over the years. So every time there was a little money needed in Social Security, we increased the tax on workers. Of course when it started out, it started out at 2 percent on the first $3,500 of earnings. Now it is 12.4 percent on the first $62,000 of earnings. And that base of $62,000 is automatically indexed to go up every year. Listen to this. Mr. Speaker, we have increased taxes on workers 36 times since 1971, more often than just once a year. We cannot increase that tax on workers anymore. It is not fair. Taxes are already getting too high. What this next chart shows, if the next chart is in order, and it is not quite in order, is how long it took to get everything back that you and your employer paid in Social Security taxes. If you happened to retire back here in 1940, of course, it only took 2 months to get everything back you put in. Taxes were very low and the program was just starting. If you retired in 1960, it took 2 years to get back every tax dollar that you put in, that your employer put in, plus compounded interest. By 1980, it took 4 years after retirement. Look at 2 years ago. In 1995, you have to live 16 years after you retire to get the money back that you and your employer put in. Not a very good investment. Some people say, look, if you go to a private investment, it is risky, Nothing is more risky than the existing system because you are going to be very, very lucky if you get back what you put into the system in taxes. In 2005, which is 8 years from now, you are going to have to live 23 years after retirement. By 2015, you will have to live 26 years after retirement to get back just what you and your employer put in in taxes. Today 78 percent of American workers pay more in the Social Security tax, the 12.4 percent Social Security tax, than they pay in the income tax. That tax is high enough. Mr. Speaker, I want to spend a little time with this last chart. This last chart is a pie representing how the Federal Government spends its money. Last year we spent a little over $1.5 trillion. Look at the large piece of this pie, how much Social Security took out of the total spending of Federal Government, 22 percent. If we go around, we are looking at Medicare, Medicare is an amendment to the Social Security Act that was amended in 1965 to say, let us expand the Social Security Program to cover health care for senior citizens. Medicare is growing at almost the rate of 10 percent a year, and pretty soon Medicare is going to be a larger, huger problem than Social Security. We have got to somehow take our heads out of the sand and start dealing with some of these tough issues. I know for politicians it is easy to put those decisions off. Maybe you say, look, I am only going to be in office another 2 years or 4 years, let the people after me deal with these tough issues. They are tough. How are we going to solve the problem? I want to point out that interest on the public debt of the $5.2 trillion that we have overspent, annually we overspend, and that is called the deficit. You add all those deficits up and now it comes to $5.2 trillion. It takes 15 percent of the total budget just to pay the interest on that debt nobody down here in Washington is thinking about anyway or any possibility of paying that debt back. We are leaving it up to the young people to say, somehow you solve this problem later on. We have got to quit this kind of Ponzi game like we have in Social Security. We have got to start having generational accounting. We have got to have the kind of decisions in Washington that do not take the chances away from our kids and our grandkids to have the same kind of opportunity, to have the same kind of standard of living that we have had. I have introduced a Social Security bill. It makes a lot of modest changes. It does not increase the tax. It does not affect existing retirees. In fact, it does not affect anybody over 57 years old. But it gradually slows down the increase in benefits for the higher income recipients. It adds one more year to the time that you would be eligible for Social Security benefits. It makes a couple other small changes. I say, and it has been scored to keep Social Security solvent forever; I say, let us run this proposal up the flag pole. Let us start looking at ways we can improve it, but let us not any longer pretend that the problems, that the problem does not exist. I say, if we have any regard for our kids, we are going to do two things: We are going to give them a good education and a good opportunity. We cannot give them a good opportunity if we continue to go deeper and deeper in debt and expect them to pay for it. We cannot give them the opportunity if we continue to increase taxes, thinking that Government can spend a worker's money better than they can. Mr. Speaker, I yield back the balance of my time.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I want to say some last words on taxes. In 1947, the Federal budget represented 12 percent of the total economy in the United States. In other words, the Federal budget was 12 percent of GDP. We have expanded that. As politicians find that they are more likely to get elected and reelected if they make a bunch of promises to people, we have had too many promises, because what it takes to keep those promises is increasing taxes and increasing borrowing. Though young people today should be up in arms about what Congress is doing to their future, everybody should be looking at what they are paying in taxes at the local, State and national level. Look at payroll deductions. If we did not have automatic deductions on paychecks, the people of America would not stand for the kind of taxes they are paying to let somebody else decide how to spend their money when they could make a much better decision to help their family.